American Tax Dodgers

On January 12, I posted some comments about Les Leopold's recent article on tricks the corporate use to hoard wealth. I referred to economic productivity and how the gains are no longer being shared with the middle class.

He also highlighted how large corporations, despite the endless bleating about high corporate taxes, often pay little or no taxes. Specifically he noted how low state and local corporate taxes have become. As Leopold says:

Large corporations pay next to nothing in state and local taxes. As a result of the Wall Street-created crash, state and local governments are struggling to make up for lost revenues and rising costs to care for the jobless and the destitute. In a fair society we would be asking Wall Street to pay for the damage it created. Instead, Wall Street has used its enormous lobbying muscle to make sure politicians are asking states to cut back public services of all kinds. Meanwhile, large corporations use every trick in the book to avoid paying state and local taxes. A recent joint report by the Institute on Taxation and Economic Policy and Citizens for Tax Justice reveals that 265 large corporations avoided $42.7 billion in taxes from 2008 to 2010. That’s enough money to hire more than one million teachers! Instead, we are firing teachers in the name of fiscal austerity.

 The full report to which Leopold refers is at The Institute for Taxation and Economic Policy.  The reports should make clear that whatever other problems ail the US, overtaxed corporations isn't one of them. Citizens for Tax Justice also offers a compendium of how America's most profitable companies pay taxes dramatically lower than the advertised rate; for many, the US tax code has become a profit center, one more way to privatize benefits and socialize costs.


The idea, which every Republican presidential candidate has made at one time or another, that America's high corporate tax rate of 35% is killing the economy should be put to rest by a simple observation at the next debate followed up by a blunt question: 

"You do realize that corporate profits have grown enormously, along with executive compensation?" 


"Are you so naive that you actually believe corporations pay a 35% tax rate?" 

It really is no different at the state level. They game the system at the federal level and at the state level. A more detailed analysis of how corporations avoid taxes while they capture subsidies and other benefits paid by taxpayers, in particular how they play one state or municipality off against another, can be found in Greg LeRoy's well-researched book: The Great American Job Scam: Corporate Tax Dodging and the Myth of Job Creation.

Amend 2012

It was two years ago this week when five corporatists on the US Supreme Court made the ludicrous argument that corporations are people and that not allowing them to spend unlimited money on political campaigns would be denying them their right, as people, to free speech. Thanks to their ruling in Citizens United vs. FEC, not only do rich people have more free speech, corporations do now as well. And since we do not hinder free speech, we cannot hinder the free flow of money into politics. Corporations can now buy elections and politicians more blatantly than ever before. Since money is fungible, that guarantees foreign corporations will be in on it as well. It's free speech, you see. It's right there in that constitution teabaggers keep waving around.

Corporate America dominates government, politicians, the voting process, and the media that covers it. Citizens United has helped turn us into a banana republic that allows an oligarchy to subvert our entire political economy. The impact of that ruling will surely be magnified greatly in 2012, a presidential election year. 

Robert Reich reviews the issue and invites us to learn more and get involved in the only way we can to reduce the ridiculous and corrupting influence of corporate money in elections. He joins with amend2012.org and others to push for a constitutional amendment that states what should have been obvious; corporations are not people. They do not get to buy elections.

Think about Citizens United the next time Republicans claim they favor strict constructionism. Think about that case's tortured logic that effectively guarantees that corporations will buy elections the next time conservatives complain about activist judges.

Red State Reality

Below is one of the few times conservative columnist David Brooks has actually said something intelligent, albeit in an otherwise ignorant piece:

Like most Americans, including most evangelicals under 40, I find this culture war language absurd. If conservative ideas were that much more virtuous than liberal ideas, then the conservative parts of the country would have fewer social pathologies than the liberal parts of the country. They don’t.

Brooks is correct, though I doubt he is truly cognizant of the implications of this admission. He originally wrote it in his own New York Times post, but in case you can't get past the barriers, and don't want to register, try Blue Texan's take.

Blue Texan notes, as have many others, that the constant harangue from conservatives about the path to prosperity, stabiity, and, sweet Jesus, freedom itself, is through an environment with low taxes, cheap labor, damn few regulations and devoid of unions, bureaucrats, and secular liberals. The big problem with this view is that it is at odds with empirical reality.

CNN's Jack Cafferty raises a good question, one not raised enough, when he asks: What does it say that most of the 10 poorest states are Republican? Things don't look good when Mississippi, home of Republican heavyweight Gov. Haley Barbour, has a friendly, pro-business infrastructure with low wages, low union membership, and Republican domination of local and government. And churches everywhere.

The problem is that Missippippi is America's poorest state, with poverty levels reminiscent of the third world. Next in line are Arkansas, Tennessee, West Virginia, Louisiana, Montana, South Carolina, Kentucky, Alabama and North Carolina. Republicans dominate all of them in most elections. 

