Weekly Audit: Wall Street Destroyed $8 for Every $1 Earned

 

by Lindsay Beyerstein, Media Consortium blogger

Tonight, President Barack Obama will deliver his State of the Union address. A major theme of the speech will be jobs and the economy. Let’s hope the president spares a few minutes for Wall Street reforms that might prevent a repeat of the economic collapse that we’re slowly starting to recover from.

As Kai Wright points out in ColorLines, the State of the Union is the unofficial kickoff of the 2012 election season:

The still churning foreclosures and mounding debt in black and brown neighborhoods don’t suggest a stabilized economy anywhere except Wall Street, but let’s set that familiar fight to the side for now. The point is that whether we’re talking about creating jobs or seating district court judges, the time for making policy is gone. Starting tomorrow night, it’s all talk until we vote next.

Amy Dean of Working In These Times shares Wright’s skepticism. With the Republicans in control of the House and the Democrats hanging on to the Senate, we’re looking at a legislative stalemate until the next election. Dean argues that activists should use this lull in the action to refocus their organizing at the grassroots level.

Wall Street destroyed $8 for every $1 it earned

In AlterNet, Les Leopold asks why bankers are earning such huge bonuses while the financial system is in disarray. According to standard economic theory, your compensation reflects the value of your work. Yet, according to Leopold’s back-of-the-envelope calculations, the financial sector has destroyed $8 worth of wealth for every dollar it earned over the last 5 years. His estimate includes the wealth-destroying impact of the subprime mortgage crisis and other epic Wall Street blunders.

The free market might not be as generous with bankers as the current system of government bailouts. If financial firms were allowed to fail, Leopold notes, bankers who drove their own firms out of business wouldn’t get paid. However, under the current “too big to fail” rules bad decisions lead to taxpayer rescues, not unemployment. So, the bonus checks keep rolling in.

Social Security switcheroo

James Ridgeway of Mother Jones predicts that Obama is gearing up to cut Social Security:

Having “retooled’’ his Presidency for a more open accommodation of the center right, Obama will soon be overseeing the battle to launch a dismantling of the Social Security system. [...] Without entirely destroying the popular program, he will support cuts that go beyond anything that should rightly happen during a Democratic administration.

Ironically, Ridgeway notes, our current Democratic president is to the right of many of yesterdays conservative Republicans. The legendary arch conservative Sen. Robert A. Taft (R-OH) was a staunch defender of Social Security. Republican President Dwight Eisenhower spearheaded the largest expansion of Social Security in the largest expansion of benefits in the history of the program.

Michelle Obama and Wal-Mart

Michelle Obama has enlisted the world’s largest corporation (and largest grocer) in her Let’s Move! campaign against childhood obesity. George Warner of Campus Progress takes a closer look at the skewed economics behind the “Nutrition Charter” signed by Wal-Mart last week. Amongst other things, Wal-Mart pledged to cut added sugar in its products by 10% by 2015; make healthy food more affordable; and develop a “nutrition seal” to alert shoppers to ostensibly healthier foods.

Yet, Warner notes that Wal-Mart is contributing to ill-health by employing a massive workforce at less than a living wage. Even if Wal-Mart follows through on its relatively modest pledges to promote healthy eating, it continues to put its own workforce at risk of ill health simply by paying them poverty-level wages. Studies show that for every job a new Wal-Mart store creates, it destroys three existing jobs, which paid an average of 18% more.

Poverty is one of the strongest predictors of obesity and poor diet.

Beck vs. Piven, Round 2

Last week, the Audit covered a bizarre right wing trend of demonizing 78-year-old CUNY political science prof Frances Fox Piven for an article she wrote in 1966. Glenn Beck and other leading lights of the right claim that Piven’s 45-year-old article is being used right now by liberal elites in their sinister plot to violently overthrow capitalism.

Piven is receiving death threats by email; and death threats are popping up on Glenn Beck’s website, including: “Snap her little chicken neck. This pinko filth needs a long dirt nap.”; “Somebody tell Frances I have 5,000 rounds ready.”, and “We should blow up Piven’s office and home.”

In actuality, Piven’s article argued that everyone who was eligible for welfare should sign up for benefits in order to expose the structural flaws in the system. Say what you will about the plan, it was non-violent. It involved a lot of paperwork. Far from overthrowing the federal government, Piven sought to usher in a federal guaranteed federal income as an alternative to the patchwork of state and local welfare agencies doling out benefits.

Matthew Rothschild reports in the Progressive that the Center for Constitutional Rights has sent a letter to Roger Ailes of Fox News asking him to reign in the anti-Piven demagoguery.

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.

 

 

Weekly Audit: We Welcome Our New Plutocratic Overlords

 

By Lindsay Beyerstein, Media Consortium blogger

Meet the new global elite. They’re pretty much the same as the old global elite, only richer and more smug.

Laura Flanders of GritTV interviews business reporter Chrystia Freeland about her cover story in the latest issue of the Atlantic Monthly on the new ruling class. She says that today’s ultra-rich are more likely to have earned their fortunes in Silicon Valley or on Wall Street than previous generations of plutocrats, who were more likely to have inherited money or established companies.

As a result, she argues, today’s global aristocracy believes itself to be the product of a meritocracy. The old sense of noblesse oblige among the ultra-rich is giving way to the attitude that if the ultra-rich could do it, everyone else should pull themselves up by their bootstraps.

Ironically, Freeland points out that many of the new elite got rich from government bailouts of their failed banks. It’s unclear why this counts as earning one’s fortune, or what kind of meritocracy reserves its most lavish rewards for its most spectacular failures.

