The Politics of Selfishness

How John Locke's Legacy Is Paralyzing America

Why Are American Conservatives Not Conservatives?

By Paul Nevins

Today many Americans --including would-be members of the Tea Party and almost all who identify themselves as members of the Republican Party -- insist upon describing themselves as conservatives, even though the core values that they profess, in fact, owe their debt more to the liberalism of John Locke rather than to the political ideas of Thomas Aquinas or Edmund Burke. Ironically, those whom these self-described conservatives often derisively dismiss as liberals are those who generally share the same commitment to Locke's ideas and his political legacy as they, although they may differ about specific policy prescriptions and the proper role of government. This confusion is so pervasive that Herbert Hoover, Barry Goldwater, Ronald Reagan, and George W. Bush and his father, to cite recent examples, are invariably described as conservatives, although each of these individuals have expressed political ideas that have little in common with the tradition of conservatism as a political philosophy.

By contrast, conservatism as a political philosophy has been exemplified by a set of values and ideas that have been transmitted down through the centuries of Western intellectual history since the time of Aristotle. One wonders, for example, what kind of sense Russ Limbaugh, George Will or other contemporary, self-proclaimed American conservatives would make of the following statements by Eric Vogelein in his book, The New Science of Politics:

" The existence of man in political society is historical existence; and a theory of
politics, if it penetrates to principles, must at the same time be a theory of history."

Or:

"A political society [is]....a cosmion illuminated from within...the cosmion has its
inner realm of meaning; but this realm exists tangibly in the external world in
human beings who have bodies through their bodies participate in the organic and
inorganic externality of the world. A political society can dissolve not only through
the disintegration of the beliefs that make it an acting unit in history; it can also be
destroyed through the dispersion of its members in such manner that
communication between them becomes physically impossible..."



***
Prior to the Renaissance and Reformation, the politics of the Western world was governed by traditional ideas about the nature of man and society. These ideas were, at root, the provenance of the ancient Greeks and Romans and were subsequently nurtured and elaborated upon over a millennia by prominent Catholic thinkers, most especially St. Augustine and St. Thomas Aquinas. For Plato, who was Aristotle's teacher, knowledge of the Form of the Good was the ultimate object of dialectical inquiry and was the apogee of knowledge. "What sort of knowledge is there which would draw the soul from becoming to being? Plato asked, and he answered. "Until the person is able to abstract and define rationally the idea of the good...he apprehends only shadows." For St. Augustine and St. Thomas Aquinas knowledge of the Form of the Good was identical to knowledge of God Himself and of His eternal law.

In contrast to later philosophies of Hobbes and Locke, who developed an epistemology based entirely upon sensory perceptions and inputs, the ancients as well as the Medieval Catholic scholars were persuaded that the body and its senses were impediments to the acquisition of true knowledge; that knowledge, which was innate, was "discovered"or apprehended by rational reflection and discussion which, to use Plato's metaphor, enabled one to leave the shadows of the Cave and to enter into the sunlight.

The glue which held the universe together--and which bound each of God's subjects to one another in this Great Chain of Being--was the concept of natural law. The Greeks simply described this set of precepts as Nature--or natural right. This concept of natural law is as old and venerable as Western civilization itself. As Cicero described natural right:

"There is in fact a true law--namely, right reason--which is in accordance with
nature, applies to all men, and is unchangeable and eternal. By its commands
this law summons men to the performance of their duties; by its prohibitions it
restrains them from doing wrong. Its commands and prohibitions always
influence good men, but are without effect upon the bad...To invalidate this law
by human legislation is never morally right, nor is it permissible ever to restrict
its operation, and to annul it wholly is impossible."

As a second core value, the Greeks and Romans embraced a concept of society and the political community which is conceptually different, and fundamentally at odds, with that the concept of society which most self-styled American "conservatives" accept. Thus, classical conservative political tradition denies that men are mere social atoms, that social and political arrangements are the result of mere contractual arrangements, and that society is merely the aggregate of individuals, each of whom seeks within its confines to maximize his own opportunities. Rather, as Aristotle taught, "man...is by nature a political animal, and a man that is by nature and not merely by fortune citiless is either low on the scale of humanity or above it...inasmuch as he resembles an isolated piece at draughts..."

In fact, the root of the English word civilization is derived from the Latin civitas. The Roman notion of the civitas was endowed with the same mystical meaning which the Greeks attributed to the polis: As a member of the civitas, the Romans, like the Greeks before them, believed that a man fulfilled himself and achieved his destiny--which was to discharge his responsibilities in the life of the republic--as a citizen. Through the civitas, therefore, one became a sociable, functioning human being and thus distinguished oneself from lower forms of life or from barbarians, who because of their lack of knowledge of politics could not create political institutions which would enable them to emerge from their servile state. In contrast to liberal political philosophy, which questions the state and defends the individual's essential right to be left alone, and to participate or to not participate in the political process, the classical conservative tradition emphasizes obligation as a correlative of right. Thus, its emphasis upon citizenship, of conscious, willing deliberation and participation in the political process, is an essential part of this second core value.

Because the Greeks insisted that man was essentially a social being, it was also axiomatic that the Greeks argued that the state preceded the existence of individual and that man had never lived in isolation as an individual. In contrast to Hobbes and Locke, Aristotle denied the existence of some mythical state of nature since man was never a solitary being capable of subsistence solely by himself: "...the state is also prior by nature to the individual; for if each individual when separate is not self-sufficient, he must be related to the whole state as other parts are to the whole, while a man who is incapable of entering into partnership is so self-sufficing that he has no need to do so, is no part of a state, so that he must be either a lower animal or a god."

Expressed in a slightly different way, Miguel de Unamuno, in his Tragic Sense of Life denied that individuals could lead meaningful lives apart from society:

"Human society, as a society, possesses senses which the individual, but for his
existence in society, would lack, just as the individual man, who is in turn a kind
of society, possesses senses lacking in the cells of which he is composed."

