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Weekly Audit: Hostage-Taking Over the Debt Ceiling

8:34 am in Uncategorized by TheMediaConsortium

By Lindsay
Beyerstein, Media Consortium blogger

The latest contrived showdown
between Congressional Republicans and the White House is over what
concessions the GOP will demand in order to increase the federal debt
ceiling.

George Zornick of The Nation explains how the shakedown works:

Congress now needs to approve any borrowing past the $14.3
trillion debt ceiling, which the United States will reach “no later” than
May 16, according to Treasury Secretary Timothy Geithner. If Congress
doesn’t raise the debt ceiling, the government would have to stop
spending—including stopping interest payments on those Treasury bonds,
meaning that the United States would effectively default on its
debt.

The debt ceiling has to be raised and everyone
knows it. Surely the Republicans knew it when they voted for tax cuts for
the rich with borrowed money. If the debt ceiling is not raised, the
United States will default on some of its obligations. Just like what
happens after you miss a credit card payment, the country’s creditors will
demand higher interest in order to lend to us in the future.

Playing chicken with the debt ceiling is a recipe for increasing the
national debt. Paul Waldman argues in The American Prospect that
the Republicans hate government so much that they are willing to declare war on the economy in a quixotic
bid to smash the state:

The reason we’re now seeing an
unprecedented amount of attention paid to a vote that ordinarily passes
with little notice is that the Republican Party’s agenda is being set by
a group of ideological radicals who seem quite willing to cripple the
American economy if that’s what it takes to strike a blow against the
government they hate so much.

Peak
Crazy

At AlterNet, Joshua Holland explains why failure to
raise the debt ceiling would be an economic
catastrophe
that could jeopardize the economic recovery. “Peak Crazy,”
he calls it.

However, Holland notes that a showdown over the debt
ceiling does not risk an immediate government shutdown, like the one we
faced over the budget battle. Borrowing isn’t the only way that government
agencies are funded. The government could still spend the $150 billion or
so it takes in every month in tax revenue, for example.

Yet, Senate
Minority Leader Mitch McConnell (R-Kentucky) has announced that 47 GOP
senators oppose raising the debt ceiling unless “credible attempts” are
made to cut federal spending. Meanwhile the Tea Party is launching an
all-out lobbying effort to urge House Republicans not to raise the debt
ceiling without major spending cuts.

The Tea Party’s wish list
includes some total pipe dreams like a balanced budget amendment to the
constitution, and a law to require a two-thirds majority for all future
tax increases. Former senator and current U.S. presidential hopeful Rick
Santorum cheerfully announced that he would let the United States default
on its debt if health care reform is not repealed. Rep. Michele Bachmann
(R-Minn) helpfully suggests paying the interest on Treasury Bills using
money that would otherwise go to Social Security.

Shoot the
hostage

Cenk Uygur of the Young Turks argues that
Democrats are panicking needlessly and, once again, offering needless preemptive concessions to the
Republican fringe in the form of a proposed “hard cap” on government
spending, which would cap new government spending, and subtract any
overruns from social welfare programs like Medicare and Social
Security.

The truth, Uygur notes, is that Wall Street has already
told the Republicans in no uncertain terms that the debt ceiling will be
raised. The economic consequences of doing anything else would be
unthinkable. The Tea Party can yell and scream, but the adults have
already made the decision. Knowing this, Democrats should not be trying to
placate the Republicans so as to induce them to do something they will
ultimately end up doing.

Digby on Social
Security

Democrats are wavering in their decades-long
commitment to defend Social Security,
Heather Digby Parton (a.k.a., “Digby”) writes in In These
Times:

In a quixotic attempt to fix the problems
in the current economy without confronting the plutocrats, the Democrats
are using the illogical argument that since Social Security is projected
to have a shortfall in 35 years, we must cut benefits now. And they seek
to prove to “the market” that the government is fiscally responsible by
showing it’s willing to inflict pain on its citizens—in the
future.

Even if we do nothing, Social Security can pay
out full benefits for the next 35 years. There is no crisis. A small
increase on the payroll cap on Social Security could shore up the program
for generations to come. Republicans oppose Social Security because they
are ideologically opposed to social welfare programs, not because Social
Security is broken.

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

Weekly Audit: We Welcome Our New Plutocratic Overlords

8:10 am in Uncategorized by TheMediaConsortium

By Lindsay Beyerstein, Media Consortium blogger

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

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

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

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

Class warfare on public sector pensions

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

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

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

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

Divide and conquer

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

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

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

Who’s screwing whom?

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

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

Signs of hope?

