Weekly Audit: The Unemployment Epidemic

By Zach Carter, Media Consortium Blogger

On Friday, we learned that the U.S. unemployment rate officially broke 10% for the first time since the early Reagan years. This is about as bad as it gets for a modern, developed economy. No economic force takes a heavier toll on a society than rampant joblessness, and few personal setbacks take a deeper psychological toll than being out of a job for months on end. If Congress and President Obama don't do something to create jobs fast, both are going to pay a hefty political price when next year's mid-term elections roll around.

So how bad is it? In October, the economy shed 190,000 jobs and the unemployment rate jumped from 9.8% to 10.2%. That percentage is the most optimistic reading of the labor market in Friday's report. If you take people who want full-time jobs but are settling for part-time work, then add those who have simply given up on finding a job, the rate is a massive 17.5%.

The problem is not that either Obama or Congress have failed to act on the problem, but rather that they have not done enough. When Congress was moving on Obama's $787 billion economic stimulus package back in February, we were shedding upwards of 700,000 jobs a month. So the stimulus package has worked--it's probably helped keep unemployment from jumping to 12% or 13%. But this is cold comfort to the nation's 15.7 million unemployed, 5.6 million of whom have been out of a job for more than six months.

As Robert Reich notes for Salon, Obama's economic advisers dramatically underestimated how bad things would get when they crafted the stimulus package. As a result, the package was too small and unemployment has remained high. Obama needs to go back to Congress and demand more economic relief funding. Republicans will continue to whine about government spending to excuse their obstructionism, of course, and conservative Democrats will probably start sweating, too--Sen. Ben Nelson (D-NE) helped cut back the original stimulus bill in February to help boost his "centrist" credentials. This of course had nothing to do with economics or policy. Government spending is what saves the economy in a recession. In a downturn as severe as this one, it takes a lot of spending to turn things around.

But as Reich notes, Nelson and his cohorts will have a lot more to worry about in the 2010 elections if the economy doesn't actually improve over the next year. And few economists think it will. The Congressional Budget Office, which is run by a conservative economist named Douglas Elmendorf, projects an average unemployment rate of over 10% in 2010. That's worse than this year. Democrats from swing districts need to support economic relief packages. Continued economic malaise will severely hurt them at the polls.

Congress finally took some action on joblessness on Thursday, voting to extend unemployment benefits for an additional 14 weeks. If we want the economy to recover, we need people to spend money, but if people aren't working, they don't have any money to spend. So the government cuts people checks to help them get by and stimulate a demand for goods and services. Even most conservative economists thinks this is a good idea.

But as Kevin Drum notes for Mother Jones, the soundness of the policy did nothing to prevent Republicans from fighting the effort to extend benefits tooth-and-nail. The bill had to overcome three--that's right, three--filibusters in the Senate from Republicans, who held up the bill for weeks for no apparent reason. In a blog post for The Washington Monthly, Steve Benen explains the economic cost of this obstructionism: In the weeks of delay, 200,000 people looking for work stopped receiving benefits.

But extending unemployment benefits will not solve our economic woes. The total program is just $2.4 billion, a drop in the bucket compared to the trillions of dollars the government put up to salvage Wall Street. $2.4 billion is not enough to reverse the unemployment trend. Cutting the checks certainly helps, but as Matthew Rothschild emphasizes for The Progressive, we need an economic policy that actually puts people back to work. We've known for months that the stimulus was too small and watched the labor market continue to deteriorate. We need more than tweaks at the economic margins, we need a robust job creation plan.

As Stephen Franklin notes for Working In These Times, we already know that the recession has created a significant jump in the nation's poverty rate. According to official government statistics, the rate climbed from 12.5% to 13.2% in 2008, the largest increase since 1991. But the National Academy of Science thinks the government statistics are misleading, as they account for rising costs associated with medical care, transportation, child care and different regional living standards, as Franklin notes. Taking these factors into account, the National Academy of Sciences calculates the actual poverty rate to be 15.8%. That's an additional 7 million people living in poverty, for a total of over 47 million. That's more than the entire population of the New York, Los Angeles, Chicago, and Philadelphia metropolitan areas combined. What's worse, we don't have poverty statistics for this year, when the most severe economic damage was been dealt.