Unamuno asserted that the self is an abstraction and he rejects the argument that one's ability to reason and the quality of that reasoning are unique attributes which belong to the solitary self as opposed to the social self. If man is a reasoning being, his ability to reason is incontrovertible evidence that he is a social being:

"But man does not live alone; he is not an isolated individual, but a member of
society. There is a little truth in the saying that the individual, like the atom, is an
abstraction. Yes, the atom apart from the universe is as much an abstraction as
the universe apart from the atom. And if the individual maintains his existence by
the instinct of self-preservation, society owes its being and maintenance to the
individual's instinct of perpetuation. And from this instinct, or rather from society,
springs reason. Reason, that which we call reason, reflex and reflective
knowledge, the distinguishing mark of man, is a social product. "

To the Greeks, the state, as the organized expression of civil society, was a public good rather than something to be feared or reigned in, as liberals later asserted.This is a third core value of the conservative tradition. For Thomas Aquinas as for Augustine, the state is a part of a universal empire of which God is the ruler and maker: "since every part is ordained to the whole, as imperfect to perfect; and since one man is a part of the perfect community, the law must need regard properly the relationship to universal happiness..."

To Aristotle and the medieval Catholic churchman also, the state (the polis) is an organic entity and not an artificial construct. As a consequence, government was viewed by the ancients and is still viewed today by adherents of the tradition of conservatism as a res publica, a public thing:

"For what is government except the people's affair. Hence, it is a common affair,
that is, an affair belonging to a state. And what is a state except a
considerable number of men brought together in a certain bond of harmony?"

Since the state exists to serve the needs of civil society--and not, as liberals would have it, the needs of the individual--the state should not be viewed as a passive instrument designed solely to protect private property or to protect rights, as distinguished from obligations.

As a fourth core value, the ancients expressed a preference for public discussion, a commitment to understanding and continuing dialogue among citizens, to discover the "truth" of politics. Consistent with the teaching of Aristotle, conservative political philosophy views man as a social being who fulfills himself as a member and participant in political society--i.e. as a citizen. The object of civility is to discern by right reason the proper means to achieve the proper end, i.e. happiness, which, in the realm of politics, is the common good. "Every state is as we see a sort of partnership and every partnership is formed with a view to some good....It is therefore evident that the...partnership which is the most supreme of all...and aims at the most supreme of all goods; and this is the partnership entitled the state, the political association."

Because of the self's ephemeral nature, the knowledge, customs, and habits contained within a given political culture are essential guideposts to properly orient the self to its social self and to other social selves and to bind each of us as persons to our ancestors and our descendants. It was Edmund Burke who contended that political society exists as an historical project into which individuals enter and depart while sharing a common destiny:

"...society is indeed, a contract....It is to be looked on with reverence; because
it is not a partnership in things...It is a partnership in all science, a partnership
in all art, a partnership in every virtue and in all perfection. As the ends of
such a partnership cannot be obtained in many generations, it becomes a
partnership not only between those who are living, but between those who are
living, those who are dead, and those who are to be born..."

As a fifth core value, Catholic thinkers who followed in the footsteps of Aristotle asserted that, since God endowed each man in His own image and likeness, man became the steward for the earth, and for all of its creatures and bounty. For that reason the conservative tradition to the present remains deeply skeptical of the liberal arguments for an unregulated market economy dominated by the profit motive and the accumulation of wealth.

Historically, Catholic social doctrine condemned aggrandizement and selfishness. Avitaria (greed) and luxuria (extravagance) were counted as two of the Seven Deadly Sins. Because of their commitment to the concept of stewardship and hostility to the venal accumulation of wealth, the polemics in which Spencer and Sumner engaged in the nineteenth century to promote the doctrine of laissez-faire have continued to elicit only incomprehension or condemnation among adherents to this tradition.

The views of the Catholic thinkers, especially, stand in stark contrast to Locke's views about private property and its individual inviolability: "It is lawful for a man to hold private property" but "Man should not consider his outward possessions as his own, but as common to all, so as to share them without hesitation when others are in need..."

As a corollary to this core value, Catholic social doctrine to the present emphasizes the importance of good works and Christian example. Charity remains one of the Church's three cardinal virtues. Over the past two millennia, inspired by the teachings of the Stoics, Catholic doctrine has also come to accept the proposition that all of us, as God's children, are entitled to equal worth and dignity of treatment. As Seneca so persuasively put it, "With a magnanimous disposition we have not shut ourselves within the walls of one city, but we have brought ourselves into communication with the whole world and have professed that the world is our native land in order that we may give virtue a wider field."

Equally important, as a sixth core value, conservative ideology, in contrast to the individualism of Hobbes and Locke and solipsism of David Hume, insists that, with respect to relations among one another, human beings are obliged to seek as the summum bonum--i.e., the highest good, the ultimate end -- which is synonymous with justice. As the primary object of all human aspiration, true justice is something that can be achieved only through the law acting as an instrument of the social order. As Aquinas remarks, quoting Isodore, "Laws are enacted for no private profit, but for the common benefit of citizens." Further, "A law, properly speaking, regards first and foremost the order of the common good..."

In addition, Aquinas asserts that, in contrast to the positive laws enacted by legislatures, which can be repealed or suspended, "...Natural law, so far as it contains general precepts, does not allow of dispensation..." Also, he observes that justice is based upon a notion of proportionality, "Justice is a habit whereby a man renders to each one his due by a constant and perpetual will" and "Just as love of God includes love of one's neighbor...so is the service of God rendering to each one his due." Finally, Aquinas invokes Cicero to the effect that "'the object of justice is to keep men together in society and mutual intercourse.' Now this implies relationship of one man to another. Therefore justice is concerned only about our dealings with others."

Lastly, the conservative worldview to the present has consistently emphasized the importance of social stability. Alfred Zimmern, in his book, The Greek Commonwealth, quoted Aeschylus to the effect, "There is no 'Government' in Athens for the people are the government;" however, Zimmern adds, "But though he has no living master, it is not without control. The fifth-century Athenian did not yet know, either in his individual or his corporate life, what it was to live without control. With all the liberty he enjoyed, obedience was still the law of his being."