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

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

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

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

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

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

Weekly Pulse: DADT, Vampire Bees, and Other Hazards to Your Health

9:16 am in Uncategorized by TheMediaConsortium

By Lindsay Beyerstein, Media Consortium blogger

Dr. Kenneth Katz recently published an article in the New England Journal of Medicine titled “Health Hazards of ‘Don’t Ask, Don’t Tell.” This week, he penned an op/ed for RH Reality Check about his experiences treating U.S. military at an STD clinic in San Diego. Dr. Katz sees the Pentagon’s “Don’t Ask Don’t Tell” rule for LGB members of the military as a huge roadblock to good medical care. He’s pretty confident that his military patients feel safe divulging their sexual histories to a civilian doctor like himself. But when those troops go overseas, they are cared for by military doctors. Technically, doctor-patient communication is exempt from DADT, but many patients don’t realize that they can tell their military doctors about gay sex without fear of reprisals (at least in theory). Dr. Katz’s patients have told him that they won’t go for recommended follow-up STD screening after they ship out because they’re afraid to be honest with their doctors. He worries about how many troops are suffering from treatable infections in war zones because they aren’t allowed to serve openly.

Food stamp use skyrockets, swordfish sales unaccountably flat

Monica Potts of TAPPED points to the alarming statistic that in the last month alone an additional 500,000 Americans went on food stamps. She notes that the right wing website Daily Caller is alarmed not by the fact that fellow citizens can’t afford food, but rather that there’s no gruel-only foodstamp program available:

Meanwhile, the conservative news site The Daily Caller is shocked, shocked, to learn that you can use food stamps to buy all manner of food. The government, apparently, doesn’t restrict you from purchasing an $18-per-pound swordfish steak from Whole Foods. But that kind of discovery, like almost everything else in the “debate” over food stamp use, is the sort of ridiculous one that comes from a person who’s never been hungry.

The Hyde Amendment

In Campus Progress, Jessica Arons and Madina Agénor call for the repeal of the Hyde Amendment for being an assault on the reproductive rights of poor women and women of color. The Supreme Court declared abortion to be a constitutional right in 1973, yet nearly 40 years later, the Hyde Amendment still prohibits nearly all federal funding for abortions. In practice, the women most affected by the Hyde Amendment are those who depend on government health care programs like Medicaid and the Indian Health Service:

Former U.S. Rep. Henry Hyde (R-IL), the law’s sponsor, admitted during debate of his proposal that he was targeting poor women because they were the only ones vulnerable enough for him to reach. “I certainly would like to prevent, if I could legally, anybody having an abortion, a rich woman, a middle-class woman, or a poor woman,” he said. “Unfortunately, the only vehicle available is the … Medicaid bill.”

Meanwhile, ultra-conservative Rep. Michele Bachmann (R-MN) is calling on Congress to de-fund the reproductive health provider Planned Parenthood, Andy Birkey reports in the Minnesota Independent. In an interview with a conservative news site, Bachmann doubled down on that idea, suggesting that all of health care reform be de-funded because it funds abortions. This is not true. The aforementioned Hyde Amendment guarantees as much. Furthermore, even though health reform never would have funded abortions, President Obama signed an eleventh-hour executive order guaranteeing that health care reform would not fund abortions.

Brooklyn bees gorge on maraschino cherry run-off

Home beekeeping is the hottest new trend for health-conscious locavores. New York City recently changed the law to accommodate beekeepers in the five boroughs. Just because you live in an industrial neighborhood in Brooklyn is no reason to miss out on this sweet action, right? Well, actually, there is a catch. That nice honey at the farmers’ market tastes like lavender because that’s what those rural bees ate. What do bees in Red Hook, Brooklyn eat? Run-off from a maraschino cherry factory. The overindulgent bees “look like vampires” according to one local keeper and their honey runs bright red. Maraschino honey sounds like a delicious mash-up of high and low culture. Unfortunately, Sarah Goodyear reports in Grist that the end product doesn’t taste nearly as good as it looks. Arthur Mondella, the owner of Dell’s Maraschino Cherries, wants to do right by the beekeepers. He initially suggested putting out vats of different colored syrup to “help” the bees make rainbow honey. His proposal was not well-received by the crunchy set. Instead, he has agreed to work with the beekeepers to keep the bees out of the vats next year.

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

Weekly Audit: Can Elizabeth Warren Save the Economy?

8:41 am in Uncategorized by TheMediaConsortium

by Zach Carter, Media Consortium blogger

President Barack Obama’s decision to appoint Elizabeth Warren to set up the new Consumer Financial Protection Bureau (CFPB) couldn’t have come at a more critical time.

Over 44 million Americans were living in poverty last year. That’s the highest number on record. The Great Recession is taking a terrible toll on everyone outside the executive class, but policymakers have been reluctant to pursue an economic agenda that improves the lives of ordinary Americans.

The uniqueness of Warren’s new post raises plenty of questions, but it puts a fierce defender of the middle class in office at a time when the middle class most needs help.

So what exactly will Elizabeth Warren do?

As Annie Lowrey emphasizes for The Washington Independent, it’s not entirely clear what Warren’s new job will be or how long she will have it.

Consumer advocates have pushed hard to get Obama to name Warren the first director of the new CFPB. Obama, citing Senate confirmation hurdles, has instead charged Warren with setting up the agency as an adviser to both the Treasury Department and Obama himself. The post allows Warren to get to work setting up the agency, but not the power to start drafting regulations. It’s good to see her get a post on the Obama team, but we do not yet know how influential she will be.

