Tuesday proving Larry Kudlow and other Ayn Rand droogies wrong

For anyone whose read my pieces in the past, knows that I hold a certain disdain towards former Reagan White House OMB Associate Director/conservative-libertarian Ayn Rand acolyte Larry Kudlow.  It's nothing personal against the guy, it's his ideas and economic policy objectives that I find fault with.  For the past couple of months, he's been going on about this is the "Goldilocks economy." Essentially, that we're worrying about nothing because one bad economic indicator is being offset by a good one (mind you, he's often just used productivity as that one).  Well today, despite his claims that all is almost well, we got some news that just proves Larry Kudlow wrong!

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Subprime, Housing, Energy, Credit Card Crises are Symptons

As rising gas prices, sub-prime mortgages, and nascent credit card disaster impose severe hardships on over 90% of Americans, public discourse focuses on the energy crisis, global warming, alternative fuels, bailouts, interest rates and the attendant economic woes.  As the economic, political, and cultural elites hypothesize over the causes and solutions to the nations problems, they deliberately ignore the real problem which has been the shift over the last 40 years from a Keynesian to a free market economic model.  Whereas Keynesian economic theory embraces the principle of some redistribution of wealth and a major role for government to provide basic programs and services, free market economics embraces the principle that the market should make all economic decisions and government should not interfere and distort the natural priorities attained otherwise.

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It's Still the Economy, Stupid

by Walter Brasch

    George W. Bush looked into the TV camera, Tuesday morning [July 15] and tried to assuage the fears of about 300 million Americans who believed they were in the middle of a Recession.

    "The economy is growing," said the President. "Productivity is high," he told us. "Trade's up. People are working," he said. In the Bush White House, the "R Word" is just a myth. Of course, the man who once wanted to be known as the Compassionate Conservative did say he knew "It's been a difficult time for many American families."

    "Difficult" doesn't even begin to describe what has happened to Americans the past seven years.

    Within hours of the President's speech, a less optimistic Ben Bernanke, chair of the Federal Reserve, told the Senate Banking Committee that inflation is high and "seems likely to move temporarily higher in the near term." In sworn testimony, he told the senators that "Many financial markets and institutions remain under considerable stress, in part because of the outlook for the economy and thus for credit quality, remains uncertain." Market Watch reports that over the past year, "inflation at the wholesale level gained 9.2%-- the largest year-over-year gain since June 1981."

    On the day that the President assuaged and the Federal Reserve chairman testified, General Motors announced it would freeze job hirings in several areas, lay off salaried workers, suspend shareholder dividends, and borrow up to $3 billion. Six weeks earlier, GM announced it was closing four plants; on the day the President spoke, GM announced four more plant closings. The nation's largest corporation, which saw a 16 percent sales decline in the first half of the year, announced that it was giving retired workers a slight pension increase but was cutting health care benefits.

    About 8.5 million Americans actively seeking work are unemployed, an increase of about 21.4 percent over one year ago, according to the Bureau of Labor Statistics (BLS). The unemployment rate of 5.5 percent is up from 4.6 percent a year ago. More important, about 1.5 million of the 8.5 million unemployed have been unemployed at least six months, a 37 percent increase over the past year, according to the BLS. Not included in the numbers are the "1.6 million people who are `marginally attached' to the workforce, who had looked for work in the previous 12 months, but not in the last month," according to Andre Damon of Global Research. Damon also reports that the BLS data does not include about 420,000 "`discouraged workers', who had given up looking for work because they think that there is no work available."

    Work is available in dozens of other countries, where American companies seeking to "maximize the bottom line" have been outsourcing jobs for years. About 14 million American jobs are going to be outsourced in the next four years, according to a report issued by the University of California at Berkeley. Short-sighted and greedy, these CEOs and their boards believe child labor and wages that can dip below $1 an hour is just another acceptable business practice. The "Made in America" label is now becoming as extinct as corporate morality.

    Americans who have been using credit cards to survive the Recession and have now reached their credit limit can raise their limit or sometimes reduce their payments or rate. All they have to do is call a credit card agency's toll-free number, which is answered by someone at a call center in India. Those same call centers are also telemarketing Americans to get into even more debt by getting credit cards.

    In a true "global economy," as many now euphemistically refer to outsourcing, persons having trouble with their computers assembled from parts made in Mexico and several Asian countries can now call technicians in India for assistance.

    Book and magazine publishers have been outsourcing art, design, editing, and printing overseas. Even newspapers have figured out how to cut even more costs while driving up profits. The Orange County (Calif.) Register, which laid off 90 persons in 2007, outsourced copyediting and page design to journalists in India. The Modesto (Calif.) Bee and Sacramento Bee have outsourced most of their advertising design departments to India.

