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Saturday, March 9, 2013

Resource Curse: Why the Economic Boom That Fracking Promises Will Be a Bust For Most People (Hard Times, USA)





Hard Times USA 

 

Evidence suggests that counties where drilling occurs will be in worse shape economically down the road.

 
Photo Credit: JFunk/ Shutterstock.com
 
 
The following article is part of AlterNet's series on poverty, Hard Times USA. This article was published in partnership with GlobalPossibilities.org.

Drillers hit the country’s first oil jackpot in Pennsylvania in 1859. Towns like Titusville and Pithole grew from a few hundred to more than 10,000 nearly overnight. But with the boom, inevitably came the bust. And it’s a history that may repeat itself in the same region soon.

Eastern states like Pennsylvania, New York, Ohio, and West Virginia sit atop the Marcellus Shale. High-volume horizontal hydraulic fracturing, often referred to as “fracking,” has put a bull’s-eye on the region by companies interested in drilling for gas tucked deep into the shale formations.

There’s been controversy over how much havoc fracking will wreak on the environment, with reports of air pollution, water contamination and other abuses from many living near drilling sites. Investigations continue to assess the impacts on human health and the environment.

But what has received less scrutiny are the economic promises made by gas companies and parroted in the media. The question is often posed whether the environmental risks outweigh the economic gains, but the “gains” themselves are far from a given. A report out of Cornell University titled, “A Comprehensive Economic Impact Analysis of Natural Gas Extraction in the Marcellus Shale,” by Susan Christopherson and Ned Rightor found, “The assertion that shale gas drilling will have positive consequences for both New York and Pennsylvania's economies is based on limited evidence.”

When it comes to long-term economic development, there’s ample evidence to suggest that counties where drilling occurs will be in worse shape down the road, and that even during the drilling and producing phases, there will be a few winners and likely a whole lot of losers, especially among lower-income individuals. Furthermore, the areas targeted for drilling are often the ones already struggling economically, which means less wealthy individuals and communities may become further impoverished.

Christopherson, a professor in Cornell University’s Department of City and Regional Planning, has been studying the economic impacts of fracking in the Marcellus for years. “If those places were rich we wouldn't be asking these questions because they wouldn't want it,” she said.

Collateral Damage

A fracking moratorium remains in place in New York, although it could be lifted at any time. If it is, there are concerns that some of the state’s economically hardest hit areas will take the brunt of drilling. The New York Times reported that, “Gov. Andrew M. Cuomo’s administration is pursuing a plan to limit the controversial drilling method known as hydraulic fracturing to portions of several struggling New York counties along the border with Pennsylvania.”
The economics of extractive industries like gas drilling are pretty simple. As Philip Bump writes for Grist about Cuomo’s plan:
The areas that will be opened to fracking are those areas over the Marcellus shale formation. That makes sense. But unfortunately, they’re also areas of the state with some of the highest rates of poverty.
But one of the challenges of the fossil fuel economy is that its facilities, refineries, and extraction points are dirty, messy, and rife with pollution. Such things don’t go in the wealthier parts of town — or, often, the wealthier parts of a state.
For residents who are economically struggling, the offer of money for a gas lease can be too good to ignore – some may not realize the risks, while others are willing to incur them because they lack other options.

But if something does go wrong, many feel that they have little recourse because of their economic position. “If they end up with pollution on their own land, they don’t want to talk about it because then they are afraid the gas drillers will go away,” said Alison Rose Levy, a journalist who has been covering fracking in the Marcellus Shale since 2009. “They are in such financial duress that they will sacrifice the water quality on their land, and deny that pollution has occurred even to the point of making themselves or their family members ill because they are afraid of the companies -- they are afraid the company will withdraw the opportunity for some kind of financial benefit.”

Christina and Wayne Woods, residents of Doddridge County, West Virginia have found that many people in their community are unwilling to speak up because they depend on the oil and gas industry for employment. They have neighbors living with water contamination but, “They don’t want to say anything because it’s part of the culture of intimidation by other members of the community,” said Wayne.

The more economically strapped communities are, the more likely that oil and gas companies will find little resistance.

Resource Curse

Pennsylvania has a long history of resource extraction, and so does West Virginia, an epicenter of coal mining. The West Virginia Center on Budget and Policy took a look at how the state has fared in a report called, “Boom and Busts: The Impact of West Virginia’s Energy Economy.”

Report co-authors Sean O’Leary and Ted Boettner assessed whether or not development in the Marcellus Shale underlying the state will be an economic blessing or a curse.  “Although coal and natural gas contribute millions of dollars in revenue to the state's budget, it also appears that communities in West Virginia that historically have relied heavily on natural resource extractive industries have underperformed economically in the long term compared to the state as a whole,” they write.

While energy development boomed in the ‘70s, after it went bust in the ‘80s mining counties suffered in the short- and the long-term. They explain:
They did worse than the state average on a range of factors, such as earnings and personal income growth, population growth, and employment. Today, these counties have higher poverty rates, lower median incomes, and worse health outcomes than the state average. Despite the rebounds in the energy sector in the 2000s, mining counties continue to struggle in comparison with the rest of West Virginia.
Although communities can rely on energy development for economic growth in the short-term, the boom is unsustainable. If trends hold, the boom ultimately leads to a bust, followed by decades of underperformance.
The same could hold true for the fracking boom as research thus far in Pennsylvania suggests.

A report by the Keystone Center foundthat claims of job creation were hyped. “The Marcellus Shale is making a small positive contribution to recent job growth in Pennsylvania,” they found. “The size of that contribution, however, has been substantially inflated based on a basic misunderstanding of the difference between ‘new hires’ and job creation. The modest contribution of the Marcellus Shale to job growth must also be balanced against the impact of drilling on other industries, such as tourism and the Pennsylvania hardwoods industry.”

Inaccurate job creation numbers aren’t the only problem – there is also an issue of how many jobs may be lost. Fracking of this kind,  Christopherson says, is incompatible with tourism and with agriculture because fracking has a heavy industrial footprint on the landscape: “You have not just the well pad, which are big things, but you have 1,000 truck trips per well multiplied by the number of wells, you have compressor plants, you have the pipelines, you have water extraction sites, you have chemicals and gravel that have to be brought in. In the Eastern part of the US you also have to bring in people -- you have man camps. It drives out other kinds of industry.”

One industry that may be affected is agriculture. A study by Penn State Extension looked at counties with at least 10,000 dairy cows. In those counties that had at 150 wells or more in the Marcellus Shale, there was an 18.5 percent decrease in milk production, while counties without Marcellus wells saw a slight increase in production.

And there are other implications. “Dairy farmers in Northern Pennsylvania and the Southern Tier of New York, who are already in a marginal economic situation, are being further squeezed because of rising costs for transporting their milk to the dairies,” Christopherson and Rightor write. “These businesses may go under during the drilling phase, leaving the region with fewer businesses outside of gas drilling, and thus a less diverse and more volatile economy.”

All this industrialization impacts areas that may not be getting drilling revenue, also. As Christopherson and Rightor report, “These elements of the industrial landscape will be located where geologic or logistical factors dictate, but not necessarily in the jurisdictions where drilling is currently taking place or production (and therefore tax revenue) is being generated.”