Workers are facing tough economic prospects around the world. Writing for The Nation, Kristina Rizga details Latvia's economic turmoil. Just like the US, overexcited bankers in Latvia inflated a massive real estate bubble that took down the entire economy when it burst. But with the bubble burst, much of the country is now out of a job and stuck with a mortgage worth far less than what they paid for it. It's almost exactly the same story we've seen at home.

No domestic economic problem is more pressing than our epic levels of unemployment. We need another round of stimulus to get people working again. If not, we'll see the same public unrest here as in Eastern Europe.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

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Weekly Audit: We Need a 'People's Bailout'

By Zach Carter, Media Consortium Blogger

The economic free-fall is finally slowing down, although nobody expects the recovery to be very pleasant. Job losses and foreclosures are expected to increase well into next year. But even if our economic system gets back to normal, it's important to remember that gross inequalities are embedded in the global order. At home, minorities face significant barriers to economic security, while abroad, children in poor countries are denied access to basic nutrition. This is especially disheartening in the wake of the G-20 meeting in Pittsburgh, which demonstrated that the world's economic leaders are more focused on bailing out banks than eradicating global poverty.

Robert Reich sums up the domestic economic scenario succinctly for Salon. The stock market is humming along, even as most Americans are tightening their belts. It's a counterintuitive situation: Wall Street is celebrating an economic recovery, but the consumers that drive our economy are still cutting back. Reich explains that the government has stepped in to fill the hole caused by consumer spending. Business executives may scream "Socialism!" when the tax man comes around, but without massive government help, those same CEOs would be watching their earnings and companies collapse.

Without the jobs and tax cuts created by President Barack Obama's economic stimulus package, we'd see more red ink from just about every industry. The entire U.S. mortgage market is currently supported by the federal government via Fannie Mae and Freddie Mac, while other special initiatives like the Cash for Clunkers program brought the auto industry out of its recession-induced coma this summer.

The trouble is, while a few programs have been good for ordinary citizens, most of the government's economic salvage operations are aimed at giant corporations. Of all the paradoxes in today's economy, the most significant can be found in the financial sector. Bank stocks are up, even though banks are in serious trouble. Their customers are broke, foreclosures are soaring, and analysts are predicting a fresh round of multi-billion-dollar losses on commercial real estate loans soon. So what makes an investor want to buy a bank stock right now? Nothing but the government's limitless willingness to bail out banks.

How much bailout money did the government actually spend? We've all heard about the $700 billion Troubled Asset Relief Program (TARP), but the real haul for bankers is much, much bigger, as Nomi Prins and Christopher Hayes detail in a piece for The Nation. A whopping $17.5 trillion has been dedicated to subsidies, guarantees, below-market-rate loans, and other special perks for the financial industry. That's roughly one-fourth of the entire global economic output for a full year, and more than the entire annual productivity of the U.S.

Prins and Hayes make use of a clever thought experiment: What if, instead of spending the money on big institutions, the money had gone to a small-time gambler? It's an apt comparison. Taxpayer money went to financial speculators who used our homes and neighborhoods as poker chips in a global casino. The dozen or so bailouts the government has enacted seem absurd when we think of them as cheap financing for bets on the craps table. The number of programs is staggering. Bank executives love to proclaim that their banks didn't really need TARP money, they just accepted it because the government wanted them to. Next time you hear that boast (sometimes it sounds more like a whine), remember that every big bank in the country issued debt guaranteed by the government, then scored ridiculously cheap loans from the Federal Reserve while others got federal help through AIG, Fannie and Freddie.

"A fraction of the $17.5 trillion bailout could have been used to cut the principal of homeowners' mortgages (using homes, even devalued ones, as collateral) and cover student loans at zero percent interest," Prins and Hayes write. "Rather than pouring it into the top layers--the banks--a people's bailout would have cost less and been more humane. And it likely would have prevented the ongoing increase in defaults, foreclosures and general economic anxiety."

There are very good reasons to maintain a healthy financial sector, but only if banks actually do something useful. Banks are supposed to lend money to enable socially productive economic activity. This bailout money has not been spent on anything socially productive. Instead, it's covered losses from predatory lending and boneheaded speculation.

