Monday, April 28, 2008

GM lays off Janesville workers, raises CEO pay

A day after General Motors (GM) announced it was giving Chief Executive Officer Rick Wagoner's a 41% raise to $14.4 million, the company announced that it will layoff 3,400 employees, including 750 at its assembly plant in Janesville.

Last year GM lost a record $38.7 billion.

Its decision to almost double Wagoner's pay demonstrates again that CEO pay has no relationship to corporate performance!

Newspaper reports suggested in classic Orwellian language that Wagoner had earned his increased millions because he "persuaded 34, 000 union workers to leave and negotiated a contract that trims pay for future workers in half."

Saying GM persuaded long time employees to leave GM is like saying a bank robber persuaded a teller to hand over the cash.

Louis Uchitelle whose seminal work on layoffs and their social costs, "The Disposable Americans," writes: "...layoffs must clearly be seen as a crisis...between 3.3 and 5.9 percent of all full time workers at least twenty years of age were permanently laid off every two years between 1981 and 2001...Hidden layoffs-disguised as retirements, buyouts, temp work and contract work-increase that already significant percentage."

Dr. Kim Cameron, an organizational psychologist at the University of Michigan who attempts to help corporate managers carry out layoffs benignly, has written that no matter how sophisticated the techniques, there is no balm: layoffs are destructive psychologically for the individuals who lose their jobs and undermine long-run corporate performance.

The prevailing wisdom among mainstream economists is that America's "flexible labor markets" give it a competitive advantage over Europe and Japan with their greater emphasis on job security. The Milwaukee Journal's conservative columnist and corporate apologist, Patrick McIlheran, recently parroted this view which ignores the importance of social capital-the trust, communications, value and productivity generated by people working together and valuing each others' contributions.

There is growing evidence that while layoffs might boost short term profits and stock prices, they actually undermine long term corporate performance. As Dr. Cameron argues:" Corporate downsizing remains the most pervasive yet unsuccessful organizational improvement strategy in the 1990 business world."

For more than a decade Wisconsin's manufacturing companies have had difficulty expanding beacuse of a shortage of skilled workers. One reason potential workers have shunned manufacturing employment, despite its high pay, is that they fear the frequency and financial instability of layoffs.

GM, whose market share has declined for decades, has repeatedly restructured because it had too much manufacturing capacity. It has closed plants and eliminated jobs as foreign owned manufacturers built non-union plants (transplants) throughout the U.S. and produced more innovative, higher quality vehicles. Can anybody say Prius?

Just three years ago, in 2005 GM announced plans to close or reduce operations at 12 North American plants and lay off 30,000 employees, 25% of its North American workforce.

The United Auto Workers whose membership and leverage has declined as the Big Three eliminated jobs and spun off suppliers was successful in bargaining an unprecedented severance package for its laid-off GM members. The packages were the result of hard nosed collective bargaining by the UAW, not CEO persuasion.

Wagoner has presided over record losses, declining market share and the destruction of thousands of family supporting jobs. To reward him with a 41% increase while he lays off even more employees is nothing less than obscene.

Saturday, April 26, 2008

McCain & Milwaukee CEOs play bumper sticker politics with trade

When John McCain visited with Milwaukee's business leaders at Bucyrus Erie's South Milwaukee headquarters, he declared his unconditional support for NAFTA and "free trade."

Jim Haney, president of Wisconsin Manufacturers & Commerce (WMC), enthusiastically supported McCain, claiming: "There are 250,000 people in this state who owe their livelihood to exports."

The WMC which has earned a reputation for stretching the truth in Wisconsin's elections was at it again.

The U.S. Department of Commerce reports that Wisconsin had a total of 164,000 export related jobs, including 82,000 in manufacturing in 2005, not the 250,000 Haney claimed.

These jobs represented 17.4% of Wisconsin's manufacturing jobs and 5.6% of the state's civilian employment.

Critics of these trade agreements who note that Wisconsin has lost 25,403 jobs because of NAFTA were labeled "protectionists" at this meeting.

Ohio Senator, Sherrod Brown, was referring to exactly this type of slander when he wrote: "It's easy to play bumper-sticker politics with trade. But it gets us nowhere...Our country deserves a real debate on trade, not a debate where labeling one side protectionist is game, set and match."

Read his entire Wall Street Journal piece.

Friday, April 25, 2008

Recession deepens in Wisconsin

While economists debate whether the current economic slowdown is a recession, Wisconsinites are increasingly grappling with the nasty effects.

A total of 80,000 workers lost jobs in March.

Among these, were 7,100 Wisconsin workers, the third highest total in the nation, who were laid off in mass layoffs. Wisconsin also had the third highest 12-month increase in average weekly initial claims for these job losses behind only Pennsylvania and Ohio.

The Milwaukee area has been hard hit, losing 1300 over the past year. More layoffs are anticipated.

Partly as a result, bankruptcy filings in the Wisconsin increased by 29.5% in the first quarter of 2008! This increase was slightly higher than the national increase of 27%.

For the year, bankruptcy filings rose 39% in Wisconsin and 38% nationally.

Major medical expenditures are the single most important reason people file for bankruptcy followed by job loss and divorce. But as the recession deepens, job loss is becoming an increasingly important factor.

Buyers also vanished from the housing market in March, as sales of new homes plummeted to the lowest level since the housing recession of the 1990s.

Sales fell in every region of the country, with the Northeast suffering the steepest drop, 19.4 percent. Sales in the Midwest and the West dropped about 13 percent and sales in the South fell about 5 percent.