Communities may end up with air, water and noise pollution -- and no economic payback. And it doesn’t just drive out industry, it drives out people who live there, especially those at the bottom of the economic ladder.

If you're a low-income person, says Christopherson, “you're in deep trouble” because the cost of living goes up. “In some places in Pennsylvania a gallon of milk costs $7,” she said. “Costs for housing will go skyrocketing because they can rent to drillers. Lower-income people generally get pushed out of their lower-cost housing and they have to leave the area. The economics term for it is 'crowding out' -- the process of intensive natural resource development drives out, crowds out other industries by raising the costs. Companies don't want to move into that area because the labor costs are too high, there is a high cost of living.”

Fracking’s massive industrial footprint means that there are far-reaching consequences for communities, not just at drilling sites. The 37 families that lived at the Riverdale Mobile Home Village in north-central Pennsylvania found out firsthand what “crowding out” is all about.

The park, sitting aside the Susquehanna River suddenly became a hot commodity when gas companies came to town. The families in the park, many of whom were elderly or on fixed incomes, found out they had two months until the land they lived on was being sold. The buyer, writes Walter Brasch of Counterpunch, was Aqua PRV, part of water company Aqua America. “Aqua had received permission from the Susquehanna River Basin Commission (SRBC) to withdraw three million gallons of water a day from the Susquehanna; the 37 families of the mobile home village would just be in the way,” Brasch explains. “The company intends to build a pump station and create a pipe system to provide water to natural gas companies that use hydraulic fracturing.”

While residents of the park owned their trailers, picking up and moving to another location was no easy task. The cost of moving a trailer can range from $6,000 to $11,000 and that’s if you can move the trailer at all. Many of the Riverdale residents had older trailers with tin roofs or siding that couldn’t be moved. And that’s only one part of the problem; the other part is that there was nowhere for them to go.
Brasch writes:
Because the natural gas companies are bringing in thousands of employees to frack the land, there is a shortage of apartments, most with inflated prices to take advantage of the well-paid roustabouts, drivers, and technicians who moved into the area, and spend their money on local businesses eager to improve their own profits. During the past two years, rents have doubled and tripled. …The current mobile home owners paid $200 a month for their lot.

Not only are there few lots available and apartments are too expensive, but most residents don’t qualify for a house mortgage; and there are waiting lists for senior citizen and low-income housing.
The story is the same across the Marcellus region where drilling has taken place. “The natural gas boom has made affordable housing as obsolete as the anthracite coal that once drove the region’s energy economy,” concludes Brasch.

Ripple Effect

Individuals who sign big leases and some businesses, like hotels, bars and retail shops, along with drilling-related companies (trucks, waste disposal, etc. ), will inevitably have short-term gains, but Christopherson cautions, “The rising tide is not likely to lift all boats: there will be losing communities, and individuals who are displaced or left behind. Moreover, the experience of many economies based on extractive industries warns us that short-term gains frequently fail to translate into lasting, community-wide economic development.”

In Pennsylvania, research has found that many of the jobs go to skilled out-of-state workers. “Drilling crews usually arrive from places like Tulsa,” said Christopherson. “They fly in for three weeks, drill and fly home.”

Community members lose out in other ways, too. One of the biggest impacts, and one of the most costly to taxpayers, is truck traffic that has caused accidents and damaged roads. In the report, “The Economic Consequences of Marcellus Shale Gas Extraction: Key Issues,” authored by Christopherson for Cornell University Department of City and Regional Planning, she found that communities are getting shortchanged.

After severe damage to roads, Pennsylvania transportation districts had to post weight limit signs on thousands of miles of roads since fracking began. She writes:

Yet bond security costs for overweight truck travel on a posted road there – the financial incentive for a company to repair road damage -- are limited to a maximum of $6,000 per mile for unpaved roads and $12,500 per mile for paved roads. This is adequate to cover only 10- 20% of the damage; road reconstruction can easily exceed $100,000 per mile. 
Additional public costs for protecting roads -- pre-bonding surveys, road condition surveys, new data collection systems, and posting roads -- are also significant.

In the Northern Tier of Pennsylvania, she found that trucks were carrying weight over the legal limit. More than 5,800 roadside inspections were performed on trucks working for the drilling industry, and “42 percent of those resulted in pulling either the driver or vehicle out of service,” she reported. The cost to the state for enforcement has reached over $550,000.

Communities also face increased pressure on schools, police, and healthcare services with the influx of workers. Hospitals have complained of rising debt because of the large number of uninsured workers they have started caring for since drilling began.

Because of political maneuvering, fracking is exempt from major national environmental laws like the Clean Water Act and the Safe Drinking Water Act. But even state regulations are not adequately enforced; some states and counties lack the political will and other simply lack the resources, which has led some companies to take advantage, to the detriment of residents.

In Sun Valley, West Virginia it is believed oil and gas companies (or a company) are to blame for millions of gallons of water stolen from fire hydrants – a tab ratepayers may be forced to pick up. Tankers are able to fill up thousands of gallons in less than five minutes, so the culprits haven’t been apprehended.

In Ohio, a company was recently caught dumping 20,000 gallons of toxic fracking wastewater into a local river. In 2011, another company was caught dumping millions of gallons of fracking wastewater into rivers, streams and sewers, with economic and environmental consequences for the communities impacted. The owner got a slap on the wrist.

The longer Marcellus drilling goes on, the more stories communities are collecting about the various impacts. All of these should be taken into consideration when calculating what an area stands to gain or lose from fracking.

“When the economic waters recede, the flotsam left behind can look more like the aftermath of a flood than of a rising tide,” wrote Christopherson.

Tara Lohan is a senior editor at AlterNet and editor of the new book Water Matters: Why We Need to Act Now to Save Our Most Critical Resource. You can follow her on Twitter @TaraLohan.

Friday, March 8, 2013

The Worst Mistake in U.S. History -- America Will Never Recover from Bush's Great Foreign Policy Disaster



News and Politics  


Ten years ago, George Bush made a decision that this country will regret for a very long time. 

 

Photo Credit: Shutterstock.com
I was there. And “there” was nowhere. And nowhere was the place to be if you wanted to see the signs of end times for the American Empire up close. It was the place to be if you wanted to see the madness -- and oh yes, it was madness -- not filtered through a complacent and sleepy media that made Washington’s war policy seem, if not sensible, at least sane and serious enough. I stood at Ground Zero of what was intended to be the new centerpiece for a Pax Americana in the Greater Middle East.

Not to put too fine a point on it, but the invasion of Iraq turned out to be a joke. Not for the Iraqis, of course, and not for American soldiers, and not the ha-ha sort of joke either. And here’s the saddest truth of all: on March 20th as we mark the 10th anniversary of the invasion from hell, we still don’t get it. In case you want to jump to the punch line, though, it’s this: by invading Iraq, the U.S. did more to destabilize the Middle East than we could possibly have imagined at the time. And we -- and so many others -- will pay the price for it for a long, long time.