Steve Chapman, writing in the Chicago Tribune, also notes the conservative meme is a fantasy:

Consider homicide, which is not only socially harmful but a violation of one of the Ten Commandments. Mississippi has the highest rate of church attendance in America, according to a Gallup survey, with 63 percent of people saying they go to church "weekly or almost weekly." But Mississippians are far more likely to be murdered than other Americans.

On the other hand, we have Vermont, where people are the most likely to skip church. Its murder rate is only about one-fourth as high as the rest of the country. New Hampshire, the second-least religious state, has the lowest murder rate.

These are no flukes. Of the 10 states with the most worshippers, all but one have higher than average homicide rates. Of the 11 states with the lowest church attendance, by contrast, 10 have low homicide rates.

David Brooks needs to complete his mea culpa. It won't do to just say that social pathology measurements are no better in red states than blue; they are, in fact, much worse.

As Harry Truman famously said:

"If you want to live like a Republican, vote Democratic."

Redistributing Wealth

Les Leopold recently posted an article at Alternet called How Can the World's Richest Country Let Children Go Hungry? 6 Tricks Corporate Elites Use to Hoard All the Wealth. Not only is he spot on in his analysis, the evidence supporting his contentions is massive and unmistakable. I want to examine just one of them in this post. The others I will return to in time.

His first, and now mine, addresses increased economic productivity and how the benefits have become poorly distributed. His contention is thus:

Productivity continues to rise but the 99 percent doesn’t share in the benefits. The key to the material wealth of any nation is productivity – how much we produce per worker hour. Productivity is a crude measure of our overall level of knowledge, technique, organization, skill and cooperative work practices that produce the sum total of our goods and services. Lo and behold, there’s nothing at all wrong with productivity in America. It continues to rise and rise just like it did during our post-WWII boom years. What’s changed is that the average American wage has stalled since the mid-1970s -- which is precisely the time that we started to deregulate Wall Street and cut taxes on the rich. During the 1950s and '60s boom years, almost all Americans shared in the fruits of productivity leading to rising real wages (after inflation). But now the productivity lines and wage lines have pulled apart. The gap between the two lines represents trillions of dollars that once went to the average American but are now going almost entirely to the super-rich.

Here's what Leopold is saying, in graphic form:

As should be apparent, throughout most of the post-war period, labor productivity steadily increased, and workers' compensation largely kept up. This was close to ideal and helps explain why the US economy was the envy of the world. The trend came to an end, rather abruptly, in roughly 1980.

It isn't getting any better. A recent study from Northwestern University reveals that 88 percent of income growth since 2009 was in the form of corporate profits, and only one percent went to wages. A recent investor report from JP Morgan notes approvingly that corporate profit margins increased by about 1.3 percent from 2000 to 2007, adding not only that profit margins are now at levels "not seen in decades," but that the primary reason for the fattened margins is a reduction in wages and benefits.

This is sick.  I remind the reader that reducing taxes on the wealthy and on corporations is at the heart of the Republican platform. And increasing wages and benefits for middle America is not.

Reckless Indifference

This lengthy chart reveals much about what powerful Republicans think of the rest of us. A quick look below at the tax proposals of the Republican presidential candidates reveals just how willing they are to exacerbate inequality.

It should be apparent that each proposal overwhelmingly benefits those already wealthy and will have little positive impact on millions of struggling families. It should be equally obvious that these tax proposals will make the deficit much worse.

None of the candidates has any intention of reimplementing the tax structures of the past that helped create the middle class, provided for solid growth, paid for defense-and wars-with taxes, and managed to balance the budget, or come very close to it.

There is only one major difference between now and earlier in the post-war period, up to the 1980s, and it isn't government spending. The difference is that 30+ years of tax cuts for the wealthy, starting with Ronald Reagan, have shielded the very wealthy from the taxes they used to pay. That has created a two-fold tax structure: the middle and working class are asked to pay more, and the budget shortfalls, dramatically larger than in the past, end up as government debt, picked up by China and other trading partners.

The current set of proposals only worsens the trend. Every detail is a giveaway to America's richest.


Tax Proposals Infographic by: Certified Tax Coach

Media and Government are Both Failing Us

Here is Cenk Uygur relating recent discoveries that members of congress provided inside information to hedge fund managers. There hasn't been much media coverage on this. Cenk notes that the story originally appeared in the Wall Street Journal, which one would think would have been enough to trigger follow-up stories, you know, the ones on the front page of every newspaper saying criminal investigations are under way.

Didn't happen. And that is the other story: media complacency. Even though the story has been broken, few have followed up and tried to learn more. How many people really learned of this story? Can there be a more blatant example of the corruption of our government? And has our media reached a point where this no longer seems to be especially newsworthy?



