Teachers Wonder, Why the Scorn
by Trip Gabriel
The New York Times
The jabs Erin Parker has heard about her job have stunned her. Oh you pathetic teachers, read the online comments and placards of counterdemonstrators. You are glorified baby sitters who leave work at 3 p.m. You deserve minimum wage.
“You feel punched in the stomach,” said Ms. Parker, a high school science teacher in Madison, Wis., where public employees’ two-week occupation of the State Capitol has stalled but not deterred the governor’s plan to try to strip them of bargaining rights.
Ms. Parker, a second-year teacher making $36,000, fears that under the proposed legislation class sizes would rise and higher contributions to her benefits would knock her out of the middle class.
“I love teaching, but I have $26,000 of student debt,” she said. “I’m 30 years old, and I can’t save up enough for a down payment” for a house. Nor does she own a car. She is making plans to move to Colorado, where she could afford to keep teaching by living with her parents.
Around the country, many teachers see demands to cut their income, benefits and say in how schools are run through collective bargaining as attacks not just on their livelihoods, but on their value to society.
Even in a country that is of two minds about teachers — Americans glowingly recall the ones who changed their lives, but think the job with its summers off is cushy — education experts say teachers have rarely been the targets of such scorn from politicians and voters.
Republican lawmakers in half a dozen states are pressing to unwind tenure and seniority protections in place for more than 50 years. Gov. Chris Christie’s dressing down of New Jersey teachers in town-hall-style meetings, accusing them of greed, has touched a populist vein and made him a national star.
Mayors are threatening mass layoffs, including in New York City and in Providence, R.I., where all 1,926 teachers were told last week they would lose their jobs — a largely symbolic gesture since most will be hired back.
Some experts question whether teaching, with its already high attrition rate — more than 25 percent leave in the first three years — will attract high-quality recruits in the future.
“It’s hard to feel good about yourself when your governor and other people are telling you you’re doing a lousy job,” said Steve Derion, 32, who teaches American history in Manahawkin, N.J. “I’m sure there were worse times to be a teacher in our history — I know they had very little rights — but it feels like we’re going back toward that direction.”
To Read the Rest of the Article
Showing posts with label Debt. Show all posts
Showing posts with label Debt. Show all posts
Thursday, March 03, 2011
Tuesday, March 01, 2011
Henry Giroux: Left Behind? American Youth and the Global Fight for Democracy
Left Behind? American Youth and the Global Fight for Democracy
by Henry Giroux
Truthout
...
Student resistance in the United States must be viewed within a broader political landscape that, with few exceptions, remains unexamined. In the first instance, students in Western Europe, in particular, are faced with a series of crises that are more immediate, bold and radical in their assault on young people and the institutions that bear down heavily on their lives. In the face of the economic recession, educational budgets are being cut in take-no-prisoners extreme fashion; the social state is being radically dismantled; tuition costs have spiked exponentially; and unemployment rates for young people are far higher than in the United States (with the exception of youth in poor minority communities). European students have experienced a massive and bold assault on their lives, educational opportunities and their future. Moreover, European students live in societies where it becomes more difficult to collapse public life into largely private considerations. Students in these countries have access to a wider range of critical public spheres; politics in many of these countries has not collapsed entirely into the spectacle of celebrity/commodity culture; left-oriented political parties still exist; and labor unions have more political and ideological clout than they do in the United States. Alternative newspapers, progressive media and a profound sense of the political constitute elements of a vibrant, critical, formative culture and range of public spheres that have not erased the possibility to think critically, engage in political dissent, organize collectively and inhabit public spaces in which alternative and critical theories can be developed.
Because of the diverse nature of how higher education is financed and governed in the United States, the assault on colleges and universities has been less uniform and differentially spread out among community colleges, public universities and elite colleges, thus lacking a unified and highly oppressive narrative against which to position resistance. Moreover, the campus "culture wars" narrative has served to galvanize many youth around a reactionary cultural project while distancing them from the very nature of the economic and political assault on their future. All this suggests another set of questions has to be raised. The more important questions, ones which do not reproduce the all-too-commonplace demonization of young people as apathetic, are twofold. First, the issue should not be why there have been no student protests, but why have the protests that have happened not been more widespread, linked, sustained? The student protests against the draconian right-wing policies attempting to destroy the union rights and collective bargaining power of teachers supported by Republican Gov. Scott Walker in Wisconsin is one example indicating that students are engaged and concerned. There are also smaller student protests taking place at various colleges, including Berkeley, CUNY, and on other campuses throughout the United States. But student activists appear to constitute a minority of students, with very few enrolled in professional programs. Most student activists are coming from the arts, social sciences and humanities (the conscience of the college). Second, there is the crucial issue of what sort of conditions have young people inherited in American society that has undermined their ability to be critical agents capable of waging a massive protest movement against the growing injustices they face on a daily basis? After all, the assault on higher education in the United States, while not as severe as in Europe, still suggests ample reasons for students to be in the streets protesting such policies. Close to 43 states have pledged major cuts to higher education in order to compensate for insufficient state funding. This means an unprecedented hike in tuition rates is being implemented, enrollments are being slashed, salaries are being reduced and need-based scholarships in some states are being eliminated. Pell Grants, which allow poor students to attend college, are being cut. Robert Reich has chronicled some of the impacts on university budgets, which include: Georgia cutting "state funding for higher education by $151 million"; Michigan reducing "student financial aid by $135 million";(29) Florida raising tuition in its 11 public universities by 15 percent; and the University of California increasing tuition by 40 percent in two years.(30) As striking as these increases are, tuition has steadily risen over the past several decades, becoming a disturbingly normative feature of post-secondary education.