Consistent with Plato, the conservative tradition accepts the reality of what politics is, but still seek to find the ideal--the ought--of what politics should be: "By the best political order the classical philosopher understood that political order which is best and everywhere. This does not mean that he conceived of that order as best for every community...But that does mean that the goodness of the political order realized anywhere and at any time can only be judged in terms of that political order which is best absolutely." For that reason, the pursuit of the ought requires prudence as well as wisdom. As Plato admonished, "Men are citizens of the polis, or freemen in it, only if they are wise; their obedience to the law which orders the natural city, to the natural law, is the same thing as prudence."

***
Lamentably, since fervent beliefs, no matter how delusional, are permitted to trump knowledge of history and political philosophy in the current American political landscape, it is doubtful that the right-wing zealots who currently speak for American "conservatism" will ever understand that the their politics, at its core, is rooted in the eighteenth century anti-social individualism of John Locke and, hence, has little, if anything, in common with the tradition of conservatism.

As eighteenth century liberals, the individualistic and anti-social worldview that informs their consciousness forces them to continue to live in the shadows, unable to comprehend that our needs as citizens-- as members of a political community -- have changed fundamentally during the three centuries that have passed since John Locke's death and the two and a quarter centuries since this republic was founded on Locke's ideas. An ability to focus on the future and a receptivity to new ideas, while still drawing inspiration from the ideas of the past, will serve all of us far better than ritualistic and unthinking invocations of the American Creed.

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Waging War on American Workers

by Stephen Lendman / January 8th, 2011

Target one is America’s middle class, endangered after decades of wealth shifts to super-rich elites besides most high-pay, good benefit jobs, offshored to cheap labor markets — a policy Washington’s duopoly endorses. It’s the most serious threat to middle America since attacks began in the 1970s.

On December 23, 1957, The Dan Smoot Report published novelist Taylor Caldwell’s (1900 – 1985) article, titled “Honoria,” the true story of a former great nation and lessons to be learned from its demise.

She explained how men seeking freedom became Pilgrims, endured terrible hardships, yet survived, prospered, and gained power. They established colonies, believed in God, hard work, public education, and transformed villages into towns and cities.

Others joined them, establishing new colonies, then uniting them. A civil war intervened. The republic was divided. A leader was assassinated, but prosperity followed conflict resolution. However, arrogance, corruption, and foreign entanglements followed. At issue – insatiable greed, not defending civilized world freedoms.

Wars resulted. Repressive laws passed, but Honoria had “a strong, industrious middle class, composed of farmers, artisans, (and) shopkeepers.” However, they posed a threat to wealth and power so had to go to let elites rule unchallenged. Targeted by oppression, they “were reduced to despair,” and began “dwindl(ing) away….Morality was dead.”

The monstrous, bureaucratic state “was happy.” People wanted entertainment, not freedom. Leaders waged more wars. Honoria became more corrupt and extremist. Its middle class eroded, died, and barbarians moved in.

Who was to blame? “Honoria, of course,” at the expense of its own citizens. They sacrificed for the common good but were betrayed. Over hundreds of years, Honoria rose and fell. Its real name? “Ancient Rome,” America its modern equivalent.

America, the New Rome

As constitutional freedoms and middle class prosperity erode, America is slowly dying. Like Rome, two empires share a remarkably common history. Both rose and prospered, then overextended, “rushed to the abyss,” and couldn’t turn back. America is on its edge. Its belligerence exceeds Rome’s. Its excesses are unsustainable. Its middle class is dying, its democracy a mere figure of speech.

Today, super-wealth rules a once great nation, malignant with corruption, delusional grandeur notions, and might ideologically triumphing over right. It’s a self-destructive path harming working Americans most, especially the once vibrant middle class, targeted for destruction. Democracy depends on preserving it as a buffer against tyranny. Slowly, however, it’s suffocating and dying, and with it the remnants of freedom.

A New Congress Highlights An Accelerated Ruinous Path

On January 3, the 112th Congress convened, its agenda accelerating America’s ruin.

In 2011, federal and state governments plan major social services cuts and other ways to address deficit and budget problems through less social spending, layoffs, and other draconian measures. At the same time, America’s aristocracy is flourishing, largely at the expense of exploited workers. Their assets flow upward to make super-rich society richer, facilitated by bipartisan political complicity and corruption.

Incoming House Republicans promise budget cuts of $100 billion, largely on the backs of working Americans who can least afford it. Given Obama’s austerity pledge, bipartisan agreement may target entitlements, including Social Security, Medicare and Medicaid, as well as education, transportation, and other discretionary areas to match 2008 levels. However, achieving it requires 20% cuts across the board from the $477 billion Congress allocated in FY 2010, ending September 30.

According to House Budget Committee chairman Paul Ryan, “That’s where you get the savings.” On January 6, he also told Bloomberg News that potential state defaults won’t be saved by bailouts, saying “We are not interested in a bailout.”

In 1933 at the height of the Great Depression, Arkansas was the last state to default at a time Washington rescues weren’t considered. Today, workers will be punished to assure steady debt service payments. In 2009, California state treasurer, Bill Lockyer, said only a “thermonuclear war” might force default, nothing less.

Less draconian than Republicans, congressional Democrats want FY 2010 spending levels frozen for three years, at least rhetorically. House Republicans, however, control appropriations so expect debt ceiling level confrontations. For one thing, Republicans want spending increases offset by cuts, meaning those affecting working Americans most.

They’ll come at a time that the Economic Policy Institute (EPI) evaluated poverty in the “Great Recession.” Calling official measures outdated, its own analysis shows over 21% of Americans in poverty — based on after-tax market wages and salaries, excluding entitlements, welfare, and other government programs that lower the figure considerably but not for millions not helped. Then add higher cost of living expenses, especially for health, food, gasoline, heating oil, and rent at a time home prices are declining.

With planned FY 2011 budget cuts, greater poverty ahead looms. On January 6, even the Census Bureau raised its numbers, saying 15.7% of the population (not 14.3%) lived in poverty in 2009, or 47.8 million people. Moreover, despite Social Security and Medicare, 16.1% of seniors are impoverished when out-of-pocket medical and other expenses are included. Children are most impacted at 18%, nearly one-fifth of them all. A 2009 EPI report estimated one in four, and for Blacks and Hispanics well over one in three.

