5/20/2013 5:30:04 PM
Topic:
Rise Up or Die
anonymous
Posts: 224
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Rise Up or Die
By Chris Hedges, TruthDig.com, May 20, 2013
Joe Sacco and I spent two years reporting from the poorest pockets of the United States for our book “Days of Destruction, Days of Revolt.” We went into our nation’s impoverished “sacrifice zones”—the first areas forced to kneel before the dictates of the marketplace—to show what happens when unfettered corporate capitalism and ceaseless economic expansion no longer have external impediments. We wanted to illustrate what unrestrained corporate exploitation does to families, communities and the natural world. We wanted to challenge the reigning ideology of globalization and laissez-faire capitalism to illustrate what life becomes when human beings and the ecosystem are ruthlessly turned into commodities to exploit until exhaustion or collapse. And we wanted to expose as impotent the formal liberal and governmental institutions that once made reform possible, institutions no longer equipped with enough authority to check the assault of corporate power.
What has taken place in these sacrifice zones—in postindustrial cities such as Camden, N.J., and Detroit, in coalfields of southern West Virginia where mining companies blast off mountaintops, in Indian reservations where the demented project of limitless economic expansion and exploitation worked some of its earliest evil, and in produce fields where laborers often endure conditions that replicate slavery—is now happening to much of the rest of the country. These sacrifice zones succumbed first. You and I are next.
Corporations write our legislation. They control our systems of information. They manage the political theater of electoral politics and impose our educational curriculum. They have turned the judiciary into one of their wholly owned subsidiaries. They have decimated labor unions and other independent mass organizations, as well as having bought off the Democratic Party, which once defended the rights of workers. With the evisceration of piecemeal and incremental reform—the primary role of liberal, democratic institutions—we are left defenseless against corporate power.
The Department of Justice seizure of two months of records of phone calls to and from editors and reporters at The Associated Press is the latest in a series of dramatic assaults against our civil liberties. The DOJ move is part of an effort to hunt down the government official or officials who leaked information to the AP about the foiling of a plot to blow up a passenger jet. Information concerning phones of Associated Press bureaus in New York, Washington, D.C., and Hartford, Conn., as well as the home and mobile phones of editors and reporters, was secretly confiscated. This, along with measures such as the use of the Espionage Act against whistle-blowers, will put a deep freeze on all independent investigations into abuses of government and corporate power.
Seizing the AP phone logs is part of the corporate state’s broader efforts to silence all voices that defy the official narrative, the state’s Newspeak, and hide from public view the inner workings, lies and crimes of empire. The person or persons who provided the classified information to the AP will, if arrested, mostly likely be prosecuted under the Espionage Act. That law was never intended when it was instituted in 1917 to silence whistle-blowers. And from 1917 until Barack Obama took office in 2009 it was employed against whistle-blowers only three times, the first time against Daniel Ellsberg for leaking the Pentagon Papers in 1971. The Espionage Act has been used six times by the Obama administration against government whistle-blowers, including Thomas Drake.
The government’s fierce persecution of the press—an attack pressed by many of the governmental agencies that are arrayed against WikiLeaks, Bradley Manning, Julian Assange and activists such as Jeremy Hammond—dovetails with the government’s use of the 2001 Authorization for Use of Military Force to carry out the assassination of U.S. citizens; of the FISA Amendments Act, which retroactively makes legal what under our Constitution was once illegal—the warrantless wiretapping and monitoring of tens of millions of U.S. citizens; and of Section 1021 of the National Defense Authorization Act, which permits the government to have the military seize U.S. citizens, strip them of due process and hold them in indefinite detention. These measures, taken together, mean there are almost no civil liberties left.
Ahandful of corporate oligarchs around the globe have everything—wealth, power and privilege—and the rest of us struggle as part of a vast underclass, increasingly impoverished and ruthlessly repressed. There is one set of laws and regulations for us; there is another set of laws and regulations for a power elite that functions as a global mafia.
We stand helpless before the corporate onslaught. There is no way to vote against corporate power. Citizens have no way to bring about the prosecution of Wall Street bankers and financiers for fraud, military and intelligence officials for torture and war crimes, or security and surveillance officers for human rights abuses. The Federal Reserve is reduced to printing money for banks and financiers and lending it to them at almost zero percent interest; corporate officers then lend it to us at usurious rates as high as 30 percent. I do not know what to call this system. It is certainly not capitalism. Extortion might be a better word. The fossil fuel industry, meanwhile, relentlessly trashes the ecosystem for profit. The melting of 40 percent of the summer Arctic sea ice is, to corporations, a business opportunity. Companies rush to the Arctic and extract the last vestiges of oil, natural gas, minerals and fish stocks, indifferent to the death pangs of the planet. The same corporate forces that give us endless soap operas that pass for news, from the latest court proceedings surrounding O.J. Simpson to the tawdry details of the Jodi Arias murder trial, also give us atmospheric concentrations of carbon dioxide that surpass 400 parts per million. They entrance us with their electronic hallucinations as we waiver, as paralyzed with fear as Odysseus’ sailors, between Scylla and Charybdis.
There is nothing in 5,000 years of economic history to justify the belief that human societies should structure their behavior around the demands of the marketplace. This is an absurd, utopian ideology. The airy promises of the market economy have, by now, all been exposed as lies. The ability of corporations to migrate overseas has decimated our manufacturing base. It has driven down wages, impoverishing our working class and ravaging our middle class. It has forced huge segments of the population—including those burdened by student loans—into decades of debt peonage. It has also opened the way to massive tax shelters that allow companies such as General Electric to pay no income tax. Corporations employ virtual slave labor in Bangladesh and China, making obscene profits. As corporations suck the last resources from communities and the natural world, they leave behind, as Joe Sacco and I saw in the sacrifice zones we wrote about, horrific human suffering and dead landscapes. The greater the destruction, the greater the apparatus crushes dissent.
More than 100 million Americans—one-third of the population—live in poverty or a category called “near poverty.” Yet the stories of the poor and the near poor, the hardships they endure, are rarely told by a media that is owned by a handful of corporations—Viacom, General Electric, Rupert Murdoch’s News Corp., Clear Channel and Disney. The suffering of the underclass, like the crimes of the power elite, has been rendered invisible.
There is nothing in 5,000 years of economic history to justify the belief that human societies should structure their behavior around the demands of the marketplace.
In the Lakota Indian reservation at Pine Ridge, S.D., in the United States’ second poorest county, the average life expectancy for a male is 48. This is the lowest in the Western Hemisphere outside of Haiti. About 60 percent of the Pine Ridge dwellings, many of which are sod huts, lack electricity, running water, adequate insulation or sewage systems. In the old coal camps of southern West Virginia, amid poisoned air, soil and water, cancer is an epidemic. There are few jobs. And the Appalachian Mountains, which provide the headwaters for much of the Eastern Seaboard, are dotted with enormous impoundment ponds filled with heavy metals and toxic sludge. In order to breathe, children go to school in southern West Virginia clutching inhalers. Residents trapped in the internal colonies of our blighted cities endure levels of poverty and violence, as well as mass incarceration, that leave them psychologically and emotionally shattered. And the nation’s agricultural workers, denied legal protection, are often forced to labor in conditions of unpaid bondage. This is the terrible algebra of corporate domination. This is where we are all headed. And in this accelerated race to the bottom we will end up as serfs or slaves.
Rebel. Even if you fail, even if we all fail, we will have asserted against the corporate forces of exploitation and death our ultimate dignity as human beings. We will have defended what is sacred. Rebellion means steadfast defiance. It means resisting just as have Bradley Manning and Julian Assange, just as has Mumia Abu-Jamal, the radical journalist whom Cornel West, James Cone and I visited in prison last week in Frackville, Pa. It means refusing to succumb to fear. It means refusing to surrender, even if you find yourself, like Manning and Abu-Jamal, caged like an animal. It means saying no. To remain safe, to remain “innocent” in the eyes of the law in this moment in history is to be complicit in a monstrous evil. In his poem of resistance, “If We Must Die,” Claude McKay knew that the odds were stacked against African-Americans who resisted white supremacy. But he also knew that resistance to tyranny saves our souls. McKay wrote:
If we must die, let it not be like hogs
Hunted and penned in an inglorious spot,
While round us bark the mad and hungry dogs,
Making their mock at our accursèd lot.
If we must die, O let us nobly die
So that our precious blood may not be shed
In vain; then even the monsters we defy
Shall be constrained to honor us though dead!
O kinsmen! We must meet the common foe!
Though far outnumbered let us show us brave,
And for their thousand blows deal one death blow!
What though before us lies the open grave?
Like men we’ll face the murderous, cowardly pack,
Pressed to the wall, dying, but fighting back!
It is time to build radical mass movements that defy all formal centers of power and make concessions to none. It is time to employ the harsh language of open rebellion and class warfare. It is time to march to the beat of our own drum. The law historically has been a very imperfect tool for justice, as African-Americans know, but now it is exclusively the handmaiden of our corporate oppressors; now it is a mechanism of injustice. It was our corporate overlords who launched this war. Not us. Revolt will see us branded as criminals. Revolt will push us into the shadows. And yet, if we do not revolt we can no longer use the word “hope.”
Herman Melville’s “Moby-Dick” grasps the dark soul of global capitalism. We are all aboard the doomed ship Pequod, a name connected to an Indian tribe eradicated by genocide, and Ahab is in charge. “All my means are sane,” Ahab says, “my motive and my object mad.” We are sailing on a maniacal voyage of self-destruction, and no one in a position of authority, even if he or she sees what lies ahead, is willing or able to stop it. Those on the Pequod who had a conscience, including Starbuck, did not have the courage to defy Ahab. The ship and its crew were doomed by habit, cowardice and hubris. Melville’s warning must become ours. Rise up or die.
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5/17/2013 6:26:09 PM
Topic:
Republicans Aren't Christians
Onward
Posts: 177
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Republicans Aren't Christians
By Bob Burnett, 05/17/2013
Whether it's fiscal austerity, Benghazi, or opposition to gun control, the Republican Party is remarkably disciplined. Day after day, press conference after press conference, Republican members of Congress speak from the same hymnal. But it's not a Christian hymnal. While the Republicans claim to be true believers they actually eschew the moral teachings of Jesus of Nazareth.
Beginning in the '50s, Christianity began to infiltrate American politics -- in 1954 the phrase "under God" was added to the pledge of allegiance. Thirty years later, during the Reagan presidency, Republicans rebranded as the "Christian Party" and labeled Democrats the Party of secular socialism.
The election of George W. Bush heralded a second wave of Republican religiosity. Dubya emphasized his fundamentalist credentials and his decision "to commit my heart to Jesus Christ." During the 2000 presidential campaign, Bush was asked what "political philosopher or thinker" he identified with most and responded, "Christ, because he changed my heart."
But after 9/11, Bush's heart hardened. Dubya began to speak of the war on terror as a "crusade." On June of 2003, in a conversation with Palestinian leaders , the President said, "I'm driven with a mission from God. God would tell me, 'George, go and fight those terrorists in Afghanistan.' And I did, and then God would tell me, 'George go and end the tyranny in Iraq,' and I did."
Dubya's messianic slant on Christianity tailored his image as commander-in-chief but had little impact on domestic policy. Evangelical minister Jim Wallis recalled a February 1, 2002, conversation where he told President Bush:
In the State of the Union address a few days before, you said that unless we devote all our energies, our focus, our resources on this war on terrorism, we're going to lose... Mr. President, if we don't devote our energy, our focus and our time on also overcoming global poverty and desperation, we will lose not only the war on poverty, but we'll lose the war on terrorism.
Dubya flashed a bewildered smile and walked away. Wallis observed:
When I was first with Bush in Austin, what I saw was a self-help Methodist, very open, seeking... What I started to see at this point was the man that would emerge over the next year -- a messianic American Calvinist.
Indeed, many describe the Republican political faith as "American Calvinism." It borrows several notions from the sixteenth century French theologian: the Bible is infallible; the "law" is driven by the Ten Commandments, rather than the teachings of Jesus; humans are totally depraved; and God has predestined who will be saved.
Despite its austere nature, Calvinism strongly influenced the original American settlers -- many of who were Presbyterians. One historian noted, "in England and America the great struggles for civil and religious liberty were nursed in Calvinism, inspired by Calvinism, and carried out largely by men who were Calvinists."
During the '80s American Calvinism morphed into a conservative political ideology with the formation of the Christian Right. James Dobson, Jerry Falwell, Ralph Reed, Pat Robertson, and others preached on political subjects and touted conservative "Christian" candidates.
In Republican hands, contemporary Calvinism has had two thrusts. It fomented the culture wars and accused Democrats, and non-believers, of advocating "sixties values" that would destroy home and community. The Christian Right was against abortion, same-sex marriage, the teaching of evolution, and the separation of church and state; they were for homeschooling, limited Federal government, and Reaganomics.
The second Calvinist thrust promoted capitalism. In his classic, The Protestant Ethic and the Spirit of Capitalism, German sociologist Max Weber observed that not only did the protestant work ethic promote capitalism but also worldly success became a measure of the likelihood of one's salvation. "He who has the most toys, wins."
Given the strong influence of Calvinism on Republican politics, it's not surprising the GOP favors the rich, opposes new taxes, and continues to support Reaganomics with its myths of "trickle down economics" and "self-regulating markets."
Nonetheless, American Calvinism has become so extreme that it no longer deserves to be called Christianity.
Jesus' first commandment was to love God. But his other teachings are about loving those around us. His second commandment was "love thy neighbor as thyself." Jesus amplified this in his Sermon on the Mount: blessed are the poor in spirit, those who mourn, the meek, those who hunger and thirst for righteousness, the merciful, the pure in heart, the peacemakers, and those who are persecuted for righteousness' sake.
Jesus was not a Calvinist or a capitalist. He disdained worldly possessions: "It is hard for a rich man to enter the kingdom of heaven... it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God."
Republican policy no longer represents the teachings of Jesus. The GOP favors the rich and ignores the poor, disadvantaged, sick, elderly, long-term unemployed, and other unfortunates. Republicans may be religious, but they're not Christians.
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5/17/2013 2:01:09 PM
Topic:
Child Poverty & Paul Ryan: Only Romainia is Worse
libby
Posts: 222
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U.S. is second-worst of 35 developed nations when it comes to child poverty
By Laura Clawson, Daily Kos, Thu Apr 18, 2013
Paul Ryan thinks the second-highest child poverty in the developed world and sequestration are a great start, but there's more to be done.
The United States ranks 34 out of 35 on a UNICEF measure of relative child poverty in developed nations. To be clear, that's 34 out of 35 in the bad way—second highest level, doing better than only Romania with more than 20 percent of children living in a household with an income below half the median.
But the picture looks even worse when you examine just how far below the relative poverty line these children tend to fall. The UNICEF report looks at something it calls the “child poverty gap,” which measures how far the average poor child falls below the relative poverty line. It does this by measuring the gap between the relative poverty line and the average income of poor families.
Alarmingly, the United States also scores second-to-last on this measurement, with the average poor child living in a home that makes 36 percent less than the relative poverty line.
This is the context before the start of sequestration, as Bryce Covert points out. With the full effects of sequestration yet to come, we've already seen kids cut from Head Start programs, less housing assistance available to families struggling to stay off the street, and homeless shelters losing funding among the sequester's effects that will hit poor kids directly. Of course all of this is just a tiny taste of what Republicans would like to deal out to poor and struggling families through Paul Ryan's Republican budget. That's why Republicans wanted the sequester to happen to begin with, their whining about airports and White House tours notwithstanding.
edited by libby on 5/17/2013
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5/16/2013 4:53:16 AM
Topic:
America’s New Oligarchs—Silicon Valley’s Shady 1%
libby
Posts: 222
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America’s New Oligarchs—Fwd.us and Silicon Valley’s Shady 1 Percenters
by Joel Kotkin, New Geography, 05/14/2013
When Steve Jobs died in October 2011, crowds of mourners gathered outside of Apple stores, leaving impromptu memorials to the fallen businessman. Many in Occupy Wall Street, then in full bloom, stopped to mourn the .001 percenter worth $7 billion, who didn’t believe in charity and whose company had more cash in hand than the U.S. Treasury while doing everything in its power to avoid paying taxes.
A new, and potentially dominant, ruling class is rising. Today’s tech moguls don’t employ many Americans, they don’t pay very much in taxes or tend to share much of their wealth, and they live in a separate world that few of us could ever hope to enter. But while spending millions bending the political process to pad their bottom lines, they’ve remained far more popular than past plutocrats, with 72 percent of Americans expressing positive feelings for the industry, compared to 30 percent for banking and 20 percent for oil and gas.
Outsource Manufacturing, Import Engineers
Perversely, the small number of jobs—mostly clustered in Silicon Valley—created by tech companies has helped its moguls avoid public scrutiny. Google employs 50,000, Facebook 4,600, and Twitter less than 1,000 domestic workers. In contrast, GM employs 200,000, Ford 164,000, and Exxon over 100,000. Put another way, Google, with a market cap of $215 billion, is about five times larger than GM yet has just one fourth as many workers.
This is an equation that defines inequality: more and more wealth concentrated in fewer hands and benefiting fewer workers.
While Facebook and Twitter have little role in the material economy, Apple, which continues to collect the bulk of its profit from physical goods—computers, iPads, iPhones and so on—has outsourced nearly all of its manufacturing to foreign companies like Foxconn that employ workers, often in appalling conditions, in China and elsewhere. About 700,000 people work on Apple’s physical products for subcontractors, according to the New York Times, but almost none of them are in the U.S. “The jobs aren’t coming back,” Jobs bluntly told President Obama at a 2011 dinner in Silicon Valley.
Not so much anti-union as post-union, the tech elite has avoided issues with labor by having so few laborers who could be organized. Andrew Carnegie and Henry Ford exploited workers in Pittsburgh and Detroit, and had to deal with the political consequences; the risks are much less if the exploited are in Chengdu and Guangzhou.
"There doesn't seem to be a role" for unions in this new economy, explained Internet entrepreneur and venture capitalist Marc Andreessen, because people are "marketing themselves and their skills.” He didn’t mention what people without skills in demand at tech companies might do.
But Americans with those skills shouldn’t rest easy, either. These same companies are always looking to cut down their domestic labor costs. Mark Zuckerberg, in particular, is pouring money into a new advocacy group, Fwd.us, with a board consisting of big-name Valley luminaries, to push “comprehensive immigration reform” (read: letting Facebook bring in a cheaper labor force). In a remarkably cynical move, Fwd.us has separate left- and right-leaning subgroups to prod politicians across the political spectrum to sign on to the bill that would pad the company’s bottom line.
Ostensibly, the increase in visas for high-skilled computer workers is a needed response to the critical shortage of such workers here—a notion that has been repeatedly dismissed, including in a recent report from the Obama-aligned Economic Policy Institute, which found that the country is producing 50 percent more IT professionals each year than are being employed in the field. The real appeal of the H1B visas for “guest workers”—who already take between a third and half of all new IT jobs in the States—is that they are usually paid less than their pricy American counterparts, and are less likely to jump ship since they need to remain employed to stay in the country. Facebook’s lobbyists, reports the Washington Post, have pressed lawmakers to remove a requirement from the bill that companies make a “good faith” effort to hire Americans first.
The Valley of the Oligarchs
Even as market caps rise, the number of Americans collecting any cut of that new wealth has scarcely moved. Since 2008, while IPOs have generated hundreds of billions of dollars of paper worth, Silicon Valley added just 30,000 new tech–related jobs—leaving the region with 40,000 fewer jobs than in 2001, when decades of rapid job growth came to an end.