Tim Fernholz sums up the pros and cons of Warren’s appointment in a piece for The American Prospect. There are very real drawbacks to the move. Confirming Warren for a permanent post as director of the CFPB will be harder next year—Democrats are likely to lose Senate seats in November.

It’s not impossible, but if confirmation was Obama’s chief worry, he’s only made it harder on himself by kicking the nomination down the road. This is true for whoever Obama picks—the bank lobby is going to scream about anybody other than a bank lobbyist, and Republicans are filibustering almost everybody Obama nominates to any post, including critical economic policy positions at the Federal Reserve.

Getting to work

But the new role also gets Warren on the economic policy team right away, and allows the agency to begin staffing up under her stewardship, even if it can’t draft regulations until a permanent director has been confirmed. There will finally be a strong voice on Obama’s economic team prioritizing household financial security above all else. That’s very good news.

Whatever the formal powers of Warren’s new post, we can be sure she’ll have a significant impact on policy making. Her current role as chair of the oversight panel for the Wall Street bailout was given almost no power at all by Congress, yet Warren has transformed it into the only real source of economic accountability in Washington, D.C. That’s no easy task, and we can expect similar courage and creativity from her as a member of Obama’s economic team.

What will the CFPB look like?

Warren herself seems to be pleased with the appointment. In a piece for AlterNet, Warren says that she "enthusiastically agreed" to take on the new position, and explains the vision for the CFPB:

"The new consumer bureau is based on a pretty simple idea: People ought to be able to read their credit card and mortgage contracts and know the deal. They shouldn’t learn about an unfair rule or practice only when it bites them — way too late for them to do anything about it. The new law creates a chance to put a tough cop on the beat and provide real accountability and oversight of the consumer credit market."

Sea change

That sounds common-sense, but it’s exactly opposite to the past three decades of deregulation. Reversing the damage caused by that anti-regulatory fervor has been extremely difficult. The Obama administration needs Warren’s voice now more than ever. In the early days of his presidency, Obama pushed through a stimulus plan that has prevented the middle class from falling completely off the map. But those efforts are expiring, and they haven’t been enough to prevent millions of families from sinking into poverty.

Alarming poverty rate

In a harrowing piece for The Nation, Kai Wright notes that more people are now impoverished than at any time since the government began tracking poverty data. The poverty rate rose to 14.3 percent, with 44 million Americans—roughly one in seven—living in poverty. More than one-third of black and Latino children are growing up impoverished.

So it’s no surprise that income inequality is also at its most severe in decades. As Kevin Drum notes for Mother Jones—for the past thirty years, more and more American wealth has been concentrated among the richest citizens. The richest 1 percent of U.S. earners are raking in 10 percent more of the national income today than they were at the start of the Reagan administration, while the poorest 95 percent have seen their share of the national income decline.

Numbers like these aren’t a fluke—they’re a direct result of policies that put the interests of Wall Street and other powerful corporate players ahead of the well-being of households. Nor were these policies adopted in a vacuum– Wall Street lobbied hard for the right to pillage our pocketbooks, and when it couldn’t rewrite the rules, it simply broke them while bank-friendly regulators looked the other way. Elizabeth Warren can’t fix all of this on her own, and she’ll surely face opposition from some members of Obama’s inner circle. But families couldn’t ask for a better advocate, and her appointment couldn’t come at a better time.

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

Weekly Audit: Business Press Gets Nasty as Economy Worsens

7:52 am in Uncategorized by TheMediaConsortium

by Zach Carter, Media Consortium blogger

The economy is terrible. Jobs are nowhere to be found. Wall Street bonuses are through the roof. But mainstream business journalism is still praising the con-men who created this mess, yet attacking anybody who takes real solutions—like government spending to create jobs—seriously.

Whatever corporate journalists say, the American economy will not recover until policymakers and the media acknowledge the mistakes of the past and move forward with a new economic agenda focused on middle-class prosperity, rather than financial evisceration by elites.

Creating jobs is key

As Annie Lowrey notes for The Washington Independent, while President Barack Obama’s economic stimulus package has dramatically slowed the pace of job losses, it hasn’t been enough to make a serious dent in the unemployment rate, which currently stands at 9.6 percent. Without a serious new set of stimulus measures, we’ll see that rate stay near double-digits for years to come.

But the stimulus package is not the only policy relevant to the economic recovery. The financial excess that sparked the Great Recession was not an accident, and much of it was straightforwardly illegal—even by the remarkably weak regulatory standards of the past decade.

As I emphasize for AlterNet, under President George W. Bush, bankers got away with all kinds of frauds. They’re continuing to get away with them under Obama. The allegations of wrongdoing range from cooking the books to the outright laundering of hundreds of billions of dollars in drug money.

Crime always pays

But you wouldn’t know it from reading a recent Washington Post op-ed by Reuters’ business editor Chrystia Freeland, which defines Wall Street problems exclusively as the product of government inadequacies, not deregulation. And of course, bank regulations were wholly inadequate in recent decades. Bankers lobbied hard for those rules, and pounced on the middle class once they were enacted. But Wall Street didn’t just win weak rules, they routinely violated rules that crimped profits. Crime always pays until you get caught. If bankers know they can caught and avoid punishment, they have no incentive to obey the law when doing so would crimp their bonuses.