In fact, Census Bureau figures way understate reality. Its poverty threshold, for example, is based on an annual $22,050 income for a family of four. Yet urban needs throughout America are much higher. A Chicago family of four needs over $49,000, and in New York over $72,000.

Yet even official data offer insight into America’s worst economic crisis since the Great Depression at a time bipartisan consensus plans social spending cuts when large increases are needed. Even so, public outrage is strangely absent. For how long is at issue.

States Plan Major Budget Cuts and Layoffs

Though slightly lower than in 2009 and 2010, the National Conference of State Legislatures forecasts $83 billion in combined state deficits, requiring greater cuts than earlier, absent federal government help or too little. As a result, major public spending cuts, wage freezes, and lower benefits are planned. Moreover, public employee unions are targeted, threatening organized labor overall.

On January 3, New York Times writer, Steven Greenhouse, headlined, “Strained States Turning to Laws to Curb Labor Unions,” saying:

Faced with growing budget deficits and restive taxpayers, elected officials from Maine to Alabama, Ohio to Arizona, are pushing new legislation to limit the power of labor unions, particularly those representing government workers, in collective bargaining and politics.

Though largely weak and ineffective, private ones are also being attacked. For example, lawmakers in Indiana, Maine, Missouri and at least seven other states plan legislation to bar private sector unions from requiring rank and file members to pay dues or fees, reducing union treasury funds. Ohio’s new Republican governor, like others, wants public school teacher strikes prohibited, and in Wisconsin, Gov. Scott Walker is targeting the right of state employees to form unions and bargain collectively.

The “bottom line” isn’t putting “balance more on the side of taxpayers” as Walker claims. It crushing organized labor entirely, public and private, driving it back to 19th century impotence. According to Stewart Acuff, Utility Workers Union of America chief of staff:

This is a very serious effort by the radical right wing to cripple the American labor movement and remove it as a serious force in American life. They want unfettered, unrestricted corporate power, and the only thing standing in the way of absolute corporate domination of our society and what’s left of our democracy is the American labor movement.

Not the way it’s been run for years as a result of corrupted union bosses on the take, siding with business, getting big salaries and fancy perks, and being more concerned about their own welfare than rank and file members. Labor historian, Paul Buhle, sees organized labor in a state of collapse. In the March/April 2010 Against the Current issue, his article titled, “Labor at War or in the Tank,” explained “the shrinking world of US organized labor,” saying:

“….a paucity of anything like solidarity, let alone a strategy for a repowered, reorganized, 21st-century labor movement” haunts American worker struggles going forward. Moreover, (r)ecent reports suggest” possible bankruptcy for “any number of the international unions as well as the AFL-CIO at large, a situation made only worse by infighting. This is a bleak irony, indeed, following so much enthusiasm” over Obama’s election. All the more reason for new leadership, information and insight to “be brought to rank-and-file working people within the unions and outside.” In addition, add strong political support at a time it’s totally absent with Democrats as anti-labor as Republicans.

On January 6 on the Progressive Radio News Hour, James Petras explained. In 2008, Big Labor contributed over $400 million to Democrat candidates and tens of millions more in 2010. In return, Obama and congressional Democrats waged war on working Americans, endorsing layoffs, wage and benefit cuts, gutted work rules, lost pensions, and promised hope from the Employee Free Choice Act (EFCA). The Democrat-controlled Congress rejected it.

It would have been the first pro-labor reform since the landmark 1935 Wagner Act, letting workers for the first time bargain collectively with management on even terms. Though modest by comparison, it promised progress at a time organized labor is virtually impotent, because union bosses, like Democrats, side more with business than their own rank and file.

Compounded by huge budget cuts, layoffs, and other social sacrifices, American workers face greater poverty, extended hard times, disenfranchisement, and bleaker futures. Moreover, their pensions are under attack. In December 2010, the Brookings Institution’s, Douglas J. Elliott, headlined, “State and Local Pension Funding Deficits: A Primer,” saying:

By some measures national shortfalls exceed “$3 trillion or more than two years’ worth of state and local tax revenues.” Today’s economic crisis revealed “the severity of the investment risks by very substantially increasing the gap between the value of (pension) assets accumulated (and) the value of pension promises” already made. Major underfunding and eroded investments are core issues of the problem. No easy solutions can resolve them.

Even at today’s overvalued levels, “the stock market would have to almost triple” to close deficits “as measured using risk-free discount rates.” Reforms are also needed, including in “accounting and actuarial rules so that state and local pension plans report liability levels and deficits that are consistent with economic reality,” such as discounting “the uncertainty of the liabilities rather than the expected return on the assets” that don’t materialize in hard times.

A Final Comment

Working Americans, especially middle class ones, are being downsized toward extinction through loss of high pay/good benefit jobs, labor rights, political empowerment, standard of living gains, personal freedoms, and retirement futures.

Replacing private pensions with 401(ks), IRAs and similar schemes failed. Public pensions now face a similar fate, states wanting liability shifted from them to workers, leaving them vulnerable on their own. It’s consistent with destructive neoliberal “reforms,” wanting all public benefits eroded and eliminated. The scheme is venal and underhanded — to create a ruler – serf society, America reduced to third world status super-wealth and growing poverty extremes. Bipartisan political support endorses it.

Stephen Lendman lives in Chicago. Contact him at: lendmanstephen@sbcglobal.net. Also visit his blog site and listen to The Global Research News Hour on RepublicBroadcasting.org Mondays from 11AM-1PM US Central time for cutting-edge discussions with distinguished guests. All programs are archived for easy listening. Read other articles by Stephen.

This article was posted on Saturday, January 8th, 2011 at 7:00am and is filed under Capitalism, Classism, Corruption, Democrats, Economy/Economics, Obama, Unions.

AlterNet / By Jim Hightower

Hightower: How Wall Street Elites Are Dynamiting Our Democracy

Our society can tolerate such raw selfishness by the privileged few, or it can have democracy. It can't have both.