    For Americans who have jobs, getting to them is more expensive. It makes no difference if the worker drives or takes public transportation, the rising cost of oil has pushed Americans into a crisis. Gas prices rose more than 25 percent in the past year, to more than $4 by July 1; diesel prices are up more than 30 percent to more than $5. The higher fuel costs affect almost every service and industry from home heating to food production and road repair.

    Flushed with an inflated housing boom, banks and mortgage companies had begun issuing mortgages, usually with excessive fees and high interest rates, to just about anyone with a pulse. The weaker the credit rating, the higher the fees and interest. Even if the economy was healthy, there would have been several hundred thousand defaults. By the end of 2007, about 2.5 million mortgages were in default, almost 40 percent higher than one year earlier. Attached to the problem is that many new homeowners bought houses at inflated prices, assured by lending companies that housing prices would continue to rise, are making monthly payments that put them at financial risk, and are now watching the value of their houses decline.

    Foreclosures and the Recession have driven down housing prices throughout the country. In 20 major American cities, house prices declined about 15 percent, according to the Case-Shiller index of housing prices. Prices declined by 25 percent in Las Vegas, Miami, and Phoenix, according to Case-Shiller. In California, the median price of houses declined by 35 percent over last year, according to the California Association of Realtors.

    Monday morning, the day before the President's speech, hundreds of Americans stood in line at the 33 Southern California branches of IndyMac Bank, now renamed Indymac Federal Bank, to withdraw what they hoped was all of their money. Over 11 days, customers had withdrawn about $1.3 billion, amid rumors that the bank was failing. The previous Friday, federal regulators seized the bank, once one of the nation's largest mortgage lenders. Last year, the bank lost $615 million; the books bled red another $184 million the first three months of this year. The Federal Deposit Insurance Corp.(FDIC) guarantees each individual account to $100,000, joint accounts to $200,000, and retirement accounts to $250,000. Those with less knew they would get all of their money. For those with more, some were just hoping to recover 50 cents on the dollar. The cost to the FDIC is expected to be $4-8 billion. IndyMac was the fifth bank to fail in the previous six months.

    Also failing were the Federal National Mortgage Association (better known as Fannie Mae) and the Federal Home Loan Mortgage Corp. (better known as Freddie Mac). The quasi-governmental agencies either own the loans or guarantee loans for almost half of the nation's $11 trillion in mortgages. But, with more homeowners buying houses they couldn't afford and now being subjected to rising costs in almost every area, combined with higher unemployment, both Fannie Mae and Freddie Mac faced collapse, their stock value freefalling about 90 percent in the past year. To keep the two agencies from failing, which would undoubtedly throw the nation into a deeper Recession that could dive into a Depression, the Federal Reserve announced it would issue low-cost loans of up to $15 billion.

    While 15 billion taxpayer dollars may seem significant, it is only about 9 percent of the $168 billion Congress appropriated for the war this year. President Bush, Vice-President Cheney, and their advisors were vigorous in demanding the U.S. go to war in Iraq and vigorous in demanding massive funding for that war, which may now cost more than $1 trillion.

    President Bush did acknowledge that the economy wasn't "as good as we'd like, and to the extent that we'll find weaknesses, we'll move." As domestic problems piled up the past few years, much caused by a diversion of the budget and assets to Iraq, it seemed that the Bush-Cheney Administration moved on domestic policies at the speed of a glacier.

    Not receiving much help are the 47 million Americans who don't have medical insurance, mostly because they can't afford the premiums, and the 3.5 million homeless, most of whom once had homes and jobs but are now living in their cars or makeshift shelters. About one-fourth of the homeless are veterans; slightly more than one-third of the homeless are children.

    In 1992, Bill Clinton and Al Gore campaigned against President George H.W. Bush on the slogan, "It's the economy, Stupid." The politics of that election came down to asking Americans if they were better off under that President Bush after four years than they were when his presidency began. Four presidential terms later, after eight years of a rising economy under President Clinton, it's the economy--not the war, the attack upon civil liberties, the destruction of the environment, or any of a few dozen other destructive policies--that may be what finally scuttles this Bush's legacy.

    [Dr. Brasch, an award-winning syndicated columnist, is professor of journalism at Bloomsburg University and president of the Pennsylvania Press Club. His latest book is Sinking the Ship of State: The Presidency of George W. Bush (November 2007), available through amazon.com and other bookstores. You may contact Brasch at brasch@bloomu.edu or through his website at: www.walterbrasch.com.]