The Madness of King George

It’s easy to forget just how normal the madness looked back then. By 2009, when I arrived in Iraq, we were already at the last-gasp moment when it came to salvaging something from what may yet be seen as the single worst foreign policy decision in American history. It was then that, as a State Department officer assigned to lead two provincial reconstruction teams in eastern Iraq, I first walked into the chicken processing plant in the middle of nowhere.

By then, the U.S. “reconstruction” plan for that country was drowning in rivers of money foolishly spent. As the centerpiece for those American efforts -- at least after Plan A, that our invading troops would be greeted with flowers and sweets as liberators, crashed and burned -- we had managed to reconstruct nothing of significance. First conceived as a Marshall Plan for the New American Century, six long years later it had devolved into farce.

In my act of the play, the U.S. spent some $2.2 million dollars to build a huge facility in the boondocks. Ignoring the stark reality that Iraqis had raised and sold chickens locally for some 2,000 years, the U.S. decided to finance the construction of a central processing facility, have the Iraqis running the plant purchase local chickens, pluck them and slice them up with complex machinery brought in from Chicago, package the breasts and wings in plastic wrap, and then truck it all to local grocery stores. Perhaps it was the desert heat, but this made sense at the time, and the plan was supported by the Army, the State Department, and the White House.

Elegant in conception, at least to us, it failed to account for a few simple things, like a lack of regular electricity, or logistics systems to bring the chickens to and from the plant, or working capital, or... um... grocery stores. As a result, the gleaming $2.2 million plant processed no chickens. To use a few of the catchwords of that moment, it transformed nothing, empowered no one, stabilized and economically uplifted not a single Iraqi. It just sat there empty, dark, and unused in the middle of the desert. Like the chickens, we were plucked.

In keeping with the madness of the times, however, the simple fact that the plant failed to meet any of its real-world goals did not mean the project wasn't a success. In fact, the factory was a hit with the U.S. media. After all, for every propaganda-driven visit to the plant, my group stocked the place with hastily purchased chickens, geared up the machinery, and put on a dog-and-pony, er, chicken-and-rooster, show.

In the dark humor of that moment, we christened the place the PotemkinChicken Factory. In between media and VIP visits, it sat in the dark, only to rise with the rooster’s cry each morning some camera crew came out for a visit. Our factory was thus considered a great success. Robert Ford, then at the Baghdad Embassy and now America's rugged shadow ambassador to Syria, said his visit was the best day out he enjoyed in Iraq. General Ray Odierno, then commanding all U.S. forces in Iraq, sent bloggers and camp followers to view the victory project. Some of the propaganda, which proclaimed that “teaching Iraqis methods to flourish on their own gives them the ability to provide their own stability without needing to rely on Americans,” is stillonline (including this charming image of American-Iraqi mentorship, a particular favorite of mine).

We weren’t stupid, mind you. In fact, we all felt smart and clever enough to learn to look the other way. The chicken plant was a funny story at first, a kind of insider’s joke you all think you know the punch line to. Hey, we wasted some money, but $2.2 million was a small amount in a war whose costs will someday be toted up in the trillions. Really, at the end of the day, what was the harm?
The harm was this: we wanted to leave Iraq (and Afghanistan) stable to advance American goals. We did so by spending our time and money on obviously pointless things, while most Iraqis lacked access to clean water, regular electricity, and medical or hospital care. Another State Department official in Iraq wrote in his weekly summary to me, “At our project ribbon-cuttings we are typically greeted now with a cursory ‘thank you,’ followed by a long list of crushing needs for essential services such as water and power.” How could we help stabilize Iraq when we acted like buffoons? As one Iraqi told me, “It is like I am standing naked in a room with a big hat on my head. Everyone comes in and helps put flowers and ribbons on my hat, but no one seems to notice that I am naked.”

By 2009, of course, it should all have been so obvious. We were no longer inside the neocon dream of unrivaled global superpowerdom, just mired in what happened to it. We were a chicken factory in the desert that no one wanted.

Time Travel to 2003

Anniversaries are times for reflection, in part because it’s often only with hindsight that we recognize the most significant moments in our lives. On the other hand, on anniversaries it’s often hard to remember what it was really like back when it all began. Amid the chaos of the Middle East today, it’s easy, for instance, to forget what things looked like as 2003 began. Afghanistan, it appeared, had been invaded and occupied quickly and cleanly, in a way the Soviets (the British, the ancient Greeks…) could never have dreamed of. Iran was frightened, seeing the mighty American military on its eastern border and soon to be on the western one as well, and was ready to deal. Syria was controlled by the stable thuggery of Bashar al-Assad and relations were so good that the U.S. was rendering terror suspects to his secret prisons for torture.

Most of the rest of the Middle East was tucked in for a long sleep with dictators reliable enough to maintain stability. Libya was an exception, though predictions were that before too long Muammar Qaddafi would make some sort of deal. (He did.) All that was needed was a quick slash into Iraq to establish a permanent American military presence in the heart of Mesopotamia. Our future garrisons there could obviously oversee things, providing the necessary muscle to swat down any future destabilizing elements. It all made so much sense to the neocon visionaries of the early Bush years. The only thing that Washington couldn’t imagine was this: that the primary destabilizing element would be us.

Indeed, its mighty plan was disintegrating even as it was being dreamed up. In their lust for everything on no terms but their own, the Bush team missed a diplomatic opportunity with Iran that might have rendered today’s saber rattling unnecessary, even as Afghanistan fell apart and Iraq imploded. As part of the breakdown, desperate men, blindsided by history, turned up the volume on desperate measures: torture, secret gulags, rendition, drone killings, extra-constitutional actions at home. The sleaziest of deals were cut to try to salvage something, including ignoring the A.Q. Khan network of Pakistani nuclear proliferation in return for a cheesy Condi Rice-Qaddafi photo-oprapprochement in Libya.

Inside Iraq, the forces of Sunni-Shia sectarian conflict had been unleashed by the U.S. invasion. That, in turn, was creating the conditions for a proxy warbetween the U.S. and Iran, similar to the growing proxy war between Israel and Iran inside Lebanon (where another destabilizing event, the U.S.-sanctioned Israeli invasion of 2006, followed in hand). None of this has ever ended. Today, in fact, that proxy war has simply found a fresh host, Syria, with multiple powers using “humanitarian aid” to push and shove their Sunni and Shia avatars around.

Staggering neocon expectations, Iran emerged from the U.S. decade in Iraq economically more powerful, with sanctions-busting trade between the two neighbors now valued at some $5 billion a year and still growing. In that decade, the U.S. also managed to remove one of Iran’s strategic counterbalances, Saddam Hussein, replacing him with a government run by Nouri al-Malaki, who had once found asylum in Tehran.

Meanwhile, Turkey is now engaged in an open war with the Kurds of northern Iraq. Turkey is, of course, part of NATO, so imagine the U.S. government sitting by silently while Germany bombed Poland. To complete the circle, Iraq’s prime minister recently warned that a victory for Syria's rebels will spark sectarian wars in his own country and will create a new haven for al-Qaeda which would further destabilize the region.

Meanwhile, militarily burnt out, economically reeling from the wars in Iraq and Afghanistan, and lacking any moral standing in the Middle East post-Guantanamo and Abu Ghraib, the U.S. sat on its hands as the regional spark that came to be called the Arab Spring flickered out, to be replaced by yet more destabilization across the region. And even that hasn’t stopped Washington from pursuing the latest version of the (now-nameless) global war on terror into ever-newer regions in need of destabilization.