Cenk treats this as a breaking story, and it should be, but in reality it is another incremental move to complete oligarchy. The more it happens, the less people pay attention. Apparently not enough people, regardless of motivation, seem to think the story should be vigorously pursued.

David Sirota has a excellent analysis on why no one is investigating Wall Street, not specifically the insider trading info given to the hedgies, but the widely documented criminal behavior of the big banks.

When it comes to our government’s collective refusal to aggressively investigate — much less prosecute — Wall Street crime, one prevailing line of apologism implies that it’s all about resources. As the general fable goes, Wall Street is so sprawling and so lawyered up that public law enforcement agencies simply don’t have the resources to make sure justice is served, especially at a time of budget deficits. In this story, Wall Street is not simply too big to fail; it’s too big to even police.

Right, David; there are reasons why congress has underfunded watchdog agencies like the SEC, and it isn't because it cares about the budget deficits. And it is worth noting that the media did in fact cover the banker-induced recession reasonably well, at least for those of us who sought out appropriate media sources. Not hard to do, by the way if you have an Internet connection. Sirota's dismay is that Washington knew full well what had happened, in time we all knew, but that there is still almost no government action to hold the criminal class criminally liable.  Instead politicians direct their venom at the poor.

Tracking an individual example of this phenomenon, Matt Taibbi makes clear that it’s really difficult to overstate just how revealing this kind of thing is. Wall Street crooks who stole trillions of dollars are rewarded by the administration with additional trillions in bailouts. Meanwhile, those crooks’ now-impoverished victims — so poor they are on food stamps, mind you — are being targeted by the same administration for criminal investigation for allegedly making a few extra bucks on recycling empty bottles.

Our government is directing prosecutorial resources at food stamp recipients because they may have earned a few extra dollars from recycling bottles. Poor people are sent to jail while the wealthy pay fines and sign documents that allow for no admission of wrong-doing.

We could endlessly debate the extent to which President Obama or Democrats in congress contribute to Wall Street's special privileges. It should be clear to all that Republicans are the party of America's wealthiest. Never in recent history has a party so shamelessly shilled for the 1% while demonizing, ridiculing, and haranguing the poor and powerless. It is Republicans, it must be remembered, who continue to claim that unqualified home borrowers of modest means were to blame for derailing the economy.

Others will argue, incorrectly in my view, that there is no real difference between the two parties. These are cynical conclusions held by the intellectually lazy. Having said that, there is not as much difference between the two parties as I would like, or as much as there used to be. More than a few Democrats have shown a contemptible willingness to do the bidding of the investor class.

Getting More Bang for the Buck

The chart below, and it's from Moody's Economy.com, a mainstream source, says what progressive economists have been saying all along. As the column on the right shows (It's that technical term called "bang for the buck"), progressive policy prescriptions are more effective than conservative ones. I do not know the methodological specifics, but the higher number indicates greater efficiency.

One example is "increased infrastructure spending," which has a score of 1.57. This was, and is, spending urged by progressives and by the Democratic Party in general. In comparison, conservatives, and certainly every Republican presidential candidate, argue for reduced corporate taxes (.32), that the Bush tax cuts should be permanent (.32), and that we should make dividend and capital gains tax cuts permanent (.37). It is not a coincidence that each of these items, despite demonstrated inefficiency, favor the rich. And wouldn't you know it, even a temporary increase in food stamps proves to be the single most efficient item on the entire list, a policy strongly supported by Democratic pols and strongly opposed by Republicans.


The chart does not say why the policies differ so much, and it certainly does not address why Republican pols ignore the evidence, but two observations are warranted.

The first of these is that from an economic perspective, policies that help the working and middle class are generally superior because it is they who prop up the economy, and that is because they work, pay taxes, and, very importantly, are the primary patrons of most businesses in America. They are the true job creators and they are the reason most businesses even exist. Most businesses will tell you that they don't need a tax break, or less regulation. What they need are more customers.

But this does not explain why Republicans so shamelessly shill for the rich, and why so many middle-class Republican voters are OK with this. The answers are mostly not found in economics, but in psychology. My premise is this: Educated progressives are in favor of evidence-based policies. Of course, some policies have not been effective, but those that are not get revised or abandoned. And don't get any ideas about how progressives keep flogging dead ideas like Keynesian stimulus packages; the chart above shows them to be effective. Progressives (mostly) follow the evidence, and base policies that they consider rational and empirically-grounded.

In contrast, true conservatives are not basing policies on economics (except perhaps the economics of personal enrichment), but on psychology. Issue after issue, conservatives are making moral arguments about what they think is right, not what is economically sound. Their positions are often less rational than they are visceral.  Call it the politics of personality. And do note that even ostensibly educated Republicans, such as the presidential candidates, cater to and sound like their conservative base: Their economic policy prescriptions are almost entirely lower taxes, lower regulations, and now that a Democratic is in the White House, lower spending. These are absurdly inadequate and inappropriate policies that are massively at odds with the evidence and expert opinion.