And those bonuses are still wild and wonderful for corporate elites. As Sam Pizzigati emphasizes for Yes! Magazine, CEO pay last year was an astonishing four times higher than during the years of elite dominance shepherded by President Ronald Reagan. This kind of pay isn’t good for the economy. It’s a waste of resources that could be going to rank-and-file workers.

Business journalists skewing facts

The editorial pages of major newspapers aren’t the only places where preposterous business journalism pops up. As Kevin Drum notes, you can also read it on the pages of major mainstream business magazines.

In a blog post for Mother Jones, Drum takes down one of the worst articles on both Obama and business that has yet been written. It’s by right-wing writer Dinesh D’Souza, and it reads like a combination between a Birther conspiracy theory, a coded racist rant and a completely incoherent assault on reasonable economic policy.

Without citing any evidence, D’Souza calls Obama, "the most antibusiness president in a generation, perhaps in American history," and goes on to blame this attitude on the "anticolonialist" views of Obama’s Kenyan father. One might expect this kind of garbage to be running in white nationalist newsletters, but as Drum highlights, the article was published in Forbes magazine, a thoroughly mainstream conservative business rag (don’t confuse Forbes with Fortune, which uncovered the Enron scam).

Obama’s baby steps

Obama could make outrageous attacks like D’Souza’s easier to defend if he proposed a set of bold, new policies to combat the recession. Instead, as William Greider highlights for The Nation, Obama is going for half-measures that will make things a little less worse, but won’t really put the economy back on track. His recently proposed tax cuts for small businesses and $50 billion in infrastructure spending will indeed create jobs– just not enough of them.

We need a robust government plan to create jobs, which means lots of spending for government hiring, expanded benefits for the unemployed, and robust government investments in the national infrastructure. All of these things will cost money, but if we don’t put people back to work, the resulting lack of economic growth will make the federal budget deficit far worse than the jobs spending will.

Helping the middle class isn’t "antibusiness," it’s common-sense economics. If all of our economic policies are geared toward throwing money at the rich, we’ll just watch rich people hoard most of that money. Repairing our economy requires repairing the middle class. That means lots of jobs—and in a deep recession, only the government can provide those jobs.

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

Weekly Audit: Why Do Deficit Hawks Hate Social Security?

8:27 am in Uncategorized by TheMediaConsortium

by Zach Carter, Media Consortium blogger

Last week, Social Security advocates learned something they had long suspected. Arguments for cutting Social Security aren’t really about economics or the deficit. They’re all about waging war on social services.

In short, some very prominent policymakers are out to dismantle Social Security on ideological grounds. The most recent example of this view comes from Alan Simpson, a former Republican Senator from Wyoming who now serves as co-Chair of President Barack Obama’s Federal Debt Commission. Earlier this summer, Simpson was caught on video spreading absurd lies about Social Security, but his latest outburst explains why he’s been so willing to distort the facts. Simpson simply hates Social Security.

As Joshua Holland highlights for AlterNet, Simpson fired off a nasty email to Ashley Carson, who advocates for elderly women, in which he referred to the most successful social program in U.S. history as "a milk cow with 310 million tits."

Social Security is doing just fine

But Simpson has a lot of power on the Debt Commission, which is expected to recommend that Congress reduce the deficit by cutting social programs in a report this year. But as Holland notes, Social Security isn’t in trouble:

Social Security is in fine shape. It’s got a surplus that will run out in 2037, but even if nothing were to change by then, it could still continue to pay out 75 percent of scheduled benefits seventy-five years from now, long after the surplus disappears, and those benefits would still be higher than what retirees receive today.

What’s more, as William Greider notes for The Nation, Social Security has never added one cent to the federal budget deficit. According to the law that created the program, Social Security never can. Targeting Social Security in order to fix the deficit is like invading Iraq to fight Al-Qaeda. The issues are not related.

Raising the retirement age robs workers

The Debt Commission is likely to recommend raising the retirement age—the age at which Social Security benefits begin to be paid out. But as Martha C. White notes for The Washington Independent, it’s a "solution" that simply robs low-income workers of their tax money. Everybody pay Social Security taxes when they work, and when they retire, they receive federal support. If you don’t live long enough to actually retire, you don’t get any benefit from Social Security.

"The hardship of raising the retirement age falls disproportionately on low-income workers who work in physically demanding professions, jobs they may not be able to continue through their seventh decade. … Moreover, though the average lifespan has increased since Social Security’s creation, those extra years aren’t enjoyed equally by all Americans. Overall, Americans are living about 7 years longer. But the poorest 20 percent of Americans are living just two years longer."

Raising the retirement age, in other words, disproportionately hurts the poor—the very people Social Security is supposed to help most.

Subprime scandal 2.0

So who would pick up the slack if Social Security were to be cut? The same crooked Wall Street scoundrels who brought us the financial crisis. If the government cuts back on retirement benefits, the financial establishment can step in and manage a bigger piece of the retirement pie. The more we learn about the financial mess, the less we should want to see our retirement money controlled by bigwig financiers. Truthout carries a blockbuster new investigative report by ProPublica’s Jake Bernstein and Jesse Eisinger that reveals a new, multi-billion-dollar subprime scam engineered by the financial elite.

