tagged w/ Christopher Hayes
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Ed. Note: This blog is available for any organization or outlet to republish or excerpt. Please feel free to share it widely!
by Zach Carter, Media Consortium blogger
Undue corporate influence over U.S. elections has been a serious problem in American politics for decades, but this year’s Supreme Court ruling in Citizens United v. Federal Election Commission made things worse. Worst of all, we may never know the extent of the damage.
Citizens United freed corporations to spend unlimited amounts of money backing specific political candidates, and without congressional action, those expenditures can be completely anonymous. Major corporations are already capitalizing on the new legal landscape by the millions, and the public doesn’t really know who is buying what influence or why.
That’s why The Media Consortium will be carefully watching the effects of this ruling in the run up to this year’s midterm elections. Every day through Nov. 4, we’ll bring you some of the best independent reporting on the effects of corporate spending in an attempt to measure just how widespread the effect of Citizens United will be on this—and the next—election. Keep your eye on “Campaign Cash” as we follow this issue in the coming weeks. If you want to tweet about it, use the hashtag #campaigncash.
The impact of Citizens United
As Harvard University Law School Professor Lawrence Lessig explains in an interview with The Nation’s Christopher Hayes, the Citizens United v. FEC decision represents one of many ways that corporations buy political favors.
Prior to the ruling, companies couldn’t spend money to directly advocate the election of a particular political candidate during election season. They could form Political Action Committees (PACs) to support or attack specific candidates, but those PACs had to be funded by individuals who worked for the company and couldn’t be funded from the corporation’s treasury directly. The executives of Goldman Sachs, for instance, could band together to form GoldmanPAC and spend their money on whatever candidates they wished—and many corporate employees exercised that right and spent freely on elections through their corporate PACs.
Now corporations can spend as much as they want and actual corporate funds—not just organized individuals—can also be deployed, making massive amounts of corporate cash eligible for political purchasing.
But the scariest part of Citizens United, as Lessig emphasizes, is the money that isn’t spent. That is, if a firm makes it known that they are willing spend millions of dollars to fight any politician who opposes them on a particular policy issue, representatives and senators might begin changing their voting behavior in Congress before the company actually has to put up the cash.
And ultimately, Citizens United didn’t just legalize unlimited corporate expenses on elections. It also allows those expenses to be anonymous. If companies launder their political cash through a front group, that third-party spender doesn’t have to disclose who its donors are.
This isn’t your local Chamber of Commerce
As Harry Hanbury details for GRITtv, this laundering scheme is essentially the business model for the U.S. Chamber of Commerce– a lobbying powerhouse in the nation’s capital. Don’t be fooled by its name—the U.S. Chamber has almost nothing to do with the local small business coalitions who help strengthen local economies.
As Hanbury notes, 40 percent of the U.S. Chamber’s 2008 funding came from just 26 corporations. The group represents many of the nation’s largest and most irresponsible corporations, from those responsible for the financial meltdown on Wall Street to BP, the company that spilled millions of barrels worth of oil in the Gulf this summer. The Chamber’s branding allows them to disguise their political as a coalition of local businesses while it does dirty work for corporate titans.
When BP was publicly promising to do everything in its power to fix the massive oil disaster it created in the Gulf of Mexico, it was also funneling money to the U.S. Chamber of Commerce. And what was the Chamber up to? It was lobbying furiously to protect BP from new rules that would force the company to pay for oil disaster clean-up. The Wall Street banks did the same thing as financial reform legislation moved through Congress, and companies never have to disclose these expenditures to the public.
So it’s no surprise that the Chamber responded to Citizens United by immediately announcing a 40 percent boost in its political spending operations. So much corporate money then flowed into the Chamber that the group chose to boost this budget again by 50 percent, allocating $75 million for its 2010 war chest. So far, the Chamber’s ads have favored Republican’s 93 percent of the time. No entity spends more on politics than the Chamber—not even the political parties themselves.
Corporations top the list of big election spenders
But while the future of corporate spending in campaigns looks bleak after Citizens United, corporations are still barred from contributing directly to political campaigns. A company might take out a television ad attacking Rep. Alan Grayson (D-FL), but it can’t make unlimited contributions directly to Grayson’s challenger, Republican Dan Webster.