One reason students are not protesting these cuts in large numbers may be that, by the time the average American student now graduates, he or she has not only a degree, but also an average debt of about $23,000.(31) The vast majority must balance jobs with academics, leaving no opportunity to protest, however motivated a student might be. This debt amounts to a growing form of indentured servitude for many students that both undercuts any viable notion of social activism and is exacerbated by the fact that "unemployment for recent college graduates jumped from 5.8 percent to 8.7 percent in 2009." (32) Crippling debt plus few job opportunities in a society in which individuals are relentlessly held as solely responsible for the problems they experience leaves little room for rethinking the importance of larger social issues and the necessity for organized collective action against systemic injustices. In addition, as higher education becomes one of the most fundamental requirements for employment, many universities have reconfigured their mission exclusively in corporate terms, replacing education with training and defining students as consumers, faculty as a cheap form of subaltern labor and entire academic departments as "cost centers and revenue production units."(33) No longer seen as a social or public good, higher education is increasingly viewed less as a site of struggle than as a credential mill for success in the global economy.
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Meanwhile, not only have academic jobs been disappearing, but given the shift to an instrumentalist education that is technicist in nature, students have been confronted for quite some time with a vanishing culture for sustained critical thinking. As universities and colleges emphasize market-based skills, students are neither learning how to think critically nor how to connect private troubles with larger public issues. The humanities continue to be downsized, eliminating one source of learning that encourages students to develop a commitment to public values, social responsibilities and the broader demands of critical citizenship. Moreover, critical thinking has been devalued as a result of the growing corporatization of higher education. Under the influence of corporate values, thought in its most operative sense loses its modus operandi as a critical mediation on "civilization, existence and forms of evaluation."(34) Increasingly, it has become more difficult for students to recognize how their education in the broadest sense has been systematically devalued and how this not only undercuts their ability to be engaged critics, but contributes further to making American democracy dysfunctional. How else to explain the reticence of students in protesting against tuition hikes? The forms of instrumental training they receive undermine any critical capacity to connect the fees they pay to the fact that the United States puts more money into the funding of war, armed forces and military weaponry than the next 25 countries combined - money that could otherwise fund higher education.(35)
The inability both to be critical of such injustices and to relate them to a broader understanding of politics, suggests a failure to think outside of the normative sensibilities of a neoliberal ideology that isolates knowledge and normalizes its own power relations. In fact, one recent study found that "45 percent of students show no significant improvement in the key measures of critical thinking, complex reasoning and writing by the end of their sophomore years."(36) The corporatization of schooling over the last few decades has done more than make universities into adjuncts of corporate power. It has also produced a culture of illiteracy and undermined the conditions necessary to enable students to be engaged and critical agents. The value of knowledge is now linked to a crude instrumentalism and the only mode of education that seems to matter is one that enthusiastically endorses learning marketable skills, embracing a survival-of-the-fittest ethic and defining the good life solely through accumulation and disposing of the latest consumer goods. Academic knowledge has been stripped of its value as a social good; to be relevant and therefore funded, knowledge has to justify itself in market terms or simply perish.