The good jobs that are being created are also heavily clustered in one region, the west side of the San Francisco peninsula—a distinct and geographically constrained zone of privilege. The area boasts both formidable technical talent and, more important still, roughly one third of the nation’s venture funds along with the world’s most sophisticated network of tech-savvy investment banks, publicists, and attorneys.
But little of the Valley’s wealth reaches surrounding communities. Just across the bridge to the East Bay are high crime rates and an economy that’s lost about 60,000 jobs since 2001 with few signs of recovery. Inland, in the central Valley, double-digit unemployment is the norm and local governments are cutting police and other core services and even trying to declare bankruptcy.
“We live in a bubble, and I don’t mean a tech bubble or a valuation bubble. I mean a bubble as in our own little world,” Google’s Schmidt boasted to the San Francisco Chroniclein 2011. “And what a world it is. Companies can’t hire people fast enough. Young people can work hard and make a fortune. Homes hold their value. Occupy Wall Street isn’t really something that comes up in a daily discussion, because their issues are not our daily reality.”
Inside the bubble zone, centered around the bucolic university town of Palo Alto, employees at firms like Facebook and Google enjoy gourmet meals, child-care services, even complimentary house-cleaning. With all these largely male, well-paid geeks around, there’s even a burgeoning sex industry, with rates upwards of $500 an hour.
Those at top of the tech elite live very well, occupying some of the most expensive and attractive real estate in the country. They travel in style: Google maintains a fleet of private jets at San Jose airport, making enough of a racket to become a nuisance to their working-class neighbors. They have even proposed an $85 million flight center, called Blue City Holdings, to manage airplanes belonging to Google’s founders, Larry Page and Sergey Brin, and its executive chairman, Eric Schmidt. Like the Russian oligarchs, currently making a run on Tuscany’s castles and resorts, the Valley elite have embraced conspicuous consumption, albeit dressed up in California casual. In San Francisco, San Mateo, and Santa Clara counties combined, luxury vehicles accounted for nearly 21 percent of new car registrations from April 2011 to March 2012, more than twice the national average. Home prices in places like Palo Alto and the fashionable precincts of San Francisco go for well over a million—and routinely trigger all-cash bidding wars.
We’re the best thing happening in America,” one tech entrepreneur told the Los Angeles Times. Even a reporter for the New York Times, usually worshipful in its Valley coverage, described the spending as “obscene.” An industry party he attended included a 600-pound tiger in a cage and a monkey that posed for Instagram photos.
But past the conspicuous consumption, the most outstanding characteristic of the new oligarchs may be how quickly they have made their fortunes—and how much of the vast wealth they’ve held on to, rather than paid out to shareholders or in taxes. Ten of the world’s 29 billionaires under 40 come from the tech sector, with four from Facebook and two from Google. The rest of the list is mostly inheritors and Russian oligarchs.
Tech oligarchs control portions of their companies that would turn oilmen or auto executives green with envy. The largest single stockholder at Exxon, CEO and chairman Rex Tillerson, controls .04 percent of its stock. No direct shareholder owns as much as 1 percent of GM or Ford Motors. In contrast, Mark Zuckerberg’s 29.3 percent stake in Facebook is worth $9.8 billion. Sergey Brin, Larry Page and Eric Schmidt control roughly two thirds of the voting stock in Google. Brin and Page are worth over $20 billion each. Larry Ellison, the founder of Oracle and the third richest man in America, owns just under 23 percent of his company, worth $41 billion. Bill Gates, who’s semi-retired from Microsoft, is worth a cool $66 billion and still controls 7 percent of his firm.
The concentration of such vast wealth in so few hands mirrors the market dominance of some of the companies generating it. Google and Apple provide almost 90 percent of the operating systems for smart phones. Over half of Americans and Canadians and 60 percent of Europeans use Facebook. Those numbers dwarf the market share of the auto Big Five—GM, Ford, Chrysler, Toyota, and Honda—none of whom control much more than a fifth of the U.S. market. Even the oil-and-gas business, associated with oligopoly from the days of John Rockefeller, is more competitive; the world’s top 10 oil companies collectively account for just 40 percent of the world’s production.
Greater Representation with Minimal Taxation
Despite this vast wealth, and their newfound interest in lobbying Washington, the tech firms are notorious for paying as little as possible to the taxman. Facebook paid no taxes last year, while making a profit of over $1 billion. Apple, “a pioneer in tactics to avoid taxes,”has kept much of its cash hoard abroad, out of reach of Uncle Sam. Microsoft has staved off nearly $7 billion in tax payments since 2009 by using loopholes to shift profits offshore, according to a recent Senate panel report.
And now, these 1 percenters—who invested heavily in Obama—are looking to help shape the “public good” in Washington and, as with Fwd.us, what they’re selling as good for us all is what aligns with their interests.
There’s been a huge surge of Valley investment in Washington lobbying, not just on immigration but also on issues effecting national, industrial, and science policy. Facebook’s lobbying budget grew from $351,000 in all of 2010 to $2.45 million in just the first quarter of this year. Google spent a record $18 million last year. In the process, they have hired plenty of professional Washington parasites to make their case; exactly the kind of people Valley denizens used to demean.
The oligarchs believe their control of the information network itself gives them a potential influence greater than more conventional lobbies. The prospectus for Fwd.us—headed up by one of Zuckerberg’s old Harvard roommates—suggests tech should become “one of the most powerful political forces,” noting “we control massive distribution channels, both as companies and individuals.”
One traditional way the wealthy attain influence is purchasing their own news and media companies. Facebook billionaire and former Obama tech guru Chris Hughes (who owes his fortune to having been another of Zuckerberg’s college roommates) has already started on this road by buying the New Republic. (His husband, perhaps not incidentally, is running for the New York State Assembly.) Leaving old-media legacy purchases aside, Yahoo is now the most-read news site in the U.S., with over 100 million monthly viewers, and the Valleyites are also moving into the culture business with both Google-owned YouTube and Netflix getting into the entertainment-content business.
Great wealth, and high status, particularly at a young age, often persuades people that they know best about the future and how we should all be governed. Twitter founder Jack Dorsey, a 37-year-old resident of San Francisco, recently announced on 60 Minutes that he’d like to be mayor—of New York, a city he’s never lived in.
Expect more of this kind of hubris from the new oligarchs. Some cities, ranging from Seattle, where Amazon is leading the charge, to Las Vegas and even Detroit now are counting on tech giants to expand or restore their damaged central cores.
But if those oligarchs do come, they will have little interest in retaining or expanding blue-collar jobs in construction or manufacturing, which they see as passé; the housing they build and even the public amenities they invest in will be for their own employees and other members of the “creative class.” The best the masses can hope for are jobs cutting hair, mowing grass, and painting the toenails of the oligarchs and their favored minions. You won’t see much emphasis, either, on basic skills training and community colleges, which are critical to auto manufacturers, oil refiners, and other older businesses and can provide opportunity for upward mobility for middle- and working-class youth.
Yet these limitations will not circumscribe the ambitions of the new oligarchs, who see their triumph over cyberspace as a prelude to a power grab in the real world, a proposition they’ve tested over the last three presidential cycles. “Politics for me is the most obvious area [to be disrupted by the Web],” suggests former Facebook president and Napster founder Sean Parker.
If You're the Customer, You're the Product
Perhaps an even bigger danger stems from the ability of “the sovereigns of cyberspace” to collect and market our most intimate details. Moving beyond the construction of platforms for communication, the oligarchs trade on the value of the personal information of the individuals using their technology, with little regard for social expectations about privacy, or even laws meant to protect it. Google has already been caught bypassing Apple’s privacy controls on phones and computers, and handing the data over to advertisers. The Huffington Post has constructed a long list of the firm’s privacy violations. Apple is being hauled in front of the courts for its own alleged violations while Consumer Reports recently detailed Facebook’s pervasive privacy breaches—culling information from users as detailed as health conditions, details an insurer could use against you, when one is going out of town (convenient for burglars), as well as information pertaining to everything from sexual orientation to religious affiliation to ethnic identity.
As Google’s Eric Schmidt put it: "We know where you are. We know where you've been. We can more or less know what you're thinking about."
But while Facebook and Google have been repeatedly cited both in the United States and Europe for violating users’ privacy, the punishments have been puny compared to the money they’ve made by snatching first and accepting a slap on the wrist later.
It's no surprise then that Silicon Valley firms have been prominent in trying to quell bills addressing Internet privacy, both in Europe and closer to home. Washington is where big firms have always gone to change the rules to protect their own prerogatives and pull the ladder up on smaller competitors. Like previous oligarchical interests, the Valley, predictably, has become a regular and crucial fundraising stop for Obama and other Democrats crafting those rules.
Al Gore—who owes much of his Romney-sized fortune to lucrative positions on the board of Apple and as a senior adviser to Google, as well as to energy investments heavily backed by federal funds—has emerged as the symbol of the lucrative, if shady, intersection of those two worlds.
Green is an easy sell in the Valley. If California electricity is too unreliable or expensive, firms will just shift their power-consuming server farms to places with cheap electricity, such as the Pacific Northwest or the Great Plains. Middle-class employees who, in part due to green “smart growth” policies, can no longer afford to live remotely close to Palo Alto or in San Francisco, can be shifted either abroad or to more affordable locales such as Salt Lake City, Phoenix, or Austin, Texas. Meanwhile, with supply restricted, the prices on houses owned by the oligarchs and their favored employees continue to rise into the stratosphere.
What we have then is something at once familiar and new: the rise of a new ruling class, arrogant and self-assured, with a growing interest in shaping how we are governed and how we live. Former oligarchs controlled railway freight, energy prices, agricultural markets, and other vital resources to the detriment of other sectors of the economy, individuals, and families. Only grassroots opposition stopped, or at least limited, their depredations.
But today’s new autocrats seek not only market control but the right to sell access to our most private details, and employ that technology to elect candidates who will do their bidding. Their claque in the media may allow them to market their ascendency as “progressive” and even liberating, but the new world being ushered into existence by the new oligarchs promises to be neither of those things.
Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.
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5/15/2013 5:21:51 PM
Topic:
New App: Boycott the Koch Brothers
libby
Posts: 222
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New App Buycott Lets Users Protest Koch Brothers, Monsanto And More
By Clare O'Connor, Forbes, 05/15/2013
In her keynote speech at last year’s annual Netroots Nation gathering, Darcy Burner pitched a seemingly simple idea to the thousands of bloggers and web developers in the audience. The former Microsoft programmer and congressional candidate proposed a smartphone app allowing shoppers to swipe barcodes to check whether conservative billionaire industrialists Charles and David Koch were behind a product on the shelves.
Burner figured the average supermarket shopper had no idea that buying Brawny paper towels, Angel Soft toilet paper or Dixie cups meant contributing cash to Koch Industries through its subsidiary Georgia-Pacific. Similarly, purchasing a pair of yoga pants containing Lycra or a Stainmaster carpet meant indirectly handing the Kochs your money (Koch Industries bought Invista, the world’s largest fiber and textiles company, in 2004 from DuPont).
At the time, Burner created a mock interface for her app, but that’s as far as she got. She was waiting to find the right team to build out the back end, which could be complicated given often murky corporate ownership structures.
She wasn’t aware that as she delivered her Netroots speech, a group of developers was hard at work on Buycott, an even more sophisticated version of the app she proposed.
“I remember reading Forbes’ story on the proposed app to help boycott Koch Industries and wishing that we were ready to launch our product,” said Buycott’s marketing director Maceo Martinez.
The app itself is the work of one Los Angeles-based 26-year-old freelance programmer, Ivan Pardo, who has devoted the last 16 months to Buycott. “It’s been completely bootstrapped up to this point,” he said. Martinez and another friend have pitched in to promote the app.
Pardo’s handiwork is available for download on iPhone or Android, making its debut in iTunes and Google Play in early May. You can scan the barcode on any product and the free app will trace its ownership all the way to its top corporate parent company, including conglomerates like Koch Industries.
Once you’ve scanned an item, Buycott will show you its corporate family tree on your phone screen. Scan a box of Splenda sweetener, for instance, and you’ll see its parent, McNeil Nutritionals, is a subsidiary of Johnson & Johnson.
Even more impressively, you can join user-created campaigns to boycott business practices that violate your principles rather than single companies. One of these campaigns, Demand GMO Labeling, will scan your box of cereal and tell you if it was made by one of the 36 corporations that donated more than $150,000 to oppose the mandatory labeling of genetically modified food.
Deciding to add that campaign to your Buycott app might make buying your breakfast nearly impossible, as that list includes not just headline grabbers like agricultural giant Monsanto but just about every big consumer company with a presence in the supermarket aisle: Coca-Cola, Nestle, Kraft, Heinz, Kellogg’s, Unilever and more.
Buycott is still working on adding new data to its back end and fine-tuning its information on corporate ownership structures. Most companies in the current database actually own more brands than Buycott has on record. The developers are asking shoppers to help improve their technology by inputting names of products they scan that the app doesn’t already recognize.
And if this all sounds worthy but depressing, be assured that your next trip to the supermarket needn’t be all doom and gloom. There are Buycott campaigns encouraging shoppers to support brands that have, say, openly backed LGBT rights. You can scan a bottle of Absolut vodka or a bag of Starbucks coffee beans and learn that both companies have come out for equal marriage.
“I don’t want to push any single point of view with the app,” said Pardo. “For me, it was critical to allow users to create campaigns because I don’t think its Buycott’s role to tell people what to buy. We simply want to provide a platform that empowers consumers to make well-informed purchasing decisions.”
Forbes reached out to Koch Industries and Monsanto for comment and will update this story with any responses.
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5/15/2013 5:15:23 PM
Topic:
How the Case for Austerity Crumbled
libby
Posts: 222
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How the Case for Austerity Has Crumbled
By Paul Krugman, NYBooks.com, June 6, 2013
In normal times, an arithmetic mistake in an economics paper would be a complete nonevent as far as the wider world was concerned. But in April 2013, the discovery of such a mistake—actually, a coding error in a spreadsheet, coupled with several other flaws in the analysis—not only became the talk of the economics profession, but made headlines. Looking back, we might even conclude that it changed the course of policy.
Why? Because the paper in question, “Growth in a Time of Debt,” by the Harvard economists Carmen Reinhart and Kenneth Rogoff, had acquired touchstone status in the debate over economic policy. Ever since the paper was first circulated, austerians—advocates of fiscal austerity, of immediate sharp cuts in government spending—had cited its alleged findings to defend their position and attack their critics. Again and again, suggestions that, as John Maynard Keynes once argued, “the boom, not the slump, is the right time for austerity”—that cuts should wait until economies were stronger—were met with declarations that Reinhart and Rogoff had shown that waiting would be disastrous, that economies fall off a cliff once government debt exceeds 90 percent of GDP.
Indeed, Reinhart-Rogoff may have had more immediate influence on public debate than any previous paper in the history of economics. The 90 percent claim was cited as the decisive argument for austerity by figures ranging from Paul Ryan, the former vice-presidential candidate who chairs the House budget committee, to Olli Rehn, the top economic official at the European Commission, to the editorial board of The Washington Post. So the revelation that the supposed 90 percent threshold was an artifact of programming mistakes, data omissions, and peculiar statistical techniques suddenly made a remarkable number of prominent people look foolish.
The real mystery, however, was why Reinhart-Rogoff was ever taken seriously, let alone canonized, in the first place. Right from the beginning, critics raised strong concerns about the paper’s methodology and conclusions, concerns that should have been enough to give everyone pause. Moreover, Reinhart-Rogoff was actually the second example of a paper seized on as decisive evidence in favor of austerity economics, only to fall apart on careful scrutiny. Much the same thing happened, albeit less spectacularly, after austerians became infatuated with a paper by Alberto Alesina and Silvia Ardagna purporting to show that slashing government spending would have little adverse impact on economic growth and might even be expansionary. Surely that experience should have inspired some caution.
So why wasn’t there more caution? The answer, as documented by some of the books reviewed here and unintentionally illustrated by others, lies in both politics and psychology: the case for austerity was and is one that many powerful people want to believe, leading them to seize on anything that looks like a justification. I’ll talk about that will to believe later in this article. First, however, it’s useful to trace the recent history of austerity both as a doctrine and as a policy experiment.
1. In the beginning was the bubble.
There have been many, many books about the excesses of the boom years—in fact, too many books. For as we’ll see, the urge to dwell on the lurid details of the boom, rather than trying to understand the dynamics of the slump, is a recurrent problem for economics and economic policy. For now, suffice it to say that by the beginning of 2008 both America and Europe were poised for a fall. They had become excessively dependent on an overheated housing market, their households were too deep in debt, their financial sectors were undercapitalized and overextended.
All that was needed to collapse these houses of cards was some kind of adverse shock, and in the end the implosion of US subprime-based securities did the deed. By the fall of 2008 the housing bubbles on both sides of the Atlantic had burst, and the whole North Atlantic economy was caught up in “deleveraging,” a process in which many debtors try—or are forced—to pay down their debts at the same time.
Why is this a problem? Because of interdependence: your spending is my income, and my spending is your income. If both of us try to reduce our debt by slashing spending, both of our incomes plunge—and plunging incomes can actually make our indebtedness worse even as they also produce mass unemployment.
Students of economic history watched the process unfolding in 2008 and 2009 with a cold shiver of recognition, because it was very obviously the same kind of process that brought on the Great Depression. Indeed, early in 2009 the economic historians Barry Eichengreen and Kevin O’Rourke produced shocking charts showing that the first year of the 2008–2009 slump in trade and industrial production was fully comparable to the first year of the great global slump from 1929 to 1933.
So was a second Great Depression about to unfold? The good news was that we had, or thought we had, several big advantages over our grandfathers, helping to limit the damage. Some of these advantages were, you might say, structural, built into the way modern economies operate, and requiring no special action on the part of policymakers. Others were intellectual: surely we had learned something since the 1930s, and would not repeat our grandfathers’ policy mistakes.
On the structural side, probably the biggest advantage over the 1930s was the way taxes and social insurance programs—both much bigger than they were in 1929—acted as “automatic stabilizers.” Wages might fall, but overall income didn’t fall in proportion, both because tax collections plunged and because government checks continued to flow for Social Security, Medicare, unemployment benefits, and more. In effect, the existence of the modern welfare state put a floor on total spending, and therefore prevented the economy’s downward spiral from going too far.
On the intellectual side, modern policymakers knew the history of the Great Depression as a cautionary tale; some, including Ben Bernanke, had actually been major Depression scholars in their previous lives. They had learned from Milton Friedman the folly of letting bank runs collapse the financial system and the desirability of flooding the economy with money in times of panic. They had learned from John Maynard Keynes that under depression conditions government spending can be an effective way to create jobs. They had learned from FDR’s disastrous turn toward austerity in 1937 that abandoning monetary and fiscal stimulus too soon can be a very big mistake.
As a result, where the onset of the Great Depression was accompanied by policies that intensified the slump—interest rate hikes in an attempt to hold on to gold reserves, spending cuts in an attempt to balance budgets—2008 and 2009 were characterized by expansionary monetary and fiscal policies, especially in the United States, where the Federal Reserve not only slashed interest rates, but stepped into the markets to buy everything from commercial paper to long-term government debt, while the Obama administration pushed through an $800 billion program of tax cuts and spending increases. European actions were less dramatic—but on the other hand, Europe’s stronger welfare states arguably reduced the need for deliberate stimulus.