We’ve known about Wall Street’s subprime shenanigans for some time, but the report reveals that banks were essentially selling their own products to themselves in order to create the illusion that people really wanted lousy mortgages. It’s called "self-dealing," and it’s supposed to be illegal.

Subprime Disaster, meet Mortgage Nightmare

Here’s how the scam worked: Wall Street crammed thousands of mortgages into securities, then sliced and diced those securities into new products called CDOs. Those CDOs, in turn, were divided into different "buckets" and sold to investors. The riskiest buckets paid out the most money to investors, but were the most likely to take losses if the underlying mortgages ever went bad. As the housing bubble grew more and more out-of-control, investors became wary of these risky buckets, and stopped buying them.

Wall Street banks were still making a killing from the packaging and sale of everything else, though, so they devised a plan to get rid of some risky bits: they’d buy them up themselves, without telling anybody. A bank would create a CDO called, say, Mortgage Nightmare CDO. Then it would create a separate CDO, called, say, Subprime Disaster CDO. Subprime Disaster would buy up a risky bucket from Mortgage Nightmare, creating the illusion to the market that banks were still able to sell off risky mortgage assets without any trouble, even though the bank was basically just selling garbage to itself.

That illusion propped up the prices of these risky assets and created more revenue for the tricky bankers who sold them, and plump, short-term profits for the banks. It also strongly encouraged other bankers to issue lousy mortgages to the public, since those loans could be packaged into lousy CDOs and score short-term profits for Wall Street’s schemers.

Ultimately, this scheming resulted in a multi-billion-dollar disaster for Wall Street, which taxpayers ended up footing the bill for. Anybody want to see that happen with Social Security?

Social programs did not cause the deficit

As Seth Freed Wessler notes for ColorLines, deficit hawks’ emphasis on social programs is at odds with the factors that actually created the deficit. The Bush tax cuts, the wars in Iraq and Afghanistan and the bank bailouts are the big-ticket items when it comes to government revenues and expenses. Yet deficit hawks in Congress have been refusing to extend paltry unemployment benefits or food stamps to the people hit hardest by the recession. And pretty soon they’re going to go after Social Security too.

In reality, the deficit is only a problem if investors are afraid that the government will default on its debt. Markets measure this worry with interest rates—high rates mean investors are worried, low rates mean they are not. Right now, interest rates on government bonds are at their lowest in decades. With the recession dragging on and the recovery weakening, now would be a great time for the government to spend more money to create jobs and help those knocked out of work.

Instead, the policy debate features cranky old men whining about 310-million-titted cows.

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

Weekly Audit: The Hidden Casualties of the Great Recession

8:23 am in Uncategorized by TheMediaConsortium

by Annie Shields, Media Consortium blogger

The June labor market report announced that the unemployment rate is down from 9.7 to 9.5 percent and 83,000 private-sector jobs were created in June. Unfortunately, the situation isn’t quite so rosy. As Annie Lowrey reports in The Washington Independent, the real cause of the drop in unemployment was not more jobs, but fewer workers. Hundreds of thousands of unemployed Americans have now been reclassified as “discouraged” workers who have not actively searched for work for four weeks. As such, they are no longer part of the system.

Unemployed and disenfranchised
What’s worse, the unemployment crisis is hurting some more than others. Among the discouraged workers that have simply dropped out of the labor market, 65% are women. People of color have also been hit especially hard, as have young people that are just entering the labor market. As Katherine S. Newman and David Pedulla of The Nation write:

"The Great Recession is reminding us of how unequal the distribution of damage can be. While virtually everyone other than the top 1 percent is suffering in some fashion, the depth of the fallout varies a great deal by race, education and gender."

The economic disparities are stark. The unemployment rate for African Americans is nearly twice the rate for whites, while the rate among people 16 to 24 years old is nearly double the rate for all workers. And the disadvantages for these particular groups are expected to persist. According to The Nation:

"Young black men are the most disadvantaged of all in the job tournament, but young workers across the board are in terrible shape in this labor market. If previous recessions are an indication of what’s to come, we can expect these stumbling entries into the world of work to translate into long-term disadvantages, relative to those who come of age in a climate of opportunity."

Foreclosed and forgotten
The recession is also continuing to devastate homeowners, as Seth Freed Wessler explains for Colorlines. Wessler documents “the country’s long failure to address systemic racial inequity through public policy eventually threw the whole economy into free fall.”

According to a recent report from the Center for Responsible Lending, nearly 6 million homes are at imminent risk of foreclosure right now. It’s estimated that by 2014, 13 million homes will be gone. The report shows that Black, Latino, Asian, Native American and Alaskan Native/Pacific Islander borrowers are all at greater risk for immediate foreclosure than White borrowers.

One of the most startling findings is that between 2009 and 2012, “Black and Latino communities will be drained of $194 and $177 billion, respectively, because of the plummeting home values in the high foreclosure neighborhoods,” Wessler writes.