Builders are now faced with the biggest backlog of unsold homes in more than a quarter century, a sign that home values may continue to drop and that worst days of the housing slump may lie ahead.

Normally a recession reduces pressure on prices. But because of soaring international demand, particularly in China and India, prices of crude oil, gasoline, and food, continue to soar.

The surging cost of necessities has also led to belt-tightening among consumers. Spending on food and gasoline is effectively crowding out other purchases, leaving people with less to spend on furniture, clothing and electronics. Consequently, chains specializing in those goods are proving vulnerable.

Sales plummeted 4.5 percent during the last three months, the largest decline since the 1990-91 recession.

Sales declined at department stores, clothing stores and furniture stores, as well as at auto dealers.

The consumer spending slump and tightening credit markets have unleashed a wave of bankruptcies in retailing, prompting thousands of store closings that are expected to remake suburban malls and downtown shopping districts across the country.

Since last fall, eight mostly midsize chains — as diverse as the furniture store Levitz and the electronics seller Sharper Image — have filed for bankruptcy protection as they staggered under mounting debt and declining sales.

But the troubles are quickly spreading to bigger national companies, like Linens ‘n Things, the bedding and furniture retailer with 500 stores in 47 states, which may be forced to file for bankruptcy.

Retailers that can avoid bankruptcy are shutting down stores to preserve cash. Over the next year, Foot Locker plans to close 140 stores, Ann Taylor 117, and the jeweler Zales will close 100.

The downturn has even spread to discretionary spending. The New York Times reports that laser vision correction surgeries are expected to fall by 17% in 2008. Even spas, the ultimate in discretionary purchases, are cutting prices in an effort to keep customers.

As the economy has slowed so have tax revenues. So Wisconsin is now facing a $650 million deficit.

President Bush has refused to support legislation that would protect homeowners who were duped into taking out loans they could not afford from foreclosure. He has even refused to support extending unemployment benefits and increasing food stamp payments which are recognized as effective counter cyclical policies.

When the initial stimulus package was passed gas cost $3 a gallon. By the time the rebate checks arrive it could be up to $4. At that price most of the $100 billion will go to fill people's gas tanks and do more for oil producing economies than for our own.

Wisconsin's Congressional delegation should demand immediate action that helps those who are losing jobs and income and that helps revitalize the economy. A basic stimulus package should include:

* an extension of unemployment benefits

* an expansion of the food stamp program

* legislation that allows bankrupt homeowners to have their mortgages modified under court protection and provides them with financial assistance

* aid to states' experiencing deficits

The recession is deepening. More and more people are hurting. If states are forced to reduce spending to balance their budgets, the downturn will become more severe.

It is time for Congress to act!

Thursday, April 24, 2008

Consumer Spending: Look Out Below - The Board - Editorials - Opinion - New York Times Blog

Consumer Spending: Look Out Below - The Board - Editorials - Opinion - New York Times Blog

President is wrong-this is a recession!

Dean Baker, co-director of the Center for Economic and Policy Research, writes:

President Bush says that the economy is not in a recession. He's wrong. According to the Bureau of Labor Statistics, the economy has lost jobs for three consecutive months while the private sector has lost jobs for four consecutive months. This has never happened except in periods associated with recessions. The private sector has now lost 320,000 jobs since November.

Need more evidence? The unemployment rate is up 0.7 percentage points from a year ago, residential construction continues to fall, and nonresidential construction is now falling as well. Consumption, which accounts for 70 percent of gross domestic product, has been flat since November. Despite all this, President Bush still doesn't think we're in a recession? I guess that's no surprise coming from someone who thinks that things are going well in Iraq.

Monday, April 21, 2008

Roberto Clemente documentary on PBS, April 21

Roberto Clemente,” an “American Experience” documentary will be shown on most PBS stations tonite.

It will run on Milwaukee Public Television (channel 10) at 8 pm.

Clemente was a trailblazing, activist athlete in the tradition of Jackie Robinson.

Dave Zirin, author of several books on sports and politics and the Edge of Sports web site, recently published an article about Clemente entitled "Common Bond for Uncommon Men: Roberto Clemente and Martin Luther King."

It is linked here.

Sunday, April 20, 2008

Study misrepresents Miller Park's economic impact

Tax for Miller Park didn't help economy

Opening day is a time for optimism. Warm weather is just around the corner. Another Bucks' season comes to a merciful close. And this year, we can hope that our Brewers will make a real run at the pennant.

But opening day also raises the question that the Journal Sentinel's Don Walker asked about whether "the stadium has been a net economic benefit to the community." ("Miller Park: Economic promises got it built. Has it paid?" April 4).

Walker refered to a 2-year-old Major League Baseball study by Leon Schur and Swarnjit Arora that gave new meaning to the baseball fans' maxim that "hope springs eternal" when it asserted that: "The direct and indirect economic impact by visitors (Brewers' fans) from outside the area, a majority of whom came from outside the state, resulted in $327.3 million in increased spending and the creation of 4,683 additional full and part time jobs."

These findings contradict all serious research on the economic impact of professional sports. Studies done by independent economists, not those paid for by stadium proponents like this one, are unanimous that there is no real economic benefit from public subsidies of stadiums and teams.

Robert Blade of Lake Forest College, for example, studied 30 cities over 30 years and found that 27 experienced no significant impact from new stadiums, while three experienced a negative economic impact. An anthology edited by Roger G. Noll and Andrew Zimbalist concluded: "A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment."