Now, some economists (myself included) warned from the beginning that these monetary and fiscal actions, although welcome, were too small given the severity of the economic shock. Indeed, by the end of 2009 it was clear that although the situation had stabilized, the economic crisis was deeper than policymakers had acknowledged, and likely to prove more persistent than they had imagined. So one might have expected a second round of stimulus to deal with the economic shortfall.
What actually happened, however, was a sudden reversal.
2. Neil Irwin’s The Alchemists gives us a time and a place at which the major advanced countries abruptly pivoted from stimulus to austerity.
The time was early February 2010; the place, somewhat bizarrely, was the remote Canadian Arctic settlement of Iqaluit, where the Group of Seven finance ministers held one of their regularly scheduled summits. Sometimes (often) such summits are little more than ceremonial occasions, and there was plenty of ceremony at this one too, including raw seal meat served at the last dinner (the foreign visitors all declined). But this time something substantive happened. “In the isolation of the Canadian wilderness,” Irwin writes, “the leaders of the world economy collectively agreed that their great challenge had shifted. The economy seemed to be healing; it was time for them to turn their attention away from boosting growth. No more stimulus.”
How decisive was the turn in policy? Figure 1, which is taken from the IMF’s most recent World Economic Outlook, shows how real government spending behaved in this crisis compared with previous recessions; in the figure, year zero is the year before global recession (2007 in the current slump), and spending is compared with its level in that base year. What you see is that the widespread belief that we are experiencing runaway government spending is false—on the contrary, after a brief surge in 2009, government spending began falling in both Europe and the United States, and is now well below its normal trend. The turn to austerity was very real, and quite large.
On the face of it, this was a very strange turn for policy to take. Standard textbook economics says that slashing government spending reduces overall demand, which leads in turn to reduced output and employment. This may be a desirable thing if the economy is overheating and inflation is rising; alternatively, the adverse effects of reduced government spending can be offset. Central banks (the Fed, the European Central Bank, or their counterparts elsewhere) can cut interest rates, inducing more private spending. However, neither of these conditions applied in early 2010, or for that matter apply now. The major advanced economies were and are deeply depressed, with no hint of inflationary pressure. Meanwhile, short-term interest rates, which are more or less under the central bank’s control, are near zero, leaving little room for monetary policy to offset reduced government spending. So Economics 101 would seem to say that all the austerity we’ve seen is very premature, that it should wait until the economy is stronger.
The question, then, is why economic leaders were so ready to throw the textbook out the window.
One answer is that many of them never believed in that textbook stuff in the first place. The German political and intellectual establishment has never had much use for Keynesian economics; neither has much of the Republican Party in the United States. In the heat of an acute economic crisis—as in the autumn of 2008 and the winter of 2009—these dissenting voices could to some extent be shouted down; but once things had calmed they began pushing back hard.
A larger answer is the one we’ll get to later: the underlying political and psychological reasons why many influential figures hate the notions of deficit spending and easy money. Again, once the crisis became less acute, there was more room to indulge in these sentiments.
In addition to these underlying factors, however, were two more contingent aspects of the situation in early 2010: the new crisis in Greece, and the appearance of seemingly rigorous, high-quality economic research that supported the austerian position.
The Greek crisis came as a shock to almost everyone, not least the new Greek government that took office in October 2009. The incoming leadership knew it faced a budget deficit—but it was only after arriving that it learned that the previous government had been cooking the books, and that both the deficit and the accumulated stock of debt were far higher than anyone imagined. As the news sank in with investors, first Greece, then much of Europe, found itself in a new kind of crisis—one not of failing banks but of failing governments, unable to borrow on world markets.
It’s an ill wind that blows nobody good, and the Greek crisis was a godsend for anti-Keynesians. They had been warning about the dangers of deficit spending; the Greek debacle seemed to show just how dangerous fiscal profligacy can be. To this day, anyone arguing against fiscal austerity, let alone suggesting that we need another round of stimulus, can expect to be attacked as someone who will turn America (or Britain, as the case may be) into another Greece.
If Greece provided the obvious real-world cautionary tale, Reinhart and Rogoff seemed to provide the math. Their paper seemed to show not just that debt hurts growth, but that there is a “threshold,” a sort of trigger point, when debt crosses 90 percent of GDP. Go beyond that point, their numbers suggested, and economic growth stalls. Greece, of course, already had debt greater than the magic number. More to the point, major advanced countries, the United States included, were running large budget deficits and closing in on the threshold. Put Greece and Reinhart-Rogoff together, and there seemed to be a compelling case for a sharp, immediate turn toward austerity.
But wouldn’t such a turn toward austerity in an economy still depressed by private deleveraging have an immediate negative impact? Not to worry, said another remarkably influential academic paper, “Large Changes in Fiscal Policy: Taxes Versus Spending,” by Alberto Alesina and Silvia Ardagna.
One of the especially good things in Mark Blyth’s Austerity: The History of a Dangerous Idea is the way he traces the rise and fall of the idea of “expansionary austerity,” the proposition that cutting spending would actually lead to higher output. As he shows, this is very much a proposition associated with a group of Italian economists (whom he dubs “the Bocconi boys”) who made their case with a series of papers that grew more strident and less qualified over time, culminating in the 2009 analysis by Alesina and Ardagna.
In essence, Alesina and Ardagna made a full frontal assault on the Keynesian proposition that cutting spending in a weak economy produces further weakness. Like Reinhart and Rogoff, they marshaled historical evidence to make their case. According to Alesina and Ardagna, large spending cuts in advanced countries were, on average, followed by expansion rather than contraction. The reason, they suggested, was that decisive fiscal austerity created confidence in the private sector, and this increased confidence more than offset any direct drag from smaller government outlays.
As Mark Blyth documents, this idea spread like wildfire. Alesina and Ardagna made a special presentation in April 2010 to the Economic and Financial Affairs Council of the European Council of Ministers; the analysis quickly made its way into official pronouncements from the European Commission and the European Central Bank. Thus in June 2010 Jean-Claude Trichet, the then president of the ECB, dismissed concerns that austerity might hurt growth:
As regards the economy, the idea that austerity measures could trigger stagnation is incorrect…. In fact, in these circumstances, everything that helps to increase the confidence of households, firms and investors in the sustainability of public finances is good for the consolidation of growth and job creation. I firmly believe that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today. This was straight Alesina-Ardagna.
By the summer of 2010, then, a full-fledged austerity orthodoxy had taken shape, becoming dominant in European policy circles and influential on this side of the Atlantic. So how have things gone in the almost three years that have passed since?
3. Clear evidence on the effects of economic policy is usually hard to come by.
Governments generally change policies reluctantly, and it’s hard to distinguish the effects of the half-measures they undertake from all the other things going on in the world. The Obama stimulus, for example, was both temporary and fairly small compared with the size of the US economy, never amounting to much more than 2 percent of GDP, and it took effect in an economy whipsawed by the biggest financial crisis in three generations. How much of what took place in 2009–2011, good or bad, can be attributed to the stimulus? Nobody really knows.
The turn to austerity after 2010, however, was so drastic, particularly in European debtor nations, that the usual cautions lose most of their force. Greece imposed spending cuts and tax increases amounting to 15 percent of GDP; Ireland and Portugal rang in with around 6 percent; and unlike the half-hearted efforts at stimulus, these cuts were sustained and indeed intensified year after year. So how did austerity actually work?
The answer is that the results were disastrous—just about as one would have predicted from textbook macroeconomics. Figure 2, for example, shows what happened to a selection of European nations (each represented by a diamond-shaped symbol). The horizontal axis shows austerity measures—spending cuts and tax increases—as a share of GDP, as estimated by the International Monetary Fund. The vertical axis shows the actual percentage change in real GDP. As you can see, the countries forced into severe austerity experienced very severe downturns, and the downturns were more or less proportional to the degree of austerity.
There have been some attempts to explain away these results, notably at the European Commission. But the IMF, looking hard at the data, has not only concluded that austerity has had major adverse economic effects, it has issued what amounts to a mea culpa for having underestimated these adverse effects.*
But is there any alternative to austerity? What about the risks of excessive debt?
In early 2010, with the Greek disaster fresh in everyone’s mind, the risks of excessive debt seemed obvious; those risks seemed even greater by 2011, as Ireland, Spain, Portugal, and Italy joined the ranks of nations having to pay large interest rate premiums. But a funny thing happened to other countries with high debt levels, including Japan, the United States, and Britain: despite large deficits and rapidly rising debt, their borrowing costs remained very low. The crucial difference, as the Belgian economist Paul DeGrauwe pointed out, seemed to be whether countries had their own currencies, and borrowed in those currencies. Such countries can’t run out of money because they can print it if needed, and absent the risk of a cash squeeze, advanced nations are evidently able to carry quite high levels of debt without crisis.
Three years after the turn to austerity, then, both the hopes and the fears of the austerians appear to have been misplaced. Austerity did not lead to a surge in confidence; deficits did not lead to crisis. But wasn’t the austerity movement grounded in serious economic research? Actually, it turned out that it wasn’t—the research the austerians cited was deeply flawed.
First to go down was the notion of expansionary austerity. Even before the results of Europe’s austerity experiment were in, the Alesina-Ardagna paper was falling apart under scrutiny. Researchers at the Roosevelt Institute pointed out that none of the alleged examples of austerity leading to expansion of the economy actually took place in the midst of an economic slump; researchers at the IMF found that the Alesina-Ardagna measure of fiscal policy bore little relationship to actual policy changes. “By the middle of 2011,” Blyth writes, “empirical and theoretical support for expansionary austerity was slipping away.” Slowly, with little fanfare, the whole notion that austerity might actually boost economies slunk off the public stage.
Reinhart-Rogoff lasted longer, even though serious questions about their work were raised early on. As early as July 2010 Josh Bivens and John Irons of the Economic Policy Institute had identified both a clear mistake—a misinterpretation of US data immediately after World War II—and a severe conceptual problem. Reinhart and Rogoff, as they pointed out, offered no evidence that the correlation ran from high debt to low growth rather than the other way around, and other evidence suggested that the latter was more likely. But such criticisms had little impact; for austerians, one might say, Reinhart-Rogoff was a story too good to check.
So the revelations in April 2013 of the errors of Reinhart and Rogoff came as a shock. Despite their paper’s influence, Reinhart and Rogoff had not made their data widely available—and researchers working with seemingly comparable data hadn’t been able to reproduce their results. Finally, they made their spreadsheet available to Thomas Herndon, a graduate student at the University of Massachusetts, Amherst—and he found it very odd indeed. There was one actual coding error, although that made only a small contribution to their conclusions. More important, their data set failed to include the experience of several Allied nations—Canada, New Zealand, and Australia—that emerged from World War II with high debt but nonetheless posted solid growth. And they had used an odd weighting scheme in which each “episode” of high debt counted the same, whether it occurred during one year of bad growth or seventeen years of good growth.
Without these errors and oddities, there was still a negative correlation between debt and growth—but this could be, and probably was, mostly a matter of low growth leading to high debt, not the other way around. And the “threshold” at 90 percent vanished, undermining the scare stories being used to sell austerity.
Not surprisingly, Reinhart and Rogoff have tried to defend their work; but their responses have been weak at best, evasive at worst. Notably, they continue to write in a way that suggests, without stating outright, that debt at 90 percent of GDP is some kind of threshold at which bad things happen. In reality, even if one ignores the issue of causality—whether low growth causes high debt or the other way around—the apparent effects on growth of debt rising from, say, 85 to 95 percent of GDP are fairly small, and don’t justify the debt panic that has been such a powerful influence on policy.
At this point, then, austerity economics is in a very bad way. Its predictions have proved utterly wrong; its founding academic documents haven’t just lost their canonized status, they’ve become the objects of much ridicule. But as I’ve pointed out, none of this (except that Excel error) should have come as a surprise: basic macroeconomics should have told everyone to expect what did, in fact, happen, and the papers that have now fallen into disrepute were obviously flawed from the start.
This raises the obvious question: Why did austerity economics get such a powerful grip on elite opinion in the first place?
4. Everyone loves a morality play.
“For the wages of sin is death” is a much more satisfying message than “**** happens.” We all want events to have meaning.
When applied to macroeconomics, this urge to find moral meaning creates in all of us a predisposition toward believing stories that attribute the pain of a slump to the excesses of the boom that precedes it—and, perhaps, also makes it natural to see the pain as necessary, part of an inevitable cleansing process. When Andrew Mellon told Herbert Hoover to let the Depression run its course, so as to “purge the rottenness” from the system, he was offering advice that, however bad it was as economics, resonated psychologically with many people (and still does).
By contrast, Keynesian economics rests fundamentally on the proposition that macroeconomics isn’t a morality play—that depressions are essentially a technical malfunction. As the Great Depression deepened, Keynes famously declared that “we have magneto trouble”—i.e., the economy’s troubles were like those of a car with a small but critical problem in its electrical system, and the job of the economist is to figure out how to repair that technical problem. Keynes’s masterwork, The General Theory of Employment, Interest and Money, is noteworthy—and revolutionary—for saying almost nothing about what happens in economic booms. Pre-Keynesian business cycle theorists loved to dwell on the lurid excesses that take place in good times, while having relatively little to say about exactly why these give rise to bad times or what you should do when they do. Keynes reversed this priority; almost all his focus was on how economies stay depressed, and what can be done to make them less depressed.
I’d argue that Keynes was overwhelmingly right in his approach, but there’s no question that it’s an approach many people find deeply unsatisfying as an emotional matter. And so we shouldn’t find it surprising that many popular interpretations of our current troubles return, whether the authors know it or not, to the instinctive, pre-Keynesian style of dwelling on the excesses of the boom rather than on the failures of the slump.
David Stockman’s The Great Deformation should be seen in this light. It’s an immensely long rant against excesses of various kinds, all of which, in Stockman’s vision, have culminated in our present crisis. History, to Stockman’s eyes, is a series of “sprees”: a “spree of unsustainable borrowing,” a “spree of interest rate repression,” a “spree of destructive financial engineering,” and, again and again, a “money-printing spree.” For in Stockman’s world, all economic evil stems from the original sin of leaving the gold standard. Any prosperity we may have thought we had since 1971, when Nixon abandoned the last link to gold, or maybe even since 1933, when FDR took us off gold for the first time, was an illusion doomed to end in tears. And of course, any policies aimed at alleviating the current slump will just make things worse.
In itself, Stockman’s book isn’t important. Aside from a few swipes at Republicans, it consists basically of standard goldbug bombast. But the attention the book has garnered, the ways it has struck a chord with many people, including even some liberals, suggest just how strong remains the urge to see economics as a morality play, three generations after Keynes tried to show us that it is nothing of the kind.
And powerful officials are by no means immune to that urge. In The Alchemists, Neil Irwin analyzes the motives of Jean-Claude Trichet, the president of the European Central Bank, in advocating harsh austerity policies:
Trichet embraced a view, especially common in Germany, that was rooted in a sort of moralism. Greece had spent too much and taken on too much debt. It must cut spending and reduce deficits. If it showed adequate courage and political resolve, markets would reward it with lower borrowing costs. He put a great deal of faith in the power of confidence…. Given this sort of predisposition, is it any wonder that Keynesian economics got thrown out the window, while Alesina-Ardagna and Reinhart-Rogoff were instantly canonized?
So is the austerian impulse all a matter of psychology? No, there’s also a fair bit of self-interest involved. As many observers have noted, the turn away from fiscal and monetary stimulus can be interpreted, if you like, as giving creditors priority over workers. Inflation and low interest rates are bad for creditors even if they promote job creation; slashing government deficits in the face of mass unemployment may deepen a depression, but it increases the certainty of bondholders that they’ll be repaid in full. I don’t think someone like Trichet was consciously, cynically serving class interests at the expense of overall welfare; but it certainly didn’t hurt that his sense of economic morality dovetailed so perfectly with the priorities of creditors.
It’s also worth noting that while economic policy since the financial crisis looks like a dismal failure by most measures, it hasn’t been so bad for the wealthy. Profits have recovered strongly even as unprecedented long-term unemployment persists; stock indices on both sides of the Atlantic have rebounded to pre-crisis highs even as median income languishes. It might be too much to say that those in the top 1 percent actually benefit from a continuing depression, but they certainly aren’t feeling much pain, and that probably has something to do with policymakers’ willingness to stay the austerity course.
5. How could this happen?
That’s the question many people were asking four years ago; it’s still the question many are asking today. But the “this” has changed.
Four years ago, the mystery was how such a terrible financial crisis could have taken place, with so little forewarning. The harsh lessons we had to learn involved the fragility of modern finance, the folly of trusting banks to regulate themselves, and the dangers of assuming that fancy financial arrangements have eliminated or even reduced the age-old problems of risk.
I would argue, however—self-serving as it may sound (I warned about the housing bubble, but had no inkling of how widespread a collapse would follow when it burst)—that the failure to anticipate the crisis was a relatively minor sin. Economies are complicated, ever-changing entities; it was understandable that few economists realized the extent to which short-term lending and securitization of assets such as subprime mortgages had recreated the old risks that deposit insurance and bank regulation were created to control.
I’d argue that what happened next—the way policymakers turned their back on practically everything economists had learned about how to deal with depressions, the way elite opinion seized on anything that could be used to justify austerity—was a much greater sin. The financial crisis of 2008 was a surprise, and happened very fast; but we’ve been stuck in a regime of slow growth and desperately high unemployment for years now. And during all that time policymakers have been ignoring the lessons of theory and history.
It’s a terrible story, mainly because of the immense suffering that has resulted from these policy errors. It’s also deeply worrying for those who like to believe that knowledge can make a positive difference in the world. To the extent that policymakers and elite opinion in general have made use of economic analysis at all, they have, as the saying goes, done so the way a drunkard uses a lamppost: for support, not illumination. Papers and economists who told the elite what it wanted to hear were celebrated, despite plenty of evidence that they were wrong; critics were ignored, no matter how often they got it right.
The Reinhart-Rogoff debacle has raised some hopes among the critics that logic and evidence are finally beginning to matter. But the truth is that it’s too soon to tell whether the grip of austerity economics on policy will relax significantly in the face of these revelations. For now, the broader message of the past few years remains just how little good comes from understanding.
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5/15/2013 4:28:50 PM
Topic:
CEOs and the Corporate Capture of the American Dre
TheTaxMan
Posts: 65
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Drone CEOs and the Corporate Capture of the American Dream
By Editor, Corporate Crime Reporter, May 6th, 2013
The American dream has been captured by drone corporations.
That’s according to a new book by shareholder activist Robert A.G. Monks.
The book is called — Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream (Miniver Press, 2013).
What makes a corporation a drone corporation?
“By drone corporation, I mean one in which there is no element of effective ownership to monitor or to restrain the exercise of power by the corporate executive,” Monks told Corporate Crime Reporter in an interview last week.
Most major American corporations are drone corporations.
“I would say that about 60 percent of the biggest ones are,” Monks said. “Companies like General Electric. Exxon. IBM.”
Name some that aren’t drones?
“Microsoft, Berkshire Hathaway, Google, Apple,” Monks says.
The key characteristic of a drone corporation?
“Drones were more likely to externalize liability,” Monks said. “In comparing drone corporations to non-drone corporations, we discovered that the drone corporations were distinctly more likely to externalize liability. They were distinctly more liable to be indicted for criminal activity. And the extent of their criminal fines were significantly larger than those for the non drones.”
“There are now a significant number of drone corporations that use the violation of criminal law and the fines and penalties that result as a sales expense that on balance they have concluded is worthwhile.”