Unfortunately, there’s little relief in sight for these communities. Wessler explains that the Obama administration’s attempt to help prevent foreclosures, the Home Affordable Modification Program, or HAMP, has done more to help mortgage servicers than struggling homeowners. The recent defeat of an unemployment benefits extension only makes matters worse. Some advocacy groups are calling for a moratorium on foreclosures as a temporary remedy. Obama supported such a measure during his 2008 Presidential campaign.

Silver lining, but no silver bullet

If there is a silver lining to this ominous economic raincloud, it might be found in recent changes to to the Home Mortgage Disclosure Act (HMDA), an anti-redlining measure from 1975. As Kat Aaron and Mary Kane report for The American Prospect, these changes are one result of a long fight against discriminatory lending practices, and could prove to be invaluable for “consumer activists, regulators, and researchers trying to identify egregious lenders and their loans.” The American Prospect has more about the revisions to HMDA and what they might mean for the ongoing fair-lending debate.

Many Americans are also turning to timebanks as an alternative to the down economy. Timebanks provide a cooperative, egalitarian system for sharing skills and trading services with others, free of charge. As Mira Luna reports for Yes! Magazine, the trend might be a result of tough times, but it has an upside.

"Instead of paying professionals who we may never see again to provide services, we can use time exchanges to find neighbors who might provide service in exchange for hour credits, thereby saving scarce U.S. dollars for things like rent and medicine.

In the process, people get to know and trust their neighbors, establishing caring relationships that can help reweave the fabric of our communities, and replace our culture’s over-reliance on individual financial security."

Weekly Pulse: Rhythm Method Madness

8:50 am in Uncategorized by TheMediaConsortium

by Lindsay Beyerstein, Media Consortium blogger

Seventeen percent of sexually active teenage girls said they used the rhythm method as a means of birth control in 2008, up from just 11% in 2002, according to the latest report from the CDC. For most of these girls "rhythm method" means guessing the least risky day to have unprotected sex. You and I both know that one in five teenage girls isn’t taking her temperature every day and charting the consistency of her cervical mucus on the calendar.

Not so ab-fab

Amanda Marcotte of RH Reality Check blames abstinence-only propaganda for the trend. She points out that abstinence-based curricula rely heavily on shame to discourage kids from having sex. Teens who are ashamed don’t necessarily abstain, but they are less likely to use birth control when they do have sex. Claiming to use the rhythm method is an excuse not to use real birth control. Marcotte points out that abstinence-only curricula also promotes stereotypes of female passivity and male dominance, which makes it even harder for girls to negotiate condom use.

There is a glimmer of hope, Robin Marty of RH Reality Check reports that the Obama administration is shifting gears on sex ed. For the first time in many years, school districts will be eligible for federal funds to teach evidence-based, comprehensive sex ed. Abstinence-only funding hasn’t gone away, but at least districts will have the option.

Recession-based bedroom blues

Interestingly, teens are having slightly less sex overall, according to the CDC. The abstinence-only crowd is trying to take credit, but as Stephanie Mencimer of Mother Jones notes, the recession seems to be putting a damper on the sex lives Americans of all ages. The latest sex survey by the AARP showed that Americans over 45 are having less sex than they were in 2004 and enjoying it less as well.

Looking at the same study, Wendy Strgar of Care2 notes that that teen motherhood has become much more socially acceptable among adolescents, perhaps due to highly publicized teen moms like Bristol Palin and Jamie Spears.

The war on choice

Michelle Chen of RaceWire reports that hundreds of anti-choice bills have been introduced in state legislatures around the country since the passage of national health care reform. Missouri’s new Abortion Restriction Act requires abortion clinics to post signs offering state assistance if she has the baby. Too bad the Missouri legislature slashed the funds that would have provided most of those services.

Two moms = healthy kids

In other health news, a new study forthcoming in the journal Pediatrics shows that lesbian couples raise healthier children than straight couples. Gabriel Arana of TAPPED suggests that maybe lesbians do better on average because they are a self-selected group of highly motivated parents that had to overcome obstacles in order to raise their kids. Or maybe two moms are better than one.

As Arana notes, the politically important thing about this study is the finding that same-sex parents are doing at least as well as opposite sex parents. Conservatives opposed to gay rights have often justified second-class citizenship for gays in terms of protecting children from allegedly harmful same-sex parents. Now, science is showing that same-sex families are at least as healthy as more traditional family units.

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

Weekly Audit: Wall Street Goes to the Movies

10:10 am in Media by TheMediaConsortium

by Zach Carter, Media Consortium blogger

Last week, the U.S. Senate rejected a plan that would have broken up the nation’s six largest banks firms into firms that could fail without wreaking havoc on the economy. Even though the defeat reinforces Wall Street’s political dominance, there is still room for a handful of other useful reforms, like banning banks from gambling with taxpayer money and protecting consumers from banker abuses. After looting our houses, banks are now pushing for the ability to bet on movie box-office receipts, and will keep trying to financialize anything they can unless Congress acts.