Enforced privatization, the closing down of critical public spheres and the endless commodification of all aspects of social life have created a generation of students, who are increasingly being reared in a society in which politics is viewed as irrelevant, just as the struggle for democracy is erased from social memory. This is not to suggest that Americans have abandoned the notion that ideas have power or that ideologies and visions can move people. Unfortunately, the institutions and cultural apparatuses that generate such ideas seem to be primarily controlled by the corporate media, right-wing think tanks, and other conservative groups. Public pedagogy is dominated by the right, whose activities proceed, more often than not, unchallenged from a left that has never taken public pedagogy seriously as part of its political strategy. The rise of the Tea Party movement seems to have no counterpart among progressives, especially young people, though this may change given the arrogant and right-wing attack being waged on unions, public-sector workers and public school educators in Wisconsin, Florida, Ohio, New Jersey, and other states where Tea Party candidates have come to power.(37)
In a social order dominated by the relentless privatizing and commodification of everyday life and the elimination of critical public spheres, young people find themselves in a society in which the formative cultures necessary for a democracy to exist have been more or less eliminated, reduced to spectacles of consumerism made palatable through a daily diet of game shows, reality TV and celebrity culture. What is particularly troubling in American society is the absence of vital, formative cultures necessary to construct questioning agents, who are capable of seeing through the consumer come-ons, who can dissent and act collectively in an increasingly imperiled democracy. Sheldon Wolin is instructive in his insistence that the creation of a democratic, formative culture is fundamental to enabling both political agency and a critical understanding of what it means to sustain a viable democracy. According to Wolin,
Instead of public spheres that promote dialogue, debate and arguments with supporting evidence, American society offers young people a conservatizing, deformative culture through entertainment spheres that infantilize almost everything they touch, while legitimating opinions that utterly disregard evidence, reason, truth and civility. The delete button has replaced the critical knowledge and the modes of education needed for intimacy, long-term commitments and the search for the good society. Attachments are short-lived and the pleasure of instant gratification cancels out the coupling of freedom, reason and responsibility. As a long-term social investment, young people are now viewed as a liability, if not a pathology. No longer a symbol of hope and the future, they are viewed as a drain on the economy and if they do not assume the role of functioning consumers, they are considered disposable.
To Read the Entire Essay
by Henry Giroux
Truthout
...
Student resistance in the United States must be viewed within a broader political landscape that, with few exceptions, remains unexamined. In the first instance, students in Western Europe, in particular, are faced with a series of crises that are more immediate, bold and radical in their assault on young people and the institutions that bear down heavily on their lives. In the face of the economic recession, educational budgets are being cut in take-no-prisoners extreme fashion; the social state is being radically dismantled; tuition costs have spiked exponentially; and unemployment rates for young people are far higher than in the United States (with the exception of youth in poor minority communities). European students have experienced a massive and bold assault on their lives, educational opportunities and their future. Moreover, European students live in societies where it becomes more difficult to collapse public life into largely private considerations. Students in these countries have access to a wider range of critical public spheres; politics in many of these countries has not collapsed entirely into the spectacle of celebrity/commodity culture; left-oriented political parties still exist; and labor unions have more political and ideological clout than they do in the United States. Alternative newspapers, progressive media and a profound sense of the political constitute elements of a vibrant, critical, formative culture and range of public spheres that have not erased the possibility to think critically, engage in political dissent, organize collectively and inhabit public spaces in which alternative and critical theories can be developed.
Because of the diverse nature of how higher education is financed and governed in the United States, the assault on colleges and universities has been less uniform and differentially spread out among community colleges, public universities and elite colleges, thus lacking a unified and highly oppressive narrative against which to position resistance. Moreover, the campus "culture wars" narrative has served to galvanize many youth around a reactionary cultural project while distancing them from the very nature of the economic and political assault on their future. All this suggests another set of questions has to be raised. The more important questions, ones which do not reproduce the all-too-commonplace demonization of young people as apathetic, are twofold. First, the issue should not be why there have been no student protests, but why have the protests that have happened not been more widespread, linked, sustained? The student protests against the draconian right-wing policies attempting to destroy the union rights and collective bargaining power of teachers supported by Republican Gov. Scott Walker in Wisconsin is one example indicating that students are engaged and concerned. There are also smaller student protests taking place at various colleges, including Berkeley, CUNY, and on other campuses throughout the United States. But student activists appear to constitute a minority of students, with very few enrolled in professional programs. Most student activists are coming from the arts, social sciences and humanities (the conscience of the college). Second, there is the crucial issue of what sort of conditions have young people inherited in American society that has undermined their ability to be critical agents capable of waging a massive protest movement against the growing injustices they face on a daily basis? After all, the assault on higher education in the United States, while not as severe as in Europe, still suggests ample reasons for students to be in the streets protesting such policies. Close to 43 states have pledged major cuts to higher education in order to compensate for insufficient state funding. This means an unprecedented hike in tuition rates is being implemented, enrollments are being slashed, salaries are being reduced and need-based scholarships in some states are being eliminated. Pell Grants, which allow poor students to attend college, are being cut. Robert Reich has chronicled some of the impacts on university budgets, which include: Georgia cutting "state funding for higher education by $151 million"; Michigan reducing "student financial aid by $135 million";(29) Florida raising tuition in its 11 public universities by 15 percent; and the University of California increasing tuition by 40 percent in two years.(30) As striking as these increases are, tuition has steadily risen over the past several decades, becoming a disturbingly normative feature of post-secondary education.