“This is true for companies like Pfizer in the pharmaceutical industry. And it seems to be a policy that British Petroleum has followed. They are prepared as a matter of management policy to conduct themselves in such a way as to violate criminal laws, to accept criminal penalties, and then continue to violate criminal law. That seemed to be substantially more prevalent in drone corporations than in non drone corporations.”
Not that Monks holds out high hopes for corporate criminal liability.
He has been grappling with the subject for a long time.
When he started the proxy advisory firm Institutional Shareholder Services in 1985, Monks was searching for a method to control corporate criminality.
“Everybody would agree that society needs some protection from the method of operation and scope of impact of corporate functioning,” Monks said. “That takes its most extreme form in criminal sanctions.”
“What can a country could do at the extreme to indicate that certain conduct is intolerable? Characterize it as being criminal. Back then, we got a very good lawyer — a man named Bill Weld, who had just left the Attorney General’s office. This was before he became Governor of Massachusetts. And we drafted bylaw provisions that we would make the subject of shareholder resolutions. And we sent drafts of these to the principals of the corporations. And we said, in effect — we sure you will agree that you do not countenance having on your board any individual who has been on a board of a company that has been convicted of criminal activity during the time of his service.”
“We got back a variety of really hostile replies, including a warning from the self-confessed leader of the corporate bar that anybody who did such a thing would be sued.”
“And it became clear that we were way ahead of ourselves. No one was going to agree to restrict the service of directors who had been involved with companies with a criminal record.”
“That’s what started me down the road to the really sad conclusion that the application of the criminal law to corporate activity is a delusion. It is something that is adduced by policy makers to try to quiet people’s anxiety by saying — we are doing something about the adverse effect of corporations — we have made this a crime.”
“But in doing it, they really have been guilty of a far worse crime — that of knowingly deceiving people. The characterization of activity as criminal has not in the least inhibited corporate functioning. So, this is simply a governmental delusion in an effort to create a known wrong conclusion about the effectiveness of corporate restraint by criminal enforcement.”
And what would be a better way to control corporate wrongdoing?
Monks is a believer in shareholder democracy.
Monks believes that owners of corporations should exert control over the corporations they control.
He believes in the quaint notion of corporate democracy.
He believes that shareholder democracy can make our world a better place to live.
But since millions of Americans own shares through mutual funds and index funds, for the most part, they don’t even know what they own.
That’s why Monks says the key to shareholder democracy is for the leaders of twelve of the largest institutions to take action to protect the public from corporate wrongdoing.
In his book, Monks identifies the trustees of the six largest university endowments — MIT, Harvard, Stanford, Princeton, Yale and Texas — and the six largest foundations — the Bill and Melinda Gates Foundation, the Ford Foundation, the J. Paul Getty Trust, the Robert Wood Johnson Foundation, the William and Flora Hewlett Foundation, and the David and Lucile Packard Foundation.
“In the world in which meaningful change actually occurs, those who can make a true and lasting difference—who can lead the charge, who can raise the flag that others follows — are perilously few: not the funds per se, not their hired managers, however handsomely they are rewarded, but the trustees who stand behind them and are both legal owners of the entities and moral owners of their actions. They, the trustees, have ultimate power, and thus they have ultimate responsibility and accountability. They are the tip of the tip of the tip of the spear in defense of truly democratic capitalism.”
But if these trustees won’t raise a finger — which they haven’t — is there a public interest group dedicated to pushing these powerful trusts to do the right thing?
“There is such a group, but it’s not in the United States,” Monks said. “It’s the Greens in Europe, in particularly the Green political party in Germany. They were able to boycott Shell at the time of a serious disagreement about how Shell was going to dispose of some of the drilling rigs they used in the North Sea. And they boycotted Shell to the point that Shell said — whatever you say we must do we’ll do. Shell was beaten into it by consumer pressure.”
“That’s the only example I can think of that has been that dramatic.”
But from a sociological perspective, why hasn’t this been done in the United States?
Not one such group exists in the United States.
That doesn’t make sense.
“It’s a depressing subject,” Monks says. “Ask Ralph Nader. God bless Ralph. He’s still at it. And he doesn’t show any signs of being discouraged. And we are all the better for it.”
“I keep saying to myself — enough people aren’t hurting enough.”
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5/15/2013 4:15:12 PM
Topic:
Growth and Greed Have Taken Over
TheTaxMan
Posts: 65
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Former USAir General Counsel Speaks Out
Growth and Greed Have Taken Over
by RUSSELL MOKHIBER, CounterPunch.org, May 14, 2013
It’s not every day that a former corporate lawyer comes out in favor of stronger regulation of big business.
And it’s not every day the former general counsel of a major American corporation comes out and urges the federal government to force major corporate wrongdoers to admit to their wrongdoing.
But today is that day.
Lawrence Stentzel is the former general counsel for USAir.
He then went on to join Morgan Lewis & Bockius in Washington, D.C.
And now, he’s speaking out about corporate crime and wrongdoing.
He has written a paper titled — Federal Regulation is Not an Effective Deterrent to Corporate Malfeasance.
In the paper, Stentzel chastises federal regulators for not holding corporate wrongdoers’ feet to the fire.
“Conscientious and effective corporate governance in the United States has been declining sharply for at least the last two decades,” Stentzel writes.
“Most of the large, publicly held corporations comprising the Dow Jones Industrial Average have been implicated in egregious corporate wrongdoing in recent years. When the wrongdoing has been challenged, more often than not the consequences to the corporation have been minimal in comparison with the advantages gained by the wrongdoing. In nearly all instances of multi-million dollar settlements with regulatory agencies, the corporation has been permitted by the regulatory agency to refrain from admitting wrongdoing.”
Stentzel focuses on “the failure of our regulators and legal system to impose meaningful sanctions on corporate malfeasance.”
“The recently increased use of so-called deferred prosecution agreements and non-prosecution agreements attests to this fact,” Stentzel writes.
“The actions and inaction of our regulatory agencies often encourage, rather than discourage, corporate wrongdoing because sanctions are infrequently imposed and, when imposed, are often insufficient to deter future wrongdoing that would enhance short-term corporate profitability.”
Stentzel surveyed the nation’s 30 largest publicly held companies and found “numerous instances in which the Securities and Exchange Commission (SEC) or the Department of Justice and other federal regulatory agencies have settled cases of serious corporate malfeasance without insisting on an admission of wrongdoing by the corporation.”
“In many, if not most, of these settlements, the benefits to the corporate wrongdoer probably greatly exceeded the fines imposed,” Stentzel argues.
“Furthermore, many instances of corporate wrongdoing are never challenged by the regulatory agencies. In a financial system so narrowly focused on short term profits, this combination of lenient sanctions and infrequent regulatory challenges encourages the types of wrongdoing that will enhance profits, if undetected.”
“Not only does the corporate entity emerge from those SEC and DOJ proceedings virtually unscathed, but almost invariably senior management is also unscathed. In many such cases the prior knowledge of the offense by senior management is apparent. When a member of senior management encourages, condones, has prior awareness of or reasonably should have had prior knowledge of the malfeasance, that member of senior management should be charged with wrongdoing and the corporation should not be permitted to settle without admitting the wrongdoing. Wrongful actions or inaction by senior management should have widely publicized adverse consequences for both the corporation and the senior manager.”
Stentzel is disturbed by the failure of regulatory agencies to force corporate wrongdoers to admit to their wrongdoing.
“What is the reasoning underlying the reluctance of the SEC and DOJ to insist upon an admission of wrongdoing by the corporation?” Stentzel asks.
“One convenient — but fallacious – excuse is the regulators’ professed concern about the impact of a corporate admission of guilt upon innocent shareholders. This erroneous reasoning ignores the widespread harmful consequences to both investors and the general public of these SEC and DOJ whitewash proceedings. This policy encourages and greatly exacerbates future corporate wrongdoing.”
“If an admission of wrongdoing were required when the SEC or DOJ settlements are entered into, analysts would not have the luxury of ignoring the wrongdoing and the investing public would have much greater visibility of the widespread corporate misconduct that has become more the rule than the exception with large public corporations in the United States,” Stentzel writes.
“In fairness to the analysts, it is difficult for them to ascribe significance or importance to a settlement and payment of even a sizeable fine when the SEC or DOJ has seen fit to settle without an admission by the corporation. If challenged in an analyst report, the corporate wrongdoer would probably respond that it was innocent but wished to avoid the expense of litigation. The initial charges by the regulatory agency are often a better indication of the challenged corporate misconduct than the settlement agreement. These charges never appear in an analyst report and are rarely conclusively documented because the regulator habitually settles without an admission of wrongdoing.”
Stentzel also chides the government for not creating a user friendly database of corporate wrongdoing.
“There is no user-friendly SEC or DOJ or other governmental agency website that reveals all of the charges against, investigations and convictions of and settlements with any particular company,” Stentzel writes.
“Both the SEC and DOJ should have websites on which the entry of a corporation’s name or listing symbol would reveal all of that company’s involvements with that regulatory agency for the greater of a ten-year period or the incumbency of the current CEO.”
Stentzel says he has written to two U.S. Attorneys General and two chairs of the SEC urging such a database be created — to no avail.
In his paper, Stentzel writes:
“A return to the sound perspective about corporate size of Supreme Court Justice Louis Brandeis and President Theodore Roosevelt is not feasible.”
We asked him — why not?
“Do you see this ad (AT&T commercial) on television?” Stentzel asks.
“I cringe every time I see it. It’s a young man sitting down with five or six little children in a circle. They ad states — bigger is better. That’s what is happening in our society. Growth is so important. We are developing into a country dominated by massive corporations and lobbyists who control our Congress and have captured some of our federal regulatory agencies.”
Do you know of any other corporate lawyers like yourself who are speaking out?
“I do know them,” Stentzel told Corporate Crime Reporter in an interview last week. “But they are pessimistic about the future and believe that greed has overtaken everything else.”
What’s going to turn it around?
“A return to good governance could be encouraged somewhat by federal regulatory agencies,” Stentzel said.
“Get rid of this neither admit nor deny because that lets the analysts off the hook. If there is an admission of wrongdoing, the analysts aren’t going to be able to ignore it. They are going to have to talk about it.”
Russell Mokhiber edits the Corporate Crime Reporter.
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5/15/2013 4:02:26 PM
Topic:
The Radical Center and Armed Revolution
TheTaxMan
Posts: 65
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The Radical Center and Armed Revolution
A Challenge for the Left
by ROB URIE, CounterPunch.org, May 10, 2013
Following release of the results of a recent Fairleigh Dickinson University poll showing 29% of registered voters in the U.S. believe armed revolution to ‘protect liberties’ may be necessary the self-appointed political ‘center’ went into full conniption in defense of the established order. Visions of shotgun wielding Tea Partiers were trotted out, racists no doubt, storming the Capitol to roll back the radical progress President Barack Obama and a blameless Congress have made to save ‘our fledgling democracy’ from the predations of empire, the corrupting influence of money in politics, the growing and conspicuous divide between haves and have-nots, the murderous militarism of the war industry and the oppressive machinations of a militarized police. Accurate descriptions of official policies to which the citizenry might legitimately object were prominent in their absence.
Framed as reaction to the ascendance of America’s first black President and the ‘liberal agenda’ he studiously paid lip service to while factually acting in the service of his rich campaign contributors and the corporations they own, missing was where this ‘movement’ fits into recent American history. On the political right the ‘Militia’ movement of armed defenders of American ‘liberties’ arose in the mid-1990s. The economic context was a prior decade of de-industrialization of the heartland attributable to Federal Reserve efforts to ‘tame’ inflation (high interest rates raised the value of the U.S. dollar making industrial exports uncompetitive), military cuts following the end of the Cold War that disproportionately affected the rural middle class and the savage, largely gratuitous mass layoffs by corporate America that were the fashion between 1990 – 1995. While poorly understood and often even more poorly articulated at the time, the ‘New World Order’ against which the Militias were preparing to fight was a rough proxy for the factually ascendant plutocracy now patron and sole beneficiary of official Washington policy.
Unmentioned out of apparent residual embarrassment are left wing revolutionaries, a/k/a ‘terrorists,’ long known to enthusiastically object to economic predation, historical and current police violence against their persons, colleagues, families and communities, wanton militarism in the interests of imperial capital and the class predations of reigning plutocracies—all the policies good liberals support when a credentialed guy in a $3,000 suit explains in liberal-speak the policies of the radical right are ‘liberal.’ To the ongoing humiliation of said professional left, South American Marxists / Leninists and homegrown anarcho-collectivists impede, or at least have in the not so distant past, their corporate fund raising and networking efforts at the annual con-fabs held at five-star hotels in exotic locales where they no doubt enthusiastically discuss the locale and menu of the next year’s con-fab. As anyone receiving a paycheck from the responsible left could tell you, ‘working within the system’ is the only way to ‘get a seat at the table.’
The basis of the current charge these would-be revolutionaries are from the radical right is that over twice as many registered Republicans (44%) as Democrats (18%) claim to be ready to take up arms (27% of Independents join them). Having apparently declined to ask the economic status of the respondents, economic class was pre-determined to be irrelevant to both the poll questions and liberal discussion of them. Beyond this, it seems a reasonable assumption a racist, reactionary right composes some proportion of those ready to take up arms, just as it is represented in the police forces of major U.S. cities, in the military, in senior management positions in large corporations, is regularly welcomed at White House functions and serves on the Boards of Directors of prominent cultural institutions. While the apparent liberal fear is of heavily armed trailer park rednecks swilling beer while trying to reclaim the Ku Klux Klan from the FBI and local police forces, the facts of the existing political economy suggest the revolution of the radical right was won some decades past. So what exactly is it bourgeois commentators are defending?
The ‘centrist’ tale told is of a once dominant culture displaced by history that is now desperate to reclaim its right– the ‘Leave it to Beaver’ world of white privilege being ‘stolen’ by Spanish speaking immigrants, Affirmative Action receiving ‘minorities,’ and feckless academics promoting the interests of ‘others’ over their own heritage and culture. The tale not being told is of a political economy re-dedicated some decades back to capitalist accumulation at any cost that has resulted in wildly skewed income distribution, stagnant incomes for most of the population, regular and large scale unemployment, widespread and increasing economic insecurity, predation by large corporations now exempted from laws and accountability, the diminishment of public institutions and a national state wholly dedicated to serving the tiny elite who now control the country. The liberal tale needn’t be wrong to be irrelevant— while the ‘feelings’ of racist right-wing reactionaries may be strong; there is little possibility they would have actual effect without the wholesale economic dispossession now under way.
One aspect missing in the debate over gun control– the back-story of the Fairleigh Dickinson poll, is gun control advocates only look at the civilian side of the issue. Coincident in recent decades with increasing concentration of political-economic power has been the militarization of the police; the massive build out of incarceration and prisons as capitalist enterprises, the erosion of legal protections from illegitimate state and commercial power, the growth of intrusive surveillance technologies and a shift to formal race and class-based strategies of police repression. On the one hand gun control advocates argue the fear of growing state power is lunatic paranoia while on the other there is no apparent interest on their part in disarming the increasingly militarized state against who the claims of outsized power are being made. This contradiction, combined with the articulated fear of an ideological right accompanied by implicit acceptance of the institutional right, points to the class basis for liberal fears. While ideological right-wing reactionaries are the perceived threat to bourgeois liberals, the facts of daily existence posed by institutional racism, the ‘legal status’ machinations used to exploit the manufactured immigrant underclass, and the rapidly and visibly growing class divide supported by state policies and enforced with state power, affect the lives of more people far more dramatically.
Put another way, it is the reaction of the growing underclass bourgeois liberals fear, not the diminishing material conditions faced by it. But the diminishing conditions are not fact of nature, but of policy. In but one example, Mr. Obama’s assorted efforts to solve the ‘foreclosure crisis’ his administration inherited were unwaveringly designed to screw ordinary citizens, both black and white, for the benefit of outlaw banks. Even so, residual anger over the bank bailouts would have diminished if wages and employment had recovered from depression levels. But wages for most Americans remain well below where they were six years ago and unemployment and underemployment remain at historically high levels. Were this not coincident with the full restoration of the fortunes of the reigning plutocracy at the expense of the broad citizenry these facts could be attributed to ignorance of basic economics on the part of establishment Washington. But this is not the case. The fortunes of the people ‘who matter’ were effectively restored—the economic mechanics for doing so are understood. It is entirely reasonable to conclude Mr. Obama and liberal Democrats (and Republicans) are tools of a predator class not just indifferent to the well being of most Americans, but one that actively benefits at their expense.
Congressional Republicans may more publicly promote economic and political predation under the guise of libertarian ‘freedom,’ but it is Democrats since President Bill Clinton (Jimmy Carter actually) who have more effectively promoted them. And therein lies at least part of the reason for current political angst. Beginning in 2006 when the Democrat majority was returned to Congress to the election of ‘liberal’ Democrat Barack Obama to the Presidency in 2008, the American electorate offered a rebuke of the murderous overreach and increasing plutocratic control of the George W. Bush era. And with it, the opportunity arose, in theory at least, to repudiate those excesses and chart a different course for the nation. Congressional Democrats immediately abdicated leadership under the conspicuous lie they needed a super majority to govern and Barack Obama set about codifying the most far reaching abuses of governmental power established by the Bush administration while demonstrating unwavering fealty to the reigning plutocracy. By describing his own policies as ‘moderate Republican’ Mr. Obama made it clear the electoral choice is between degrees of Republican—in contemporary terms the establishment Party of the radical right. When the possibility of affecting political change through the ballot box is removed, no other choice remains but to use other means to do so.
On a number of specific policy issues the feared non-establishment right may be inarticulate but may still have a point. By putting forward a conspicuously inadequate economic stimulus program when he entered office Mr. Obama ‘proved’ to a citizenry more concerned with just getting by than with the arcana of macroeconomic debates that Keynesian remedies don’t work. (Mr. Obama was loudly and repeatedly warned of this outcome at the time). Mr. Obama’s health care program forces financially strapped citizens to buy expensive private health insurance from for-profit companies with little redress for legitimate claims denied and with unchanged probability of economic ruin from exorbitant health care costs. To the Tea Party point, when associated with the increased militarization of the police, mass incarceration and diminished civil rights, this joining of state and corporate interests satisfies Italian fascist Benito Mussolini’s definition of fascism as the ‘corporate state.’ And in contrast to educated, connected, bourgeois liberals, those on the receiving end of illegitimate searches, arrests and incarceration, illegitimate foreclosures, predatory student loans from scam private educators and various and sundry state and commercial predations, have no other choice but to act collectively outside of ‘official’ channels if recourse is to be had. In other words, the question of whether the existing order is worth maintaining depends very much on where one exists within it.
The remaining charge is the existing political order represents the democratically chosen will of the citizenry and efforts to change it outside of (highly controlled) elections are necessarily to force the wishes of an aggressive minority onto the broader citizenry. But the consistent distance between poll results of Americans asked what policies they favor and official government policies belies this claim. From bank bailouts to environmental policies to government works programs to raising taxes on the wealthy to increased funding for education and social insurance, Americans are consistently far to the left of official Washington policy. And the direction of this distance is important—the conceit that calls for radical change are from a loutish right contradicts the reality the greatest distance between actual and desired policy is from the left.