The MLB study made two errors: It ignores the substitution effect and grossly overestimates the number of out-of-town visitors and their expenditures. Both contribute to overestimating the Brewers' contribution to the local economy. The Schur and Arora argument relies on historical local economic impact multipliers that misrepresent the effect of consumer expenditures on professional sports because sports expenditures are subject to extraordinary consumer substitution away from other local entertainment expenditures.

Brewers' fans have relatively inflexible and limited entertainment budgets. The money they spend on a sporting event is a substitute for other entertainment such as movies, restaurants or eating out. Brewers' baseball doesn't increase the aggregate amount of entertainment spending in southeastern Wisconsin; it simply redistributes it from one form of entertainment to another.
Similarly, most professional sports tax collections, almost $15 million according to the Brewers' study, are also substitutes: As other entertainment businesses decline, tax collections from them fall, something the study ignores.

The study estimates that 57% of Miller Park attendees came from outside the metropolitan area, "a majority . . . from outside the state," and spent an additional "$327.3 million." This is almost double the most successful stadium, Camden Yards in Baltimore, where less than a third of the crowd at every game came from outside the area and the net gain to Baltimore's economy was roughly $3 million a year - not much of a return on a $200 million stadium investment and not close to $327 million.

The study also overestimates the spending of the visitors the Brewers' attract. Fans from Green Bay or Chicago don't spend nearly as much as projected because tailgating, the rationale for the stadium's location, ensures that visitors spend their food and beverage dollars in the communities they come from.

Schur attributes significant job growth to the Brewers. But most sports revenue goes to a relatively few players, managers, coaches and executives who earn extremely high salaries.
Most stadium employees work part time at very low wages and earn a small fraction of team revenues. Substituting spending on sports for other recreational spending concentrates income, reduces the total number of jobs and replaces full-time jobs with low-wage, part-time jobs. Since Miller Park was built, Milwaukee has lost more than 19,000 jobs.

Professional sports expenditures also suffer unusually large first-round leakages from the local economy because players export their earnings to their permanent homes. Moreover, players make inflated salaries for only a few years. They have high savings which are invested in national firms. Most of the millions that Schur counts simply leaves Milwaukee with the players and their investment advisers.

Stadium booster studies fail to recognize that there is an opportunity cost involved in publicly financing stadiums. More than the price of construction, what communities sacrifice in other goods or services to build professional stadiums is critical in determining the benefit to the community. The District of Columbia spent $611 million on its new stadium even as it planned to close a staggering 24 public schools and reduce library hours.

A strong argument can be made that the public dollars that financed Miller Park would have been better spent on education, given Milwaukee's achievement gaps.

Finally Schur and Arora argued that the Brewers are an amenity ". . . helping to decrease the recognized brain drain from Wisconsin." This is circular reasoning. The Brewers have been in Milwaukee since 1970, well before the alleged "brain drain" began. If the Brewers were the solution, we wouldn't have the problem!

The 1994-1995 Major League Baseball strike was a natural experiment that sheds light on the impact of professional baseball on a local economy. If the study is correct, the strike would have hurt Milwaukee's economy. But John Zipp found "the strike had little, if any, economic impact on host cities. Retail trade appeared to be almost completely unaffected by the strike."

So there may be good reasons for rooting for the Brewers. But economic development isn't one of them.

Military industrial complex sells war in iraq

In a speech before he retired as President, Former General Dwight D. Eisenhower warned the nation about the danger posed by the emerging military industrial complex:

Our military organization today bears little relation to that known by any of my predecessors in peacetime, or indeed by the fighting men of World War II or Korea.

Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence -- economic, political, even spiritual -- is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the militaryindustrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

The New York Times' David Barstow, in a lengthy expose, examines how the Bush administration has enlisted former high ranking military officers, many serving on the boards of defense contractors, to promote the war in Iraq as military experts.

These former officers, in turn, have used the information and access provided by the Pentagon to secure lucrative deals for their firms. And the Pentagon has used these contracts to silence potential dissidents

The Times characterizes this cynical manipulation of the news as "a Pentagon information apparatus," noting that the Bush White House has frequently manipulated the media through paying columnists to write favorably about the administration and by producing fake news segments with fawning accounts of the administration's accomplishments.

Barstow concludes that this symbiotic relationship has obliterated the usual dividing lines between government and journalism:

Hidden behind that appearance of objectivity, though, is a Pentagon information apparatus that has used those analysts in a campaign to generate favorable news coverage of the administration’s wartime performance...

The effort, which began with the buildup to the Iraq war and continues to this day, has sought to exploit ideological and military allegiances, and also a powerful financial dynamic: Most of the analysts have ties to military contractors vested in the very war policies they are asked to assess on air.

Those business relationships are hardly ever disclosed to the viewers, and sometimes not even to the networks themselves. But collectively, the men ...represent more than 150 military contractors either as lobbyists, senior executives, board members or consultants. The companies include defense heavyweights, but also scores of smaller companies, all part of a vast assemblage of contractors scrambling for hundreds of billions in military business generated by the administration’s war on terror. It is a furious competition, one in which inside information and easy access to senior officials are highly prized.

...the Bush administration has used its control over access and information in an effort to transform the analysts into a kind of media Trojan horse — an instrument intended to shape terrorism coverage from inside the major TV and radio networks.

Analysts have been wooed in hundreds of private briefings with senior military leaders, including officials with significant influence over contracting and budget matters, records show. They have been taken on tours of Iraq and given access to classified intelligence. They have been briefed by officials from the White House, State Department and Justice Department, including Mr. Cheney,
Alberto R. Gonzales and Stephen J. Hadley.