January 6, 2011 |

By gollies, America is still an exporting powerhouse. In fact, the good ol' U.S.A. is No. 1 in the world in exports! Our corporate leaders, backed by Republicans and Democrats alike in Washington, are now routinely exporting America's most precious goods -- our jobs, factories, technologies and middle-class opportunities.

With unemployment and underemployment devastating millions of families in our country, perhaps you've assumed that U.S. corporations simply aren't hiring these days. Nonsense. They added 1.4 million jobs last year alone -- overseas.

For example, more than half of Caterpillar's new hires in 2010 were in foreign countries. Many more of this giant's jobs are headed offshore in the near future, for Caterpillar, which was once an iconic American brand, has recently invested in three new plants in China. It'll not only manufacture tractors and bulldozers there, but it'll also begin to ship its design work and technology development jobs to China.

Likewise, DuPont, once proud of its U.S. workforce, has slashed its number of American employees in recent years, while increasing its Asia-Pacific workforce by more than half. Indeed, DuPont no longer considers itself American -- "We are a global player," sniffs its chief innovation officer.

Such homemade brands as Coca-Cola, Dell and IBM are also among the multitude of corporations abandoning our shores and our middle class. Of course, they keep their posh headquarters here so they and their top executives can continue enjoying all that America has to offer.

Calvin Coolidge once famously asserted that "what's good for business is good for America." That's myopic enough, but today's narcissistic CEOs are even more self-centered, declaring that "what's good for business is good for business, America be damned."

In fact, profits are up, the stock market is roaring, corporations are awash in cash, CEOs are reaping fabulous paychecks again, and -- did you hear? -- holiday spending reached its highest level in four years. Forget last year's talk of gloom, all economic indicators are now on zoom, headed for a new boom!

Well, maybe not all indicators. There is still that pesky little problem of joblessness, for instance. Most politicos and economists, however, no longer want to be bothered with the fact that millions of our people are either unemployed or underemployed. Jobs, they say dismissively, are merely a "lagging economic indicator," a problem that'll take care of itself in the by and by. Just be patient. And be quiet.

But jobs have been "lagging" for years now, and there's no sign that this problem will ever take care of itself. To the contrary, America's corporate elite have learned that they can prosper by deliberately holding the workaday majority in a new normal of job insecurity.

No one at the top wants to admit it, but big business has quietly been imposing a structural transformation on our economy, shifting from a workforce of permanent employees to one in which most jobs are temporary, scarce, low-paid, without benefits and with no upward mobility. Of the 1.2 million jobs created by the private sector last year, for example, 26 percent were temporary positions, and in November, temp jobs soared to 80 percent of that month's total.

What's happening here is not merely a matter of a few million folks being momentarily down on their luck, but of an intentional dismantling of America's middle-class structure.

The Powers That Be can talk all they want about a boom, but working families -- America's majority -- know better. A boom for whom? they ask. They can plainly see that self-serving elites are jury-rigging the job market, lowering the standard of living and closing opportunities for millions.

The elites don't know it yet, but they are playing with dynamite. Our society can tolerate such raw selfishness by the privileged few, or it can have democracy. It can't have both.

To find out more about Jim Hightower, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

COPYRIGHT 2011 CREATORS.COM

Jim Hightower is a national radio commentator, writer, public speaker, and author of the new book, "Swim Against the Current: Even a Dead Fish Can Go With the Flow." (Wiley, March 2008) He publishes the monthly "Hightower Lowdown," co-edited by Phillip Frazer.

Casinos Make More Sense than the Stock Market

by Ernesto Raj Peshkov-Chow / January 5th, 2011

According to a New York Times article on the day before Christmas, one of the world’s biggest bond traders, Cantor Fitzgerald, now owns Nevada’s biggest legal bookie for sports bets. People who enjoy the occasional trip to Las Vegas should be very worried. Of course, some have described the past few decades of capitalism as the “casino economy,” but for my money that’s an insult to gaming houses.

I mean a casino has a hell of a lot more clarity than the stock market. Take Blackjack, for example. I bet $100 and I get back $200 if my cards are closer to 21 than the dealer’s, or I get $250 if I turn over an ace and a face card. Every time the cards are dealt, either I win or the casino wins or a push. Nice and clear.

But on the stock market I bet a thousand dollars in shares of Plunder Mining Corp. and what happens? The price goes up or down, but why? How many of us really understand how the stock market works? Sure, we nod in agreement when the analyst comes on the six o’clock news and says, “Bond prices rose six basis points and the Dow dropped 43 points today on news the November employment figures were higher than expected.”

The truth is I understand that like I understand how an 184,000-kilogram Boeing 747 with 524 people and my Aunt Jenny’s bottomless suitcase on board can leave Hong Kong and appear in Vancouver about the same time it left.

A bull market, they say. A miracle, they called it back when JC did the same with loaves and fishes.

A Ponzi scheme is when people who buy in first get paid their big returns by the people who come in later and it eventually crumbles. Or is that the stock market?

Derivatives? Say what? My cousins from New Jersey?

We’re told what they do on Wall Street or the City or Bay Street is part of the real economy and what they do on the Strip is gambling. Seems to me, real gambling is when you don’t understand what is going on. Think about it: If I bet my pension on whether or not the little ball is going to fall in a red slot or a black slot, at least I can see what happens. If I hand it over to a mutual fund, I don’t have a clue.

If I put my hundred on the table, the least they can do is show me the cards to prove whether I won or lost. On a Las Vegas craps table I can see the pit boss check the dice and cameras watching all the action to prevent cheating.

On Wall Street? No pit boss, no cameras, not even some guys named Guido and Tony to take a cheater out in the alley. Two years after a company steals $10 billion, the government starts a court case that lasts another 14 years with appeals and five rich guys end up spending a few months in jail and losing their trading privileges.

I’m with Conrad Black in finding the rules of the system extremely confusing. Or like those poor guys from companies like Enron and Adelphia who were charged with fraud and corporate wrongdoing. For years they were fudging numbers, putting the interests of themselves ahead of others and driving down workers’ wages and it got them stinking rich. Stories were written and people marveled about their big houses and their wild, lavish parties.