The tactic of official Washington is to misrepresent policies as being in the broader interest while making largely empty gestures on social issues like gay rights. And even this formulation ignores the highly developed technologies for manufacturing consent by ‘private’ media acting for private interests under the guise of faux ‘adversarial’ politics by the one Party state. Far from repudiating George W. Bush’s extra-legal grab of executive power, Democrat Barack Obama has achieved the most radical extensions of it in American history. And as liberals railed at Mr. Bush’s kowtowing to his wealthy constituents, it is this same constituency that is the sole beneficiary of Mr. Obama’s time in office. These are specifically, visibly and unequivocally the policies of the radical right integrated into Western political institutions by ‘both’ political parties over the last forty years. And from those who bothered to ask, this is not the will of the people that is being represented. So again, what is it that liberals are defending?
It is a virtual certainty professional liberals and progressives were sitting behind their office desks only last year when the NYPD (New York Police Department) and Oakland police were beating the crap out of Occupy, firing projectiles into faces at point blank range and parking their motorcycles on the legs of NLG (National Lawyers Guild) observers for daring to protest the ‘liberal’ state / plutocrat nexus. This was in marked contrast to Federal and local police respect for the ‘rights’ of Tea Partiers to carry loaded weapons at rallies for their political ‘opposition.’ FBI and local police infiltration of Occupy, including illegal ‘pre-emptive’ kidnappings and all manner of dirty tricks, was immediate, intense and had the desired effect of creating paranoia and mistrust. And those efforts tie historically to the COINTELPRO facilitated murders of black leaders and radical disruption of the legal and constitutionally ‘protected’ rights of (real) leftist and anti-war organizations trying to affect substantive political change in the 1960s and early 1970s. But the grassroots Tea Partiers aren’t responsible for the different treatment they received– the institutions of the radical right in Federal and state government working in the interests of their ruling class patrons are.
By framing the Fairleigh Dickinson poll results in Democrat / Republican and left / right terms bourgeois liberals left unstated, purposely or not, the joined class interests that are at a minimum a relevant aspect of widespread political disaffection. Ironically, Wall Street is well ahead of the professional left in understanding this—any regular reader of the financial press would find many titans of finance incredulous at how narrow, and potentially politically destabilizing, the class interest represented by official Washington, and in particular by corporate Democrats, has become. And straightforwardly, domestic victims of Washington’s plutocrat-friendly policies of recent decades, the unemployed, underemployed, fraudulently indebted, illegitimately foreclosed upon, impoverished and fraudulently arrested and incarcerated, weren’t victimized based on major political Party affiliation– they were victimized based on class. Put another way, middle and lower class Tea Partiers may have more interests in common with inner city socialists, communists, anarcho-collectivists and undocumented immigrants than they have with wealthy Republican patrons of the Tea Party. That this possibility hasn’t already been offered to them is a challenge for the left. And likewise, through unwavering support for corporate Democrats, even if from near-total ignorance of their actual policies, liberals and the bourgeois left promote the interests of the very rich against all who aren’t, including in most cases their own.
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5/15/2013 3:50:49 PM
Topic:
From the Spring Swoon back to Recession
TheTaxMan
Posts: 65
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From Spring Swoon to the Big Crash
Back to Recession
by MIKE WHITNEY, CounterPunch.org, April 26, 2013
The media is calling it a “Spring swoon”, but it’s really just the next phase of the long slump.
After a strong showing in the first quarter (Q1), the economy is starting to lose steam for the forth year in a row. The main cause for the slowdown is –what Bloomberg calls–”the biggest federal-budget tightening in more than 60 years”. The impact of the budget cuts can already be seen in retail sales, personal consumption and consumer confidence. Eventually, they’ll be felt throughout the entire economy pushing unemployment higher and shrinking GDP by 1.6 percent or more.
Economists warned policymakers not to reduce government spending while the economy was still weak, but Congress shrugged off their advice and cleared the way for another slowdown. Activity is likely to fall off sharply as already over-stretched households try to muddle through on paychecks that are now 2 percent smaller following the restoration of the payroll tax. The deceleration should intensify into the summer months impacting other areas of the economy and, ultimately, widening the deficits due to lower tax receipts. This illustrates the futility of austerity measures, they only serve to make matters worse.
Let’s face it; the economy has never gotten better, not for working people at least. And now it’s getting worse; should we be surprised?
Not at all. The system is performing the way it’s set to perform; providing unlimited sums of money for speculators and moneybags friends of Obama, and table scraps for everyone else. Here’s a blurb from the Wall Street Journal that just confirms what everyone already knows:
“From 2009 to 2011, the average wealth of America’s richest 7% — the 8 million households with a net worth north of about $800,000 — rose nearly 30% to $3.2 million from $2.5 million, according to a Pew Research Center report that analyzed recent Census data. By contrast, the average wealth of America’s remaining 93%, some 111 million households, actually dropped by 4% to $134,000 from $140,000. Wealth is the value of what a household owns minus what it owes.”
So all the money is going upwards, but we’re expected to believe that that’s not what policymakers had in mind to begin with; that it’s all just one big accident?
Uh, huh. As Robert Reich points out, there’s never been a recovery, not really. Here’s how he puts it in his latest blog-post:
“Four years into a so-called recovery and we’re still below recession levels in every important respect except the stock market. A measly 88,000 jobs were created in March, and total employment remains some 3 million below its pre-recession level. Labor-force participation is its lowest since 1979.
Businesses won’t hire and expand unless they have more customers, but most Americans can’t spend more. Last Friday’s retail sales report showed sales down .4 percent in March. Consumer sentiment has fallen to its lowest level in nine months.
The underlying problem is the vast middle class is running out of money. They can’t borrow more — and shouldn’t, given what happened after the last borrowing binge.
Real annual median household income keeps falling. It’s down to $45,018, from $51,144 in 2010. All the gains from the recovery continue to go to the top.” (“Why This is the Worst Recovery on Record“, Robert Reich’s blog)
Okay, so you’ve heard it all a million times before. But it’s about to get worse, so you might want to know some of the details. You see, the economy was already slowing down before
Obama’s budget cuts. Retail sales are off, manufacturing is sputtering, earnings are weak, existing home sales are dropping, and durable goods are in the tank. Here’s more from the WSJ:
“U.S. orders for long-lasting manufactured goods fell sharply in March as businesses cut investment, suggesting that economic growth has cooled since the start of the year.
Durable goods orders decreased 5.7% from the prior month to a seasonally adjusted $216.28 billion, the Commerce Department said Wednesday. Economists surveyed by Dow Jones Newswires expected a 2.9% drop in March orders.
Durable goods are usually big-ticket items designed to last at least three years. Businesses and consumers typically make such purchases when they are confident about the economy….
Wednesday’s report echoes other recent data suggesting solid but slowing growth through the first quarter of the year as consumers and businesses became increasingly cautious.”
Problems in the US are compounded by growing troubles abroad, notably the slowdown in China and the ongoing Depression in Europe. Here’s more from the WSJ:
“Troubles overseas are threatening the U.S. recovery for the fourth year in a row. This time it’s weakening economies abroad, rather than tumbling financial markets, signaling turbulence ahead.
U.S. exports of goods to the European Union are declining outright. Growth in overall U.S. exports has been sputtering for months, after a three-year post recession surge. And major U.S. companies are reporting increasingly dour overseas outlooks tied to the recession-plagued euro zone and slowing growth in other leading economies such as China.
The renewed fears of a global slowdown come after months of hope that a stronger recovery was finally taking shape.”
So, don’t expect any help from overseas–like an uptick in exports–because it ain’t gonna happen. China’s investment-heavy economic model is beginning to crack beneath its prodigious debt-load and the slump in Europe will persist until EU elites achieve their goal, which is to decimate the social model that provides health care, pensions and labor protections for the people in the 17-member Eurozone. That’s what this is all about. Once the EU’s working population has been reduced to third world poverty, then policymakers will return to a pro-growth strategy, but not before. But that’s going to take a while, so don’t hold your breath.
So, what’s in store for the US economy?
First we need to summarize what’s going on right now. Just take a quick look at these charts from analyst Lance Roberts at Street Talk Live in a post titled “Economy In Pictures: Have We Seen The Peak?”
This will help you see the present trajectory of the economy vis a vis wages, consumer spending, output, employment and GDP.
Wages and Salaries
Incomes are the lifeblood of the economy. In order for consumers to consume (which makes up roughly 70% of the economy currently) wages must rise at a rate to support increases in consumption.
Consumer Spending
As state above, personal consumption expenditures (PCE) comprise about 70% of the gross domestic product calculation. As PCE goes – so goes the economy.
Production and Manufacturing
The chart below is the STA Economic Output Composite Index which is an index comprised of the Chicago Fed National Activity Report, ISM Composite, several Fed regional manufacturing surveys, Chicago ISM PMI, and the NFIB Small Business Survey. This is a very broad measure of the economy.
Employment
The chart below shows both the seasonally adjustment employment levels compared to a 12-month moving average of the non-seasonally adjusted data.
GDP
Do you see any glimmer of light in these charts?
I don’t. The fact is, everything is headed in the wrong direction. And this is just “big picture” stuff. If you wanted to get into the weeds and really dig through the data on other sectors, you’d see the same thing, that is, that things are progressively getting worse. And, of course, Obama’s budget cuts will further intensify the downturn, which appears to be what the politicians really want.
Have you seen this Bloomberg video of Nouriel Roubini explaining what we can expect when the sequester cuts kick in?
Here’s a clip. Nouriel Roubini:
“I’m quite concerned about the US economy. People underestimated how much…the sequester would effect the economy. …fiscal drag of 1.7%….We’re doing the wrong kind of fiscal consolidation. It’s way too frontloaded….will have a drag on consumption…so, US will have subpar growth, below trend..and unemployment will remain high. …The Fed’s QE has already created froth in asset and credit markets that could lead to another significant bubble …So, you’ll have a big party in asset prices for the next couple years, (while rates stay low) followed by a crash bigger than before.” (Bloomberg)
Oh good. So the asset bubbles are already forming, but the economy is still flat on its back. So–chances are–we’ll suffer a meltdown before the anticipated recovery ever takes hold. Doesn’t that sound like a policy that needs to be revisited?
Let’s not kid ourselves, none of this is accidental. This whole permanent Depression-thing is just part of the plan. How could it not be? I mean, is there anyone dumb enough to believe in austerity anymore? Even the right-wing Washington Post has given belt tightening the old heave-ho. Just look at this excerpt from a recent editorial:
”There’s basically no evidence that fast austerity programs, or ones undertaken during economic downturns, are even good at reducing the debt burden. It’s very clear they’re bad for growth. Austerity through spending cuts may help growth in the long run, but so do a lot of things, and if those cuts are to things known to boost growth, like early childhood education or research, they could be counterproductive. But for the time being, austerity is the wrong prescription for advanced economies.”
Even Fox on 15th Street is admitting defeat and running up the white flag. Can you believe it?
But it doesn’t matter how discredited the policy is, the politicians are going to keep ratcheting up the pressure until they get what they want, which is, more privatization of public assets, more busting up federal unions and more dismantling critical safetynet programs. (particularly, SS, Medicare, Medicaid) Present policy has nothing to do with growing the economy or putting people back to work. It’s just plain old class warfare.
So, how bad will it get?
Nobody really knows for sure, but with factory output already dropping, retail sales flagging, existing home sales down, new payrolls flatlining, consumers spending less and saving more, and the global economy on life-support, it’s hard to see how we’re going to get out of the doldrums, especially since the full effect of the tax hikes and budget cuts have yet to be felt. Clearly, the downside risks have increased exponentially, which means that any unexpected shock will push the economy back into recession.
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition.Whitney’s story on Bernanke’s Subprime Bonanza appears in the April issue of CounterPunch magazine.
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5/15/2013 3:35:48 PM
Topic:
Straight Talk About the Next American Revolution
TheTaxMan
Posts: 65
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What Then Must We Do?: Straight Talk About the Next American Revolution
By Elliott, Fire Dog Lake, May 12, 2013
Never before have so many Americans been more frustrated with our economic system, more fearful that it is failing, or more open to fresh ideas about a new one. The seeds of a new movement demanding change are forming.
But just what is this thing called a new economy, and how might it take shape in America? In What Then Must We Do?, Gar Alperovitz speaks directly to the reader about where we find ourselves in history, why the time is right for a new-economy movement to coalesce, what it means to build a new system to replace the crumbling one, and how we might begin. He also suggests what the next system might look like—and where we can see its outlines, like an image slowly emerging in the developing trays of a photographer’s darkroom, already taking shape.
He proposes a possible next system that is not corporate capitalism, not state socialism, but something else entirely—and something entirely American.
Alperovitz calls for an evolution, not a revolution, out of the old system and into the new. That new system would democratize the ownership of wealth, strengthen communities in diverse ways, and be governed by policies and institutions sophisticated enough to manage a large-scale, powerful economy.
For the growing group of Americans pacing at the edge of confidence in the old system, or already among its detractors, What Then Must We Do? offers an elegant solution for moving from anger to strategy.
Gar Alperovitz, Lionel R. Bauman Professor of Political Economy at the University of Maryland, is cofounder of The Democracy Collaborative. He is a former fellow of the Institute of Politics at Harvard and of King’s College at Cambridge University, where he received his PhD in political economy. He has served as a legislative director in the U.S. House of Representatives and the U.S. Senate, and as a special assistant in the Department of State. Earlier he was president of the Center for Community Economic Development, Codirector of The Cambridge Institute, and president of the Center for the Study of Public Policy. Dr. Alperovitz’s numerous articles have appeared in publications ranging from The New York Times and The Washington Post to The Journal of Economic Issues, Foreign Policy, Diplomatic History, and other academic and popular journals.
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5/15/2013 1:36:17 PM
Topic:
Why Washington Destroyed the Labor Market
Onward
Posts: 177
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Why Washington Saved the Economy, Then Permanently Destroyed the Labor Market
Comparing Washington's reaction to the banking crisis and the unemployment crisis shows how and why government focuses on the rich and ignores the rest
By Derek Thompson, The Atlantic, May 13 2013
On April 24, Minnesota Sen. Amy Klobuchar scheduled a hearing. Fun story, right? A hearing in Washington is like a fern in the rainforest. But this hearing was notable for both its subject and its attendance. It was a meeting about the most important economic crisis facing America today: long-term unemployment.
At 10:30am, the hearing began. She was the only attendant.
***
I have two stories for you about Washington and the economy. Both true. But very different.
The first story is called: How Washington Saved the Economy. You might begin in 2008, when the Federal Reserve went on an unprecedented spree of asset-buying to un-gunk the banks, push down interest rates, and spur investing in mortally weakened economy. This was followed, in 2009, with an equally historic stimulus package aimed at filling holes in state budgets and sending cash back to families and businesses. The government ran steep $1+ trillion deficits to keep as much money in the weak private sector as possible.
There is little question that monetary and fiscal stimulus blunted the recession -- and saved the economy.
The second story is called: How Washington Permanently Scarred the Labor Market. You might begin this story in 2011, when Congress (led by Republican obstructionism) embarked on a historic quest to crush deficit spending by any means necessary. Hold the economy hostage over the debt ceiling? Check. Kill the American Jobs Act while scheduling a too-awful-to-be-a-real-law sequester? Check. Allow the too-awful-to-be-a-real-law sequester to become a real law? Checkmate.
The deficit fell fast. As unemployment ebbed, the ranks of long-term jobless calcified, creating two separate job markets. One broken market for people out of work for more than six months. And another slowly healing market for everybody else. But the combination of a thermostatic recovery and a deep aversion to stimulus crushed any hope that the long-term unemployed would get the help they needed. Long-term unemployment isn't special just because it's longer; it's special because it's self-perpetuating. Skills atrophy, networks dry up, and employers discriminate, creating a vicious cycle of joblessness that can't be cured by normal economic growth.
There is little question that, in the last two years, Washington has essentially left the long-term unemployed to fend for themselves -- and permanently scarred the labor market.
***
This isn't so much a tale of two cities, but a tale of one city that responded differently to two crises: (1) the collapse of the financial system and (2) the scarring of the labor market. These are both emergencies. So why did we respond to the first emergency like an ambulance siren and the second like a harmless murmur of white noise?
I can think of at least three explanations. The first two are the explanations I've heard, believed, and used. The third I hadn't fully considered until last week. But it might be the most compelling.
(1) It's the basic fact that, without a financial system, there is no economy.
This explanation blames pretty much nobody in Washington.
In 2007 and 2008, the entire economy stood on the brink of collapse, and the only way to save it was by a historic all-hands-on-deck response from the Federal Reserve and Congress. In retrospect, you could say that we went too far to protect the biggest banks (some of which are even bigger, today) without ensuring similar financial protection for homeowners. And yet, while millions of underwater homeowners are an acute tragedy, you might say, they won't guarantee a lasting national depression. Without enough gainfully employed homeowners, you won't have a strong housing market. Without a banking system, you won't have a housing market, period.
(2) It's all the Republicans' fault.
This explanation blames half of Washington.
Let's be crystal-clear about this: There is no doubt that Republican policies are disproportionately to blame for the shift away from stimulus. That's an easy story to tell, and I don't think Republicans would even dispute it. After all, they've argued that cutting spending would help the economy. The GOP has thoroughly convinced itself that spending-side efforts to fix unemployment are unworkable.
But there's something else, too.
In the last year, there has settled, even among the Democrats, a kind of reserved defeat that shows a stunning lack of urgency toward the crisis of long-term joblessness. From abandoning the payroll tax cut in late 2012, to quietly acceding to sequester, to going silent on unemployment, nearly all of Washington -- not just the right -- has essentially stopped talking about the most important economic issue of our time.
High-ranking Treasury officials officials I've spoken with on background couldn't name any specific proposals they have to help the long-term unemployed. Instead, they've argued that general economic growth stuff, such as infrastructure spending, should be enough to put these 4 million people back to work. But the economic literature objects: Fighting vast long-term unemployment with general economic growth policies is like fighting pneumonia with Vitamin C.
So, why aren't even Democrats scrambling to fight for the long-term unemployed?
(3) It's the mind-shifting power of money in politics.
This explanation blames everything about Washington. Money might not buy elections. But it does buy the attention of electeds. It subtly but substantially biases them toward the issues that most concern the rich.
Let's begin with a zoom-out: Winning elections is more expensive than ever. Ironically, that makes it harder to "buy" elections, in the conventional sense, because both sides in marquee elections raise so much cash that each marginal dollar becomes less consequential (principles of inflation apply). But it also means that candidates are required to spend an egregious and unprecedented share of their time getting rich people to donate. Having a Rolodex full of wealthy folks is a prerequisite for winning federal representation. It's also a recipe for having your priorities shaped, if not determined, by hours spent going over rich-guy problems.
"Being a candidate means being a telemarketer for 24 months before an election," Connecticut Sen. Chris Murphy said last week at a conference by the Yale Institution for Social and Policy Studies. But not just any telemarketer. A telemarketer for people with lots of money. After all, it doesn't make much sense to spend your limited time asking jobless families to send you their unemployment insurance.
Murphy's remarks were as critical of the corrosive power of money as they were revealing: Even if money doesn't buy legislators outright, it does buy their legislative focus. Political science backs the claim: As Larry Bartels' 2005 paper on "Economic Inequality and Political Representation" found, Democrats and Republicans are responsive to middle-class and high-income constituents much more precisely than the low-income ...
Even if money doesn't always change the outcome of political debates, it shapes what debates we have. We didn't have a debate about whether we should extend the payroll tax in December 2012. But we did have a debate about whether we should raise taxes on families making more than $250,000. Congress didn't vote to cancel the sequester when it learned it would cut unemployment benefits and assistance to low-income households. But it did cancel the FAA cuts when frequent flyers complained about security lines and departure times. Nobody on Capitol Hill is talking about long-term joblessness. We're still debating carried interest and the Volcker Rule.