One reason students are not protesting these cuts in large numbers may be that, by the time the average American student now graduates, he or she has not only a degree, but also an average debt of about $23,000.(31) The vast majority must balance jobs with academics, leaving no opportunity to protest, however motivated a student might be. This debt amounts to a growing form of indentured servitude for many students that both undercuts any viable notion of social activism and is exacerbated by the fact that "unemployment for recent college graduates jumped from 5.8 percent to 8.7 percent in 2009." (32) Crippling debt plus few job opportunities in a society in which individuals are relentlessly held as solely responsible for the problems they experience leaves little room for rethinking the importance of larger social issues and the necessity for organized collective action against systemic injustices. In addition, as higher education becomes one of the most fundamental requirements for employment, many universities have reconfigured their mission exclusively in corporate terms, replacing education with training and defining students as consumers, faculty as a cheap form of subaltern labor and entire academic departments as "cost centers and revenue production units."(33) No longer seen as a social or public good, higher education is increasingly viewed less as a site of struggle than as a credential mill for success in the global economy.
Do you like this? Click here to get Truthout stories sent to your inbox every day - free.
Meanwhile, not only have academic jobs been disappearing, but given the shift to an instrumentalist education that is technicist in nature, students have been confronted for quite some time with a vanishing culture for sustained critical thinking. As universities and colleges emphasize market-based skills, students are neither learning how to think critically nor how to connect private troubles with larger public issues. The humanities continue to be downsized, eliminating one source of learning that encourages students to develop a commitment to public values, social responsibilities and the broader demands of critical citizenship. Moreover, critical thinking has been devalued as a result of the growing corporatization of higher education. Under the influence of corporate values, thought in its most operative sense loses its modus operandi as a critical mediation on "civilization, existence and forms of evaluation."(34) Increasingly, it has become more difficult for students to recognize how their education in the broadest sense has been systematically devalued and how this not only undercuts their ability to be engaged critics, but contributes further to making American democracy dysfunctional. How else to explain the reticence of students in protesting against tuition hikes? The forms of instrumental training they receive undermine any critical capacity to connect the fees they pay to the fact that the United States puts more money into the funding of war, armed forces and military weaponry than the next 25 countries combined - money that could otherwise fund higher education.(35)
The inability both to be critical of such injustices and to relate them to a broader understanding of politics, suggests a failure to think outside of the normative sensibilities of a neoliberal ideology that isolates knowledge and normalizes its own power relations. In fact, one recent study found that "45 percent of students show no significant improvement in the key measures of critical thinking, complex reasoning and writing by the end of their sophomore years."(36) The corporatization of schooling over the last few decades has done more than make universities into adjuncts of corporate power. It has also produced a culture of illiteracy and undermined the conditions necessary to enable students to be engaged and critical agents. The value of knowledge is now linked to a crude instrumentalism and the only mode of education that seems to matter is one that enthusiastically endorses learning marketable skills, embracing a survival-of-the-fittest ethic and defining the good life solely through accumulation and disposing of the latest consumer goods. Academic knowledge has been stripped of its value as a social good; to be relevant and therefore funded, knowledge has to justify itself in market terms or simply perish.