In turn, members of this group have echoed administration talking points, sometimes even when they suspected the information was false or inflated. Some analysts acknowledge they suppressed doubts because they feared jeopardizing their access...

The article is long, but worth the read.

Saturday, April 19, 2008

President requests an additional $109 billion for war

President Bush has requested an additional $108 billion for the wars in Iraq and Afghanistan which have already cost $513 billion!

We are now spending $5,000 per second, $434 million every day, $12 million every month in an occupation that John McCain says could last for 100 years.

The $108 billion request is above and beyond the $515.4 billion allocated for national defense in 2009 which was was $35.9 billion or 7.5 percent more (5.4 percent adjusted for inflation) than the previous year.

It will increase the projected $410 billion deficit to more than $500 billion.

That's a lot of money that could be used to rebuild our nation's infrastructure, keep Social Security and Medicare solvent, invest in research and development, healthcare, alternative energy, education, conservation and homeland security.

The war in Iraq is costing this nation dearly- in lives, reputation and long-term prosperity.

Friday, April 18, 2008

Obama on hoops and life

Obama explains how important basketball has been to him and what basketball can tell you about others!

Recession hits Milwaukee as firms lay off workers

The US economy has shed 300,000 private sector jobs over the past three months.

Wisconsin lost 8,600 manufacturing positions last year and 9,600 private sector jobs in total.

And things appear to be getting worse.

Yesterday, Harley Davidson announced it will lay off 730 employees, including hundreds at its Milwaukee facilities where just a few year ago workers agreed to concessions in an effort to secure work.

Midwest Express is eliminating 109 positions, 3.5% of its workforce.

Briggs and Stratton might halt the production of small engines in May if the market for lawn and garden equipment continues to sag.

For those left working, workweeks and wages are being reduced.

4.9 million workers are now employed in part-time positions because they cannot find full time employment!

The New York Times reports today that:

The gradual erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline, which has already spread from housing and finance to other important areas of the economy.

While official unemployment has risen only modestly, to 5.1 percent, the reduction of wages and working hours for those still employed has become a primary cause of distress, pushing many more Americans into a downward spiral, economists say...

Last month, the hours worked by those on American payrolls dropped, compared with six months earlier, according to an index maintained by the Labor Department. The last time the index moved into negative territory was February 2001, when the economy was on the doorstep of recession. A similar slide emerged in August 1990, one month into what proved an even more severe downturn.

And on Wednesday, the government reported that average earnings slipped in March after accounting for the rising costs of food and fuel — the sixth consecutive month that pay failed to keep pace with inflation.

As people bring home paychecks that do not go as far, they are forced to economize, eliminating demand for goods and services that once captured their dollars, spreading pain to providers like auto dealers and lawn care providers. They, too, must trim their outlays on pay, shrinking working hours more and furthering the slowdown

Immediate federal action is required to help those who are losing jobs and income and to reinvigorate the economy.

A basic stimulus package would include extending unemployment benefits, which currently lapse after twenty-six weeks, and providing assistance to the twenty-five states that are facing budget deficits. The time to act is now!

Wednesday, April 16, 2008

Congress subsidizes hedge fund billionaires

The New York Times reported yesterday that:

Hedge fund managers, those masters of a secretive, sometimes volatile financial universe, are making money on a scale that once seemed unimaginable, even in Wall Street’s rarefied realms.

One manager, John Paulson, made $3.7 billion last year. He reaped that bounty, probably the richest in Wall Street history, by betting against certain mortgages and complex financial products that held them.

Mr. Paulson... was not the only big winner. The hedge fund managers James H. Simons and George Soros each earned almost $3 billion last year, according to an annual ranking of top hedge fund earners by Institutional Investor’s Alpha magazine....

Hedge fund managers have redefined notions of wealth in recent years. And the richest among them are redefining those notions once again.

Their unprecedented and growing affluence underscores the gaping inequality between the millions of Americans facing stagnating wages and rising home foreclosures and an agile financial elite that seems to thrive in good times and bad. Such profits may also prompt more calls for regulation of the industry.

Even on Wall Street, where money is the ultimate measure of success, the size of the winnings makes some uneasy. “There is nothing wrong with it — it’s not illegal,” said William H. Gross, the chief investment officer of the bond fund Pimco. “But it’s ugly.”

What's really ugly, even obscene, is that these billionaire managers pay lower tax rates on most of their income than millions of middle and working class Americans.

Most workers have their wages taxed as normal income.

Low and moderate income workers typically pay tax at a 10 or 15 percent marginal rate. More middle class workers, like teachers or firefighters, generally face a marginal tax rate of 25 percent. Higher paid professionals, like doctors or lawyers, will generally face a marginal tax rate of 33 percent. Very high-end workers pay a marginal tax rate of 35 percent; that is, unless they manage a private equity or hedge fund because they are allowed to claim their income as capital gains which is taxed at a low 15% rate.

This exemption makes little sense: in economic terms, the fund managers (also known as investment advisors) perform professional services, much like lawyers or doctors, and are paid for their expert labor.

But it one reason for the growth in inequality. Since 1913, the United States has witnessed only one other year of such unequal wealth distribution — 1928, the year before the stock market crashed.

So why does Congress provide private equity and hedge fund managers with this hand-out?

As the notorious bank robber Willie Sutton proclaimed when asked why he robbed banks: "Because that's where the money is!"

Members of Congress know that this costly subsidy greases their palms with large campaign contributions!