Class warfare on public sector pensions

In The Nation, Eric Alterman assails the Republican-controlled Congress’s decision to scrap the popular and effective Build America Bonds program as an act of little-noticed class warfare:

These bonds, which make up roughly 20 percent of all new debt sold by states and local governments because of a federal subsidy equivalent to some 35 percent of interest costs, ended on December 31, as Republicans proved unwilling even to consider renewing them. The death of the program could prove devastating to states’ future borrowing.

Alterman notes that the states could face up to $130 billion shortfall next year. States can’t deficit spend like the federal government, which made the Build America Bonds program a lifeline to the states.

According to Alterman, Republicans want the states to run out of money so that they will be unable to pay the pensions of public sector workers. He notes that Reps. Devin Nunes (R-CA), Darrell Issa (R-CA) and Paul Ryan (R-WI) are also co-sponsoring a bill to force state and local governments to “recalculate” their pension obligations to public sector workers.

Divide and conquer

Kari Lydersen of Working In These Times explains how conservatives use misleading statistics to pit private sector workers against their brothers and sisters in the public sector. If the public believes that teachers, firefighters, meter readers and snowplow drivers are parasites, they’ll feel more comfortable yanking their pensions out from under them.

Hence the misleading statistic that public sector workers earn $11.90 more per hour than “comparable” private sector workers. However, when you take education and work experience into account, employees of state and local governments typically earn 11% to 12% less than private sector workers with comparable qualifications.

Public sector workers have better benefits plans, but only for as long as governments can afford to keep their contractual obligations.

Who’s screwing whom?

Former Secretary of Labor Robert Reich is calling for a sense of perspective on public sector wages and benefits. In AlterNet he argues that the people who are really making a killing in this economy are the ultra-rich, not school teachers and garbage collectors:

Public servants are convenient scapegoats. Republicans would rather deflect attention from corporate executive pay that continues to rise as corporate profits soar, even as corporations refuse to hire more workers. They don’t want stories about Wall Street bonuses, now higher than before taxpayers bailed out the Street. And they’d like to avoid a spotlight on the billions raked in by hedge-fund and private-equity managers whose income is treated as capital gains and subject to only a 15 percent tax, due to a loophole in the tax laws designed specifically for them.

Signs of hope?

The economic future looks pretty bleak these days. Yes, the unemployment rate dropped to 9.4% from 9.8% in December, but the economy added only 103,000, a far cry from the 300,000 jobs economists say the economy really needs to add to pull the country out its economic doldrums.

Andy Kroll points out in Mother Jones that it will take 20 years to replace the jobs lost in this recession, if current trends continue.

Worse yet, what looks like job growth could actually be chronic unemployment in disguise. The unemployment rate is calculated based on the number of people who are actively looking for work. Kroll worries that the apparent drop in the unemployment rate could simply reflect more people giving up their job searches.

For an counterweight to the doom and gloom, check out Tim Fernholtz’s new piece in The American Prospect. He argues that the new unemployment numbers are among several hopeful signs for economic recovery in 2011. However, he stresses that his self-proclaimed rosy forecast is contingent upon avoiding several huge pitfalls, including drastic cuts in public spending.

With the GOP in Congress seemingly determined to starve the states for cash, the future might not be so rosy after all.

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.

 

An Upswing Is Good - Can It Be Better?

After a recent breakup, a friend of mine had an awkward conversation with her new ex. It began with this difficult question – “I know you’ve got a new man, but is he a good man?”

Some things are just hard to answer.  So when I read in the New York Times this Friday that the job market was brightening, I knew better than to question the statement.  Out loud, at least.

There's more...

The Great Risk Shift: Understanding American Capitalism

The bailout of the banking industry was the result of decades of Reagan policy making carried out by both Democratic and Republican neoliberals that shifted risk from corporations to the American public.  It is only the tip of iceberg. This shifting of risk is the flip side of the coin to wage stagnation and deflation that acts to increase the debt and loses of the American people.

To understand, why this is the case requires an understanding of what risk is.  This is not an easy task.  However, to have a working definition, let's just say that risk is the chance in any given transaction for one to be a winner or a loser. It is the concept of working the odds. What are the  odds that you will obtain a job that will cover your debt from college?  What are the odds that you will have enough money to pay for health care premiums and save money? What are odds of bank failure if they are too big to fail?

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I'm running for Congress in IL-5. (Progressive candidacy announcement for Rahm's seat.)

Tom is an exciting progressive candidate running to replace Rahm Emanuel in IL-05. You're going to be hearing a lot about Tom in the coming weeks. Please welcome him to MyDD - Todd

I'm running for Congress in the Fifth District of Illinois.  

As a Chicago lawyer for thirty years, I have fought for working people in the Fifth District and throughout the city. I have represented unions as well as people with no unions to protect them. In plant closings I have helped them recover health and pension benefits. I obtained health care for the uninsured. I've been pressing the State of Illinois to crack down on payday lenders.

In my life as a lawyer I have lived out a commitment to one cause above all - to bring economic security to working Americans, in our District, in our country. That's the same commitment I will bring to Congress.  

We're deep in an economic crisis unlike any other we've known. It may last years. We need new and creative ways to protect working Americans, especially our older working people who have no real pensions to live on.

For years we've heard the doomsayers: "We can't afford Social Security." "We can't afford 'single-payer' national health." One thing we all learned from the $700 billion bail out: We've got the money to do all of this and more.

At the moment, the Federal Reserve is literally printing money, to give not billions but trillions to banks and financial firms. To the people of this District, the banks and others have gotten their money. Now it's your turn.

(Please stay in the loop with my campaign: www.geogheganforcongress.com)

Here's the bailout I will go to Congress to get:

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