Nevertheless, corporate employees and company PACs have already been spending lavishly on elections for decades. In a feature for Mother Jones, Dave Gilson compiles the 75 biggest political spenders, both companies and trade groups, from 1989 through 2010, and breaks them down by industry. Goldman Sachs, Citigroup, JPMorgan Chase, and Morgan Stanley are all among the top 20 most extravagant political spenders—but the American Bankers Association, a trade group that all four belong to, is also in the top 10. If you’re wondering how Wall Street was able to secure its massive taxpayer bailout in the face of widespread voter outrage, this is your answer.
To soften the Citizens United blow, Congress has been debating the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act, which would require companies to disclose all of their political expenditures as well as requiring front-groups like the Chamber to list the identities and amounts of its donors. The bill, sponsored by Rep. Christopher Van Hollen (D-MD) and Sen. Russ Feingold (D-WI), cleared the House this summer but was stymied by a Republican filibuster in the Senate.
Undoing the damage dealt by Citizens United through something like the DISCLOSE Act will help, but it won’t make our democracy totally safe from corporate abuse. As Lessig notes, the day before the decision was handed down, U.S. election financing was already encouraging rampant corruption and in need of serious reform.
Lessig suggests banning political expenditures by corporations altogether, and placing a hard cap on the amount that individuals can contribute. By limiting individual donations to $100, the ability of corporate PACs to funnel cash into the political process would be thwarted.
This post features links to the best independent, progressive reporting about the mid-term elections and campaign financing by members of The Media Consortium. It is free to reprint. Visit The Media Consortium for more articles on these issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Audit, The Mulch, The Pulse, and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.Ed. Note: This blog is available for any organization or outlet to republish or... more
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http://www.themediaconsortium.org/2010/05/25/weekly-audit-want-economic-justice-then-its-time-to-act/
by Zach Carter, Media Consortium blogger
Image courtesy of Flickr user SEIU International under Creative Commons LicenseOn Thursday, the U.S. Senate passed a financial reform package that includes a handful of important reforms, but it won’t fundamentally change the relationship between banks and society. Wall Street still has a vice grip on our economy, and lawmakers still find it very difficult to stand up to bigwig financiers.
The real fight for our economy will involve future legislative battles with bankers. Winning those battles will require sweeping action by engaged citizens. The good news is, critical progressive mobilization is already happening. Public outcry helped fuel the fire for Senate reform. Rep. Barney Frank (D-MA), has said that the Wall Street reform bill he pushed through the House last year would have been much stronger in today’s atmosphere of outspoken economic unrest.
Focus on the Fed
So what’s good about the bill the Senate just passed? As Annie Lowrey explains for The Washington Independent, the Federal Reserve’s emergency lending programs will finally be subjected to public scrutiny.
The Fed served as the U.S. government’s chief bailout engine during the crisis. It injected trillions of dollars into the banking system without any oversight. We still don’t know who got the vast majority of that money, or what collateral the Fed accepted in return. There are all sorts of potential scandals, ranging from sweetheart deals the Fed cut with hedge funds to the trillions of dollars in loans to megabanks with no strings attached.
Of particular interest are the “Maiden Lane vehicles”—programs the Fed devised to purchase or guarantee assets from Bear Stearns and AIG. These were explicit bailouts for individual firms. We know almost nothing about the Bear Stearns bailout, and what little we do know about the AIG bailout is unsavory to say the least— big bonuses for AIG’s employees, with little or no effort to limit the impact on taxpayers.
Reconciliation
There are still a handful of important fights as the House and Senate iron out the differences between their respective versions of the bill. As I emphasize for AlterNet, a host of major issues are still on the table, including consumer protection rules and fixing the derivatives casino. These changes could be gutted entirely or dramatically strengthened during negotiations between the House and Senate.
The final bill will not dramatically alter Wall Street. As Roger Bybee explains for In These Times, the Democratic leadership has been trying to both establish meaningful reforms and simultaneously maintain its campaign finance relationship with megabanks. Republicans have almost universally attempted to block any reform altogether.