The dominant cause of the recession was the collapse of an $8 trillion housing bubble, which banks helped inflate with all outrageous loans. For decades, the value of a family's house was the foundation of most American middle-class wealth. When home prices took a nosedive, so did the spending power of every homeowner. Even borrowers who had affordable mortgage payments were hit hard. For borrowers stuck with expensive, predatory mortgages, the result was a wave of foreclosures. Writing for Mother Jones, Andy Kroll highlights a hard reality: Recovery in the housing market will not lead to middle-class financial security. It will be at least a decade before home prices reach pre-crash levels.

It's critical to remember how the recession is deepening existing inequalities, particularly along racial lines. In a post for In These Times, Michelle Chen explains how African Americans and Latinos are consistently paid less than whites during boom times, and are pushed even further down the ladder when things go bust. Communities of color are more likely to be targeted by predatory lending, which can devastate entire neighborhoods for generations. That means people of color are more likely to be foreclosed on, more likely to be laid off, and less likely to have access to basic necessities like health insurance.

The statistics are stark. In a story for New America Media, Christina Fernandez-Pereda, notes that while the overall unemployment stands at 9.7%, for minorities, the actual number is much higher. A full 15.1% of Blacks are unemployed, while unemployment among Asian Americans has doubled since early 2007. A full third of Latinos between the ages of 16 and 29 are unemployed.

The bank bailout has done nothing to improve the status of the global poor. The G-20 made grand promises to help those who need it most in developing countries this year, but so far, the talk has resulted in very little action. As Hayley Hathaway explains at Sojourners, only $50 billion has been dedicated to the 78 countries where humanitarian risk is greatest. As Hathaway notes, that's less than 25% of the TARP money received by the 20 largest U.S. banks.

Without major action, between 1.4 million and 2.8 million children will die of malnutrition in the next five years. Instead of pushing major humanitarian aid, the G-20 has promised $750 billion to the International Monetary Fund. The IMF was supposed to act as an international lender of last resort--if a nation's financial woes got really bad, they could get a loan from the IMF while they restructured. But IMF money ends up flowing to private-sector banks, and governments in need are forced to cut spending on programs that help the poor. When the G-20 met in Pittsburgh last week, a major topic of discussion involved giving developing nations a greater voice in IMF policies. But despite this talk, wealthy nations remain committed to the status quo, protecting the interests of their bankers eyeing future international bailouts.

For most people, it will be a long time before our economic recovery is a reality. But as the economy crawls out of the ditch, it's critical to build our future on a stronger foundation, one where we don't allow millions children to starve and where skin color does not determine economic security.

This post features links to the best independent, progressive reporting about the economy and is free to reprint. Visit StimulusPlan.NewsLadder.net and Economy.NewsLadder.net for complete lists of articles on the economy, or follow us on Twitter. And for the best progressive reporting on critical health and immigration issues, check out Healthcare.NewsLadder.net and Immigration.NewsLadder.net. This is a project of The Media Consortium, a network of 50 leading independent media outlets, and was created by NewsLadder.

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Will Speaker Pelosi Stand Up to the IMF?

It would be an exaggeration to say that Congress has a once-in-a-lifetime opportunity this week to reform the policies of the International Monetary Fund. If the future is like the past, if Congress misses this opportunity, another one will come along - in about 10 years or so.

This week, House and Senate leaders are meeting in a conference committee to work out the differences between the House and Senate versions of the supplemental appropriations bill.  The Senate version of the bill is likely to include $100 billion and new authorities for the IMF, but the House version of the supplemental bill did not include funds for the IMF. The Senate is debating amendments now as I write. The conference committee will almost surely meet soon after Senate passage; the stated goal is to pass the supplemental before the Memorial Day recess.

Concrete, observable reforms of the IMF's policies in poor countries should be part of any agreement: there should be no "blank check" for the IMF.

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Is Pakistan's Civil War a Class War?