There is a growing body of literature on what motivates conservatives. I have touched on this previously, especially on the role of authoritarianism.  Here let me add two additional academic studies: one has been out for a few years, called The Political Brain: The Role of Emotion in Deciding the Fate of the Nation, by Drew Westin. The other just came out: The Reactionary Mind: Conservatism From Edmund Burke to Sarah Palin, by Corey Robin.

Read, learn, and arm your brain.  Your nation depends on you to make rational decisions.

American Justice II

A Merry Christmas for one guy, a lump of coal for the other.
 
This is from the Dec 21, 2011 edition of Midweek, in a syndicated column called Weird News, by Chuck Shepherd. I have reproduced it verbatim.

Criminal Justice?: Daniel Vilca, 26, was ordered to prison for the rest of his life (without possibility of parole) following his conviction in Naples, Fla., for having pornographic photos of children on his computer. He had no previous criminal record nor was there any evidence of contact with children. The judge computed the sentence by multiplying a five-year term by 545 photos police found...A week earlier, a judge in Dayton, Ohio, sentenced former CEO Michael Peppel, 44, for defrauding his shareholders by overstating revenue in a company that went on to lose $298 million and cost 1,300 employees their jobs. Sentencing guidelines recommended an eight- to 10-year term, but federal judge Sandra Beckwith ordered Peppel to jail for seven days.

Peppel also received a $5 million fine, the levying of which seems to be the preferred approach when the wealthy are convicted. More on his story here.

The United States has an overtly class-based system of justice. It is the poor, the powerless, and the disadvantaged who are prosecuted in the first place, face high conviction rates, and serve disproportionately long jail sentences.

"The Dumbest Idea in the World"

In a recent article in the online version of Forbes, Steve Denning writes intriguingly of the American corporate model and its penchant for short-term profit seeking. His views are something of a vindication for those, myself included, that have long felt the American management system is flawed. His basic premise is that in the mid 1970s US corporations began to shift their focus away from their products and processes, and towards catering to the short-term interests of investor.

Denning cites the work of Roger Martin in his new book, Fixing the Game. As Denning relates, 'Martin says that the trouble began in 1976 when finance professor Michael Jensen and Dean William Meckling of the Simon School of Business at the University of Rochester published a seemingly innocuous paper in the Journal of Financial Economics entitled “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.'"

In short, Martin says US corporations began a fateful and undue focus on the interests of investors in the 1970s. And that means, generally, the short-term interests of individuals and firms that are less interested in what a company makes, or how it makes it, and more interested in making money off the company's stock, preferably sooner than later. As a result, managers, especially CEOs, are motivated to turn in quick, impressive results, measured primarily by quarterly earnings. 

CEO compensation has become tied to the stock price, not product quality, and that is because they too are focused on the short-term. Boosted earnings will please the investor class, and also line the CEOs' pockets through stock options. They have less incentive to focus on a company's long-term health, the way a founder would, and more on making sure their stock options pay out. The ability to quickly increase "shareholder value" is thus the holy grail by which investors judge management.

Accordingly, both Steve Denning and Roger Martin argue that corporate America's dogma regarding the importance of shareholder value, e;g. making the investor class rich, is proving ruinous. Martin specifically identifies US business schools as culprits in promoting the primacy of shareholder value. Denning reminds us that none other than Jack Welch, legendary former head of GE, said the concern over maximizing shareholder value was "the dumbest idea in the world."

Now let me take a moment to remind readers what most business writers don't often explicitly acknowledge: business in America, especially big business, is predominately Republican. More to the point, management at major US corporations is conservative, often deeply so. The American corporate model is, or has become, a conservative model; labor should be cheap, regulations should be minimal, taxes are always too high, and business should be free to move cash and assets around, including overseas, as it sees fit. This model implicitly says that the sum and substance of capitalism is the microeconomic interests of the corporation and the investors to which it is supposed to owe its greatest allegiance: that allegiance must prevail over the broader interests of country, citizens, and communities. As it turns out, that includes just about everyone in the world except the investor class and their subset, upper management. It is business economics for the chronically selfish and short-sighted.

In other words, the interests of the 1% must prevail over the 99%. Anything less is socialism and an invitation to stagnation and decline. Real patriots must give the 1% all they want or you will jeopardize civilization. And if you have not noticed how much further to the right the Republican party--starting notably with Ronald Reagan--has helped both corporations and the investor class reap ever higher portions of economic output, then you are not paying attention. 

So it is grimly satisfying to see some business thinkers and leaders, and not just those on the Left, questioning the efficacy of a model that obscenely enriches the few while it provides decreasing benefits for most. 