I'm paid to spend my day reading economic papers and asking people to explain their conclusions. Spending my time this way has persuaded me that long-term unemployment is a national emergency that is both devastating millions of families and making the country permanently poorer.
Politicians have a slightly different information diet. They spend more time gleaning information from lobbyists and rich donors whose concerns and opinions graft themselves onto representatives as easily as the pithiest economists' opinions attach themselves to me. If politicians naturally gravitate to the issues rich folks want to talk about, it doesn't make them bad people. It makes them normal people in a broken system that elevates polarization -- both between parties and between the priorities of high-income and low-income families -- while subtly concealing the issues that most affect Americans who cannot afford a lobbyists' luncheon or a number on a congresswoman's speed-dial.
The centrality of big money in politics makes it nearly impossible for an issue like long-term unemployment to buy a sliver of mindshare. Our priorities are shaped not only by the stories we choose to believe, but also the stories we happen to hear, from the ideas we give a hearing ...
***
Sen. Chris Murphy eventually joined the April 24 meeting on long-term unemployment. He was joined by two more Democrats.
Sixteen of the 20 members of the Joint Economic Committee never bothered to show up. National Journal wrote a report. Liberals blogs expressed outrage. But the story quickly died, carried out by the effluence of the media cycle and the frenzied schedule of Washington, its writers, and its representatives. There were so many hearings to attend. There were so many calls to make.
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5/15/2013 1:29:43 PM
Topic:
DC Decides That Unemployment is so 2009
Onward
Posts: 177
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DC Decides That Unemployment is so 2009
By David Frum, May 15, 2013
I'm working on a little less than all cylinders this week, but I don't want to overlook an important piece by Derek Thompson in the Atlantic. Thompson contrasted the decisive and effective government response to the financial crisis of 2008 to the weak and exhausted response to the unemployment problem.
You might begin this story in 2011, when Congress (led by Republican obstructionism) embarked on a historic quest to crush deficit spending by any means necessary. Hold the economy hostage over the debt ceiling? Check. Kill the American Jobs Act while scheduling a too-awful-to-be-a-real-law sequester? Check. Allow the too-awful-to-be-a-real-law sequester to become a real law? Checkmate.
The deficit fell fast. As unemployment ebbed, the ranks of long-term jobless calcified, creating two separate job markets. One broken market for people out of work for more than six months. And another slowly healing market for everybody else. But the combination of a thermostatic recovery and a deep aversion to stimulus crushed any hope that the long-term unemployed would get the help they needed. Long-term unemployment isn't special just because it's longer; it's special because it's self-perpetuating. Skills atrophy, networks dry up, and employers discriminate, creating a vicious cycle of joblessness that can't be cured by normal economic growth.
There is little question that, in the last two years, Washington has essentially left the long-term unemployed to fend for themselves -- and permanently scarred the labor market.
Thompson aptly observes that the abandonment of the long-term unemployed cannot be blamed on Republicans alone.
In the last year, there has settled, even among the Democrats, a kind of reserved defeat that shows a stunning lack of urgency toward the crisis of long-term joblessness. From abandoning the payroll tax cut in late 2012, to quietly acceding to sequester, to going silent on unemployment, nearly all of Washington -- not just the right -- has essentially stopped talking about the most important economic issue of our time.
High-ranking Treasury officials officials I've spoken with on background couldn't name any specific proposals they have to help the long-term unemployed. Instead, they've argued that general economic growth stuff, such as infrastructure spending, should be enough to put these 4 million people back to work. But the economic literature objects: Fighting vast long-term unemployment with general economic growth policies is like fighting pneumonia with Vitamin C.
Thompson could go further: The one major administration measure that has any chance of passage this year could not be more perfectly designed to worsen the problems of the long-term unemployed: the Rubio-Schumer immigration reform. Under the bill, millions of non-Americans will suddenly gain access to vast new reaches of the U.S. labor market. Immigration flows will accelerate, including guest worker flows. The bill guarantees - is intended to guarantee - ultra-slack labor markets across a wide variety of specializations for years and decades to come. If you're a 55-year-old laid-off autoworker who holds any reserve expectation of ever again enjoying the standard of living you had before 2008 - AKA "attitude" - this bill ensures that you will never, ever work again. And it ensures that the autoworkers' children, unless very unusually bright and motivated and lucky, will probably have to choose between earning half of what their father earned and never, ever working again.
A country that took seriously the unemployment problem would not even consider such a measure as Schumer-Rubio. It would say, "Let's put our unemployed back to work first." But Democrats and Republicans alike have higher priorities: ethnic politics for Democrats, employer demands for Republicans.
The scandals now reverberating through Washington reduce to zero any last vestigial possibility of further action on jobs. Congress will plunge into full scandal-investigating mode. The more hot-headed Republicans will bay for impeachment. The work of damage control will consume administration energies. Nothing will get done. But then, nothing was going to get done anyway.
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5/14/2013 2:22:33 PM
Topic:
It's Past Time to Investigate Tea Party Funding
TheTaxMan
Posts: 65
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It’s High Time the IRS Investigates the Funding of the Tea Party
By Pam Martens: May 14, 2013 For years now, journalists have been doing the heavy lifting in investigations of Charles and David Koch using their billionaire status to fund faux grassroots groups to push their far right agenda on the country — an agenda that effectively boils down to deregulation of corporations to the detriment of the working class, the environment and wealth equality in America. It’s about time the IRS investigated.
According to the 2013 Forbes List, Charles and David Koch are each worth $34 billion. Their wealth derives from Koch Industries, a private global conglomerate with a presence in over 60 countries. The company’s business interests include oil, refining, pipelines, paper products, chemicals, fertilizer and trading. Because the company is not publicly traded, despite the Koch brothers’ stated devotion to free markets, we have no idea what goes on in the sprawling Koch enterprises because they are not required to make public filings.
In April 2010, Koch Industries issued a statement denying involvement in the creation of the Tea Party movement: “…no funding has been provided by Koch companies, the Koch foundations, Charles Koch or David Koch specifically to support the Tea Parties.” Technically, they might be correct; the Kochs funded Americans for Prosperity (AFP) which then created the Tea Party groups.
In this video, David Koch appears before an annual convention of chapters of Americans for Prosperity, and states “…my brother Charles and I provided the funds to start the Americans for Prosperity.” Later in the video, members of the state chapters report to David Koch on how many Tea Party groups they have created. One man states: “…hey folks, we’ve held 29 Tea Parties”; another says his chapter has “organized dozens of Tea Parties.” Another woman reports her Americans for Prosperity group turned out 10,000 people at a Tea Party rally in California.
Americans for Prosperity has worn many more masks than just the Tea Party. The group or the AFP Foundation have spawned the following identities in recent elections:
- DefendingtheDream.org (D.C. summit for right wing strategizing and rally);
- SayNoCapandTrade.org (kill tax on production of greenhouse gases);
- NoInternetTakeover.com (attacks on the Federal Communications Commission);
- SickofSpending.com (“…how to recruit, educate, organize, and mobilize fed up Americans to stop the radical left-wing agenda…”);
- RegulationReality.com (“…educate citizens about the EPA’s attempt to implement radical global warming regulations…”);
- NovemberIsComing.com (phone bank; go door to door to beat back those liberals);
- TaxCutsForAll.com (don’t raise taxes on the rich);
- SpendingCrisis.org (shrink the Federal government);
- United4NoOn4.com (killing an Amendment in Florida that would give voters more say in local legislative decisions; an ironic position for people who say they want to promote more liberty).
Americans for Prosperity also created PatientsUnitedNow.com and orchestrated hundreds of rallies to help kill the public option in health care reform.
On October 26, 2010 we exposed how a secretive nonprofit group with Charles Koch’s fingerprints all over it bankrolled a group called the Clarion Fund, which used the funds to distribute 28 million DVDs of a race-baiting, Islamophobic documentary titled “Obsession: Radical Islam’s War Against the West” in swing voter states just seven weeks before the Presidential election of 2008. The DVDs were inserted into approximately 100 newspapers and magazines in the U.S., including the New York Times, Wall Street Journal, Miami Herald, Philadelphia Inquirer, and St. Petersburg Times along with a direct mail campaign.
Not everyone was fooled that this was anything more than a propaganda campaign. A commenter at Democratic Underground using the moniker MrMickeysMom posted the following: “Okay – Who ELSE just picked through the Sunday advertisements and viewed this DVD today?…They’re here to warn us about the declaration of war on Western Culture and to bring down Christianity and Judaism – just in time for the election. So, this is the heat, folks. This blitz DVD is one more step – the biggest, boldest step I can see to orchestrate fear, hatred and to change your vote…It told me that the White House will be changed and become the Muslim House…that America has to wake up and that America is strangling itself with ‘our political correctness.’ ”
The $17.7 million funding to the Clarion Fund in 2008 for the DVD campaign, which represented 96 percent of its total funding that year, came from a tax-subsidized nonprofit called Donors Capital Fund, which has a sister organization, Donors Trust. We reported the following at the time:
“There are shades of Charles Koch all over Donors Capital and Donors Trust. Two grantees receiving repeat and sizeable grants from Donors Capital are favorites of the Koch foundations: George Mason University Foundation and Institute for Humane Studies. Another tie is Claire Kittle. A project of Donor’s Trust is Talent Market.org, a headhunter for staffing nonprofits with the ‘right’ people. Ms. Kittle serves as Talent Market’s Executive Director and was the former Program Officer for Leadership and Talent Development at the Charles G. Koch Charitable Foundation. Then there is Whitney Ball, President of both Donors Capital Fund and Donors Trust. Ms. Ball was one of the elite guests at the invitation-only secret Aspen bash thrown by Charles Koch in June of this year, as reported by ThinkProgress.org. Also on the guest list for the Koch bash was Stephen Moore, a member of the Editorial Board at the Wall Street Journal. Mr. Moore is a Director at Donors Capital Fund. Rounding out the ties that bind is Lauren Vander Heyden, who serves as Client Services Coordinator at Donors Trust. Ms. Vander Heyden previously worked as grants coordinator and policy analyst at the Charles G. Koch Charitable Foundation.”
Prior to publishing our article in 2010, we gave the Kochs’ legal counsel a one week lead time to respond to our request for clarification of the Kochs’ relationship with Donors Capital and Donors Trust. There was no response.
In 2011 we reported that Scott Markley, Public Information Specialist at the Supreme Court, had confirmed our research that Supreme Court Justice Clarence Thomas was “hosted by Charles and Elizabeth Koch in Indian Wells, California, at the Vintage Club” in 2008. The dinner came amidst the Justice’s all-expenses-paid, four-day luxury trip to the January 2008 Koch brothers’ annual political confab in the Palm Springs area of California. According to Justice Thomas’ 2008 financial disclosure form, his expenses for that trip were paid by the Federalist Society, a conservative nonprofit that the Koch foundations gave $1.9 million to from 1991 through 2009.
Eight days after Justice Thomas voted in favor of the Citizens United decision on January 21, 2010 – a decision which allowed almost unlimited corporate funding of the nation’s elections – Cleta Mitchell, a partner of the law firm Foley & Lardner, filed an application with the IRS for a nonprofit on behalf of Justice Thomas’ wife, Virginia Thomas. The group was called Liberty Central, Inc., another Tea Party group.
Mitchell was the same lawyer who had filed an Amicus brief in the Citizens United case on behalf of the American Justice Partnership and Let Freedom Ring, supporting the corporate funding of political campaigns. Mitchell’s law firm, Foley & Lardner, are registered lobbyists for more than two dozen corporations.
Acting as General Counsel in 2010 for Virginia Thomas’ Liberty Central, Inc., was a former lawyer for the Charles G. Koch Foundation, Sarah Field. A former Koch lobbyist, Matt Schlapp, served on her board at inception.
Virginia Thomas ran Liberty Central out of a post office box in a UPS building in Burke, Virginia. It subsequently moved to 12587 Fair Lakes Circle, Suite 331, Fairfax, Virginia, another post office box in another UPS building.
According to IRS tax filings, Liberty Central, Inc. received $550,000 from anonymous donors in 2009 and was anticipating the receipt of $2,014,000 in 2010. Virginia Thomas eventually stepped down from an official post, stating she would serve as a consultant.
The debate right now should not be the ethics of the IRS investigating Tea Party groups – the debate should be why the U.S. Department of Justice has not brought any criminal prosecutions.
edited by TheTaxMan on 5/14/2013
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5/14/2013 4:20:30 AM
Topic:
How Austerity Kills
libby
Posts: 222
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How Austerity Kills
By DAVID STUCKLER and SANJAY BASU, NY Times, May 12, 2013
EARLY last month, a triple suicide was reported in the seaside town of Civitanova Marche, Italy. A married couple, Anna Maria Sopranzi, 68, and Romeo Dionisi, 62, had been struggling to live on her monthly pension of around 500 euros (about $650), and had fallen behind on rent.
Because the Italian government’s austerity budget had raised the retirement age, Mr. Dionisi, a former construction worker, became one of Italy’s esodati (exiled ones) — older workers plunged into poverty without a safety net. On April 5, he and his wife left a note on a neighbor’s car asking for forgiveness, then hanged themselves in a storage closet at home. When Ms. Sopranzi’s brother, Giuseppe Sopranzi, 73, heard the news, he drowned himself in the Adriatic.
The correlation between unemployment and suicide has been observed since the 19th century. People looking for work are about twice as likely to end their lives as those who have jobs.
In the United States, the suicide rate, which had slowly risen since 2000, jumped during and after the 2007-9 recession. In a new book, we estimate that 4,750 “excess” suicides — that is, deaths above what pre-existing trends would predict — occurred from 2007 to 2010. Rates of such suicides were significantly greater in the states that experienced the greatest job losses. Deaths from suicide overtook deaths from car crashes in 2009.
If suicides were an unavoidable consequence of economic downturns, this would just be another story about the human toll of the Great Recession. But it isn’t so. Countries that slashed health and social protection budgets, like Greece, Italy and Spain, have seen starkly worse health outcomes than nations like Germany, Iceland and Sweden, which maintained their social safety nets and opted for stimulus over austerity. (Germany preaches the virtues of austerity — for others.)
As scholars of public health and political economy, we have watched aghast as politicians endlessly debate debts and deficits with little regard for the human costs of their decisions. Over the past decade, we mined huge data sets from across the globe to understand how economic shocks — from the Great Depression to the end of the Soviet Union to the Asian financial crisis to the Great Recession — affect our health. What we’ve found is that people do not inevitably get sick or die because the economy has faltered. Fiscal policy, it turns out, can be a matter of life or death.
At one extreme is Greece, which is in the middle of a public health disaster. The national health budget has been cut by 40 percent since 2008, partly to meet deficit-reduction targets set by the so-called troika — the International Monetary Fund, the European Commission and the European Central Bank — as part of a 2010 austerity package. Some 35,000 doctors, nurses and other health workers have lost their jobs. Hospital admissions have soared after Greeks avoided getting routine and preventive treatment because of long wait times and rising drug costs. Infant mortality rose by 40 percent. New H.I.V. infections more than doubled, a result of rising intravenous drug use — as the budget for needle-exchange programs was cut. After mosquito-spraying programs were slashed in southern Greece, malaria cases were reported in significant numbers for the first time since the early 1970s.
In contrast, Iceland avoided a public health disaster even though it experienced, in 2008, the largest banking crisis in history, relative to the size of its economy. After three main commercial banks failed, total debt soared, unemployment increased ninefold, and the value of its currency, the krona, collapsed. Iceland became the first European country to seek an I.M.F. bailout since 1976. But instead of bailing out the banks and slashing budgets, as the I.M.F. demanded, Iceland’s politicians took a radical step: they put austerity to a vote. In two referendums, in 2010 and 2011, Icelanders voted overwhelmingly to pay off foreign creditors gradually, rather than all at once through austerity. Iceland’s economy has largely recovered, while Greece’s teeters on collapse. No one lost health care coverage or access to medication, even as the price of imported drugs rose. There was no significant increase in suicide. Last year, the first U.N. World Happiness Report ranked Iceland as one of the world’s happiest nations.
Skeptics will point to structural differences between Greece and Iceland. Greece’s membership in the euro zone made currency devaluation impossible, and it had less political room to reject I.M.F. calls for austerity. But the contrast supports our thesis that an economic crisis does not necessarily have to involve a public health crisis.
Somewhere between these extremes is the United States. Initially, the 2009 stimulus package shored up the safety net. But there are warning signs — beyond the higher suicide rate — that health trends are worsening. Prescriptions for antidepressants have soared. Three-quarters of a million people (particularly out-of-work young men) have turned to binge drinking. Over five million Americans lost access to health care in the recession because they lost their jobs (and either could not afford to extend their insurance under the Cobra law or exhausted their eligibility). Preventive medical visits dropped as people delayed medical care and ended up in emergency rooms. (President Obama’s health care law expands coverage, but only gradually.)
The $85 billion “sequester” that began on March 1 will cut nutrition subsidies for approximately 600,000 pregnant women, newborns and infants by year’s end. Public housing budgets will be cut by nearly $2 billion this year, even while 1.4 million homes are in foreclosure. Even the budget of the Centers for Disease Control and Prevention, the nation’s main defense against epidemics like last year’s fungal meningitis outbreak, is being cut, by at least $18 million.
To test our hypothesis that austerity is deadly, we’ve analyzed data from other regions and eras. After the Soviet Union dissolved, in 1991, Russia’s economy collapsed. Poverty soared and life expectancy dropped, particularly among young, working-age men. But this did not occur everywhere in the former Soviet sphere. Russia, Kazakhstan and the Baltic States (Estonia, Latvia and Lithuania) — which adopted economic “shock therapy” programs advocated by economists like Jeffrey D. Sachs and Lawrence H. Summers — experienced the worst rises in suicides, heart attacks and alcohol-related deaths.
Countries like Belarus, Poland and Slovenia took a different, gradualist approach, advocated by economists like Joseph E. Stiglitz and the former Soviet leader Mikhail S. Gorbachev. These countries privatized their state-controlled economies in stages and saw much better health outcomes than nearby countries that opted for mass privatizations and layoffs, which caused severe economic and social disruptions.
Like the fall of the Soviet Union, the 1997 Asian financial crisis offers case studies — in effect, a natural experiment — worth examining. Thailand and Indonesia, which submitted to harsh austerity plans imposed by the I.M.F., experienced mass hunger and sharp increases in deaths from infectious disease, while Malaysia, which resisted the I.M.F.’s advice, maintained the health of its citizens. In 2012, the I.M.F. formally apologized for its handling of the crisis, estimating that the damage from its recommendations may have been three times greater than previously assumed.
America’s experience of the Depression is also instructive. During the Depression, mortality rates in the United States fell by about 10 percent. The suicide rate actually soared between 1929, when the stock market crashed, and 1932, when Franklin D. Roosevelt was elected president. But the increase in suicides was more than offset by the “epidemiological transition” — improvements in hygiene that reduced deaths from infectious diseases like tuberculosis, pneumonia and influenza — and by a sharp drop in fatal traffic accidents, as Americans could not afford to drive. Comparing historical data across states, we estimate that every $100 in New Deal spending per capita was associated with a decline in pneumonia deaths of 18 per 100,000 people; a reduction in infant deaths of 18 per 1,000 live births; and a drop in suicides of 4 per 100,000 people.
OUR research suggests that investing $1 in public health programs can yield as much as $3 in economic growth. Public health investment not only saves lives in a recession, but can help spur economic recovery. These findings suggest that three principles should guide responses to economic crises.