Wall Street calls the shots

Writing for The Nation, John Nichols details last week’s Capitol Hill damage. Today’s financial oligarchy, in which a handful of bigwig bankers and their lobbyists are able to write regulations and evade rules they don’t like, will still be in place after the Wall Street reform bill is passed. The lesson is clear, as Nichols notes:

Whatever the final form of federal financial services reform legislation, one thing is now certain: The biggest of the big banks will still be calling the shots.

Still worth fighting for

As I emphasize for AlterNet, Congress has made a terrible mistake here, but there is still room for reform. It took President Franklin Delano Roosevelt seven years to enact his New Deal banking laws. It took even longer to reshape public opinion of monopolies when President Theodore Roosevelt took on Corporate America in the early 1900s.

What’s still worth fighting for? We have to curb the derivatives market—the multi-trillion-dollar casino that destroyed AIG. We have to impose a strong version of the Volcker Rule, which would ban banks from engaging in speculative trading for their own accounts. We have to change the way the Federal Reserve does business and force the government’s most secretive bailout engine to operate in the open. And we have to establish a strong, independent Consumer Financial Protection Agency to ensure that the horrific subprime mortgage abuses are not repeated.

As Nomi Prins details for The American Prospect, the current reform bill will not effectively deal with the dangers posed by hedge funds and private equity firms—companies that partnered with banks to blow up the economy through investments in subprime mortgages. That means that whatever happens with the current bill, Congress must again take action next year to rein in other financial sector excesses.

The derivatives casino at the movies

As Nick Baumann demonstrates for Mother Jones, banks are doing everything they can to gobble up other productive elements of the economy. The economy crashed in 2008 in large part because banks had used the derivatives market to place trillions of dollars in speculative bets on the housing market. This wasn’t lending, it was pure gambling: Instead of using poker chips, bankers placed their bets with derivatives. But, as Baumann emphasizes, banks are now looking to expand the sort of thing they can make derivatives gambles with. The latest proposal is to allow banks to bet on the box office success of movies. That’s right, banks would be gambling on movies.

Hollywood may be shallow, but it isn’t stupid. It doesn’t want to see the banking industry repeat its destructive looting of the housing industry on the movie business, and is pushing hard to ban banks from betting on movies. But we can’t count on every industry having a powerful lobby group to counter every assault from the banking system.

Taking stock in schools

Consider the unsettling report by Juan Gonzales of Democracy Now!. Gonzales details how big banks gamed the charter school system to score huge profits while simultaneously saddling taxpayers with massive debts that make teaching kids supremely difficult. By exploiting multiple federal tax credits, banks that invest in charter schools have been able to double their money in seven years—no small feat in the investing world—while schools have seen their rents skyrocket. One school in Albany, N.Y. saw its rent jump from $170,000 to $500,000 in a single year.

About that unemployment rate…

It’s not like public schools are flush with cash right now. The $330,000 increase in rent could pay the salaries of more than a few teachers. As the recession sparked by big bank excess grinds on, even the good news is pretty hard to swallow. As David Moberg emphasizes for Working In These Times, the economy added 290,000 jobs in April, but the unemployment rate actually climbed from 9.7 percent to 9.9 percent in March. That’s because the unemployment rate only counts workers who are actively seeking a job—if you want a job but haven’t found one for so long that you give up, you’re not technically "unemployed." All of those "new" workers are driving the official figures up.

In other words, it’s still rough out there. And likely to stay rough as state governments try to deal with the lost tax revenue from plunging home values and mass layoffs. Nearly half of all unemployed people in the U.S. have been out of a job for six months or more. And while we’d be much worse off without Obama’s economic stimulus package, that percentage is likely to grow this year, Moberg notes.

This is what unrestrained banking behemoths do. They book big profits and bonuses for themselves, regardless of the consequences for the rest of the economy. Congress absolutely must impose serious financial reform this year. After the November election, breaking up the banks must once again be on the agenda when Congress considers the future fate of hedge funds, private equity firms, Fannie Mae and Freddie Mac. If we don’t rein in Wall Street, banks will continue to wreak havoc on our homes, our jobs and even our schools. Congress must act.

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

Weekly Audit: How Deregulation Fueled Goldman Sachs’ Scam

9:28 am in Media by TheMediaConsortium

by Zach Carter, Media Consortium blogger

Last week, the Securities and Exchange Commission filed fraud charges against Goldman Sachs and underscored what most Americans have believed for some time: Wall Street has rigged the economy in its own favor, and will stop at nothing—not even outright theft—to boost its profits. What’s worse, Goldman’s scam could have been completely prevented by better regulations and law enforcement.

Goldman’s heist

Let’s be clear. "Financial fraud" means "theft." Goldman Sachs sold investors securities that were stocked with subprime mortgages and had been cherry-picked by a hedge fund manager named John Paulson. Paulson believed these mortgages were about to go bust, so he helped Goldman Sachs concoct the securities so that he could bet against them himself.

Goldman Sachs, like Paulson, also bet against the securities. But when Goldman sold the securities to investors, it didn’t tell them that Paulson had devised the securities, or that he was betting on their failure. By withholding crucial information from investors, Goldman directly profited from the scam at the expense of its own clients. If ordinary citizens did what the SEC’s alleges Goldman did, we’d call it stealing.