Having noted the ease with which a numbed American public patriotically looked the other way while our wars followed their particular paths to hell, our leaders no longer blink at the thought of sending American drones and special operations forces ever farther afield, most notably ever deeper into Africa, creating from the ashes of Iraq a frontier version of the state of perpetual warGeorge Orwell once imagined for his dystopian novel 1984. And don’t doubt for a second that there is a direct path from the invasion of 2003 and that chicken plant to the dangerous and chaotic place that today passes for our American world.

Happy Anniversary

On this 10th anniversary of the Iraq War, Iraq itself remains, by any measure, a dangerous and unstable place. Even the usually sunny Department of Stateadvises American travelers to Iraq that U.S. citizens “remain at risk for kidnapping... [as] numerous insurgent groups, including Al Qaida, remain active...” and notes that “State Department guidance to U.S. businesses in Iraq advises the use of Protective Security Details.”

In the bigger picture, the world is also a far more dangerous place than it was in 2003. Indeed, for the State Department, which sent me to Iraq to witness the follies of empire, the world has become ever more daunting. In 2003, at that infamous “mission accomplished” moment, only Afghanistan was on the list of overseas embassies that were considered “extreme danger posts.” Soon enough, however, Iraq and Pakistan were added. Today, Yemen and Libya, once boring but secure outposts for State’s officials, now fall into the same category.

Other places once considered safe for diplomats and their families such as Syriaand Mali have been evacuated and have no American diplomatic presence at all. Even sleepy Tunisia, once calm enough that the State Department had its Arabic language school there, is now on reduced staff with no diplomatic family members resident. Egypt teeters.

The Iranian leadership watched carefully as the American imperial version of Iraq collapsed, concluded that Washington was a paper tiger, backed away from initial offers to talk over contested issues, and instead (at least for a while) doubled-down on achieving nuclear breakout capacity, aided by the past work of that same A.Q. Khan network. North Korea, another A.Q. Khan beneficiary, followed the same pivot ever farther from Washington, while it became a genuine nuclear power. Its neighbor China pursued its own path ofeconomic dominance, while helping to “pay” for the Iraq War by becoming thenumber-one holder of U.S. debt among foreign governments. It now owns more than 21% of the U.S. debt held overseas.

And don’t put away the joke book just yet. Subbing as apologist-in-chief for an absent George W. Bush and the top officials of his administration on this 10th anniversary, former British Prime Minister Tony Blair recently reminded us that there is more on the horizon. Conceding that he had “long since given up trying to persuade people Iraq was the right decision,” Blair added that new crises are looming. “You’ve got one in Syria right now, you’ve got one in Iran to come,” he said. “We are in the middle of this struggle, it is going to take a generation, it is going to be very arduous and difficult. But I think we are making a mistake, a profound error, if we think we can stay out of that struggle.”

Think of his comment as a warning. Having somehow turned much of Islam into a foe, Washington has essentially assured itself of never-ending crises that it stands no chance whatsoever of winning. In this sense, Iraq was not an aberration, but the historic zenith and nadir for a way of thinking that is only now slowing waning. For decades to come, the U.S. will have a big enough military to ensure that our decline is slow, bloody, ugly, and reluctant, if inevitable. One day, however, even the drones will have to land.

And so, happy 10th anniversary, Iraq War! A decade after the invasion, a chaotic and unstable Middle East is the unfinished legacy of our invasion. I guess the joke is on us after all, though no one is laughing.

Tuesday, March 5, 2013

Sh*t CEOs Say: 6 Outrageous Statements from America's Big-Mouthed Overlords




Economy



Regulating their mouths is not the strong suit of America's corporate chieftains.

 
JPMorgan Chase Chairman and CEO Jamie Dimon testifies on Capitol Hill in Washington, DC on June 19, 2012.
 
 
The sh*t CEOs say! When the chiefs of giant corporations are not blaming others for their mismanagement and unscrupulous behavior, they’re explaining why their distorted worldviews are best for the 99 percent. They do this, of course, at a time of declining national median income and huge paydays for executives.
Recently, there has been an uptick of particularly stupid remarks coming from the mouths of America’s CEOs. Here are a few of the most out-of-touch and out-of-line oracles, a mix of recent gaffes and classic blunders.

1. “That's why I'm richer than you.”

JPMorgan honcho Jamie Dimon has taken time out of his regularly scheduled program of mismanaging a systemically dangerous bank to divulge why he's richer than the rest of us. Last week, Mike Mayo, who is both an analyst at CLSA and a critic of too-big-to-fail banks, was on an investor conference call -- a forum in which executives typically offer BS about their company’s performance. Mayo wasn’t having it. He asked pointedly if customers might take their money to better-capitalized banks than JPMorgan. (Check out the video.)
Mayo: I think what I hear UBS saying in the presentation is that if I'm an affluent customer I'll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

Dimon: You would go to UBS and not JPMorgan?

Mayo: I didn't say that. That's their argument.

Dimon: That's why I'm richer than you.

The mystery of Dimon’s riches solved! Dimon became 1 percenter extraordinairre because he operates in a lax regulatory climate that lets him get away with low capital ratios. That, of course, is one of the reasons the big banks blew up the economy during the recent financial crisis – they were over-leveraged. Which is awful for just about everybody -- investors, taxpayers and ordinary people dealing with economic ruin. But it sure is great for Dimon.
James Saft over at Reuters was less than impressed by Dimon’s musings:
“The real issue isn't who is rich, but rather whose interests are being fairly served and whose aren't. Dimon's approach gives short shrift to both shareholders and taxpayers. Taxpayers still carry substantial risks for which they are not being compensated, a state that will only change when regulations are tightened, and hopefully vastly simplified…Shareholders do badly because the kind of bank Dimon runs is prone to loss and volatility, leading markets to set a low value on the bank's earnings.”
Dimon may be wealthy, but his crappy performance as a CEO, demonstrated in the “London Whale” fiasco in which $6 billion went missing, has cost him. His pay was recently cut by more than half, to $11.5 million from $23 million. Alas, he still feels more than rich enough to continue his obnoxious bragging.

The Mayo exchange certainly isn’t the first time Dimon has shared his perspective on being filthy rich: In 2011, as bankers were under fire from the Occupy movement, he whined, "Acting like everyone who's been successful is bad and that everyone who is rich is bad -- I just don't get it.”

No, Jamie, and you probably never will.

2. “I don’t think that I would consider myself a feminist.”

Marissa Mayer, who recently became the CEO of Yahoo, catapulted to meme-of-the-moment when she decided, in a burst of anachronistic bone-headedness, that employees may no longer telecommute, but must stay chained to their desks five days a week.

That was bad enough, but Mayer’s offenses don’t stop there. She has also taken it upon herself to expound upon how “easy” it is to have a baby: “way easier than everybody made it out to be.” Which, of course, it must be when you have a nursery built right by your office!

Mayer has also treated us to her dim view of feminists, whom she characterizes as negative Nellies whose bitching and moaning is unwelcome: “I don’t, I think, have sort of the militant drive and sort of the chip on the shoulder that sometimes comes with that. And I think it’s too bad, but I do think feminism has become, in many ways, a more negative word.”