Then one day the music stops playing, a few people can’t find chairs and what happens? Instead of being heroes they’re called criminals.

I mean, looking after No. 1, screwing small investors, screwing workers, isn’t that what capitalism is all about?

It’s so unfair. They pick on the poor guys who steal hundreds of millions, but what do they do about the bankers and bond dealers who grabbed hundreds of billions? Bail them out. Crank up the government printing presses and holler, “load ‘em up and let’s do it all over again.”

Keep your Wall Street, the City and Bay Street; I’ll gamble elsewhere. At least at a Vegas casino the same rules apply to everyone. At least they did before the bond dealers got involved.

Ernie Peshkov-Chow is the author of Great Multicultural North - A Canadian Primer for Hosers, Immigrants and Socialists, recently released by Fernwood Publishing. Peshkov-Chow is a left-wing, hockey-loving, mongrel-Canadian, working-class activist in the tradition of Ginger Goodwin or Joe Hill, who sometimes takes over the mind and body of longtime Canadian journalist Gary Engler. Read other articles by Ernesto.

This article was posted on Wednesday, January 5th, 2011 at 7:00am and is filed under Economy/Economics, General

January 5, 2011 at 15:55:25

The Real Reason Fannie and Freddie Lost So Much Money

By David Fiderer (about the author)

opednews.com

How did Fannie and Freddie lose so much money? There are many reasons, but the two most important ones are Alt-A and interest-only loans, which generated most of the losses. These are not products for low or moderate-income borrowers. But they are products that invite fraud. Reports by the Federal Housing Finance Agency and the St. Louis Fed lay it all out in context. Once again, we see how the root causes of the real estate bubble are traceable to interest rates and fraud.

Interest Rates: Greenspan's Boom/Bust Cycles

The chart below from the St. Louis Fed is one of the best illustrations anywhere of how Fed policy creates predictable boom/bust cycles in the mortgage lending business. It could be titled, "What Alan Greenspan Wrought."

Since the 1980s, lenders have benefited from booms caused -- not by loans for new home purchases, which rose steadily year after year -- but by refinancing waves caused by drops in mortgage rates. Each ensuing bust, or sharp drop in refinancing volumes, began after rates started rising, or after everyone who wanted to refinance had already done so.

The chart illustrates two successive boom/bust cycles. The first applied to Fannie and Freddie (the Agencies), which specialized in 30-year fixed-rate loans. There was a 2001 - 2003 boom, when 90% of the GSEs' loans were fixed-rate. "Between 1971 and 2002, the fed-funds rate and the [fixed] mortgage rate moved in lockstep," wrote Greenspan. On December 31, 2000, the fed-funds rate was 6.5%. Six months later it was 3.75%. By year-end, it was 1.75%. He triggered the biggest refinancing boom in history, which accelerated when he slashed the Fed Funds rate to 1.25% in November 2002. At the end of 2000, America had $5.1 trillion in single-family residential mortgage debt. During 2001- 2003, $6.1 trillion had been refinanced (page 21 of Greenspan's study) .

Fed Funds Rate

During the ensuing bust of 2004 - 2006, the GSEs' loan volumes fell by more than 60%. The dropoff could have been worse but for the spike in cash-out refinancings, which were rationalized by rising real estate values. Fiscal year 2000 was the last time that a decisive majority of Fannie's loans were extended for home purchases. It was more a matter of people using their homes as piggybanks, as opposed to people buying homes they couldn't afford. It was a phenomenon that Greenspan followed closely.

Subprime/Alt-A and ARMs

The second cycle, which applied to subprime and the Alt-A loans, began with a 2004 - 2006 boom. The subprime/Alt-A bust began in 2007 and continues into the indefinite future. This was the first-ever boom tied to short-term interest rates. The St. Louis Fed, tracking the data on mortgage securitizations, shows how in 2004, for the first time ever, the majority of Alt-A originations were ARMs. Over three-quarters of subprime loans were ARMs, with the lion's share subject to reset after three years.

Greenspan promoted the second refinancing boom, both by continuing to reduce short-term rates after fixed-rate mortgage pricing flattened out in 2002, and by promoting ARMs. "Alan Greenspan said Monday that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives," wrote USA Today on February 24, 2004.

But ARMs blow up.

ARMs are much riskier than fixed-rate loans. Their failure rate shoots up whenever interest rates rise. Lew Ranieri, who invented mortgage securitizations and warned regulators and the rating agencies about reckless lending practices five years ago, explained the problem with ARMs last August, at lunch meeting hosted by Treasury and HUD to discuss, "Funding Housing and the Role of Securitization." he said:

I can give you a history of how many different types of floating rate loans we tried simply because the market wants more floating rate than it wants fixed. Every one of them blew up until Jim Montgomery created the California ARMs with caps and a floor. We never had a floating rate that didn't blow up on us. And that one is only a collar. All of these other structures that we have now never stood the test of time. You have nothing to prove to me that it's not going to blow up in your face.

So the only structure that we know that has stood the test of time, when they don't monkey with it, is the 15-year self-amortizing and the 30-year and the Jim Montgomery [coffee?] ARM, although that's only a collar. So when there are violent interest rate moves it gets kind of scary.

So as surely as the sun sets in the west, ARMs started defaulting after the fed-funds rate moved upward and their initial teaser rates were reset. In May 2004, the fed-funds rate was 1%. In May 2006, the fed-funds rate was 5%. Viola. Delinquencies among all ARMs spiked. By June 30, 2008, the rate of serious delinquencies among subprime ARMs was five times what it was three years earlier, according to the Mortgage Bankers Association. Serious delinquencies among prime ARMs had increased more than tenfold over the same period.