Enforced privatization, the closing down of critical public spheres and the endless commodification of all aspects of social life have created a generation of students, who are increasingly being reared in a society in which politics is viewed as irrelevant, just as the struggle for democracy is erased from social memory. This is not to suggest that Americans have abandoned the notion that ideas have power or that ideologies and visions can move people. Unfortunately, the institutions and cultural apparatuses that generate such ideas seem to be primarily controlled by the corporate media, right-wing think tanks, and other conservative groups. Public pedagogy is dominated by the right, whose activities proceed, more often than not, unchallenged from a left that has never taken public pedagogy seriously as part of its political strategy. The rise of the Tea Party movement seems to have no counterpart among progressives, especially young people, though this may change given the arrogant and right-wing attack being waged on unions, public-sector workers and public school educators in Wisconsin, Florida, Ohio, New Jersey, and other states where Tea Party candidates have come to power.(37)
In a social order dominated by the relentless privatizing and commodification of everyday life and the elimination of critical public spheres, young people find themselves in a society in which the formative cultures necessary for a democracy to exist have been more or less eliminated, reduced to spectacles of consumerism made palatable through a daily diet of game shows, reality TV and celebrity culture. What is particularly troubling in American society is the absence of vital, formative cultures necessary to construct questioning agents, who are capable of seeing through the consumer come-ons, who can dissent and act collectively in an increasingly imperiled democracy. Sheldon Wolin is instructive in his insistence that the creation of a democratic, formative culture is fundamental to enabling both political agency and a critical understanding of what it means to sustain a viable democracy. According to Wolin,
democracy is about the conditions that make it possible for ordinary people to better their lives by becoming political beings and by making power responsive to their hopes and needs. What is at stake in democratic politics is whether ordinary men and women can recognize that their concerns are best protected and cultivated under a regime whose actions are governed by principles of commonality, equality and fairness, a regime in which taking part in politics becomes a way of staking out and sharing in a common life and its forms of self-fulfillment. Democracy is not about bowling together but about managing together those powers that immediately and significantly affect the lives and circumstances of others and one's self.(38)
Instead of public spheres that promote dialogue, debate and arguments with supporting evidence, American society offers young people a conservatizing, deformative culture through entertainment spheres that infantilize almost everything they touch, while legitimating opinions that utterly disregard evidence, reason, truth and civility. The delete button has replaced the critical knowledge and the modes of education needed for intimacy, long-term commitments and the search for the good society. Attachments are short-lived and the pleasure of instant gratification cancels out the coupling of freedom, reason and responsibility. As a long-term social investment, young people are now viewed as a liability, if not a pathology. No longer a symbol of hope and the future, they are viewed as a drain on the economy and if they do not assume the role of functioning consumers, they are considered disposable.
To Read the Entire Essay
Sunday, February 27, 2011
Reuters: Government Study says most corporations pay no U.S. income taxes
Study says most corporations pay no U.S. income taxes
Reuters
Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.
The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.
More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.
During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.
The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.
With the U.S. budget deficit this year running close to the record $413 billion that was set in 2004 and projected to hit a record $486 billion next year, lawmakers are looking to plug holes in the U.S. tax code and generate more revenues.
Dorgan in a statement called the report "a shocking indictment of the current tax system." Levin said it made clear that "too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."
The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.
Link
Reuters
Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.
The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.
More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.
During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.
The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.
With the U.S. budget deficit this year running close to the record $413 billion that was set in 2004 and projected to hit a record $486 billion next year, lawmakers are looking to plug holes in the U.S. tax code and generate more revenues.
Dorgan in a statement called the report "a shocking indictment of the current tax system." Levin said it made clear that "too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."
The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.
Link
Thursday, February 10, 2011
Terrance Heath: Revisiting the Reagan Nightmare
Revisiting the Reagan Nightmare
by Terrance Heath
Campaign for America's Future
...
And it started with Reagan. Anyone who's wringing their hands about America's debt and China's ownership of it has Reagan to thank, as Reagan's former budget director David Stockman recently explained to David Corn.
As Paul Krugman wrote 2009, we weren't always a nation of big debts. He went on to explain how it started with Reagan.
Revisiting the Reagan ruins earlier this week, Robert Borosage explained that Reagan's de-regulatory fervor essentially gutted consumer protections.
Working people's share of the benefits from increased productivity took a sudden turn down.
In the column quoted above Krugman also wrote that the increase in public debt was dwarfed by the increase in private debt, made possible by Reagan's deregulation. "It's the gift that keeps on taking," Krugman wrote. Taking, that is, from working people.
To Read the Rest of the Article and Access Charts
by Terrance Heath
Campaign for America's Future
...
And it started with Reagan. Anyone who's wringing their hands about America's debt and China's ownership of it has Reagan to thank, as Reagan's former budget director David Stockman recently explained to David Corn.
Here's how Stockman tells the tale. In the '80s, Reagan and his White House crew were eager to cut income taxes across the board. The aim, he asserts, was to fix the slumping economy, not to starve the beast of big government. Republican leaders on the Hill were initially skeptical—they insisted that the White House pass spending cuts before Congress tackled the tax side. "The honest-to-goodness fact," Stockman says, "is that in February 1981, there wasn't close to a Republican majority for tax cuts without any accompanying or coupled spending cuts. The idea of supply-side in its purest form"—that tax cuts fuel economic growth that yields increased tax revenues—"was only embraced by a handful of junior Republicans, plus Jack Kemp."
The Reagan administration hardly minded proposing massive cuts to both taxes and spending. But then things went haywire, Stockman notes. The tax cut ballooned from $500 billion over five years to $1 trillion after lobbyists added special-interest tax breaks for various industries. And on the spending side, the Reagan administration went hog-wild throwing money at the Pentagon. The inevitable happened: The deficit ballooned.