Essentially, Mayer has waltzed through doors kicked open by the courageous women who have fought and organized to win her the opportunity to become a CEO, and then kicks dirt in their faces. Classy.

3. “We have a right to make a profit.”

Bank of America CEO Brian Moynihan is no stranger to controversy, having amplified his bank’s bad vibes in 2011 with an infamous $5 debit card fee that fizzled in the face of widespread criticism. The BofA chief whined that this was all grossly unfair, insisting that his company had a "right to make a profit" and that nobody understood "how much good" his employees do.

Moynihan neglected to mention that the debit card move was a classic example of what economists call “price leadership” –the signal given by the lead dog in an oligopoly that tells everyone in the group that it’s fine to raise prices. That the price increase has no connection whatever to the quality of the product or service is ample evidence that big banks like BofA do not operate in anything remotely resembling a free or fair market. They are dangerous parasites that suck the lifeblood out of the real economy and get away with it because of their political influence and their status as too-big-to-fail.

Somehow, even without the nasty debit card fee, Moynihan managed to suck up gargantuan amounts of money. Despite his dismal performance as CEO, in 2012 he received a 73-percent pay increase, largely because the bank was able to resolve various lawsuits launched in the wake of the financial crisis. BofA was able to do this of course, because financial crimes go largely unpunished in America. The $12.1 million pay package meant that Moynihan was one of the best-paid CEOs on Wall Street last year.

4.We've got to get companies to regulate themselves…”

Of all the idiotic ideas we’ve heard since the financial crisis, this notion ranks high for sheer brazenness. And who uttered these words? None other than AIG CEO Robert Benmosche, whose company became the poster child for the culture of corporate dysfunction that helped tank the economy. AIG got a $180 billion bailout during the 2008 financial crisis, which it needed in part because financial institutions had been allowed to regulate themselves.

After the bailout, which came in the wake of several fraud investigations, huge bonuses were distributed to AIG executives. Unabashed, Benmosche explained to CNN that "the most important thing is that we've got to get companies to regulate themselves and to do the right thing.”

Mm-kay. Elizabeth Warren, among others, has been vocal about the pressing reasons why just the opposite approach is needed, explaining that such financial institutions “run the risk of taking down everyone’s job…everyone’s pensions…[and] the entire economy.”

Perhaps Benmosche should try regulating his mouth.

5. “I have no regrets about…how Countrywide was run. It was a world-class company.”

Spoken like a world-class asshole! Angelo Mozilo, the former head of Countrywide, brought “subprime mortgage” into common parlance by chasing high-risk borrowers to boost market share. Countrywide's shady practices led to a frenzy of subprime lending in the industry that eventually torpedoed the economy. To keep the frauds and hustles going, the company aggressively silenced whistleblowers.

But according to the perma-tanned Mozilo, foreclosure problems in America had nothing to do with his company. It was all the fault of irresponsible homeowners who decided to abandon their homes because the value dropped below the mortgage amount. “These people didn't lose their jobs,” he fumed. “They didn't lose their health. They didn't lose their marriage…They left their home because the values went below the mortgage. That's what caused the problem.”

Oh, really? As CNBC’s John Carney has pointed out, there’s no evidence that anything but a tiny fraction of homeowners walked away from underwater mortgages, even at the very height of the crisis.

Nobody bought Mozilo’s ludicrous defense, including the SEC, which sued him for fraud. He paid $67.5 million to settle a civil fraud case and is banned from ever serving as an officer or a director at any public company. Portfolio magazine ranked Mozilo as #2 on its list of "Worst American CEOs of All Time."

6. “I’m doing God’s work.”

Obviously, this list would not be complete without acknowledging the spectacular verbal gifts of Lloyd Blankfein, chief of Goldman Sachs. Blankfein sees himself as the champion of the free market, a hero who mocks the public and revels in his power.

In the gaffe-of-all-gaffes, Blankfein proclaimed the heavenly mission of investment bankers, insisting that they are doing “God’s work.” He added, perhaps with some foreboding, "I know I could slit my wrists and people would cheer."

Goldman Sachs has made a specialty of defrauding investors by hiding conflicts of interest between itself and its customers. In 2010, the company was forced to pay a $550 million fine to settle securities fraud charges.

Recently, Blankfein expressed his commitment to seeing that Social Security and Medicare will not be there for the elderly.
God certainly works in mysterious ways.
Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.' She received her Ph.d in English and Cultural Theory from NYU, where she has taught essay writing and semiotics. She is the Director of AlterNet's New Economic Dialogue Project. Follow her on Twitter @LynnParramore.

Monday, March 4, 2013

Billionaire Speculators' Greed Makes Life Hard For Renters and Would-Be Homebuyers




Economy  

Wealthy real estate speculators are snapping up homes with the same zeal that created the housing market bubble.

 
 
 
 
The foreclosure crisis in America has had many unexpected twists. But none may be as striking as the latest development: real estate speculators, with billions in ready cash, are swooping into hard-hit locales and buying foreclosed and low-end homes with the same vehemence that created the housing market bubble.

They’re hoping to rent these properties to ex-owners or others, but they’re creating distortions that truly worry housing advocates. Banks are flocking to cash buyers, not to people with loans. First-time buyers can’t get in. Rents are skyrocketing. Home values and prices are going up.

If Maria Benjamin had her way, the For Rent sign hanging from a post on the small front lawn of the bungalow at 22 Chanslor Ave. would not be there. Nor would similar signs on other lawns across Richmond or a string of other working-class cities on the industrial northern end of San Francisco Bay.

Benjamin is program director at the Community Housing Development Corporation of North Richmond, which relies on a portfolio of government housing programs, some with roots dating back to the New Deal, to assist first-time home buyers. Her mission, as has been the case for housing activists for decades, is built on the belief that owning a home helps to stabilize individuals, families and communities.

But in a turn that affordable housing advocates like Benjamin could not imagine just two years ago, starter homes like the two-bedroom, one-bathroom, 939-square-foot bungalow at 22 Chanslor, keep being snatched from her clients’ hands. Homes that were abandoned or boarded up as the housing bubble burst are now hot properties, but not for the kind of buyer Benjamin seeks.

“We have people who have been making offers for a year or more, continuously being turned down,” she said. “They’re being outbid by investors.”

“Waypoint is a giant player,” said Benjamin, referring to a company that started in the Bay Area in 2008 and expects to raise $1 billion from Silicon Valley venture capitalists this year as part of an ambitious plan to buy 10,000 homes across America’s foreclosure belts. “But it is not only Waypoint,” she said. “They’re buying up and targeting low-income neighborhoods… They’re targeting cities that don’t have strong rent controls.”
  
Benjamin is upset that working people who have played by the rules—saving money, holding jobs, filling out piles of paperwork to get low-interest federal loans—or tried to restructure debt to keep their homes—are being steamrolled. She says there’s no precedent for corporate takeover of low-end homes on the scale that’s unfolding, a concern voiced by others, including realtors in Southern California where outlier counties are seeing a third or more of foreclosed homes bought with cash.