First, do no harm: if austerity were tested like a medication in a clinical trial, it would have been stopped long ago, given its deadly side effects. Each nation should establish a nonpartisan, independent Office of Health Responsibility, staffed by epidemiologists and economists, to evaluate the health effects of fiscal and monetary policies.
Second, treat joblessness like the pandemic it is. Unemployment is a leading cause of depression, anxiety, alcoholism and suicidal thinking. Politicians in Finland and Sweden helped prevent depression and suicides during recessions by investing in “active labor-market programs” that targeted the newly unemployed and helped them find jobs quickly, with net economic benefits.
Finally, expand investments in public health when times are bad. The cliché that an ounce of prevention is worth a pound of cure happens to be true. It is far more expensive to control an epidemic than to prevent one. New York City spent $1 billion in the mid-1990s to control an outbreak of drug-resistant tuberculosis. The drug-resistant strain resulted from the city’s failure to ensure that low-income tuberculosis patients completed their regimen of inexpensive generic medications.
One need not be an economic ideologue — we certainly aren’t — to recognize that the price of austerity can be calculated in human lives. We are not exonerating poor policy decisions of the past or calling for universal debt forgiveness. It’s up to policy makers in America and Europe to figure out the right mix of fiscal and monetary policy. What we have found is that austerity — severe, immediate, indiscriminate cuts to social and health spending — is not only self-defeating, but fatal.
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5/13/2013 1:09:30 PM
Topic:
Obama is NOT on YOUR SIDE!!
TheTaxMan
Posts: 65
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Pritzker for Commerce: President Obama Sends a Devastating Message to America’s Young People
By Pam Martens, Wall Street on Parade, May 10, 2013
President Obama adds to the rising stench of his nominations to the U.S. Treasury and Securities and Exchange Commission with the nomination of the billionaire Hilton Hotel heiress, Penny Pritzker, to be the next U.S. Commerce Secretary.
With the confirmed nominations of Mary Jo White as Chair of the SEC, Jack Lew as Treasury Secretary and now the nomination of Pritzker to lead Commerce, the President is sending the chilling message to the Nation’s young people that it’s legal if you can get away with it; and if you get away with enough and get rich enough, the President of the United States admires that and you can join the power elite. Building a career through honesty and hard work is for suckers.
Jack Lew, the President’s pick for Treasury, was paid millions as Chief Operating Officer for the very division of Citigroup that collapsed the bank in 2008. He then accepted a personal bonus for himself of $940,000 out of taxpayer bailout funds paid to Citigroup. Lew also invested in a tax dodge in the Cayman Islands. Before that, Lew played a key role in busting a grad students union at New York University while buying a mansion with over $1 million in forgivable loans from the tax subsidized university.
Mary Jo White, installed by the President as Chair of the SEC, and her husband, John W. White, have legally represented the largest Wall Street firms that have been serially charged with looting the public. Mary Jo White came from the corporate law firm Debevoise and Plimpton; her husband is a partner at Cravath, Swaine & Moore.
Under 18 U.S.C. § 208, the basic criminal conflict of interest statute, an executive branch employee is prohibited from participating personally and substantially in a particular Government matter that will affect his own financial interests, as well as the financial interests of his spouse. Effectively, the SEC is now too conflicted to function – exactly the way that Wall Street likes it.
According to the 2013 Forbes list of billionaires, Penny Pritzker has a net worth of $1.85 billion. She is heiress to the Hyatt Hotel fortune and serves on its Board. The company is the target of a global boycott campaign for alleged abuse of its housekeepers, hazardous working conditions and anti-union activities. Supporters of the boycott include the National Organization for Women, the NFL Players Association, the National Council of La Raza and over 5,000 social justice organizations and individuals.
The U.S. Commerce department, which Pritzker will head if confirmed, states that its mission is to promote “progressive business policies that help America’s businesses and entrepreneurs and their communities grow and succeed.” Anti-union activities were once considered not a “progressive business” policy.
Pritzker also joins Lew in having among her career highlights the collapse of a major bank. In 1988, Penny Pritzker’s uncle, Jay Pritzker, and his long time friend, Alvin Dworman, acquired a failing thrift, the Lyons Savings Bank of Countryside, Illinois. The bank was renamed Superior Bank. This occurred during the time that the Federal Home Loan Bank Board was attempting to conceal the savings and loan crisis. The Board gave Pritzker and Dworman a sweetheart deal. The two put up $21.25 million each and bought bank assets of $1.5 billion. According to media reports, the deal also garnered $645 million in tax credits.
Penny Pritzker served as the Chair of the bank and later served on the Board of its holding company as the bank went on a subprime loan securitization binge and used accounting tricks to hide its enormous losses. In 2001, Superior collapsed. The Government Accountability Office assigned the collapse to bad management.
How is this Democratic President, elected twice by progressives, unions and minorities, getting away with this sell out of his base?
In Obama’s first run for the Presidency, he spent over $52 million on media, strategy consultants, image building, marketing research and telemarketing to cast himself as the candidate of hope and change. I wasn’t buying it then and neither was the Black Agenda Report. Bruce Dixon, Managing Editor, wrote at the time:
“The 2008 Obama presidential run may be the most slickly orchestrated marketing machine in memory. That’s not a good thing. Marketing is not even distantly related to democracy or civic empowerment. Marketing is about creating emotional, even irrational bonds between your product and your target audience.”
It is “irrational” to observe these nominations by the President at a time when the wealth and income gap in our Nation is at historic extremes, when 46 million Americans live below the poverty level including one in every five children, when corruption on Wall Street continues to dominate the headlines, and still believe that this President is on your side. And yet tens of millions of Americans still cling to the illusion, to the detriment of the entire country.
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edited by TheTaxMan on 5/13/2013
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5/13/2013 7:08:36 AM
Topic:
H-1B Visas
TheTaxMan
Posts: 65
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Testimony Given By Ronil Hira, Ph.D., P.E.,
Associate Professor of Public Policy
Rochester Institute of Technology, Rochester, NY
In A Hearing Before The Subcommittee on Immigration Policy and Enforcement
Committee on the Judiciary U.S. House of Representatives
On "H-1B Visas: Designing a Program to Meet the Needs of the U.S. Economy and U.S. Workers"
March 31, 2011 Rayburn House Office Building 2
I want to thank Chairman Smith, Chairman Gallegly, and the members of the subcommittee for inviting me to testify today. My name is Ronil Hira. I am a professor of public policy at the Rochester Institute of Technology in Rochester, New York. I have been studying the H-1B program and high-skill immigration since 2000. I appreciate the opportunity to share my thoughts about how the H-1B program is currently impacting the U.S. economy and American workers.1
I have concluded that the H-1B program, as currently designed and administered, does more harm than good. To meet the needs of the U.S. economy and U.S. workers, the H-1B visa program needs immediate and substantial overhaul.
The principal goal of the H-1B visa program is to bring in foreign workers who complement the U.S. workforce. Instead, loopholes in the program have made it too easy to bring in cheaper foreign workers, with ordinary skills, who directly substitute for, rather than complement, workers already in America. They are clearly displacing and denying opportunities to U.S. workers. A sizable share of highly skilled American workers and students - engineers, information technologists, and scientists - have concluded the H-1B program undercuts their wages and job opportunities. Those conclusions are largely correct and the program has lost legitimacy amongst much of America's high-tech workforce.
Furthermore, program loopholes provide an unfair competitive advantage to companies specializing in offshore outsourcing, speeding up the process of shipping high-wage, high-tech jobs overseas. It has disadvantaged companies that primarily hire American workers and forced those firms to accelerate their own offshoring, threatening America’s future capacity to innovate and ability to create sufficient high-wage, high-technology jobs.
For at least the past five years nearly all of the employers receiving the most H-1B are using them to offshore tens of thousands of high-wage, high-skilled American jobs. Table 1 below shows that, for fiscal years 2007 to 2009, seven of the top ten H-1B employers are doing significant offshoring. Offshoring through the H-1B program is so common that it has been dubbed the "outsourcing visa" by India’s former commerce minister.
The offshore outsourcing industry is adding hundreds of thousands of jobs every year. The top three India-based offshore outsourcing firms, Tata Consultancy Services, Infosys, and Wipro, added a stunning 57,000 net new employees last year alone. If the H-1B program loopholes were closed, many of those jobs would have gone to Americans.
In a recent interview with ComputerWorld magazine, former Representative Bruce Morrison, a past chairman of this subcommittee and co-author of the Immigration Act of 1990 that created the H-1B program, summed up his view about how the H-1B program has been distorted by outsourcing:
"If I knew in 1990 what I know today about the use of it [H-1Bs] for outsourcing, I wouldn't have drafted it so that staffing companies of that sort could have used it," Morrison said. Jobs are going abroad because of globalization, he said, "but the government shouldn't have its thumb on the scale, making it easier."
[tr ] Table 1
| Top 10 H-1B Employers for Fiscal Years 2007-09 7 of 10 Have Significant Offshoring
| H-1B Use Rank
| Company
| H-1Bs Obtained
FY07-09
| Significant Offshoring
| 1
| Infosys
| 9,625
| X
| 2
| Wipro
| 7,216
| X
| 3
| Satyam
| 3,557
| X
| 4
| Microsoft
| 3,318
| 5
| Tata
| 2,368
| X
| 6
| Deloitte
| 1,896
| 7
| Cognizant
| 1,669
| X
| 8
| IBM
| 1,550
| X
| 9
| Intel
| 1,454
| 10
| Accenture
| 1,396
| X
| Source: DHS USCIS: Initial H-1B I-129 Petitions FY07-09
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Below I summarize the problems with the H-1B program and how we can solve them. FOUR DESIGN FLAWS WITH THE H-1B PROGRAM
H-1B visa use has become antithetical to policy makers’ goals due to four fundamental flaws:
Flaw 1 -- No Labor Market Test
Contrary to popular perception in the media, and even amongst some policy makers, the H-1B visa program does not require any labor market test. In other words, employers are not required to show that qualified American workers are unavailable before hiring foreign workers through 4 the H-1B visa program. Employers can and do bypass American workers when recruiting for open positions and even replace outright existing American workers with H-1B guest workers.
Flaw 2—Wage requirements are too low
Wage requirements are too low for H-1B visas and as a result the program is extensively used for wage arbitrage. Employers have told the Government Accountability Office (GAO) that they hire H-1Bs because they can legally pay below-market wages. The primary wage requirement is the setting of a wage floor, the lowest level an employer can pay an H-1B. The current wage floor is approximately the 17th percentile. A recent GAO study found that the majority (54%) of H-1B labor condition applications were for that lowest level, a level reserved for "entry level" positions, hardly a wage level that the "best and brightest" would earn. Just to provide one example of how low that wage can be, the Department of Labor has certified wages as low as $12.25 per hour for H-1B computer professionals, an occupation where the typical median wage is more than $70,000.
Flaw 3—Work permits are held by the employer
Visas are held by the employer rather than the worker. An H-1B worker's legal status in the country is thus dependent on the employer, giving inordinate power to the employer over the worker. As a result, H-1B workers can be easily exploited and put into poor working conditions, but they have little recourse because the working relationship is akin to indentured servitude. A number of cases have been highlighted in the press recently.
Flaw 4—The visa period is far too long
H-1B visas are issued for three years and are renewable for another three years, which magnifies the damage done by low wages and the inability of workers to change jobs freely. The visas can be extended indefinitely beyond six years when employers apply for permanent residence for their H-1B workers, keeping the visa valid beyond a decade in some cases. Extending the H-1B visa length in lieu of fixing the underlying problems associated with permanent residence creates more problems than it solves.
Flawed administration
In addition to the inherent flaws in the design of the program, there is little oversight or enforcement of the program.
H-1B program oversight and enforcement is deficient. The Department of Labor review of H-1B applications has been called a "rubber stamp" by its own Inspector General. And a 2008 DHS IG report found that one-in-five H-1Bs were granted under false pretenses - either through outright fraud or serious technical violations. Critical data on actual program use is either not released or in some cases even collected. And program integrity largely relies on hope that H-1Bs would 5 blow the whistle if they were being exploited. Whistle-blowing is highly unlikely given that H-1Bs' legal status depends on their continued employment.
SOLVING THE PROBLEMS WITH THE H-1B PROGRAM
By closing the H-1B visa loopholes described above, Congress would create and retain tens of thousands of high-wage American jobs and ensure that our labor market works fairly for American and foreign workers alike.
Institute an Effective Labor Market Test
An effective labor market test, such as labor certification for each application, needs to be created. U.S. workers should not be displaced by guest workers, and employers should demonstrate they have looked for and could not find qualified U.S. workers.
As a fix, some have proposed extending H-1B Dependent firm rules to all firms. But these rules are clearly not effective since H-1B Dependent firms are able to avoid hiring Americans while garnering thousands of H-1Bs annually. Table 1 above shows four of the top five H-1B recipients are H-1B Dependent.
Pay Guest Workers True Market Wages
Guest workers should be paid true market wages. The Congressionally imposed four-level wage structure should be abandoned. No guest worker should be paid less than the median wage in the occupation for all skill levels. Ensuring that employers pay market wages will remove the temptation of wage arbitrage. Further, employers should pay an annual fee equal to 10% of the average annual wage in the occupation. Those fees could be used to increase the skills of the American workforce and will ensure that employers are hiring guest workers who are filling real gaps in the labor market.
Limit the visa to a maximum of three years, with no renewal.
This will ensure that employers either sponsor their H-1B workers for permanent residence or find a suitable American worker to fill the position.
Eliminate access to additional H-1B visas for any H-1B Dependent firms.
The program is intended to help employers in the United States operate more effectively, providing them skilled workers they cannot find in the U.S. It should not be a way for businesses to compete here in the U.S. with an imported workforce. With the exception of very small businesses, no employer should be permitted to employ a workforce consisting of more than 15% H-1Bs. There is no reason, other than wage arbitrage, for any firm to have more than 15% of its workforce on guest worker visas.
Shine Light on H-1B Program Practice
There is widespread and substantial misunderstanding, in the media and even amongst some policy makers, about how the program works in practice. Many of these misunderstandings could be cleared up through greater transparency. Congress and USCIS should publish data on program use by employer, including job title, job location, actual wages paid, and whether the worker is being sponsored for permanent residence. The data should include all H-1B workers, not just newly issued and renewed petitions.
Further, H-1B use by H-1B Dependent firms should be investigated and the findings publicly released. So called H-1B Dependent firms must meet additional requirements prior to hiring an H-1B worker, yet it is clear that these firms are able to circumvent Congress' intent regarding those additional requirements. As noted above these firms are able to hire literally thousands of H-1Bs annually without hiring any Americans for those positions.
Institute Sensible Oversight
Through their use of guest worker visas employers are asking government to intervene in the normal functioning of the American labor market. With this privilege should come accountability. Employers using guest workers should be subject to random audits to ensure they are fulfilling the obligations contained in their attestations. And Government agencies in charge of these programs— the Departments of Homeland Security, Labor, and State—should be granted the authority, and allocated resources, to ensure the programs are operating properly. Given the efforts in Congress to cut deeply into discretionary spending, some mechanism to fund these audits should be created. At a minimum, one in ten H-1B employers should be audited and, if they are not eliminated, every H-1B Dependent firm should be audited every year.
Establish a Clear Single Objective for the H-1B Program
The H-1B program is a so-called "dual-intent" visa; i.e., though the visas are temporary, employers can choose to sponsor these workers for permanent residence. While this design feature appears to provide flexibility, it comes at substantial cost. Is the H-1B program supposed to be truly temporary, be used sparingly, and only for short periods of time? Or is it the way to entice very recent foreign graduates of American universities to stay permanently? Or is it the primary bridge to immigration for high-skilled workers who are trained abroad? Each of these objectives creates inherent conflicts in program design; e.g., in setting wage floors. Congress should consider how to limit the scope of the H-1B program to improve its performance.
The H-1B is often equated with permanent residence in the media's discussion of high-skill immigration policy. As I have shown, with an analysis of the PERM database, many of the largest users of the H-1B program sponsor few, if any, of their H-1Bs for permanent residency. In the case of offshore outsourcing firm Tata Consultancy Services, it received 2,368 H-1Bs between 2007 and 2009, yet didn't sponsor a single H-1B for permanent residence. This example illustrates how the program's reality doesn't match the claims made by employer coalitions such as Compete America.
Other High-Skill Visa Programs Need Scrutiny & Fixing
I understand that this hearing is specifically about the H-1B program but I would like to briefly highlight some other critical issues for high skill immigration policy that are directly related to the H-1B. Other temporary visa programs, such as the L-1 and B-1 and OPT, are also badly in need of an overhaul, and are being used to circumvent the annual numerical limit on H-1Bs. The L-1 visa program has even less control and oversight than the H-1B, has no annual "cap" and is very vulnerable to abuse. For example, the opportunities to exploit wage arbitrage using the L-1 is even greater than for the H-1B since the L-1 workers can be paid home country wages. The wage differentials between America and India, the source country for the largest share of L-1s, are staggering. With respect to the B-1 "business visitor" visa we have even less information about how it might be being exploited, but recent news reports and an ongoing lawsuit reveal that it is likely also being used to get around the H-1B rules and cap.
In 2008, the duration of the OPT work visa was extended for STEM to 29 months without oversight or any approval from Congress. It appears that the largest beneficiaries of this extension are obscure colleges that are providing workers to the offshore outsourcing industry. There is no wage floor for OPT and one analyst estimate they are paid a mere 40% of what Americans earn. The rationale for the OPT extension has disappeared so it should be rolled back to its original duration. And certain categories of high skill employment based permanent resident visa programs with very long backlogs should be cleared. A clear pathway to permanent residence, which can be completed in a reasonable amount of time, should be created.
Immigration Policy Should Be Made By Congress, Not the U.S. Trade Representative
Given the widespread use of both H-1B and L-1 visas by offshore outsourcing firms, Congress should take affirmative steps to make it clear that both guest worker programs and permanent residence are immigration, and not trade, policy issues. In 2003, the U.S. Trade Representative (USTR) negotiated free trade agreements (FTAs) with Chile and Singapore, which included additional H-1B visas for those two countries, and constrained Congress from changing laws that govern the L-1 visa program. In response, many members of Congress felt it was important to re-assert that Congress, not the USTR, has jurisdiction over immigration laws. But no law was ever passed. Without legislation, the muddying of trade and immigration policy will keep recurring. Most recently, it appears that some L-1 visa provisions were included as a side agreement in the Korea-U.S. Free Trade Agreement. Many countries, including India, have pressed for more liberalized visa regimes through trade agreements including proposing a new GATS work visa. Congress, not the U.S. Trade Representative, should have the authority to change these laws, and Congress should pass a law reaffirming jurisdiction.
Immigration Policy Should Be Made By Congress But It Needs Specialized Expertise From An Independent Commission
A number of think tanks and academics, including the Migration Policy Institute and the Economic Policy Institute, have recommended that Congress create a standing commission on immigration. This commission would track the implementation of policy, the changing needs of the U.S. economy and labor market, and make recommendations to Congress on legislative changes. Given the nature of immigration policymaking Congress should seriously consider creating such a commission.
In conclusion, let me say that I believe the United States benefits enormously from high skilled permanent immigration, especially in the technology sectors. We can and should encourage the best and brightest to come to the United States and settle here permanently. But our future critically depends on our homegrown talent, and while we should welcome foreign workers, we must do it without undermining American workers and students. By closing the H-1B visa loopholes we would ensure that the technology sector remains an attractive labor market for Americans and continues to act as a magnet for the world’s best and brightest.