...The new doctrine got a boost when it turned out you didn't have to match tax cuts with spending cuts: The Federal Reserve was able to sell the nation's growing debt to China and others. "It totally anesthetized the political system to the costs of deficit spending," Stockman says. "Therefore the simplistic and reckless idea that the way to stimulate the economy is to cut taxes anytime, anywhere, for any reason, became embedded [in the GOP]. It has become a religion, it has become a catechism. It's become a mindless incantation."
As Paul Krugman wrote 2009, we weren't always a nation of big debts. He went on to explain how it started with Reagan.
“This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot.” So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.
He was, as it happened, wrong about solving the problems of the thrifts. On the contrary, the bill turned the modest-sized troubles of savings-and-loan institutions into an utter catastrophe. But he was right about the legislation’s significance. And as for that jackpot — well, it finally came more than 25 years later, in the form of the worst economic crisis since the Great Depression.
...The S.& L. crisis has been written out of the Reagan hagiography, but the fact is that deregulation in effect gave the industry — whose deposits were federally insured — a license to gamble with taxpayers’ money, at best, or simply to loot it, at worst. By the time the government closed the books on the affair, taxpayers had lost $130 billion, back when that was a lot of money.
But there was also a longer-term effect. Reagan-era legislative changes essentially ended New Deal restrictions on mortgage lending — restrictions that, in particular, limited the ability of families to buy homes without putting a significant amount of money down.
These restrictions were put in place in the 1930s by political leaders who had just experienced a terrible financial crisis, and were trying to prevent another. But by 1980 the memory of the Depression had faded. Government, declared Reagan, is the problem, not the solution; the magic of the marketplace must be set free. And so the precautionary rules were scrapped.
Together with looser lending standards for other kinds of consumer credit, this led to a radical change in American behavior.
Revisiting the Reagan ruins earlier this week, Robert Borosage explained that Reagan's de-regulatory fervor essentially gutted consumer protections.
Deregulation gutted consumer protection, environmental protection, workplace safety and the right to organize under Reagan. It led to many scandals that made his administration one of the most corrupt in history, with a record 138 officials investigated, indicted or convicted. But the biggest change was deregulation of banking, which led to successive financial wildings and crashes that have cost taxpayers literally trillions. The first was the Savings and Loan debacle that followed on Reagan's reforms that empowered banksters to gamble with other people's money, with their losses guaranteed by the federal government.
Working people's share of the benefits from increased productivity took a sudden turn down.
In the column quoted above Krugman also wrote that the increase in public debt was dwarfed by the increase in private debt, made possible by Reagan's deregulation. "It's the gift that keeps on taking," Krugman wrote. Taking, that is, from working people.
To Read the Rest of the Article and Access Charts
Friday, September 10, 2010
Allison Kilkenny: David Brooks and the centuries of magical thinking
David Brooks and the centuries of magical thinking
by Allison Kilkenny
Unreported
...
Now, he argues that we are the middle of a “jobless recovery,” whatever that means. At first, I assumed he was talking about the people who wrecked the economy receiving fat bonuses, while the starving masses squirrel away food stamps. You know, “the right people” are recovering – prospering, even – while the undesirables suffocate under a mountain of debt and disease. After all, there’s not enough money for universal health care, but there’s enough cash to supply two ongoing military occupations.
Or perhaps Bobo was referring to America’s two tier justice system where the underclass forever toil and barely scrape by, occasionally bearing the full brunt of the courts, which imprison and enslave the working class for petty theft and drug-dealing, while the CEO of a company that dumped millions of gallons of oil into the Gulf, along with poisonous chemical dispersants, gets to go yachting with his buddies.
Alas, Bobo appears to be talking about magical thinking. He writes, “After decades of affluence, the U.S. has drifted away from the hardheaded practical mentality that built the nation’s wealth in the first place.” In his revised history of the United States, sometime around 1800, the economy simply “took off.” Like a miracle.
Actually, the country’s wealth came from slave labor. Eli Whitney invented the cotton gin in 1793, and the invention revolutionized the cotton industry. Suddenly, the industry could produce fifty times as much cotton as it could previously, but they needed people to run the gins. Hence, the need for a whole lot of slaves, the actual human beings responsible for the labor and influx of sweet, sweet cash.
The 1800s were also the time of the robber barons, a disparaging term applied to the individuals who dominated industries and amassed lavish fortunes utilizing anti-competitive practices. Railroad tycoons like Jay Gould and Russell Sage were famous for preying on average citizens in order to extort their savings in shady speculations, not unlike the considerably more complex housing bubble deals that wrecked the economy this time around. (Railroads were also built using slave labor, and did not simply “take off”).