“It’s been going on for about 20 months,” Benjamin said. “In the beginning, the investors were on the courthouse steps buying these properties, but they weren’t organized. They were smaller investors. Now there are investment pools that are coming together. So they are more organized and more strategic. Our folks don’t stand a chance.”   

Another Set of Rules

Waypoint, however, tells another story. It sees itself as something of a capitalist white knight, riding into blighted communities and doing what few private investors have done as the foreclosure crisis spread like a wildfire and left shuttered homes, or buildings with Occupiers who refused to leave as banks and lenders refused to restructure their debt.

There’s an old saying in real estate that you make money when you buy, not when you sell. Waypoint’s investors—like other big investment pools with similar plans—see low-end homes as a giant untapped equity play. Property values in this market dropped by a half or two-thirds in value in cities such as Richmond as the real estate crash bottomed out. Pheonix, Las Vegas, Tampa and other foreclosure centers all had similar price collapses. The sector was poised to rise in value at margins exceeding most stocks and bonds, if home values even recovered a fraction of their former peak.

Investors with hundreds of millions in ready cash, such as the Blackstone Group, Colony Capital, Oaktree Capital Management started buying thousands of homes in the most depressed markets for cash and as-is. Their sales pitch promised returns of 6 to 8 percent from rental income and a longer-term payout of 16 to 18 percent once the properties are sold in a half-dozen years or so, said Paul Staley, who buys, rehabs and sells homes for a Bay Area affordable housing non-profit. The investor's cash meant banks and other mortgage lenders didn’t have to worry about inspections, appraisals, government standards and haggling with buyers. Those market "efficiencies" pushed players like Community Housing Development Corporation of North Richmond and its clients out of the equation.

But then Waypoint spent tens of thousands of dollars fixing up its homes. If you look at its website, you’ll see houses with new paint inside and out, new kitchens, carpets and floors, tubs and showers. They weren’t bringing buildings up to new construction code, but they were spending $20,000 or more on each to improve them. That investment had not been seen in this kind of housing stock in low-income communities in years. It helps to stabilize falling home values for neighbors (whose mortgages may be underwater) and it fortifies the local property tax base. For those efforts, and launching a slick marketing campaign where Waypoint said it would award prompt-paying renters with "points" that could be used to buy the home or to get cash back after leases end, the company has become a local media darling (although it is now downplaying these programs).

Waypoint spokeswoman Beth Haiken declined to make any executives available, saying they’d spent last week “skiing with their kids on spring break” and now “had to get back to work.” That’s too bad, because it would be very instructive to hear their take on the national trend they are part of—including questions about their business model and what they believe will be its long-term impact on affordable housing. Executives told USA Today that Waypoint now owns 3,300 homes and “expects to own 10,000” by the year’s end.

As you might imagine, skeptics abound. On the local level, Richmond’s Benjamin is worried about what kind of landlords they will be. Early on, she said they seemed to be making mistakes by renting to anyone and then evicting people who couldn’t pay. “To me, the biggest concern is the property management of these scattered sites,” she said. “There is no track record for this type of property management.”

On a more macro level, there are substantive questions about this business model and how it will play out, especially once it gets past the easy stages of buying and rehabbing properties with other people’s money. Waypoint seems to be relying on forecasts that suggest it can drive up local rents, get find enough occupants at price points that require middle-class paychecks, and eventually sell the properties to satisfy its billionaire venture capitalists.

“The question is what is scalable in that business model,” asked housing historian Eric John Abrahamson, author of Building Home: Howard F. Ahmanson and the Politics of the American Dream. “Is property management scalable? Is the intelligence that it takes to buy well scalable? Because one of the things about real estate historically is that it tends to remain a profoundly local business.”

Affordable Housing Trends

Owning and renting homes has deep roots in American culture, Abrahamson said, noting that the country’s founders—and later New Deal reformers—saw property ownership as a path to social stability and citizenship. As a result, the government created the kinds of programs that promoted buying homes. Yet, today, as Washington has allowed the banks and others that created the 21st century’s first housing bubble and crash to continue with little oversight, Abrahamson said that access to property has taken a backseat to market efficiencies. “The question is being raised in a way that hasn’t been raised for decades,” he said. “Is home ownership the way to promote community? Does government have a real stake in promoting ownership. Should the mortgage deduction be continued?”   

The transformation of thousands of single homes into corporate rentals is a new business model, he said, adding that it would be telling to see how companies like Waypoint face a host of new pressures, from getting rental income to meet their goals to finding and buying more homes to satisfy investor’s expectations to their impact on the communties they target. “Are they just tapping the speculative bubble and climbing in the short-run?” he asked. “Or is their business model sustainable through the real estate cycle?”
“Up to this point you have to give these guys credit,” said Staley. “They have demonstrated something that alot of people didn't think was really possible, which was to scale up a very granular business... As far as I can tell, they're doing it. But google Och-Ziff. They got out. They sold their portfolio late last year.”
Compared to two years ago, there's a lot more competition for low-end homes. Housing analysts say that up to $10 billion could be spent in 2013 to buy up to 80,000 distressed homes for conversion to rentals across America. Those would be added to 12 million single family homes now rented. The press clips on Waypoint’s website seem to be chosen to say that its industry—the rental real estate barons—is barely impacting local market trends or inflating local home prices.

But recent statistics suggest otherwise. Walter Molony, National Association of Realtors spokesperson, said in 2011 that, “the investment market share surged extraordinarily in terms of the volume of transactions.”

“It was up 64.5 percent, from 1.3 million sales in 2011 from 749,000 in 2010,” he said. “It’s hard to say what the 2012 data is going to come in at. The overall sales were up 9.5 percent. The investment component might be flatter, and that’s because properties that are most popular with investors, foreclosures and other low-end property, have been shrinking as a market share.”

In 2011, “distressed properties” were 35 percent of all home sales, Molony said. “Now it is down to 23 percent,” he said, referring to January figures. “We’re projecting that it will be below 15 percent by the year’s end. So this might be something of a transition year when investors have to start looking at higher price ranges.”

These statistics suggest that the supply of low-end housing is shrinking and that housing costs—buying or renting—are all but certain to rise; and not just in communities hit by the foreclosure crisis, but in nearby areas as well. That change in supply and price will undoubtedly cause investors like Waypoint to change their plans or stake out new markets. They have new offices in Southern California, Florida, Georgia and Illinois. But it is also undermining local affordable housing options for ordinary Americans.  

“My guys tell me that every person—and I am really not exaggerating—every potential homeowner who comes in our fold that’s been out there looking and has made offers has been beat by an investor," CHDC’s Maria Benjamin said. “It might be that they’re [investors] bidding $150,000 or coming in with $75,000 in cash. But our folks have to go out and get a FHA mortgage. That requires an inspection, and that health and safety requirements are met before the transaction can go through.”

Abrahamson, the housing historian, has another take on the latest housing market trends.

“I think we’re in a new gilded age,” he concluded. “The things that contributed to social stability in the past, whether they were home ownership or some form of lifetime employment at one firm or one career—all those things created stability within community. But all those things are going away.”

Steven Rosenfeld covers democracy issues for AlterNet and is the author of "Count My Vote: A Citizen's Guide to Voting" (AlterNet Books, 2008).