As Nick Baumann emphasizes for Mother Jones, the SEC’s suit against Goldman is just the tip of the iceberg. During the savings and loan crisis of the late 1980s, literally thousands of bankers were jailed for financial fraud. Today’s crisis was much larger in scope, yet the Goldman allegations are among the first serious charges of legal wrongdoing to emerge (other complaints have been filed against Regions Bank and former Countrywide CEO Angelo Mozilo). If the SEC or the FBI are doing their jobs, we should see many more of these cases.

Bust ‘em up.

How do banks get away with these kinds of shenanigans and still secure epic taxpayer bailouts? It’s all about their political clout, as Robert Reich notes for The American Prospect. So long as banks are so enormous that they can ruin the economy with their collapse, the institutions will always carry tremendous political clout.

Even in the case of Goldman Sachs, which is too-big-to-fail by any reasonable standard, the SEC’s fraud case is being filed three years after the company’s alleged offense. That’s well after the company rode to safety on the Troubled Asset Relief Program, the AIG bailout and billions more in other indirect assistance—and only after multiple journalists made Goldman’s offensive transactions general public knowledge.

If we don’t break up the big banks, politically connected Wall Street titans will make sure they get bailed out when the next crisis hits, regardless of whatever laws we have on the books.

Fix the derivatives casino

If Congress doesn’t soon pass a bill to break up behemoth banks, it will be neglecting the gravest problem in our financial system today. But several other reforms are needed if Wall Street is ever going to serve a useful economic function again.

As Nomi Prins emphasizes for AlterNet, much of the Wall Street profit machine has been divorced from the economy that the rest of us live in. These days, banks make most of their money from securities trades and derivatives deals. Their actual lending business is taking a beating. That means big banks have very little incentive to promote economic well-being for every day citizens. We need to create these incentives by banning economically essential banks from engaging in securities trades, and make sure all derivatives transactions are conducted on open, transparent exchanges, just like ordinary stocks and bonds.

Better derivatives regulations could help protect against fraud. If Goldman Sachs’ sketchy subprime deal had been subject to market scrutiny on an exchange, it’s very unlikely that any investor would have bought into it. Goldman Sachs almost got away with it because the deal was secretive and beyond the scope of most regulatory oversight.

Protect whistleblowers

The Goldman case also raises significant questions about the government’s enforcement of existing financial fraud laws. Bradley Birkenfeld, a banker for Swiss financial giant UBS, helped the Department of Justice bring the largest tax fraud case in history against his company, which was helping rich Americans hide money from the IRS in offshore bank accounts.

For his cooperation, Birkenfeld was rewarded with a four-year prison sentence, even though nobody else at UBS—nobody—has been sentenced to prison over the scam. As Juan Gonzalez and Amy Goodman emphasize for Democracy Now!, Birkenfeld’s imprisonment could have something to with who exactly is hiding money with UBS.

Gonzalez discusses an interview with Birkenfeld, in which the former banker notes that the bank had a special office to handle the accounts of "politically exposed persons"— American politicians. Moreover, the top brass at UBS includes key advisors to top politicians in both parties. This is exactly the kind of influence smuggling that breaking up the banks would help fix. UBS is a multi-trillion-dollar institution with no less than 27 U.S. subsidiaries.

But protecting Birkenfeld would accomplish still more—by jailing him, the Justice Department is actively discouraging others from coming forward, and making it more difficult for regulators to enforce the law.

Greenspan’s failure

It’s abundantly clear that almost every major regulatory agency charged with curtailing financial excess failed to prevent the Crash of 2008. But that failure doesn’t mean that effective regulation is impossible—it only shows that the regulators in power failed. The top bank regulator in the U.S., John Dugan, was a former bank lobbyist.

As Christopher Hayes demonstrates for The Nation, former Federal Reserve Chairman Alan Greenspan has never had any interest in regulation whatsoever. After the crash, Greenspan insisted that nobody could have seen it coming. But as Hayes notes, many people did—Greenspan simply didn’t listen to them. These days, Greenspan is revising his story, claiming that he did in fact see the crisis coming, but that nobody could have prevented it. That is simply not credible.

Hayes draws a useful parallel Hurricane Katrina, a problem sparked by a natural event that became a catastrophe when regulators failed to take the necessary precautions. The lesson from both Katrina and the financial crash is not that government always screws up—we have plenty of examples of government preventing floods and economic calamity. The lesson we should learn is that people who don’t believe in government will never do a good job governing. As Hayes notes:

If Greenspan couldn’t figure things out, that doesn’t mean others can’t. In fact, developing systems for doing just that is called—quite simply—progress, and Alan Greenspan continues to be one of its enemies.

That is exactly the task that now presents itself before Congress: Developing a system to prevent and constrain economic destruction wielded by Wall Street. The U.S. had a system that did exactly this for more than fifty years. For the last thrity years, it has been systematically dismantled. How well Congress lives up to that challenge will define much of our economic future for decades to come.

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