Again, Steve Denning provides an example. He writes:

The new bottom line of business is customer delight. If a firm isn’t delighting its customers, the prospects of its long-term survival in today’s highly competitive low-growth economy aren’t promising. Fortunately, as a result of almost three decades of research by Fred Reichheld and his colleagues at Bain, we have a robust methodology for measuring customer delight. It’s the Net Promoter Score discussed in the second edition of The Ultimate Question 2.0 published in September 2011.

The parameter they developed, the Net Promoter Score, basically attempts to quantify (crucial for numbers-obsessed business schools) how well companies are winning and keeping satisfied customers.

What a novel thought; actually pleasing the customer with an eye towards long-term loyalty. This is beginning to sound almost progressive; worry about your products, and how you treat customers and workers, and the stock price will follow suit. Your allegiance should be to those who build and buy your products and services.

It's enough to give Ayn Rand a fit.

How They See Us

On Monday, 12/12 I wrote of at least one Republican who has finally decided to buck the tide and speak out against his party's lurch to the right, one that is both ridiculous, because proponents are twisting themselves into logical and factual contradictions, and dangerous, because they are opening the door to a fascist state.  

The European press has noticed the sum and substance of the Republican presidential candidates, leaving it both dismayed and amused. As Der Spiegel laments:

It's horrifying because these eight so-called, would-be candidates are eagerly ruining not only their own reputations and that of their party, the party of Lincoln lore. Worse: They're ruining the reputation of the United States...They lie. They cheat. They exaggerate. They bluster. They say one idiotic, ignorant, outrageous thing after another. They've shown such stark lack of knowledge -- political, economic, geographic, historical -- that they make George W. Bush look like Einstein and even cause their fellow Republicans to cringe.

The December 16 edition of The Week (print version), in an article entitled "The GOP makes a virtue of ignorance," summarizes European views. In addition to Der Spiegel, it references Lorraine Millot, of the Paris Liberation, who observes that the only Republican candidate who is relatively well-versed in diplomacy, John Huntsman, is also completely out of contention. This is not a coincidence. The others "careen to extreme positions that include starting new wars and abandoning old allies." Herman Cain tried to make a virtue of his ignorance of foreign affairs, which apparently sat well with millions of Republican voters. It was charges of adultery, not laughable ignorance of the world, that ended his campaign.

Max Hastings, of the London Daily Mail, notes that throughout much of red state America, you are viewed suspiciously as an elitist if you show interest in science or the world beyond America. "Say what you want about British politics, no MP of any party would dare to offer themselves as town dogcatcher while knowing as little about the world as the Republican presidential candidates...The American political system has seldom, if ever, looked so inadequate."

Finally, Matthew Norman of the London Independent predicts that Mitt Romney will eventually win the nomination even if he is "the slimiest, phoniest opportunist to run for president since...well, ever." And that is because Newt Gingrich is so widely despised.

We'll see about whether Romney does in fact prevail. But it is too early to count out Gingrich, though even he seems to be peaking, pretty much on the same timeline as the rest of them. Republican primary voters are the reddest of the red, but even they seem discomfited by this crowd.

Some Republicans Have Had Enough

Below is a video of former Bush speechwriter David Frum in an interview with Howard Kurtz of CNN. Frum is one of a small number of Republican operatives who are speaking out against their party's nuttiness and increasingly harsh and nonsensical policy prescriptions.

I welcome Frum's lonely effort to steer his party back to (relative) sanity and away from its asinine dance on the ideological precipice. Thoughtful Republicans have every right to be sickened by the buffoons getting all the attention in the presidential debates.

In the video, other media sources are labeled as "liberal." Frum says that Fox provided a welcome counterweight to that. This is an ironic statement coming from someone who worked at the Wall Street Journal, the official rag of the 1%. And does this mean that Fox is indeed a counterpoint to a media Fox mouthpieces laughably call left-wing? I thought it was "fair and balanced."

Fox CEO Roger Ailes himself has said the network has recently made a course correction away from the far right. This was, he says, a tactical decision in the wake of the Gabrielle Giffords shooting early in the year when Ailes told his anchors and pundits to "tone it down".  Is this not the same criticism that progressives have been making about Fox for years? That it is not a real news organization, but a fear monger for low-info voters and a Republican cheerleader? Thanks for making our point, Roger.

The other networks are not truly liberal, not just because they have Rachel Maddow and Ed Schultz at MSNBC. You do not get to claim a network is liberal just because it is less right-wing than Fox. The others, including MSNBC, are deeply mainstream and conventional.

I do not believe many viewers in America ever really see what the international community would consider leftist news commentary.

Corruption Unabated

Here's a reminder of the fallout from Bush's decision to invade Iraq. In addition to massive loss of life and a country with its infrastructure destroyed, Americans (with help from Iraqis) are now plundering funds that were meant for rebuilding Iraq. As the video below explains, there is widespread waste and systemic fraud with almost no accountability.

And not much coverage by our mainstream media.

