Archive | Dirty Rotten Scoundrels

Deficit Reduction Is Class War

This is a really good post on the deficit wars – and the myth of economic “recovery.” [via Corrente]

For about 20 years now, I’ve been warning people that the continuing rise in home values was unsustainable – and bad for the economy. I can’t stress this enough: Shelter is shelter, and not an investment. Speculating in residential real estate on the basis of constantly-increasing equity is a relatively recent development that drives a lot of bad economic and social results. (Don’t even get me started on what a very bad idea it is to use property taxes to fund school systems.)

Using houses as ATM distorted many things in the economy, not the least of which was the parallel stagnation in wages. Think about this: since the 70s, we’ve seen a steady rise in women working outside the home, a rise in property values, and a monstrous increase in personal debt.

Yet wages never kept pace with any of that. (In fact, those of us who still have jobs are now working harder for less money than we earned in the 1970s.) But with a working spouse bringing in additional income and home equity loans, we could convince ourselves that increasing equity was the same as earning more.

It also kept things calm on the domestic political front, because we bought the illusion that the economy was rewarding them. (Which is one of the reasons why otherwise conservative Republicans were always so supportive of women going to work. It helped keep wages low.)

Even though I see great amounts of psychic pain in the transition, I believe that deflated housing prices are an ultimate good. Housing simply shouldn’t cost this much when we aren’t earning enough to pay for them; we shouldn’t have to take out equity loans to get by.

Which is why I’d recommend that you read Jesse’s entire article. He points out that the bulk of Obama’s bailout funds and the thrust of his policies is not to bail out underwater mortgages for drowning homeowners, but to reinflate the value of the bad housing assets.

In other words, to continue the class war on behalf of the bankers.

…in view of the rising and well-subsidized efforts of Harold Ford and his fellow Corporate Democrats, the actual “bipartisan” aim seems to be to provide political cover for cutting spending on labor and on social services. Obama already has sent up trial balloons about needing to address the Social Security and Medicare deficits, as if they should not be financed out of the general budget by taxpayers including the higher brackets (presently exempted from FICA paycheck withholding).

Traditionally, running deficits is supposed to help pull economies out of recession. But today, spending money on public services is deemed “bad,” because it may be “inflationary” – that is, threatening to raise wages. Talk of cutting deficits thus is class-war talk – on behalf of the FIRE sector.

The economy needs deficit spending to avoid unemployment and poverty, to increase social spending to deal with the present economic shrinkage, and to maintain their capital infrastructure. The federal government also needs to increase revenue sharing with states forced to slash their budgets in response to falling tax revenue and rising unemployment insurance.

But the deficits that the Bush-Obama administration have run are nothing like the familiar old Keynesian-style deficits to help the economy recover. Running up public debt to pay Wall Street in the hope that much of this credit will be lent out to inflate asset prices is deemed good. This belief will form the context for Wednesday’s State of the Union speech. So we are brought back to the idea of economic recovery and just what is to be recovered.

Financial lobbyists are hoping to get the government to fill the gap in domestic demand below full-employment levels by providing bank credit. When governments spend money to help increase economic activity, this does not help the banks sell more interest bearing debt. Wall Street’s golden age occurred under Bill Clinton, whose budget surplus was more than offset by an explosion of commercial bank lending.

The pro-financial mass media reiterate that deficits are inflationary and bankrupt economies. The reality is that Keynesian-style deficits raise wage levels relative to the price of property (the cost of obtaining housing, and of buying stocks and bonds to yield a retirement income). The aim of running a “Wall Street deficit” is just the reverse: It is to re-inflate property prices relative to wages.

Go read the whole thing.

Go Sherrod

Down With Tyranny:

There is a small group of progressive Democrats– very small– who are actually independent of Wall Street. You may have noticed that last week Barbara Boxer (D-CA) and Jim Webb (D-VA) introduced a bill targeting outrageous bonuses of banksters who are getting it out of TARP money.

Yesterday Sherrod Brown (D-OH) introduced an even more stringent bill that targets any bonus over $25,000-– where the Boxer-Webb bill goes after anything over $400,000. I’m with Sherrod on this one. He says he wants to use the proceeds to help small businesses expand and hire new employees. In a talk about how Wall Street benefited from the infusion of taxpayer dollars via TARP, he explained why he thinks Main Street needs to be helped along now and how this is a way to get that started. “It’s time,” he said, “for Wall Street to return the favor to Main Street. While big banks have rebounded thanks to the help of American taxpayers, small businesses are still struggling. If a big firm that received taxpayer help is now paying out massive bonuses, they should be able to help American small businesses expand operations and hire new workers. Small business growth will create jobs and get our economy back on track.”