The lobbyists supporting the H-1B program have repeatedly made claims that the program is needed because there is a shortage of American workers with the requisite skills, and the foreign workers being imported are the best and brightest. If that is indeed the case, then those employers should not object to these sensible reforms. The policies I have proposed pose no limitations on employers' ability to hire foreign workers who truly complement America's talent pool.
1 This testimony is based on two papers I published with the Economic Policy Institute (EPI): "The H-1B and L-1 Visa Programs: Out of Control", published on October 14, 2010; and, "Bridge to Immigration or Cheap Temporary Labor? The H-1B & L-1 Visa Programs Are a Source of Both," published on February 17, 2010. Both papers can be found on the EPI website: www.epi.org.
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5/13/2013 6:39:05 AM
Topic:
It doesn’t add up
TheTaxMan
Posts: 65
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“STEM” careers are challenging, -engaging, -valuable to humanity, and vital to America’s strength. However, “the conventional wisdom” regarding our STEM-workforce is flawed. Actually – the USA is “sinking its own boat.”
NPR once aired a story on an MIT-developed suit which acquaints a younger wearer with the physical challenges of an aged body. Q: Why not just walk-across-the-hall and tap the perspective of an OLDER scientist/engineer? A: “Because there are increasingly-fewer of them around.”
Actually –
• America HAS A SUFFICIENT SUPPLY of STEM graduates NOW.
• Corporate USA is consciously FORCING STEM graduates OUT of these fields.
Web searches for the phrases “older engineer” and “unemployed engineer” will reveal informed testimony- and reader comments such as:
• “The United States has arranged to produce more knowledge workers than we can employ, creating a labor-excess economy that keeps labor costs down and productivity high.”
• “One might ask why, in the face of such evidence, we still hear spirited claims that there are too few engineers. …What you are hearing is simply the expressions by interest groups and their lobbyists.”
• “…Companies often create the very shortages they decry by insisting on applicants who meet EVERY item on a detailed list of qualifications.”
• “In some engineering fields, the 40-year level is becoming almost as much a turning point for some engineers as it is for professional athletes. In the software area, it certainly happens at 35 and often lower…”
• “Salary curves as a function of age routinely show salary decline after age 45.”
• “The fastest-growing group of unemployed people is the experienced and educated in the 45-to-54 age range…”
• “One of America's dirty little secrets is that most engineers over 50 are underemployed or long-term unemployed.”
• “No one says they don't want to be operated on by a doctor who is too experienced but an engineer who has too much experience can't get hired…”
• “Why would someone want to become an engineer? Years of brutally tough coursework followed by 60-70 hour workweeks and the constant threat of a layoff? All for the same or less money you could make as a business major, where you drink your way through college and complain about the engineers that work for you.”
• “Seniority and experience seem to count for little, and good work offers no protection...”
And this is just a SAMPLE.
Consider the following:
• Americans would be STUNNED at the number of ex-scientists- & engineers now driving trucks or working at Lowe's & Radio Shack.
• We’re now at a point where many of our best-&-brightest can be SHOT-AT (in the military) for a longer term than they can employ their brains/creativity in designing our WEAPONS…
• This isn’t just about “supply-&-demand;” it’s a NATIONAL SECURITY ISSUE. We haven’t prevailed in military conflicts solely due to the number (or caliber) of our troops; we’ve also benefitted GREATLY from having “better toys.”
• Q: If a foreign aggressor successfully mounts our shores because our tech lags behind, will it matter that we’ve become a nation of investment bankers?
• “Strong backs” don’t design “smart”-bombs; strong MINDS do. The contributions of Scientists & Engineers facilitate America’s safety- & standard-of-living – yet U.S. companies now routinely overwork-, underpay-, demoralize-, and discard many of our best minds (…at the peak of their powers…) at a time when competition has never been more fierce nor the stakes higher.
• Rest Assured: If someone is truly interested in a STEM field, s/he WILL love it – as long as the individual doesn’t expect a STEM career to be the lucrative-, trouble-free “vehicle-to-retirement” of yore. Today’s STEM grads must (a.) “raise the periscope” at age 35 and (b.) devise- and be ready to execute a “Plan B” by age 40. Unfortunately, they will have no choice.
• Greed is achieving what NO foreign force could – the systematic destruction of U.S.-based STEM superiority.
Lastly –
(1) a comment to an article entitled “Why Students Are Leaving Engineering” –
“You know what? [Everytime] I cross a bridge, ride an elevator, or fail to be crushed by a collapsing building, I'm thankful that engineering schools work the living crap out of engineers. Engineering is too important to be easy. The right way to get more engineers into circulation would be better pay -- it's basic supply and demand. When demand exceeds supply, prices must go up. It's funny how corporations love economics right up until the point where it involves paying intelligent people higher wages.”
and --
(2) how “Crash54” (a respondent to a recent web article entitled “Do Layoffs Target Older Workers?”) describes himself:
“Graduate degree in EE, Summa Cum Laude from undergraduate institution, 58 years old and now changing oil and tires at an auto shop for 1/5th what I used to make. I've got a job, but it feels like such a waste.”
The impact of age discrimination (and other “MBA-proffered lunacy”) on our technical workforce is truly hobbling the Republic. Sadly, "wisdom" is no longer held in high esteem – just how “the bottom line" looks for the next Quarterly Report. (Think About It: Many who DIDN'T necessarily apply themselves in school are now (a.) running companies and (b.) systematically-discarding those who DID. Now THAT's a prescription for the long-term survival of a NATION...) This country’s love-affair with “cheap labor” is going to be its downfall – and Corporate America needs to own-up to the problem it has created (and continues to stoke). The H-1B visa is one of Coprorate America's favorite "Weapons of Mass Dismissal." Tragically, I cannot in-good-conscience encourage a young person to pursue a STEM-career. PLEASE find-out the truth about America’s STEM situation – otherwise, our grandchildren will face a MUCH bigger problem than “excessive debt.”
From a Long-Term-Unemployed-, 52-Year-Old-, STEM-Degree-Holder.
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5/13/2013 6:29:41 AM
Topic:
It doesn’t add up
Chandler
Posts: 128
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It doesn’t add up
A science writer questions the conventional wisdom of US-born STEM workers
By Beryl Lieff Benderly, May 1, 2013
In late February, Christine Miller and Sona Shah went to the Capitol Hill office of Miller’s senator, Barbara Mikulski, a Maryland Democrat, to talk about immigration reform and the job market for science, technology, engineering, and mathematics (STEM) workers. Miller, an American-born MIT grad with a PhD in biochemistry, had 20 years of research experience when Johns Hopkins University laid her off in 2009 because of funding cuts. Shah, an Indian-born US citizen with degrees in physics and engineering, had been laid off earlier by a computer company that was simultaneously hiring foreign workers on temporary visas. Proposals to increase admission of foreign stem workers to the US, Miller and Shah told Erin Neill, a member of Mikulski’s staff, would worsen the already glutted stem labor market.
According to Miller, Neill told them this is not the argument “she normally encounters on this issue.” The conventional wisdom is that tech companies and universities can’t find enough homegrown scientists to hire, so they need to import them from China and India. Neill suggested to Miller and Shah that “we would have more impact if we represented a large, organized group.”
Miller and Shah are, in fact, part of a large group. Figures from the National Institutes of Health, the National Academies, the National Science Foundation, and other sources indicate that hundreds of thousands of STEM workers in the US are unemployed or underemployed. But they are not organized, and their story is being largely ignored in the debate over immigration reform.
The two main STEM-related proposals currently part of that debate in Congress would increase the number of temporary high-skill worker visas (also called guestworker visas), and give green cards to every foreign graduate of an American college with a master’s or PhD in a STEM field. Media coverage of these proposals has generally hewed, uncritically, to the unfounded notion that America isn’t producing enough native talent in the science and engineering fields to satisfy the demands of businesses and universities—and that foreign-born workers tend to be more entrepreneurial and innovative than their American-born counterparts. Allowing more stem immigrants, the story goes, is key to adding jobs to the beleaguered US economy.
It is a narrative that has been skillfully packaged and promoted by well-funded advocacy groups as essential to the national interest, but in reality it reflects the economic interests of tech companies and universities.
High-tech titans like Bill Gates, Steve Case, and Mark Zuckerberg are repeatedly quoted proclaiming a dearth of talent that imperils the nation’s future. Politicians, advocates, and articles and op-eds published by media outlets—including The New York Times, Forbes, CNN, Slate, and others—invoke such foreign-born entrepreneurs as Google’s Sergey Brin or Yahoo’s Jerry Yang, as if arrival from abroad (Brin and Yang came to the US as children) explains the success of the companies they founded . . . with partners who are US natives. Journalists endorse studies that trumpet the job-creating skills of these entrepreneurs from abroad, while ignoring the weaknesses that other scholars find in the research.
Meanwhile, The National Science Board’s biennial book, Science and Engineering Indicators, consistently finds that the US produces several times the number of STEM graduates than can get jobs in their fields. Recent reports from the National Institutes of Health, the National Academies, and the American Chemical Society warn that overproduction of STEM PhDs is damaging America’s ability to recruit native-born talent, and advise universities to limit the number of doctorates they produce, especially in the severely glutted life sciences. In June 2012, for instance, the American Chemical Society’s annual survey found record unemployment among its members, with only 38 percent of new PhDs, 50 percent of new master’s graduates, and 33 percent of new bachelor’s graduates in fulltime jobs. Overall, STEM unemployment in the US is more than twice its pre-recession level, according to congressional testimony by Ron Hira, a science-labor-force expert at the Rochester Institute of Technology.
And yet, a bill introduced in Congress last year that would have heeded the NIH recommendation by limiting visas for biomedical scientists was attacked in a Forbes article that suggested it could delay progress on the search for a cure for cancer by keeping out able researchers.
* * *
Foreign-born scientists and engineers have, of course, contributed significantly to American society as innovators and entrepreneurs—and the nation’s immigration policy certainly needs repair. But many leading STEM-labor-force experts agree that the great majority of stem workers entering the country contribute less to innovative breakthroughs or job growth for Americans than to the bottom lines of the companies and universities that hire them.
Temporary visas allow employers to pay skilled workers below-market wages, and these visas are valid only for specific jobs. Workers are unable to take another job, making them akin to indentured servants. Universities also use temporary visas to recruit international graduate students and postdoctoral scientists, mainly from China, to do the gruntwork for professors’ grants. “When the companies say they can’t hire anyone, they mean that they can’t hire anyone at the wage they want to pay,” said Jennifer Hunt, a Rutgers University labor economist, at last year’s Mortimer Caplin Conference on the World Economy.
Research by Hira, Norman Matloff of the University of California-Davis, Richard Freeman of Harvard, and numerous others has shown how temporary visas have allowed employers to flood STEM labor markets and hold down the cost of tech workers and scientists doing grant-supported university research. Wages in the IT industry rose rapidly throughout the 1990s, but have been essentially flat or declining in the past decade, which coincides with the rising number of guestworkers on temporary visas.
In his new book, Why Good People Can’t Get Jobs, Peter Cappelli, a human-resources specialist at the Wharton School, concludes that companies’ reported hiring difficulties don’t arise from a shortage of qualified workers, but from rigid recruitment practices that use narrow categories and definitions and don’t take advantage of the applicants’ full range of abilities. Companies so routinely evade protections in the visa system designed to prevent displacement of American citizens that immigration lawyers have produced videos about how it is done. For instance, tech companies that import temporary workers, mainly recent graduates from India, commonly discard more expensive, experienced employees in their late 30s or early 40s, often forcing them, as Ron Hira and other labor-force researchers note, to train their replacements as they exit. Age discrimination, Hira says, is “an open secret” in the tech world.
The temporary-visa system also facilitates the offshoring of STEM work, particularly in the IT field, to low-wage countries. Outsourcing companies use the temporary visas to bring workers to the US to learn the jobs that the client company is planning to move to temp workers’ home country. The 10 firms with the largest number of H-1B visas, the most common visa for high-skill workers, are all in the business of shipping work overseas, and former Indian commerce minister Kamil Nath famously labeled the H-1B “the outsourcing visa.”
These practices have helped to reduce incomes and career prospects in STEM fields drastically enough to produce what UC Davis’s Norman Matloff calls “an internal brain drain” of talented Americans to other, more promising career opportunities such as Wall Street, healthcare, or patent law.
The proposal before Congress to automatically grant green cards to all STEM students with graduate degrees—regardless of field, origin, or quality—would exacerbate the problem of already overcrowded markets, according to new research by Hal Salzman of Rutgers University, Daniel Keuhn of American University, and B. Lindsay Lowell of Georgetown University. It also would benefit universities facing tough financial times by dramatically increasing the allure of American graduate schools, and thus the income potential to universities. And, as Republican Senator Chuck Grassley said at a 2011 hearing, it would “further erode the opportunities of American students. Universities would in essence become visa mills.”
Academic departments generally determine how many graduate students they admit, or postdocs they hire, based on the teaching and research workforce they need, not on the career opportunities awaiting young scientists. Unlike companies, universities have access to unlimited temporary-worker visas. This allows universities to hire skilled lab workers and pay them very low, “trainee” wages. Postdocs are an especially good deal for professors running labs because they don’t require tuition, which must be paid out of the professors’ grants, notes Paula Stephan, a labor economist at Georgia State University, in her book How Economics Shapes Science.
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Immigrants constitute the nation’s “only shot at getting a growing economy,” because they “start more jobs than natives,” declared New York Times columnist David Brooks on Meet the Press in February. “Every additional 100 foreign-born workers in science and technology fields is associated with 262 additional jobs for US natives,” he had written in the Times, adding that “a quarter of new high-tech companies with more than $1 million in sales were also founded by the foreign-born.”
These claims, cited by Brooks and many others, arise from a body of research that has been the subject of scholarly dispute—though you’d never know it from the media coverage of this issue. The overwhelming majority of coverage presents the conclusions reached in studies like the one conducted by Duke University’s Vivek Wadhwa, who publishes widely in popular media and speaks frequently on immigration issues. About a quarter of the 2,054 engineering and technology companies that responded to Wadhwa’s telephone survey said they had a “key founder”—defined as a chief technology officer or a CEO—who was foreign-born. Extrapolating from that figure, the study credits immigrant-founded companies with employing 450,000 people nationally in 2005.
But a nationwide survey by political scientist David Hart and economist Zoltan Acs of George Mason University reached a different conclusion. In a 2011 piece in Economic Development Quarterly, Hart and Acs note that between 40 and 75 percent of new jobs are created by no more than 10 percent of new businesses—the so-called high-impact firms that have rapidly expanding sales and employment. In their survey of high-impact technology firms, only 16 percent had at least one foreign-born founder, and immigrants constituted about 13 percent of total founders—a figure close to the immigrant share of the general population. But the more fundamental problem with Wadhwa’s study, Hart and Acs suggest, is that it does not report the total number of founders at a given company, making conclusions about immigrants’ overall contribution impossible to quantify.
Evaluating the issues of statistics and sample selection that divide the academic researchers is beyond the purview of most general media, but informing readers that reputable researchers reached different conclusions is not. Though real, the immigrant role in high-tech entrepreneurship could be considerably less dramatic than many writers claim. Research on Silicon Valley entrepreneurs in 1999 by AnnaLee Saxenian, for example, found that 36 percent of high-tech companies owned by Chinese immigrants were doing nothing more groundbreaking than putting together computers for sale from components.
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As Erin Neill, of Senator Mikulski’s staff, pointed out, no one in the immigration debate speaks effectively for US-born STEM workers. The IT world’s libertarian ethos, the relative poverty among young scientists and their unemployed and underemployed peers, and a fear of antagonizing present or potential employers all hamper efforts to organize these workers. National scientific associations and advocacy groups sponsored by industry and universities, meanwhile, represent the interests of those who benefit from the system—tenured faculty, university administrators, and company executives, including those at companies whose donations support scholarly conferences and other association activities. These organizations and their lobbyists frame their policy arguments with feel-good abstractions about the inherent value of science and research and innovation, suggesting they are a panacea for America’s economic ills.
Which brings us to the story of Xianmin Shane Zhang, a software engineer in Minnesota. According to his LinkedIn page, Zhang earned his BS in engineering in his native China, one MS in physics at Southern Illinois University, and another in computer science at the University of Houston. His profile next lists a series of IT jobs at US companies. In 2005, 43-year-old Zhang was one of a group of workers over 40 who sued their former employer, Best Buy, for age discrimination, when the company laid them off after outsourcing their jobs. The suit ended in an undisclosed settlement.
After being laid off by Best Buy, Zhang eventually fulfilled the rosy forecast of those advocating increased STEM-worker immigration by becoming an entrepreneur, though hardly following the innovation and jobs-for-Americans script. His Z&Z Information Services in St. Paul helps US companies outsource their IT and programming needs to China. “Giving green cards to foreign students can lead to offshoring as well,” notes Norman Matloff, who uncovered this tale. That’s because young scientists and engineers from abroad get older, and wind up facing the same age discrimination and glutted market as their native-born colleagues. Why isn’t that reported, too?
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5/10/2013 9:18:46 AM
Topic:
America Declares WAR on the NRA
Onward
Posts: 177
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The Internet Declares War on the NRA
By Francis Wilkinson, May 9, 2013
The Internet is good for many things -- conspiracy theories, shopping, sharing funny pictures with friends. But it may prove to be very, very bad for the extreme gun-rights movement.
Here are a few recent stories that the Web, in its collective wisdom, has plucked from relatively obscure locales in the past week and elevated to national prominence.
We have the case of the 2-year-old who shot himself in the head with a handgun about 50 miles from Dallas. He is dead.
There is the matter of the 3-year-old Tampa boy who fatally shot himself this week with his uncle's gun. (Like 1 million Floridians, the uncle has a state permit to carry a concealed weapon. The boy apparently found the weapon in the uncle's backpack.)
A 13-year-old in Florida this week shot his 6-year-old sister, who survived.
And, of course, there is the now notorious tragedy of the 5-year-old Kentucky boy who shot his 2-year-old sister to death with a rifle specially manufactured and marketed to small children.
In his blog at the Daily Beast, David Frum has been posting stories of hapless gun owners causing pointless tragedy. Here is Frum responding to a typically unnecessary death:
Here's the blunt fact: for all the talk about "responsible gun ownership," guns are easily available to everybody, responsible or not. It's an empty compliment even to refer to "responsible gun owners" - many of them are people who through good luck simply have not had their irresponsibility catch up with them yet, as so tragically happened yesterday to the Wanko family. The National Rifle Association cannot bear to admit it, but many gun owners are not paragons of probity. Some are drunks, drug addicts, wife-beaters, criminals or simply reckless, stupid, irresponsible humans with atrocious judgment. It's anybody's guess, for instance, how many of the one million concealed carry permit holders in Florida are a danger to themselves and others. (Trayvon Martin isn't around to make his guess.)
There are roughly 30,000 deaths a year in the U.S. due to gunshots. As this week's news makes clear, incidents of children killing themselves or other children are appallingly common. They are also the types of stories -- compact, outrageous, horrifying -- that are readily transmitted through Twitter, Facebook and other forms of social media. As such stories spread, they make it increasingly obvious to increasing numbers of people that American gun laws are uniquely insane.
The NRA has been remarkably successful in suppressing government research on gun violence and hindering dissemination of data on guns. Legislators in Washington and state capitals have been ghoulishly accommodating. The Internet, it seems, won't be so easily bought.
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