Dean Baker writes: is difficult to even imagine an argument as to why the government should subsidize equity and hedge fund managers. Proponents of these tax breaks say these managers take a risk. This is true in the sense they get paid on commission, but so do realtors and shoe salespeople. I haven’t seen any members of Congress proposing special tax breaks for realtors or shoe salespeople.

In fact, if we want tax breaks that compensate for risk on the job, fund managers probably would not stand at the top of the line. How about firefighters, police officers or poultry workers?

All of these workers face much greater risks on their jobs, but none of them get special subsidies from the government.

Fund managers may not have much of an argument as to why they deserve a special tax break, but they have something worth much more in Washington politics: money. They have filled the pockets of candidates of both political parties. That is why the Fund managers are likely to keep their tax subsidy.

... Since there is no rationale for the fund manager tax break, we know any member of Congress who supports the tax break is doing it for the money, pure and simple. In short, the fund managers have given us the equivalent of a DNA test to assess political corruption. Let’s see how many members of Congress flunk the test.


Tuesday, April 15, 2008

Milwaukee Journal Sentinel calls for extending unemployment benefits

Only a few months ago, the Journal Sentinel editorialized that the Fed might need to raise interest rates.

It's good to see the Board has now recognized that the economy is in trouble and that the unemployed need additional assistance.

Extending unemployment benefits will help the long term unemployed and stimulate the economy.

Now the board should turn its attention to the twenty five states, including Wisconsin, that are facing budget deficits. These states also need federal assistance. Otherwise they will be forced to cut spending to balance their budgets which will only deepen the nation's economic malaise.

Monday, April 14, 2008

Community Columnist presents misleading tax picture

Al Smith , a Milwaukee Journal Sentinel community columnist, selectively uses tax data to plead the case that rich folks are overtaxed.

Mr. Smith distorts the real picture of who is shouldering the tax burden in this country by focusing exclusively on the mildly progressive federal income tax and ignoring the impact of social insurance taxes.

Yet the vast majority for Americans (80%) pay more in social insurance taxes, F.I.C.A. Social Security and Medicare, than they do in federal income taxes and a much higher percentage of their income on these taxes than the wealthy. As a result, social insurance taxes have become the nation's fastest growing source of revenue.

Now the facts that Mr. Smith ignores!

In 2005, the poorest 24 million households (the poorest 20%) averaged only $15,900 a year but paid 8.3% of their income in social insurance taxes.

The second poorest (average income $37,400) third (average income $54,500) and fourth (average income $82,200) paid 9.2%, 9.5% and 9.7% of their income in social insurance taxes- a significantly higher rate than the 6% contributed by the richest 20% who average $231,000 annually.

And it gets even more regressive. Those averaging $339,100 , the richest 10%, paid a social insurance tax rate of only 4.8%, while the wealthiest 1 %, averaging $1,558,500 a year, paid only 1.7% of their income in these taxes.

To be blunt, New York Yankee Alex Rodriguez paid a significantly lower social insurance tax rate than a welder at Bucyrus Erie or an MPS teacher!

Mr. Smith apparently thinks this is fair.

Other taxes Mr. Smith mentions, sales, property and excise, are all regressive taxes which means moderate and low income folks pay a higher percentage of their income in these taxes than do the wealthy. For example, the poorest 20% paid 2.4% of their income in federal excise taxes while the richest 10% paid only 0.5% and the richest one percent 0.2%.

The decision by the National Taxpayer Union and Al Smith to focus only on the income tax is a conscious effort to distort the facts to make their case that the wealthy are overtaxed. The reality is entirely different.

Federal income tax rates for the wealthiest American have been reduced by almost 50% since 1978 and by almost 66% since the 1950’s. Capital gains, dividend and estate tax rates have also been slashed so that billionaire hedge fund managers pay a lower tax rate than hourly employees.

Warren Buffett, the third-richest man in the world, recognized this inequity when he criticised the US tax system for allowing him to pay a lower rate than his secretary and his cleaner.

The Bush era tax cuts provide extremely wealthy families with vast benefits. The richest one percent of families will get an average tax cut of $92,000 in 2010, including cuts in income and estate taxes. The average income for families in the top one percent will be $1.6 million in 2010, and yet, the President and his allies in Congress have showered the most generous tax cuts on these fortunate families. Meanwhile, the poorest 60 percent will get only 12-15 percent of the total tax cuts in 2010.

The argument for these reductions is that lower tax rates encourage people to work harder, increasing incomes and savings, leading to reduced interests rates, increased investment and economic growth. Yet the rates of economic growth in the 1990’s and 2000s, the heyday of high income tax cuts, were significantly lower than in the Post World War II era when marginal income tax rates were higher and social insurance rates lower.

During the Post World War II era, which economists call the Great Compression, the United States invested more as a percentage of the GDP into research and development, education, health, and the nation’s infrastructure than it has since the nation began its experimentation with supply side ideology. The middle class grew and economic insecurity and inequality declined.

If the U.S. is to compete in an increasingly globalized world, strategic investments are required. How we pay for these is a contentious question that can only be answered through honest debate. A prerequisite is that the facts be presented honestly.

Mr. Smith's column may serve his ideological and political objectives, but it does not move us toward the real discussion we need to have.

Sunday, April 13, 2008

Climate change, drought and civil war

In a column entitled "Extended Forecast: Bloodshed", Nicholas Kristof discusses how the failure to confront global warming and climate change results in internal violence and civil war in effected countries and regions of the world.

He sites research that suggests a drought in one year will increase by an amazing 50% the chance of an African country slipping into civil war the next!