Building Pyramids

You would be hard pressed to come up with something in the American system that still works for ordinary people, which is one of the reasons why moving out of the country holds more appeal to me all the time.

Ian Welsh points out the road ahead, and concludes:

Which is to say, the problem in the US right now is that virtually nothing of any significance works. Not the military, who with 50% of the world military budget is being fought to a draw by ragtag militias, not the political system, and definitely not the economic system.

Fixing this, fixing America, is a literally monumental task, like building pyramids. It will take a generation, perhaps two, of very committed people.

I fear that those people don’t exist in large enough numbers, at least not in any position of power or able to seize power.

I hope Americans prove me wrong.

Mole Man

I went to the dermatologist’s office last night to have another abnormal mole removed.

“Is there any way we can remove a lot of these at once?” I asked him.

“The insurance company won’t pay for more than one at a time,” he said.

I thought that was bizarre. “Why?”

“It loses the deterrent effect.”

“You mean, they don’t want me actually using the insurance. They want me to die,” I said.

He just smiled and said nothing. Oy.

Six down, six to go, $50 a pop. I spend more time in his office than I do at home.

In Clover

New HCAN study:

The five largest U.S. health insurance companies sailed through the worst economic downturn since the Great Depression to set new industry profit records in 2009, a feat accomplished by leaving behind 2.7 million americans who had been in private health plans. For customers who kept their benefits, the insurers raised rates and cost-sharing,and cut the share of premiums spent on medical care. Executives and shareholders of the five biggest for-profit health insurers, UnitedHealthGroup inc., WellPoint inc., Aetna Inc., Humana Inc., and Cigna Corp., enjoyed combined profit of $12.2 billion in 2009, up 56 percent from the previous year. It was the best year ever for Big Insurance.

The 2009 financial reports from the nation’s five largest insurance companies reveal that:

* The firms made $12.2 billion, an increase of $4.4 billion, or 56 percent, from 2008.
o Four out of the five companies saw earnings increases, with CIGNA’s profits jumping 346 percent.
* The companies provided private insurance coverage to 2.7 million fewer people than the year before.
o Four out of the five companies insured fewer people through private coverage. UnitedHealth alone insured 1.7 million fewer people through employer-based or individual coverage.
o All but one of the five companies increased the number of people they covered through public insurance programs (Medicaid, CHIP and Medicare). UnitedHealth added 680,000 people in public plans.
* The proportion of premium dollars spent on health care expenses went down for three of the five firms, with higher proportions going to administrative expenses and profits.

Endorsement Deal

Simon Johnson at Baseline Scenario:

Being nice to the biggest banks will not save the midterm elections for the Democrats.  The banks’ campaign contributions will flow increasingly to the Republicans and against any Democrats (and there are precious few) who have fought for real reform.

The president’s only political chance is to take on the too big to fail banks directly and clearly.  He needs to explain where they came from (answer: the Reagan Revolution, gone wrong), how the problem became much worse during the last administration, and how – in credible detail – he will end their reign.

What we have now is not a free market.  It is rather one of the most complete (and awful) instances ever of savvy businessmen capturing a state and the minds of the people who run it.  Is this really what the president seeks to endorse?

Trafficking

Americans like to think we don’t have these problems – but we do. Prostitution isn’t always a “victimless crime”:

COLUMBUS, Ohio (AP) — About 1,000 American-born children are forced into the sex trade in Ohio every year and about 800 immigrants are sexually exploited and pushed into sweatshop-type jobs, a new report on human trafficking in the state said Wednesday.

Ohio’s weak laws on human trafficking, its growing demand for cheap labor and its proximity to the Canadian border are key contributors to the illegal activity, according to a report by the Trafficking in Persons Study Commission.

”Ohio is not only a destination place for foreign-born trafficking victims, but it’s also a recruitment place,” said Celia Williamson, an associate professor at the University of Toledo who led the research.

From 1990 to 2000, Ohio’s foreign-born population increased 30 percent, and the state has a growing pool of legal and illegal immigrants who draw victims or hide victims, Williamson said. These networks are highly organized, with brothels fronting as legitimate businesses.

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