Not that there wasn't a publicized effort to uncover the problems. The Commission on Wartime Contracting had issued several reports that recognize the multitude of issues. Among other things, the commission reported $30 to $60 billion lost through waste and fraud.

It closed down earlier this year because congress defunded it. And while its website does offer some downloadable data to the public, Congress has decided that some key findings should be hidden from public purview until 2031.



As author Michael O'Brien says in the video, congress is protecting the perps. Representatives and senators alike know that too many fat cats, in and around congress, will be implicated. So they cannot let the public know what really has been happening in Iraq and who benefited. They do what governments always do when they feel threatened: keep evidence from view and lie.

Twenty years on ice should take care of any statute of limitations.

The video is from RT America, and I highly recommend its Youtube channel.

All the Money Rich Bankers Could Ever Want

I believe the desire to hold the Federal Reserve Bank accountable to the American people is a major issue that progressives and disaffected right-wing populists, e.g. tea-partiers, have in common. Many do not seem to be aware of this shared interest.

The following is from Alan Grayson, former congressman from Florida. I have reproduced it in its entirety. The original is here. Mr Grayson is campaigning to win back his seat in 2012.

        The Fed Bailouts: Money for Nothing

I think it’s fair to say that Congressman Ron Paul and I are the parents of the GAO’s audit of the Federal Reserve. And I say that knowing full well that Dr. Paul has somewhat complicated views regarding gay marriage.

Anyway, one of our love children is a massive 251-page GAO report technocratically entitled “Opportunities Exist to Strengthen Policies and Processes for Managing Emergency Assistance.” It is almost as weighty as that 13-lb. baby born in Germany last week, named Jihad. It also is the first independent audit of the Federal Reserve in the Fed’s 99-year history.

Feel free to take a look at it yourself, it’s right here. It documents Wall Street bailouts by the Fed that dwarf the $700 billion TARP, and everything else you’ve heard about.

I wouldn’t want anyone to think that I’m dramatizing or amplifying what this GAO report says, so I’m just going to list some of my favorite parts, by page number.

Page 131 – The total lending for the Fed’s “broad-based emergency programs” was $16,115,000,000,000. That’s right, more than $16 trillion. The four largest recipients, Citigroup, Morgan Stanley, Merrill Lynch and Bank of America, received more than a trillion dollars each. The 5th largest recipient was Barclays PLC. The 8th was the Royal Bank of Scotland Group, PLC. The 9th was Deutsche Bank AG. The 10th was UBS AG. These four institutions each got between a quarter of a trillion and a trillion dollars. None of them is an American bank.

Pages 133 & 137 – Some of these “broad-based emergency program” loans were long-term, and some were short-term. But the “term-adjusted borrowing” was equivalent to a total of $1,139,000,000,000 more than one year. That’s more than $1 trillion out the door. Lending for these programs in fact peaked at more than $1 trillion.

Pages 135 & 196 – Sixty percent of the $738 billion “Commercial Paper Funding Facility” went to the subsidiaries of foreign banks. 36% of the $71 billion Term Asset-Backed Securities Loan Facility also went to subsidiaries of foreign banks.

Page 205 – Separate and apart from these “broad-based emergency program” loans were another $10,057,000,000,000 in “currency swaps.” In the “currency swaps,” the Fed handed dollars to foreign central banks, no strings attached, to fund bailouts in other countries. The Fed’s only “collateral” was a corresponding amount of foreign currency, which never left the Fed’s books (even to be deposited to earn interest), plus a promise to repay. But the Fed agreed to give back the foreign currency at the original exchange rate, even if the foreign currency appreciated in value during the period of the swap. These currency swaps and the “broad-based emergency program” loans, together, totaled more than $26 trillion. That’s almost $100,000 for every man, woman, and child in America. That’s an amount equal to more than seven years of federal spending -- on the military, Social Security, Medicare, Medicaid, interest on the debt, and everything else. And around twice American’s total GNP.

Page 201 – Here again, these “swaps” were of varying length, but on Dec. 4, 2008, there were $588,000,000,000 outstanding. That’s almost $2,000 for every American. All sent to foreign countries. That’s more than twenty times as much as our foreign aid budget.

Page 129 – In October 2008, the Fed gave $60,000,000,000 to the Swiss National Bank with the specific understanding that the money would be used to bail out UBS, a Swiss bank. Not an American bank. A Swiss bank.

Pages 3 & 4 – In addition to the “broad-based programs,” and in addition to the “currency swaps,” there have been hundreds of billions of dollars in Fed loans called “assistance to individual institutions.” This has included Bear Stearns, AIG, Citigroup, Bank of America, and “some primary dealers.” The Fed decided unilaterally who received this “assistance,” and who didn’t.

Pages 101 & 173 – You may have heard somewhere that these were riskless transactions, where the Fed always had enough collateral to avoid losses. Not true. The “Maiden Lane I” bailout fund was in the hole for almost two years.