He writes:

As we pump out greenhouse gases, most of the discussion focuses on direct consequences like rising seas or aggravated hurricanes. But the indirect social and political impact in poor countries may be even more far-reaching, including upheavals and civil wars...

The point is that climate change will have consequences that will be difficult to foresee but will go far beyond weather or economics. There is abundant evidence that economic stress and crop failures — as climate scientists anticipate in poor countries — can lead to violence and upheavals.

In the United States, for example, some historians have found correlations between recessions or declines in farm values and increased lynchings of blacks.

Paul Collier, an Oxford University expert on global poverty, found that economic stagnation in poor countries leads to a rising risk of civil war. Professor Collier warns that climate change is likely to reduce rainfall in southern Africa enough that corn will no longer be a viable crop there. Since corn is a major form of sustenance in that region, the result may be catastrophic food shortages — and civil conflict.

The area that may be hardest hit of all — aside from islands that disappear beneath the waves — is the fragile Sahel region south of the Sahara Desert in West Africa. The Sahel is already impoverished and torn by religious and ethnic tensions, and reduced rainfall could push the region into warfare.

"The poorest people on Earth are in the Sahel, barely eking out an existence, and climate change pushes them over the edge,” Professor Miguel said. “It’s totally unfair.”

His research suggests that a drought one year increases by 50 percent the risk that an African country will slip into civil war the next year.

Ethnic conflict in Darfur was exacerbated by drought and competition for water, and some experts see it as the first war caused by climate change. That’s too simplistic, for the crucial factor was simply the ruthlessness of the Sudanese government, but climate change may well have been a contributing factor.

In a forthcoming book, “Economic Gangsters,” Mr. Miguel calls for a new system of emergency aid for countries suffering unusual drought or similar economic shocks. Such temporary aid would aim to reduce the risk of warfare that, once it has begun, is enormously costly to stop and often damages neighboring countries as well.

The greenhouse gases that imperil Africa’s future are spewing from the United States, China and Europe. The people in Bangladesh and Africa emit almost no carbon, yet they are the ones who will bear the greatest risks of climate change. Some experts believe that the damage that the West does to poor countries from carbon emissions exceeds the benefit from aid programs.
All this makes the United States’ reluctance to confront climate change in a serious way — like a carbon tax to replace the payroll tax, coupled with global leadership on the issue — as unjust as it is unfortunate.

Wednesday, April 9, 2008

The economic boom that wasn't!

If you want to know why 81% of American disapprove of President's Bush's handling of the economy look no further than the kitchen table?

Recent Census Bureau data tells us that the "economic boom" that just ended never happened for most American families!

In 2000 at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureau’s inflation-adjusted numbers.

In 2007, in what appears to be the final year of the most recent expansion, the median family, amazingly, made less — about $60,500.

David Leonhardt, a New York Times economics columnist, reports:

This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew while the economy did. You can think of this as the most basic test of an economy’s health: does it produce ever-rising living standards for its citizens?

In the second half of the 20th century, the United States passed the test in a way that arguably no other country ever has. It became, as the cliché goes, the richest country on earth. Now, though, most families aren’t getting any richer.

More than anything else — more than even the war in Iraq — the stagnation of the great American middle-class machine explains the glum national mood today. As part of a poll that will be released Wednesday, the
Pew Research Center asked people how they had done over the last five years. During that time, remember, the overall economy grew every year, often at a good pace.

Yet most respondents said they had either been stuck in place or fallen backward. Pew says this is the most downbeat short-term assessment of personal progress in almost a half century of polling.

Leonhardt suggests that President Bush's economic policies are not responsible for the failure of family income to grow because these are long term trends.

Leonhardt is right that these are long term trends, dating back to the Reagan administration when real incomes began to fall. But he is wrong when he suggests that economic policy doesn't make a difference.

Bush's hyper supply side model of tax cuts for the wealthiest Americans, opposition to increasing the minimum wage, support for trade bills that promote capital's interest and ignore labor and environmental protections, and failure to support reforms facilitating union organization have all contributed to these trends.

While real wages and family income have declined in the United States they have increased in several European countries that have not embraced the hyper market model of deregulation, financial liberalization and privatization that has contributed to driving down the wages of hourly non supervisory workers in the U.S.

The Republican Presidential nominee, John McCain, has endorsed these failed policies including the upper income tax cuts which he originally opposed as fiscally irresponsible.

As the November election come into focus and Republican operatives raise wedge issues to divert the electorate's attention, the Democratic nominee will need to focus on the economy like a laser beam!

"It's the economy stupid!" And economic policy matters!

Monday, April 7, 2008

States need federal aid to avoid draconian cuts

Last week, before we learned about the loss of another 80,000 jobs, I wrote that at least 25 states are expecting budget shortfalls for the 2009 fiscal year. This is the largest number since 2002, when in the aftermath of the 2001 recession 37 states were forced to cut their budgets.

California is looking to fill a $14.5 billion hole for its next fiscal year, and Arizona’s $1.8 billion budget gap is 16 percent of its general fund, the largest percentage in the nation.

Wisconsin's deficit now stands at more than half a billion dollars ($527 million).

In response, most of these states are developing plans to cut state spending because they are required to balance their budgets. This will only make the recession worse!

The Washington Post updated these developments:

State budgets have been hit hard by a worsening national economy, including rising costs for energy and health care. In addition, fallout from the subprime mortgage crisis -- declining home sales, deflated property values and mounting foreclosures -- has caused a slide in states' anticipated tax receipts. Revenue from property taxes, sales taxes and real estate transfer taxes is affected.