Regulators will get a handful of important new tools, including the authority to shut down complex banks on the verge of collapse, the ability to monitor derivatives and a have new set of powers to protect consumers. That’s all good, but we’ll still be living with too-big-to-fail behemoth banks that engage in reckless trading and exploit consumers.
Engaging activists
That means that the real business of fixing the financial system is still to come. And, as Christopher Hayes emphasizes for The Nation, that business is not going to be accomplished without serious, organized progressive activists putting pressure on political leaders to act in the public interest, rather than the interests of the corporate class.
When the country suffered a trauma that massively discredited the establishment rulers, the Democratic Party became the establishment. And progressive groups in DC, under stern White House orders not to cause trouble (don’t show up at his door! he’s a donor! we might nominate him for something!), descended into what one organizer calls “grotesque transactionalism” . . . . If we’re going to get reform on the scale we need, bank lobbyists and members of Congress alike have to be confronted with the terrifying thought that the system from which they profit might just be run over—that 700 angry protesters might show up on their lawn.
As Hayes details, Bank of America lobbyist Gregory Baer woke up last Sunday with exactly that– 700 protesters in his front yard. That kind of pressure gets results. It took Franklin Delano Roosevelt seven years to enact his New Deal financial reforms. Earlier in the 20th Century, it took more than a decade for public opinion to align itself with the corporate crackdowns pushed by Republican President Theodore Roosevelt. It’s reasonable to expect the fight for fair finance to take more than two years, and important to fight hard for it.
The minimum reforms are already clear. Essentially, we need to bring banking back to the model that persisted from the 1930s into the 1980s—an era with no serious financial crises or bailouts. Our current financial woes stem from the systematic dismantling and deregulation of this system over the past 30 years.
State-run banks?
But we also need to learn from more recent economic experiments. As Ellen Brown notes for Yes! Magazine, the state of North Dakota has been largely insulated from much of the fallout from the financial crisis of 2008. Part of the reason for the state’s relative stability lies in the fact that it operates its own bank.
North Dakota’s direct supervision of one institution among the hundreds of banks that operate in the state has helped insulate it from the credit storm on Wall Street. The state has its own engine of credit, and can keep funds flowing to businesses that need it, even in the middle of a crisis.
The prospect of state-run banking may seem radical, but it isn’t. It’s a practical proposal based on the established, real-life success of the Bank of North Dakota. As Brown notes, five other states have legislation pending that would create their very own banks—Massachusetts, Virginia, Washington, Illinois and Michigan, while Hawaii recently approved a study to determine the usefulness of a bank run by that state.
The financial reform bill the Senate just passed was a good start, but we’ve got a long way to go. We’re not going to get there without a committed community of progressive activists who demand that the economy serve society, not only entrenched corporate interests.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.http://www.themediaconsortium.org/2010/05/25/weekly-audit-want-economic-justice-then-it... more
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by Zach Carter, Media Consortium blogger
Last week, the Securities and Exchange Commission filed fraud charges against Goldman Sachs and underscored what most Americans have believed for some time: Wall Street has rigged the economy in its own favor, and will stop at nothing—not even outright theft—to boost its profits. What’s worse, Goldman’s scam could have been completely prevented by better regulations and law enforcement.
Goldman’s heist
Let’s be clear. “Financial fraud” means “theft.” Goldman Sachs sold investors securities that were stocked with subprime mortgages and had been cherry-picked by a hedge fund manager named John Paulson. Paulson believed these mortgages were about to go bust, so he helped Goldman Sachs concoct the securities so that he could bet against them himself.
Goldman Sachs, like Paulson, also bet against the securities. But when Goldman sold the securities to investors, it didn’t tell them that Paulson had devised the securities, or that he was betting on their failure. By withholding crucial information from investors, Goldman directly profited from the scam at the expense of its own clients. If ordinary citizens did what the SEC’s alleges Goldman did, we’d call it stealing.