Sunday, March 3, 2013

The 32 Dumbest and Most Devastating Sequester Cuts




Economy  



As Obama said during a press conference, "This is not going to be a apocalypse, I think as some people have said. It's just dumb. And it's going to hurt."

Photo Credit: Rob Marmion via Shutterstock.com
 
 
With Congress unable to reach a deal to avert the indiscriminate spending cuts put in place in the Budget Control Act of 2011, President Obama on Friday signed an order authorizing the government to begin canceling $85 billion from federal accounts for this fiscal year.

As Obama said during a press conference yesterday, “This is not going to be a apocalypse, I think as some people have said.  It’s just dumb. And it’s going to hurt. It’s going to hurt individual people and it’s going to hurt the economy overall.” In a  83-page letter to House Speaker John Boehner (R-OH), the Office of Management and Budget details the specific reductions each government program will face. Here are the dumbest and most painful cuts:

Health care
$20 million cut from the Maternal, Infant, and Early Childhood Home Visiting Programs
$10 million cut from the World Trade Center Health Program Fund
$168 million cut from Substance Abuse and Mental Health Services Administration
$75 million cut from the Aging and Disability Services Programs

Housing
$199 million cut from public housing
$96 million cut from Homeless Assistance Grants
$17 million cut from Housing Opportunities for Persons with AIDS
$19 million cut from Housing for the Elderly
$175 million cut from Low Income Home Energy Assistance

Disaster and Emergency
$928 million cut from FEMA’s disaster relief money
$6 million cut from Emergency Food and Shelter
$70 million cut from the Agricultural Disaster Relief Fund at USDA
$61 million cut from the Hazardous Substance Superfund at EPA
$125 million cut from the Wildland Fire Management
$53 million cut from Salaries and Expenses at the Food Safety and Inspection Service

Obamacare
$13 million cut from the Consumer Operated and Oriented Plan Program (Co-ops)
$57 million cut from the Health Care Fraud and Abuse Control
$51 million cut from the Prevention and Public Health Fund
$27 million cut from the State Grants and Demonstrations
$44 million cut from the Affordable Insurance Exchange Grants program

Education
$633 million cut from the Department of Education’s Special Education programs
$184 million cut from Rehabilitation Services and Disability Research
$71 million cut from administration at the Office of Federal Student Aid
$116 million cut from Higher Education
$86 million cut from Student Financial Assistance

Immigration
$512 million cut from Customs and Border Protection
$17 million cut from Automation Modernization, Customs and Border Protection
$20 million cut from Border Security Fencing, Infrastructure, and Technology

Security
$79 million cut from Embassy Security, Construction, and Maintenance
$604 million cut from National Nuclear Security Administration
$232 million cut from the Federal Aviation Administration
$394 million cut from Defense Environmental Cleanup

Republicans, who  refused to raise any additional revenue to avoid the budget cuts, have described the reductions as “modest” a “ homerun” and something that “ needs to happen” in order to “ get this economy rolling again.”

The latest projections from the Congressional Budget Office show that the nation’s deficits have  shrunk by trillions of dollars, and the debt is close to being stabilized as a percentage of the economy. Meanwhile, budget cuts have already reduced spending by $1.5 trillion and even with the revenue included in the fiscal cliff deal, the ratio of cuts to revenue stands at an unbalanced  3 to 1.

Igor Volsky is a Health Care Researcher/Blogger for ThinkProgress.org and The Progress Report at the Center for American Progress Action Fund. Igor is co-author of Howard Dean’s Prescription for Real Healthcare. Reform.

Lords of Disorder: How the Big Banks Are Designed to Prey off Our Economic Misery



Economy  

 


Lords of Disorder: How the Big Banks Are Designed to Prey off Our Economic Misery

Modern injustices are presented with spreadsheets and PowerPoints, rather than with scrolls and trumpets and kingly proclamations.

 

Photo Credit: Shutterstock
 
 
The President’s “sequester” offer slashes non-defense spending by $830 billion over the next ten years. That happens to be the precise amount we’re implicitly giving Wall Street’s biggest banks over the same time period.

We’re collecting nothing from the big banks in return for our generosity. Instead we’re demanding sacrifice from the elderly, the disabled, the poor, the young, the middle class – pretty much everybody, in fact, who isn’t “too big to fail.”

That’s injustice on a medieval scale, served up with a medieval caste-privilege flavor. The only difference is that nowadays injustices are presented with spreadsheets and PowerPoints, rather than with scrolls and trumpets and kingly proclamations.

And remember: The White House represents the liberal side of these negotiations.

The Grandees

The $83 billion ‘subsidy’ for America’s ten biggest banks first appeared in an editorial fromBloomberg News – which, as the creation of New York’s billionaire mayor Michael Bloomberg, is hardly a lefty outfit. That editorial drew upon sound economic analyses to estimate the value of the US government’s implicit promise to bail these banks out.

Then it showed that, without that advantage, these banks would not be making a profit at all.

That means that all of those banks’ CEOs, men (they’re all men) who preen and strut before the cameras and lecture Washington on its profligacy, would not only have lost their jobs and fortunes in 2008 because of their incompetence – they would probably lose their jobs again today.

Tell that to Jamie Dimon of JPMorgan Chase, or Lloyd Blankfein of Goldman Sachs, both of whom have told us it’s imperative that we cut social programs for the elderly and disabled to “save our economy.” The elderly and disabled have paid for those programs – just as they paid to rescue Jamie Dimon and Lloyd Blankfein, and just as they implicitly continue to pay for that rescue today.
Dimon, Blankfein and their peers are like the grandees of imperial Spain and Portugal. They’ve been given great wealth and great power over others, not through native ability but by the largesse of the Throne.

Lords of Disorder

Just yesterday, in a rare burst of candor, Dimon said this to investors on a quarterly earnings call: “This bank is anti-fragile, we actually benefit from downturns.”

It’s true, of course. Other corporations – in fact, everybody else – has to survive or fail in real-world conditions. But Dimon and his peers are wrapped in a protective force field which was created by the people, of the people, and for … well, for Dimon and his peers.

The term “antifragile” was coined by maverick financier and analyst Nassim Taleb, whose book of the same name is subtitled “Things That Gain From Disorder.” That’s a good description of JPMorgan Chase and the nation’s other megabanks.

Arbitraging Failure

Dimon’s comment was another way of saying that his bank, and everything it represents, isThe Shock Doctrine made manifest. The nation’s megabanks are arbitraging their own failures, and the economic crises that flow from those failures.

These institutions are designed to prey off economic misery. They suppress genuine market forces in order to thrive, and they couldn’t do it without our ongoing help. The Treasury Department and the Federal Reserve are making it happen.

We who have made these banks “antifragile” have crowned their leaders our Lords of Disorder.

Once Dimon told reporters that he explained to his seven-year-old daughter what a financial crisis is – “something that happens … every five to seven years,” which “we need to do a better job” managing.
Thanks to fat political contributions, Dimon manages them well. So do his peers. Misery is the business model. And by Dimon’s reckoning another shock’s coming any day now.