The wily and persuasive Pepe Escobar had a column today over at the Asia Times suggesting that Pakistan is now openly being run from Washington. Mr. Escobar is, I think, half-right or perhaps more succinctly put is not too far off in his location. By Washington, Pepe Escobar clearly means the White House and the Defense Department. He's got the city right but the institutions wrong. Pakistan's fate may have been sealed back in November when the country agreed to a $7.6 billion USD bailout from the International Monetary Fund (IMF).

Pepe Escobar, who is one of a last a dying breed the hard-nosed international correspondent, writes on the elements of class struggle in the current troubles in Swat Valley.

In this complex neo-colonial scenario Pakistan's "Talibanization" - the current craze in Washington - looks and feels more like a diversionary scare tactic. (Please see The Myth of Talibanistan, Asia Times Online, May 1, 2009. ) On the same topic, a report on the Pakistani daily Dawn about the specter of Talibanization of Karachi shows it has more to do with ethnic turbulence between Pashtuns and the Urdu-speaking, Indian-origin majority than about Karachi Pashtuns embracing the Taliban way.

The original Obama administration AfPak strategy, as everyone remembers, was essentially a drone war in Federally Administered Tribal Areas (FATA) coupled with a surge in Afghanistan. But the best and the brightest in Washington did not factor in an opportunist Taliban counter-surge.

The wily Tehrik-e-Nifaz-e-Shariat-e-Mohammadi (TNSM - Movement for the Enforcement of Islamic Law), led by Sufi Muhammad, managed to regiment Swat valley landless peasants to fight for their rights and "economic redistribution" against the usual wealthy, greedy, feudal landlords who happened to double as local politicians and government officials.

It's as if the very parochial Taliban had been paying attention to what goes on across South America ... Essentially, it was the appropriation of good old class struggle that led to the Taliban getting the upper hand. Islamabad was finally forced to agree on establishing Nizam-e-Adl (Islamic jurisprudence) in the Swat valley.

Mr. Escobar's article is not the first to report some element of economic strife or class struggle in Pakistan's descent into civil war. While much of the world's attention when it comes to Pakistan has been on the situation in the FATA and the Malakand which includes Swat, Karachi has been enduring rolling riots that over the past six months have left hundreds dead. While the media often plays up an ethnic component to these riots, the rioters generally have a few things in common, they are poor and they are quite angry.

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Are US IMF Austerity Measures The Real Goal For Corporatists?

Why are the real rulers of America pushing so hard for the US government to assume the banks private gambling debts?

Experts agree that the banks real losses dwarf any estimates seen so far, and that the eventual bill will be huge.

But, most Americans didn't create those debts! WHY should we pay? Because the looting of America demands it! Because the bankers have so much power, thats why! The obvious endgame is that after assuming so much debt, not only would all social programs be put on hold indefinitely, eventually the US would eventually default on the deficit, forcing the US into IMF austerity programs.

Programs like Social Security and Medicare typically are eliminated in these national default situations.

Is the goal to force the US into the same kinds of IMF austerity programs that have caused riots in so many other nations?

Certainly, the US, which has been at the lead in pushing for these measures elsewhere, would not be able to escape having its own medicine applied to it.

Inquiring minds want to know.

http://en.wikipedia.org/wiki/Austerity

"In economics, austerity is when a national government reduces its spending in order to pay back creditors. Austerity is usually required when a government's fiscal deficit spending is felt to be unsustainable.

Development projects, welfare programs and other social spending are common areas of spending for cuts. In many countries, austerity measures have been associated with short-term standard of living declines until economic conditions improved once fiscal balance was achieved (such as in the United Kingdom under Margaret Thatcher, Canada under Jean Chrétien, and Spain under González).

Private banks, or institutions like the International Monetary Fund (IMF), may require that a country pursues an 'austerity policy' if it wants to re-finance loans that are about to come due. The government may be asked to stop issuing subsidies or to otherwise reduce public spending. When the IMF requires such a policy, the terms are known as 'IMF conditionalities'.

Austerity programs are frequently controversial, as they impact the poorest segments of the population and often lead to a wider separation between the rich and poor. In many situations, austerity programs are imposed on countries that were previously under dictatorial regimes, leading to criticism that populations are forced to repay the debts of their oppressors.[1][2][3]"

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