So let’s be clear: The reason the economy “took off” in the 1800s was because of slave labor, and it only really “took off” for the right players, like robber barons, who lied, cheated, swindled, bullied, and intimidated in order to hoard the wealth.
It’s true that poorer farmers were able to move to more fertile land in the Midwest during this time, but only because of government-created national roads and waterways like the Cumberland Pike and Erie Canal – the very kind of big gumbent projects Conservatives are currently fighting tooth and nail not to build right now.
Bobo addresses none of this, and instead declares that the nation’s brilliant minds have gone Galt (!!!)
America’s brightest minds have been abandoning industry and technical enterprise in favor of more prestigious but less productive fields like law, finance, consulting and nonprofit activism.
I always knew the decline of America could somehow be pegged on nonprofit activism. I just couldn’t clearly see the path. But now I do. Thank you, David.
Apparently, “less productive” doesn’t entail the personal wealth of the Galts themselves. Lawyers and Wall Street tycoons make a shitload of money, though I agree that their fields don’t generate mass wealth. However, that’s really more a problem of regulation – another bête noire of Conservatives. It’s not enough to hope and pray that a few good egg Harvard grads go up to Alaska to pioneer that small manufacturing company in Akron Brooks created out of thin air. Even if they go do that nobel thing, their classmates won’t. They’ll go work at Goldman Sachs, and continue America’s rich tradition of pirate-like thieving. For that reason, the financial industry still needs to be strongly (sorry, Republicans) regulated.
Bobo claims Americans’ crushing debt on their desire to emulate the Huxtables rather than the Kramdens. The truth is, wages have been stagnant in the U.S. for thirty years, and the industrial sector has been completely gutted as corporations ship their operations oversees to exploit slave labor. Health care costs have gone soaring, and many people are just one illness away from bankruptcy. Americans have literally been surviving on cheap credit, which also appears to be at an end now that the housing market melted down and student credit seems like it will be the next bubble to burst.
Yet, corporations’ most elite players are thriving. That’s not because of their ingenuity or brilliance, but rather because of nepotism, inheritance, and a keen ability to exploit slave labor.
To Read the Rest of the Essay
by Allison Kilkenny
Unreported
...
Now, he argues that we are the middle of a “jobless recovery,” whatever that means. At first, I assumed he was talking about the people who wrecked the economy receiving fat bonuses, while the starving masses squirrel away food stamps. You know, “the right people” are recovering – prospering, even – while the undesirables suffocate under a mountain of debt and disease. After all, there’s not enough money for universal health care, but there’s enough cash to supply two ongoing military occupations.
Or perhaps Bobo was referring to America’s two tier justice system where the underclass forever toil and barely scrape by, occasionally bearing the full brunt of the courts, which imprison and enslave the working class for petty theft and drug-dealing, while the CEO of a company that dumped millions of gallons of oil into the Gulf, along with poisonous chemical dispersants, gets to go yachting with his buddies.
Alas, Bobo appears to be talking about magical thinking. He writes, “After decades of affluence, the U.S. has drifted away from the hardheaded practical mentality that built the nation’s wealth in the first place.” In his revised history of the United States, sometime around 1800, the economy simply “took off.” Like a miracle.
Actually, the country’s wealth came from slave labor. Eli Whitney invented the cotton gin in 1793, and the invention revolutionized the cotton industry. Suddenly, the industry could produce fifty times as much cotton as it could previously, but they needed people to run the gins. Hence, the need for a whole lot of slaves, the actual human beings responsible for the labor and influx of sweet, sweet cash.
The 1800s were also the time of the robber barons, a disparaging term applied to the individuals who dominated industries and amassed lavish fortunes utilizing anti-competitive practices. Railroad tycoons like Jay Gould and Russell Sage were famous for preying on average citizens in order to extort their savings in shady speculations, not unlike the considerably more complex housing bubble deals that wrecked the economy this time around. (Railroads were also built using slave labor, and did not simply “take off”).
So let’s be clear: The reason the economy “took off” in the 1800s was because of slave labor, and it only really “took off” for the right players, like robber barons, who lied, cheated, swindled, bullied, and intimidated in order to hoard the wealth.
It’s true that poorer farmers were able to move to more fertile land in the Midwest during this time, but only because of government-created national roads and waterways like the Cumberland Pike and Erie Canal – the very kind of big gumbent projects Conservatives are currently fighting tooth and nail not to build right now.
Bobo addresses none of this, and instead declares that the nation’s brilliant minds have gone Galt (!!!)
America’s brightest minds have been abandoning industry and technical enterprise in favor of more prestigious but less productive fields like law, finance, consulting and nonprofit activism.
I always knew the decline of America could somehow be pegged on nonprofit activism. I just couldn’t clearly see the path. But now I do. Thank you, David.