Money For Nothing

Bloomberg’s use of the word ‘subsidy’ in this instance can be slightly misleading. Public institutions don’t issue $83 billion in checks to Wall Street’s biggest banks every year. But they didn’t let them fail as they should have – through an orderly liquidation – after they created the crisis of 2008 through fraud and chicanery. Instead it allowed them to prosper from it, creating that $83 billion implicit guarantee.

As we detailed in 2011, the TARP program didn’t “make money,” either. Banks received a free and easy trillion-plus dollars from our public institution, on terms that amounted to a gift worth tens of billions, and possibly hundreds of billions.
That gift prevented them from failing. In private enterprise, this kind of rescue is only given in return for part ownership or other financial concessions. But our government asked for nothing of the kind.

Unpaid Debts

Breaking up the big banks would have protected the public from more harm at their hands. That didn’t happen.

Government institutions could have imposed a financial transaction tax, whose revenue could be used to repair the harm the banks caused while at the same time discouraging runaway gambling. They still could.

They could have imposed fees on the largest banks to offset the $83 billion per year advantage we’ve given them. They still could.

But they haven’t. This one-sided giveaway is the equivalent of an $83 billion gift for Wall Street each and every year.

Cut and Paste

$83 billion per year: Our current budget debate is framed in ten-year cycles, which means that’s $830 billion in Sequester Speak. You’d think our deficit-obsessed capital would be trying to collect that very reasonable amount from Wall Street. Instead the White House isproposing $130 billion in Social Security cuts, $400 in Medicare reductions, $200 billion in “non-health mandatory savings,” and $100 billion in non-defense discretionary cuts.
That adds up to exactly $830 billion.

No doubt there is genuine waste that could be cut. But $830 billion, or some portion of it, could be used to grow our economy and brings tens of millions of Americans out of the ongoing recession that is their daily reality, even as the Lords of Disorder continue to prosper. It could be used for educating our young people and helping them find work, for reducing the escalating number of people in poverty, for addressing our crumbling infrastructure, for giving people decent jobs.

It’s going to Wall Street instead.

Trillion-Dollar Tribute

The right word for that is tribute. As in, “a payment by one ruler or nation to another in acknowledgment of submission …” or “an excessive tax, rental, or tariff imposed by a government, sovereign, lord, or landlord … an exorbitant charge levied by a person or group having the power of coercion.”

(Courtesy Merriam-Webster)

In this case the tribute is made possible, not by military occupation, but by the hijacking of our political process by the corrupting force of corporate contributions.

The fruits of that victory are rich: Bank profits are at near-record highs. Most of the country is still struggling to dig out from the wreckage they created but, as Demos’ Policy Shop puts it, “for the banks it’s 2006 all over again.”

On Bended Knee

“Millions for defense,” they said in John Adams’ day, “but not one cent for tribute.”

Today we’re paying for both. That doesn’t leave much for the elderly, the disabled, the impoverished, the children, or anybody else who doesn’t “benefit from disorder.” Nobody’s fighting for them in this budget battle.

That leaves the public with a clear choice: Demand solutions that are more just and democratic – or submit willingly to the Lords of Disorder.

Richard Eskow is a writer, a senior fellow with the Campaign for America's Future, and the host of a weekly radio show, "The Breakdown."

Sequester Insanity: Why Are We Flushing Economic Recovery Down the Toilet?



Economy  



We have to kill austerity before it kills us.

Photo Credit: Shutterstock.com
 
 
We have been strangling the economic recovery through economic incompetence -- and worse is in store because President Obama continues to embrace (1) the self-inflicted wound of austerity, (2) austerity primarily through cuts in vital social programs that are already under-funded, and (3) attacking the safety net by reducing Social Security and Medicare benefits. The latest insanity is the sequester -- the fourth act of austerity in the last 20 months. The August 2011 budget deal caused large cuts to social spending. The January 2013 "fiscal cliff" deal increased taxes on the wealthy and ended the moratorium on collecting the full payroll tax. The sequester will be the fourth assault on our already weak economic recovery. We have a jobs crisis in America -- not a government spending crisis and the cumulative effect of these four acts of austerity has caused a certainty of weak growth and a serious risk that we will throw our economy back into recession. The Eurozone's recession -- caused by austerity -- greatly adds to the risk to our economy because Europe remains our leading trading partner.

President Obama and a host of administration spokespersons have condemned the sequestration, explaining how it will cause catastrophic damage to hundreds of vital government services. Those of us who teach economics, however, always stress "revealed preferences" -- it's not what you say that matters, it's what you do that matters. Obama has revealed his preference by refusing to sponsor, or even support, a clean bill that would kill the sequestration threat to our nation. Instead, he has nominated Jacob Lew, the author of the sequestration provision, as his principal economic advisor. Lew is one of the strongest proponents of austerity and what he and Obama call the "Grand Bargain" -- which would inflict large cuts in social programs and the safety net and some increases in revenues. Obama has made clear that he hopes this Grand Betrayal (my phrase) will be his legacy. Obama and Lew do not want to remove the sequester because they view it as creating the leverage -- over progressives -- essential to induce them to vote for the Grand Betrayal.

Further evidence of Obama's continuing support for the sequester was revealed in an odd fashion today. Bob Woodward is in a controversy because of his column about sequestration. His column made two primary points. First, the administration authored the sequester. Second, Woodward claimed that Obama was "moving the goal posts" by asking for revenue increases. Woodward was criticized by many Democrats for this column and created a further controversy by saying that the administration threatened him. It turned out that the purported threat was based on a statement by Gene Sperling, Obama's economics advisor. David Weigel's column summarizes the dispute.

Weigel comes out where I do on each of the three issues. Yes, the administration created the sequester and has fought to keep it alive when Republicans tried to kill it. (The Republicans "started it" by their obscene extortion in 2011 in which they threatened to force a default.) No, Obama has not moved the goal posts. No, Sperling did not "threaten" Woodward. I raise this background simply to provide a context for Sperling's comments about the reasons that the administration created and continues to support the sequester.
The idea that the sequester was to force both sides to go back to try at a big or grand bar[g]ain with a mix of entitlements and revenues (even if there were serious disagreements on composition) was part of the DNA of the thing from the start. It was an accepted part of the understanding -- from the start. Really.... There may have been big disagreements over rates and ratios -- but that it was supposed to be replaced by entitlements and revenues of some form is not controversial. (Indeed, the discretionary savings amount from the Boehner-Obama negotiations were locked in in BCA [Budget Control Act of 2011]: the sequester was just designed to force all back to table on entitlements and revenues.)
Obama continues to want to "force" a "grand bargain" in which he proposes to make large cuts to social programs, some tax increases, and reductions in the safety net. Again, Obama can easily break with this strategy of choking our economic recovery by supporting a clean bill that would kill the sequester instead of our economy.

The good news is that Representative John Conyers has made the Obama's task simple by sponsoring exactly that clean bill in the one sentence form many of us have been urging: "Section 251A of the Balanced Budget and Emergency Deficit Control Act of 1985 is repealed." Amen.

I propose that we launch an effort, open to all, to support Conyers' bill and demand that our representatives in the House and the Senate promptly enact it.

Bill Black is the author of 'The Best Way to Rob a Bank is to Own One' and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.