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Monday Health Blog Roundup

* A recent study has found that black men are more likely than white men and women to be unaware that they are suffering from high blood pressure, according to an article in Wednesday's Reuters Health.  The researchers claim that this disparity stems from the fact that men are less likely than women to believe that they need to see a doctor.   Moreover, men, particularly African American men, are less likely to have access to a primary care physician:

What is not good, the researchers say, is that men were less likely than women to have a regular doctor, and they were four to five times more likely to say they had no doctor because they did not need one.

Study participants who did have a regular doctor were nearly four times more likely to know they had high blood pressure, and more than eight times more likely to be taking medication for it.


* The Kaiser Health Disparities Report has linked to a study on the prevalence of asthma that appeared in the Journal of Health and Social Behavior.  By looking at 10 different racial and ethnic groups in New York City, researchers examined how housing and neighborhood conditions might contribute to disparities among asthma patients:
Researchers found that Puerto Rican-Americans, other Hispanics and blacks had the highest levels of asthma, while Mexican-Americans, Chinese-Americans and Asian/Indians had the lowest levels. They also found that reducing minorities' exposure to deteriorated housing conditions and increasing levels of community unity, as well making improvements in other household factors, reduce asthma rates among blacks and Puerto Rican-Americans.

* An article in Saturday's New York Times discusses how rising gas prices have led to cuts in various services for the elderly.   Agencies have been forced to cut back on many programs, such as Meals on Wheels, because of the rising costs of transportation.  Elderly people, particularly those who are homebound, are among those most affected by these cuts, since they rely not only on the programs but on at-home volunteers as well:
Val J. Halamandaris, president of the National Association for Home Care and Hospice, said that rising fuel prices had become a significant burden for the 7,000 agencies represented by his group, with some forced to close and others compelled to shrink their service areas or reduce face-to-face visits with patients. A recent survey by the group concluded that home health and hospice workers drove 4.8 billion miles in 2006 to serve 12 million clients. "If we lose these agencies in rural areas, we'll never get them back," Mr. Halamandaris said.

* The Washington Post is reporting that New Jersey is one of the states facing the harshest effects of the health care crisis - hospital closures.   New Jersey's state hospitals are required to treat any person that walks through their doors, and in turn the state is supposed to reimburse the hospitals.   However, the state's budget crisis has led to cuts in reimbursements, and ultimately to hospital closures:
Six [hospitals] have closed in the past 18 months, and half of those remaining are operating in the red...

The situation has come to a head in this city [Plainfield, NJ] of 48,000 people -- majority black, largely poor and with many new immigrants moving in. The city's hospital of 130 years, Muhlenberg Regional Medical Center, is slated to become the latest casualty of this faltering system, closing its acute-care facility later this year. The obstetrics and pediatrics wards have already shut, and equipment is being packed up and wheeled out.


New Jersey is not the only state that has a problem of hospital closures.  To learn about the extent of the problem of hospital closures in New York, visit The Opportunity Agenda's GoogleMaps mashup site, Health Care That Works.

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Rental Housing Displacements Soar in Urban Areas: WaPo article raises questions

Yesterday, the Washington Post ran an article "The Profit in Decay"

http://www.washingtonpost.com/wp-dyn/con tent/article/2008/03/08/AR2008030802735. html

about how many landlords in Washinton DC are getting around laws restricting condominium conversions and rent increases by refusing to maintain buildings, and using intimidation tactics to drive tenants out, leaving many buildings first partially occupied, and eventually vacant.

When they finally succeed in driving their tenants away, emptying the buildings of tenants, they can convert the buildings to condominiums, often making huge profits.

Obviously, this makes many people homeless and further reduces the rapidly declining amount of affordable housing in cities.

The law says that if they want to convert a building to condos, they must pay relocation assistance, but despite these restrictions on condo conversions and rent stabilization laws - if they succeed in driving tenants out, they do not need to pay relocation assistance to anyone. City governments are overloaded with other problems and rarely stand in the way.

Many tenants tough it out for months or years, often without heat or hot water, because there is often nowhere else they can even remotely afford in the area.

This problem is not unique to Washington DC, its happening everywhere and middle and low income urban dwellers are being targeted for these removals. Neighborhoods are rapidy changing, as their community members are forced to leave, and cities are losing their diverse character.

Often the people who move in to these buildings have no idea that the previous tenants were in essence, 'economically cleansed' in this way.

Studies have shown that many displaced poor people have nowhere to go. Many older or disabled people, many who had been living on fixed incomes end up in homeless shelters or die.

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Diaries

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