Source: Mortgage Bankers Association

Fraud: Government Policy to Keep the GSEs Out of Subprime

"Evidence indicates that the vast majority of mortgage fraud and predatory lending activities -- including excessive fees, provision of credit life insurance and prepayment penalties -- occurs in the conventional subprime lending market," said HUD Secretary Andrew Cuomo in 2000, citing a joint HUD/Treasury study on the topic. So the Clinton Administration drafted regulations to shut Fannie and Freddie out of the segment of the subprime market dominated by Wall Street securitizations. Cuomo wanted to go further, and lobbied for legislation to categorically prohibit many subprime lending practices. But at the end of the day, his influence only extended to the GSEs. Phil Gramm prevented any legislation from moving forward, and Alan Greenspan, who had the authority to oversee and regulate the mortgage lending business, continued his steadfast policy of refusing to do anything.

Out of concern that, "mortgages with predatory features undermine homeownership by low-and moderate-income families in derogation of the GSEs' Charter missions," (65 FR 65069, Oct. 31, 2000), Cuomo's HUD excluded ''Mortgages contrary to good lending practices,'' from being counted toward meeting Affordable Housing Goals (65 FR 65085). HUD also said it would also exclude "B&C loans" (i.e. subprime loans) from its calculation of the size of the overall market. (65 FR 65090).

The new regulations specifically excluded loans with: (a) Excessive fees, (b) Prepayment penalties, (c) Single premium credit life insurance, (or d) Evidence that the lender did not adequately consider the borrower's ability to make payments, plus any loans that the HUD secretary deemed to violate good lending practices. The GSEs could not include any loans from any lenders that steered prime borrowers to higher priced subprime products, or, acting as a loan servicer, failed to accurately report a borrower's repayment history.

Cuomo's exclusion of prepayment penalties, with limited carve-outs, made it almost impossible to buy into a mortgage securitization -- subprime or otherwise -- comprised of ARMs. Investors and rating agencies demand those penalties as an offset the prepayment risk in a static loan pool. Otherwise, creditworthy borrowers would refinance whenever rates moved in their favor, while the weaker borrowers, who could not refinance, worsened the default rate.

Private Label Deals Are The Worst

Cuomo's regulations stood the test of time because mortgages financed by Wall Street's private label securitizations performed exponentially worse that the rest of the market. A report from Amherst Securities divides mortgages between private label securitizations and everything else, including GSE loans. For private label deals, the rate of nonperformance is 31.1%; for all other mortgages, it's 8.6%. An FHFA comparison between GSE and private label loan performance confirms that:

The relatively worse performance of private-label MBS-financed mortgages was consistent across origination years and, within each year, across nearly all groups of loans with similar LTV ratios and FICO scores.

Violating the Spirit of Anti-Predatory Regs

Whether or not the GSEs followed the spirit and letter of those regulations is an entirely different matter. Then there's the question of whether the Bush Administration exerted any effort to enforce the regulations against predatory lending or the laws against mortgage fraud.

Interest-only loans or option ARMs, which make principal paydown optional, seem no less predatory than the products that Cuomo specifically excluded. These products have no legitimate business purpose. Consider a $100,000 amortizing mortgage with 6% interest. The monthly installments are $600. The installments on an interest-only loan are $500. If you can't handle that $100 difference, then you can't handle an upward shift in short-term interest rates, or a decline in the value of your home.

Alt-A should not be conflated with subprime. Look for a definition of Alt-A or subprime and you'll most likely get a fuzzy answer. Both segments show off high levels of fraud and high delinquency and default rates. But they are intended for very different market segments. In general, Alt-A borrowers have high FICO scores -- they are normally categorized as "A" rated -- and they finance less than 80% of the appraised value. At year-end 2008, the average FICO scores of Fannie's and Freddie's Alt-A loans, 719 and 725 respectively, were almost identical to that of their overall portfolio balances, and they financed, on average, 72% of the appraised property value. The key distinguishing characteristic about alt-A loan packages is that they have low documentation. The source of the of the borrower's income is frequently not confirmed. In addition, if the Alt-A loan were originated from a non-bank lender, the transaction would have escaped the scrutiny of anti-money laundering rules, which required documentation of the source of the initial down payment. In other words, the deal bypassed two key protections against fraud. The sources of credit comfort aren't necessarily worth much, since FICO scores can be rigged, and home appraisals can be inflated.

FICO scores are not based on income, which is why subprime borrowers should not be equated with low-income borrowers. Subprime is almost always defined as a borrower below a certain FICO cutoff. Moody's categorized mortgages according to FICO score: Subprime was below 625, Midprime was 625 - 700, Prime was above 700. The weighted average FICO of the ABX subprime indices was around 630.

Fannie and Freddie's originations, as segmented by FICO scores, were remarkably stable. And the overwhelming majority of loans in all categories were fixed-rate. The problem was that, within the subset of ARMs and among the high-FICO borrowers, they offered the worst types of loan products. Those loans definitely did not fit the requirements for the GSEs' Affordable Housing Goals.

How the Worst Loans Overlapped

The FHFA laid out what went wrong. First, it confirmed the two immutable rules of real estate lending: 1. Location, location, location; and 2. Timing is everything. That is, the biggest losses were in the states which saw the biggest price declines, and the biggest losses were from loans booked close to the peak of the bubble, which was around June 2006. All these categories overlap. A disproportionate share of Alt-A loans were booked near the peak of the bubble in states which saw the biggest price declines, and a disproportionate share of those loans were ARMs or interest-only.

The Private Sector Enabled Fannie and Freddie To Lay Off The Risk

Look back to the first chart from the St. Louis Fed, and you can figure out what happened. The GSEs were like most private lenders. When faced with reduced revenues and profits from their core business, they became willing to make up the shortfall by going downmarket. How did they get comfortable with the increased risk? With private mortgage insurance. The private market, in its wisdom, chose to insure almost all of the Fannie's and Freddie's loans with an original LTV in excess of 90%. Private insurers covered more than 30% of the GSEs' exposure to all loans with FICO scores below 660. They covered 35% of Fannie's interest-only exposure and almost 40% of its Alt-A exposure. Of course, GSEs made the mistake of believing that those insurers' double-A and single-A ratings meant something.

Even worse, they made the mistake of believing in the triple-A ratings assigned to the private label Alt-A and Option-ARM bonds they acquired. Those bonds incurred $25 billion in writedowns.