Page 4 – You also may have heard somewhere that all this money was paid back. Not true. The GAO lists five Fed bailout programs that still have amounts outstanding, including $909,000,000,000 (just under a trillion dollars) for the Fed’s Agency Mortgage-Backed Securities Purchase Program alone. That’s almost $3,000 for every American.

Page 126 – In contemporaneous documents, the Fed apparently did not even take a stab at explaining why it helped some banks (like Goldman Sachs and Morgan Stanley) and not others. After the fact, the Fed referred vaguely to “strains in the financial markets,” “transitional credit,” and the Fed’s all-time favorite rationale for everything it does, “increasing liquidity.”

81 different places in the GAO report – The Fed applied nothing even resembling a consistent policy toward valuing the assets that it acquired. Sometimes it asked its counterparty to take a “haircut” (discount), sometimes it didn’t. Having read the whole report, I see no rhyme or reason to those decisions, with billions upon billions of dollars at stake.

Page 2 – As massive as these enumerated Fed bailouts were, there were yet more. The GAO did not even endeavor to analyze the Fed’s discount window lending, or its single-tranche term repurchase agreements.

Pages 13 & 14 – And the Fed wasn’t the only one bailing out Wall Street, of course. On top of what the Fed did, there was the $700,000,000,000 TARP program authorized by Congress (which I voted against). The Federal Deposit Insurance Corp. (FDIC) also provided a federal guarantee for $600,000,000,000 in bonds issued by Wall Street.

There is one thing that I’d like to add to this, which isn’t in the GAO’s report. All this is something new, very new. For the first 96 years of the Fed’s existence, the Fed’s primary market activities were to buy or sell U.S. Treasury bonds (to change the money supply), and to lend at the “discount window.” Neither of these activities permitted the Fed to play favorites. But the programs that the GAO audited are fundamentally different. They allowed the Fed to choose winners and losers.

So what does all this mean? Here are some short observations:

(1) In the case of TARP, at least The People’s representatives got a vote. In the case of the Fed’s bailouts, which were roughly 20 times as substantial, there was never any vote. Unelected functionaries, with all sorts of ties to Wall Street, handed out trillions of dollars to Wall Street. That’s now how a democracy should function, or even can function.

(2) The notion that this was all without risk, just because the Fed can keep printing money, is both laughable and cryable (if that were a word). Leaving aside the example of Germany’s hyperinflation in 1923, we have the more recent examples of Iceland (75% of GNP gone when the central bank took over three failed banks) and Ireland (100% of GNP gone when the central bank tried to rescue property firms).

(3) In the same way that American troops cannot act as police officers for the world, our central bank cannot act as piggy bank for the world. If the European Central Bank wants to bail out UBS, fine. But there is no reason why our money should be involved in that.

(4) For the Fed to pick and choose among aid recipients, and then pick and choose who takes a “haircut” and who doesn’t, is both corporate welfare and socialism. The Fed is a central bank, not a barber shop.

(5) The main, if not the sole, qualification for getting help from the Fed was to have lost huge amounts of money. The Fed bailouts rewarded failure, and penalized success. (If you don’t believe me, ask Jamie Dimon at JP Morgan.) The Fed helped the losers to squander and destroy even more capital.

(6) During all the time that the Fed was stuffing money into the pockets of failed banks, many Americans couldn’t borrow a dime for a home, a car, or anything else. If the Fed had extended $26 trillion in credit to the American people instead of Wall Street, would there be 24 million Americans today who can’t find a full-time job?

And here’s what bothers me most about all this: it can happen again. I’ve called the GAO report a bailout autopsy. But it’s an autopsy of the undead.

Courage,

Alan Grayson

Economists for Occupy Wall Street

A short video from economists who understand what #OWS is, and why it is protesting this country's unsustainable, rigged system.

Occupy Economics from Softbox on Vimeo.


From econ4.org.

How They Really Feel

This man's comments speaks volumes on the attitudes of the wealthy. His disdain for those with less money is palpable. He clearly is equating people's value with the size of their portfolio. Rich people are better.



And it is not just an arrogant attitude; he is also egregiously wrong,his intellectual honesty clearly compromised by his ideology. Notice that he claims to be subsidizing the 99% because he is making big bucks. It is especially ridiculous in light of the massive amounts of money our government has directed at the 1%, and especially the 0.1%, who operate under a self-serving delusion that everything they have is because of skill and hard work. Overlooked by this dickhead are the endless flows of government contracts and concessions to big Pharma, defense contractors and the like. Overlooked are the multi-million dollar giveaways by state and municipal governments as they compete to entice corporations to locate in their areas.