At least half of the nation's states are facing budget shortfalls, some of them severe, and policymakers in most of the states affected are proposing and passing often-painful measures to trim costs and close the gaps.

Spending on schools is being slashed, after-school programs are being curtailed and teachers are being notified of potential layoffs. Health-care assistance is being cut for the elderly, the disabled and the poor. Some government offices, such as motor vehicle department locations, will start closing on weekends, and some state workers are receiving pink slips.

Some analysts worry that the impact is being felt disproportionately by the most needy. ..

A recent 50-state survey by the
Associated Press showed that hundreds of thousands of poor children, the disabled and the elderly stand to have their health coverage eliminated as a result of budget cuts, and more than 10 million people would lose access to dental care, specialists and name-brand prescription drugs.

Budget experts said they see a repeat of the pattern that happened during the recession of 2001: States generally cut health services and medical benefits first, because these costs are often rising more rapidly than others, and the savings tend to be immediate.

Subsidies to higher education are also a favored target for budget cuts -- mainly because policymakers often believe that universities can find money from other sources, such as private donations or higher tuition.

Budgets for parks and recreation, and for natural resources and science, also stand to take a hit.

Over the past three months the nation has lost 300,000 private sector jobs. Yet, state governments are cutting back on services to the very people who have been hardest hit by the most severe recession since at least 1981 when unemployed peaked at 12%.

The states are required to cut spending because all of them except Vermont are required by law to balance their budgets.

These cuts will hurt our most vulnerable citizens, the unemployed, the poor, children and the elderly. They will undermine efforts to educate our children as pupil teacher ratios soar and art, music, technical education and physical education classes are eliminated. They will result in higher tuition and student fees, increasing the already spiraling costs of higher education and making it less accessible to the nation's working families..

The cuts will also make the recession worse by reducing the demand for goods and services at a time when private investment and consumption are declining.

There is an alternative-an additional stimulus package that includes aid to the distressed states. Such a package would be a twofer. It would allow the states to avoid imposing draconian cuts in education, healthcare and other areas and it would stimulate demand in our struggling economy.

Congress' original stimulus package of tax rebates was insufficient, the result of a compromise with the Bush administration's insistence on tax cuts as the only acceptable policy option. Now that it is clear that the recession is intensifying, Congress should immediately pass an additional stimulus package that extends unemployment benefits and provides temporary aid to the states.

Friday, April 4, 2008

Remembering Dr. King and the struggle in Memphis

Forty years ago on April 4, 1968 Dr. Martin Luther King Jr. was assassinated in Memphis, Tennessee.

King has been invited to Memphis by civil rights and union leaders to help draw national attention to that city's garbage workers' strike.

The strike began over the mistreatment of 22 sewer workers who reported for work on January 31, 1968, and were sent home when it began raining. White employees were not sent home. When the rain stopped after an hour or so, they continued to work and were paid for the full day, while the black workers lost a day's pay. The next day, two sanitation workers, Echol Cole and Robert Walker, were crushed to death by a malfunctioning city garbage truck.

These two incidents epitomized the workers' long-standing grievances. Wages averaged about $1.70 per hour. Forty percent of the workers qualified for welfare to supplement their poverty-level salaries. They had almost no health care benefits, pensions, or vacations. They worked in filthy conditions, and lacked basic amenities like a place to eat and shower. They were required to haul leaky garbage tubs that spilled maggots and debris on them. White supervisors called them "boy" and arbitrarily sent them home without pay for minor infractions that they overlooked when white workers did the same thing.

The workers asked Memphis Mayor Henry Loeb and the city council to improve their working conditions, but they refused to do so.

On February 12, 1,300 black sanitation workers walked off their jobs, demanding that the city recognize their union (the American Federation of State, County and Municipal Employees, AFSCME) and negotiate to resolve their grievances. They also demanded a pay increase to $2.35 an hour, overtime pay, and merit promotions without regard to race.

For the next several months, city officials refused to negotiate with the union. In private, Mayor Loeb reportedly told associates, "I'll never be known as the mayor who signed a contract with a Negro union."

In King's speech delivered the night before he was murdered he noted that the struggle of Memphis' African American community was identical with labor's:

Memphis Negroes are almost entirely a working people. Our needs are identical with labor's needs -- decent wages, fair working conditions, livable housing, old age security, health and welfare measures, conditions in which families can grow, have education for their children and respect in the community. That is why Negroes support labor's demands and fight laws which curb labor. That is why the labor-hater and labor-baiter is virtually always a twin-headed creature spewing anti-Negro epithets from one mouth and anti-labor propaganda from the other mouth.

The next day, James Earl Ray assassinated King as he stood on the balcony outside his room at the Lorraine Hotel.

As Time magazine noted at the time: "Ironically, it was the violence of Martin Luther King's death rather than the nonviolence of his methods that ultimately broke the city's resistance" and led to the strike settlement.

President Johnson ordered federal troops to Memphis and instructed Undersecretary of Labor James Reynolds to mediate the conflict and settle the strike. The following week, King's widow, Coretta Scott King, and dozens of national figures led a peaceful memorial march through downtown Memphis in tribute to Dr. King and in support of the strike. Local business leaders, tired of the boycott and the downtown demonstrations, urged Loeb to come to terms with the strikers.

On April 16, union leaders and city officials reached an agreement. The city council passed a resolution recognizing the union. The 14-month contract included union dues check-off, a grievance procedure, and wage increases of 10 cents per hour May 1 and another five cents in September. Members of AFSCME Local 1733 approved the agreement unanimously and ended their strike.