Apparently, “less productive” doesn’t entail the personal wealth of the Galts themselves. Lawyers and Wall Street tycoons make a shitload of money, though I agree that their fields don’t generate mass wealth. However, that’s really more a problem of regulation – another bête noire of Conservatives. It’s not enough to hope and pray that a few good egg Harvard grads go up to Alaska to pioneer that small manufacturing company in Akron Brooks created out of thin air. Even if they go do that nobel thing, their classmates won’t. They’ll go work at Goldman Sachs, and continue America’s rich tradition of pirate-like thieving. For that reason, the financial industry still needs to be strongly (sorry, Republicans) regulated.
Bobo claims Americans’ crushing debt on their desire to emulate the Huxtables rather than the Kramdens. The truth is, wages have been stagnant in the U.S. for thirty years, and the industrial sector has been completely gutted as corporations ship their operations oversees to exploit slave labor. Health care costs have gone soaring, and many people are just one illness away from bankruptcy. Americans have literally been surviving on cheap credit, which also appears to be at an end now that the housing market melted down and student credit seems like it will be the next bubble to burst.
Yet, corporations’ most elite players are thriving. That’s not because of their ingenuity or brilliance, but rather because of nepotism, inheritance, and a keen ability to exploit slave labor.
To Read the Rest of the Essay
Thursday, June 03, 2010
Simon Johnson: The Quiet Coup
The Quiet Coup
by Simon Johnson
The Atlantic Monthly
...
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.
But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.
Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.
The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.
To Read the Entire Essay
by Simon Johnson
The Atlantic Monthly
...
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.
But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.
Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.
The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.
To Read the Entire Essay
Tuesday, March 16, 2010
Nelson D. Schwartz: Junk Bond Avalanche Looms for Credit Markets
(via Brandon Absher)
Junk Bond Avalanche Looms for Credit Markets
By NELSON D. SCHWARTZ
The New York Times
When the Mayans envisioned the world coming to an end in 2012 — at least in the Hollywood telling — they didn’t count junk bonds among the perils that would lead to worldwide disaster.
Maybe they should have, because 2012 also is the beginning of a three-year period in which more than $700 billion in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could overload the debt markets.
With huge bills about to hit corporations and the federal government around the same time, the worry is that some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies.
The United States government alone will need to borrow nearly $2 trillion in 2012, to bridge the projected budget deficit for that year and to refinance existing debt.
Indeed, worries about the growth of national, or sovereign, debt prompted Moody’s Investors Service to warn on Monday that the United States and other Western nations were moving “substantially” closer to losing their top-notch Aaa credit ratings.
Sovereign debt aside, the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses.
The apocalyptic talk is not limited to perpetual bears and the rest of the doom-and-gloom crowd.
Even Moody’s, which is known for its sober public statements, is sounding the alarm.
“An avalanche is brewing in 2012 and beyond if companies don’t get out in front of this,” said Kevin Cassidy, a senior credit officer at Moody’s.
Private equity firms and many nonfinancial companies were able to borrow on easy terms until the credit crisis hit in 2007, but not until 2012 does the long-delayed reckoning begin for a series of leveraged buyouts and other deals that preceded the crisis.
To Read the Rest of the Article
Junk Bond Avalanche Looms for Credit Markets
By NELSON D. SCHWARTZ
The New York Times
When the Mayans envisioned the world coming to an end in 2012 — at least in the Hollywood telling — they didn’t count junk bonds among the perils that would lead to worldwide disaster.
Maybe they should have, because 2012 also is the beginning of a three-year period in which more than $700 billion in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could overload the debt markets.
With huge bills about to hit corporations and the federal government around the same time, the worry is that some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies.
The United States government alone will need to borrow nearly $2 trillion in 2012, to bridge the projected budget deficit for that year and to refinance existing debt.
Indeed, worries about the growth of national, or sovereign, debt prompted Moody’s Investors Service to warn on Monday that the United States and other Western nations were moving “substantially” closer to losing their top-notch Aaa credit ratings.
Sovereign debt aside, the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses.
The apocalyptic talk is not limited to perpetual bears and the rest of the doom-and-gloom crowd.
Even Moody’s, which is known for its sober public statements, is sounding the alarm.
“An avalanche is brewing in 2012 and beyond if companies don’t get out in front of this,” said Kevin Cassidy, a senior credit officer at Moody’s.
Private equity firms and many nonfinancial companies were able to borrow on easy terms until the credit crisis hit in 2007, but not until 2012 does the long-delayed reckoning begin for a series of leveraged buyouts and other deals that preceded the crisis.
To Read the Rest of the Article
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