Richie Rich also ignores huge sums given to banks as part of their bailout, money bank executives then used to pay outsized bonuses. And just this week we read that those banks earned roughly $13 billion in interest directly the result of the sweetheart deal they received for tanking the US economy. Here is the gist of it, as related by AllGov:

Thanks to the Federal Reserve’s generous lending during the 2007-2009 financial crisis, banks that were teetering and at risk of collapsing wound up making billions of dollars in profits, according to Bloomberg Markets magazine.

After combing through 29,000 pages of Fed documents released to Bloomberg by court order, the publication determined that banks earned about $13 billion in income by taking advantage of the Fed’s below-market rates. These loans were made without informing the public or Congress of which institutions were borrowing heavily to stave off disaster.

Finally, have a look at the chart below. The corporations in these sectors are generally run by individuals who espouse rugged individualism, a can-do attitude, and the glories of a free market. They also almost always bitch about high taxes and government regulation. As you can see, they rarely pay their share of taxes, but they sure know how to pull in those tax subsidies- nearly $223 billion from 2008-2010.

Source: Citizens for Tax Justice

That's some serious corporate welfare. And from their government-subsidized profits, they pay outsized compensation to people like the guy in the video. If corporate boards claim that their executives deserve their often huge compensation, then those corporations don't need and don't deserve government support.  If you cannot live without taxpayers like me subsidizing your bottom line, then your insistence on fat bonuses is even more morally obscene than it already is.

Or is this a problem only when the recipients are the 99%?

The implicit message: It's just good business, complete with tax write-offs, when rich guys are in on it, and it's socialism only when the poor receive it.

Semi-Happy Thanksgiving

I would prefer to believe that everyone had a happy Thanksgiving, that they enjoyed a safe and sane feast with family and loved ones. The reality is that many did not.

I believe this is the official start of the holiday season, although every year it looks more like Halloween is. Either way we are now in the most frenzied period of consumption, the time of the year corporate America loves the best and depends upon the most.

In view of that it seems appropriate to recognize how unhappy many are. They've got good reasons. Here are just a few links, each with additional links and source material, that address the growing poverty in America. Read them and learn, but don't characterize the poor, sick, homeless, or unemployed as "unfortunate." Poverty in America is the direct result of reckless policies designed by and catering to ideologues and an avaricious oligarchy, not misfortune.

Extreme poverty is growing

The growth in the "near poor," just above poverty, startles US Census

Inequality is even worse than we thought

More than 1 in 5 of American children are poor

Moyers on Plutonomy

Here is Bill Moyers taking a page from the late Edward R. Murrow when he says having a bias is not a bad thing as long as you don't try to hide it.

Their bias is my bias: Plutocracy and democracy don't mix. Moyers explains how we have now arrived at plutonomy and why it matters.




For teabaggers inclined to obsess over what our founding fathers and past patriots had to say about wealth inequality, I offer some insights.

Social Security's Biggest Defender

Here is the guy voters have been told to shun, ridicule, and oppose at every opportunity. Why? Because Senator Bernie Sanders is un-American, he hates your values, and he wants to enslave you in government-run welfare camps.

Right? I mean these are the kind of tight, reasoned arguments that true patriots like Sarah Palin make about Sanders. They must be true. After all, Sanders is the only avowed socialist in Congress and we all know what they want. If you have any doubts, Sarah will tell you, for a fee, all you need to know about socialism (and everything else).

Those who value facts over diatribe know that Senator Sanders is one of the few who consistently works for the rest of us. Listen to Sanders on social security in the video below. His is one of the few voices in Congress that pushes back against the asinine and palpably wrong argument that social security doesn't work, it is killing the budget, and must be cut. Republicans are leading the assault, but more than a few Dems are willing to give in instead of defending your interests.

Aggressive, moneyed interests in the Republican party; Weak, hand-wringing facilitators in the Democratic party. No wonder Sanders is an independent.

It'll Ruin Us, I Tell You

Yep, it is the most contemptible, onerous regulation you could possibly impose upon commerce. Just ask the business organizations quoted in the video below.

What is this horror? An August 30 ruling by the National Labor Relations Board that requires businesses to display a single poster reminding their employees of their rights.

We can't have employees knowing what their rights are. Better get that black man out of the White House. More analysis at Crooks and Liars.

We Are The Many

Asia-Pacific Economic Cooperation, or APEC, is in town. Security is tight and Waikiki is cordoned off.  Among the festivities was a performance by Makana, a popular local musician, for the numerous leaders from Asia, including China and Japan, along with the US. President Obama was there. You can read more about how the APEC forum turned out here.

As our local newspaper explains, Makana gave an unexpected and gutsy performance in which he sang his new song, We Are the Many, while he shows off an Occupy with Aloha shirt. The video below shows him singing. You will see why it was bold. In my view it was also highly appropriate.

Was anyone offended? Tough shit. If any world leader was offended, it serves to demonstrate why Occupy Wall Street is necessary in the first place.

The second video is a better-quality, professionally recorded version of the same song. Good job, Makana.