The settlement wasn't only a victory for the sanitation workers. The strike had mobilized the African American community, which subsequently became increasingly involved in local politics and school and jobs issues, and which developed new allies in the white community.

In his final speech, King, only 39 at the time, told the crowd about a bomb threat on his plane from Atlanta that morning, saying he knew that his life was constantly in danger because of his political activism.

"I would like to live a long life," he said. "Longevity has its place. But I'm not concerned about that now. I just want to do God's will. And he's allowed me to go up to the mountain, and I've looked over, and I've seen the promised land. I may not get there with you. But I want you to know tonight that we as a people will get to the promised land."

We haven't gotten there yet.

Inequality is greater today than at any time since the Gilded Age. The percentage of workers who are unionized has fallen to a dismal 12%, 8% in the private sector. Black workers are unemployed at twice the rate as their white counterparts. The are alarming racial gaps in educational achievement, home ownership, income and wealth.

The best way to honor Dr King's memory on the anniversary of his assassination is to continue the struggle for human dignity, workers' rights, living wages, equality and social justice.

Wednesday, April 2, 2008

Who is supporting the troops now?

The Bush administration's cynical use of the American military personnel was exposed by the deplorable conditions at Walter Reed, the failure of the VA to provide adequate medical treatment to thousands of returning veterans and the widespread use of Stop-loss that sends soldiers (over 81,000) who have fulfilled their military obligations back into combat against their will.

It turns out that returning vets are also having a hard to finding jobs, harder than for civilians of similar age and education.

The Washington Post reports that 18% of veterans recently back from tours of duty are unemployed. Twenty-five percent of those lucky enough to land a job earn less than $21,840 a year, according to the Department of Veterans Affairs.

Is this what the Bush administration means by supporting our troops?

The Post article is attached.

Tuesday, April 1, 2008

Who is Paul Singer and why is he trying to buy the Wisconsin Supreme Court?

Burnett County Judge Michael Gableman has outraised Justice Louis Butler in late contributions by more than $30,000 with more than three-fourths of his money coming from five donors who hit the maximum according to late contribution reports filed at the Government Accountability Board. The reports cover anything that's come in since the close of the last reporting period, March 17. Since then, Gableman has received 24 donations totaling $77,360, compared to 55 donations totaling $46,200 for Butler.

Gableman received $10,000 donations -- the maximum -- from Paul Singer, general partner at Elliott Management in New York City, and Bonnie Loeb, the executive assistant at the company. Jay Newman of New York, whose occupation was listed as finance, also gave $10,000.

Gableman also received $10,000 each from Gordon Singer and Jenny Singer. That's' $50,000 from Paul Singer's family and firm!

So who is Paul Singer and why is this New Yorker hedge fund manager so interested in the Wisconsin Supreme Court race?

Paul Singer is an up-and-coming GOP funder. He gave $5K to the Swift Boaters in 2004 and $500,000 to Rudy Giuliani's failed Presidential campaign. He runs Elliott Asset Management, a New York hedge fund known by some as a "vulture fund," so-named because it buys debt cheaply from cash-starved countries, and then sues them for the full repayment, pocketing scarce funds that would otherwise be invested in education, clean water, medicine and debt relief.

Singer is generally known as the original 'vulture' of the for-profit so-called 'vulture funds', which buy government bonds from poor countries and demand an exorbitant return on their loans.

In 1996, Singer bought up some of the debt of Peru for $11 million and got back $58 million. He purchased a bond from the Democratic Republic of Congo for about $10 million, sued in court for $400 million and ended up with $127 million... His estimated personal net worth is $700 million.

Greg Palast explains how a vulture operation works. The vulture fund buys up the debt of poor nations cheaply when it is about to be written off and then sue for the full value of the debt plus interest — sometimes more than ten times what they paid for it. Singer, for example, paid just $10 million for Congo Brazzaville’s debt and is now suing for over $400 million.

Singer knew he’d turn a 1000%-plus profit on his $10 million investment with George Bush’s help.

Bush convinced the US Congress to forgive the money Congo owes the US taxpayer, but once the US taxpayer forgives Congo’s debt, the vulture, Singer, swoops in with lawyers to claim, “Congo now has the money to pay ME.”

But wait a minute - the debt money given up by US taxpayers wasn’t supposed to go to a predator like Singer. In fact, the US Constitution provides power to the President to stop vultures from suing a foreign country in a US court if the President states such a private lawsuit interferes with America’s foreign policy.

Singer, by suing Congo for the taxpayer money meant for debt relief and medicine, is interfering with US foreign policy. Yet, the President has remained silent.

Gableman isn't the only one benefiting from Singer's largess.

Singer was in charge of Northeastern fundraising for Rudy Giuliani's failed Presidential bid.
He was Giuliani's largest fundraiser.

In August, Singer graduated from fundraising to policy becoming Giuliani's "Senior Policy Adviser."

Paul Singer also made news in September when he admitted to providing all of the funds ($175,000) to put a referendum on the California ballot to divide the state's 55 Electors according to Congressional Districts, which would give the GOP 20 Electors that would otherwise go to the Democrat - roughly the size of Ohio or Pennsylvania. When Singer's role was exposed, the staff all quit and the effort went on hold - presumably until Singer finds a less-traceable way to launder his money.

So now we know who Paul Singer is- a very wealthy and unscrupulous hedge fund manager who contributes a lot of money to Republican candidates. But why has he become so interested in the Wisconsin Supreme Court election?

Is his interest simply ideological or could Singer have an financial interest in an upcoming Supreme Court case?