Bottom Line: At the end of the day, the GSEs' biggest problems came from loans that had nothing to do with Affordable Housing Goals, because they had the predatory attributes that some politicians had sought to outlaw. The GSEs' chief enabler for acquiring toxic loans was the private insurance market, and, perhaps, regulators who were indifferent to the dangers of predatory lending.

For over 20 years, David has been a banker covering the energy industry for several global banks in New York. Currently, he is working on several journalism projects dealing with corporate and political corruption that, so far, have escaped serious (more...)

The views expressed in this article are the sole responsibility of the author
and do not necessarily reflect those of this website or its editors.

Food Prices Reach Record High

NIA
National Inflation Association
Preparing Americans for Hyperinflation

Food Prices Reach Record High

According to the Food and Agriculture Organization (FAO), their index of of 55 food commodities has surged to a new all time high of 214.7 points, surpassing its previous highest record from June of 2008 of 213.5 points.

In other words, food prices (nominally) are at a record high, despite the fact that the BLS claims that current year-over-year food price inflation is only 1.5%. According to the FAO, “It will be foolish to assume this is the peak.”

NIA is projecting that the U.S. will see double-digit food price inflation in the first half of 2011. In 2010, Americans were lucky with most of our food price inflation being exported to China. With riots breaking out in China over food prices, food riots in the U.S. could be next.

During the past week, sugar futures reached a new 30-year high, coffee futures reached a new 13-year high, orange juice futures reached a new 3-year high, corn futures reached a new 29-month high, soybean futures reached a new 27-month high, and palm oil futures reached a new 33-month high. NIA believes that Americans will fully feel recent agricultural commodity price increases at their local supermarket within the next six months. NIA predicts that food inflation will become America’s top crisis of 2011.

Click here to see NIA’s President on FOX Business discussing food inflation.

Click here to see NIA’s food price projection report.

For more information from the FAO on the World Food Situation, click here.

Published on Wednesday, January 5, 2011 by the Associated Press

Census: Number of Poor May Be Millions Higher

by Hope Yen

WASHINGTON -- The number of poor people in the U.S. is millions higher than previously known, with 1 in 6 Americans — many of them 65 and older — struggling in poverty due to rising medical care and other costs, according to preliminary census figures released Wednesday.

A homeless person leaves the Urban Ministry soup kitchen in Charlotte, North Carolina November 15, 2009. With the potential to add more older Americans to the ranks of the poor, the numbers may underscore a need for continued — if not expanded — old-age benefits as a government safety net.(REUTERS/Carlos Barria/Files)

At the same time, government aid programs such as tax credits and food stamps kept many people out of poverty, helping to ensure the poverty rate did not balloon even higher during the recession in 2009, Obama's first year in office.

Under a new revised census formula, overall poverty in 2009 stood at 15.7 percent, or 47.8 million people. That's compared to the official 2009 rate of 14.3 percent, or 43.6 million, that was reported by the Census Bureau last September.

Across all demographic groups, Americans 65 and older sustained the largest increases in poverty under the revised formula — nearly doubling to 16.1 percent. As a whole, working-age adults 18-64 also saw increases in poverty, as well as whites and Hispanics. Children, blacks and unmarried couples were less likely to be considered poor under the new measure.

Due to new adjustments for geographical variations in costs of living, people residing in the suburbs, the Northeast and West were the regions mostly likely to have poor people — nearly 1 in 5 in the West.

The new measure will not replace the official poverty rate but will be published alongside the traditional figure this fall as a "supplement" for federal agencies and state governments to determine anti-poverty policies. Economists have long criticized the official poverty measure as inadequate because it only includes pretax cash income and does not account for medical, transportation and work expenses.

"Under the new measure, we can clearly see the effects of our government policies," said Kathleen Short, a Census Bureau research economist who calculated the revised poverty numbers. "When you're accounting for in-kind benefits and tax credits, you're bringing many people in extreme poverty off the very bottom."

The official measure is based on a 1955 cost of an emergency food diet and does not factor in other living costs. Nor does it consider non-cash government aid when calculating income, which surged higher in 2009 during the recession.

Short's analysis, published Wednesday as part of a series of census working papers on poverty, shows that out-of-pocket medical expenses had a significant impact in affecting the number of poor — without those costs, poverty would have dropped from 15.7 percent to 12.4 percent.

The effect was seen most notably among older Americans. Under the official poverty rate, about 8.9 percent lived in poverty, mostly because they benefit from Social Security cash payments. But when taking into account out-of-pocket medical expenses and other factors, that number rises to 16.1 percent.

The numbers cited for 2009 are preliminary, but census officials say they offer a good representative look at the state of U.S. poverty and where the numbers are headed when new 2010 figures are released this fall.

Among the findings:

_Transportation, commuting and child care costs weigh on working-age Americans. The official poverty rate for those ages 18 to 64 is currently 12.9 percent, the highest since 1960s levels that launched the war on poverty. Under the revised formula, working-age poverty increases even higher, to 14.8 percent.

_Without the earned income tax credit, the poverty rate under the revised formula would jump from 15.7 percent to 17.7 percent. The absence of food stamps separately would increase the poverty rate to 17.2 percent.

_Taking into account millions of uninsured people in the U.S. had little effect in increasing poverty, mostly because those without insurance tend to forgo medical care rather than find ways to pay for it. Those with government-sponsored insurance generally saw decreases in poverty under the new formula, while those with employer-provided coverage saw increases. Still overall poverty for those with public insurance vs. employer insurance was higher, 31.1 percent compared to 7.2 percent.

_Under the revised formula, the West had the most people in poverty at 19.2 percent. It was followed by the South (16.1 percent), the Northeast (14.3 percent) and the Midwest (12.5 percent).

The supplemental figures could take on added significance at a time when many in the government point to an overhaul of Medicare and Social Security as the best hope for reducing the ballooning federal debt. With the potential to add more older Americans to the ranks of the poor, the numbers may underscore a need for continued — if not expanded — old-age benefits as a government safety net.

© 2011 Associated Press