As Nick Baumann emphasizes for Mother Jones, the SEC’s suit against Goldman is just the tip of the iceberg. During the savings and loan crisis of the late 1980s, literally thousands of bankers were jailed for financial fraud. Today’s crisis was much larger in scope, yet the Goldman allegations are among the first serious charges of legal wrongdoing to emerge (other complaints have been filed against Regions Bank and former Countrywide CEO Angelo Mozilo). If the SEC or the FBI are doing their jobs, we should see many more of these cases.
Bust ‘em up.
How do banks get away with these kinds of shenanigans and still secure epic taxpayer bailouts? It’s all about their political clout, as Robert Reich notes for The American Prospect. So long as banks are so enormous that they can ruin the economy with their collapse, the institutions will always carry tremendous political clout.
Even in the case of Goldman Sachs, which is too-big-to-fail by any reasonable standard, the SEC’s fraud case is being filed three years after the company’s alleged offense. That’s well after the company rode to safety on the Troubled Asset Relief Program, the AIG bailout and billions more in other indirect assistance—and only after multiple journalists made Goldman’s offensive transactions general public knowledge.
If we don’t break up the big banks, politically connected Wall Street titans will make sure they get bailed out when the next crisis hits, regardless of whatever laws we have on the books.
Fix the derivatives casino
If Congress doesn’t soon pass a bill to break up behemoth banks, it will be neglecting the gravest problem in our financial system today. But several other reforms are needed if Wall Street is ever going to serve a useful economic function again.
As Nomi Prins emphasizes for AlterNet, much of the Wall Street profit machine has been divorced from the economy that the rest of us live in. These days, banks make most of their money from securities trades and derivatives deals. Their actual lending business is taking a beating. That means big banks have very little incentive to promote economic well-being for every day citizens. We need to create these incentives by banning economically essential banks from engaging in securities trades, and make sure all derivatives transactions are conducted on open, transparent exchanges, just like ordinary stocks and bonds.
Better derivatives regulations could help protect against fraud. If Goldman Sachs’ sketchy subprime deal had been subject to market scrutiny on an exchange, it’s very unlikely that any investor would have bought into it. Goldman Sachs almost got away with it because the deal was secretive and beyond the scope of most regulatory oversight.
Protect whistleblowers
The Goldman case also raises significant questions about the government’s enforcement of existing financial fraud laws. Bradley Birkenfeld, a banker for Swiss financial giant UBS, helped the Department of Justice bring the largest tax fraud case in history against his company, which was helping rich Americans hide money from the IRS in offshore bank accounts.
For his cooperation, Birkenfeld was rewarded with a four-year prison sentence, even though nobody else at UBS—nobody—has been sentenced to prison over the scam. As Juan Gonzalez and Amy Goodman emphasize for Democracy Now!, Birkenfeld’s imprisonment could have something to with who exactly is hiding money with UBS.
Gonzalez discusses an interview with Birkenfeld, in which the former banker notes that the bank had a special office to handle the accounts of “politically exposed persons”— American politicians. Moreover, the top brass at UBS includes key advisors to top politicians in both parties. This is exactly the kind of influence smuggling that breaking up the banks would help fix. UBS is a multi-trillion-dollar institution with no less than 27 U.S. subsidiaries.
But protecting Birkenfeld would accomplish still more—by jailing him, the Justice Department is actively discouraging others from coming forward, and making it more difficult for regulators to enforce the law.
Greenspan’s failure
It’s abundantly clear that almost every major regulatory agency charged with curtailing financial excess failed to prevent the Crash of 2008. But that failure doesn’t mean that effective regulation is impossible—it only shows that the regulators in power failed. The top bank regulator in the U.S., John Dugan, was a former bank lobbyist.
As Christopher Hayes demonstrates for The Nation, former Federal Reserve Chairman Alan Greenspan has never had any interest in regulation whatsoever. After the crash, Greenspan insisted that nobody could have seen it coming. But as Hayes notes, many people did—Greenspan simply didn’t listen to them. These days, Greenspan is revising his story, claiming that he did in fact see the crisis coming, but that nobody could have prevented it. That is simply not credible.
Hayes draws a useful parallel Hurricane Katrina, a problem sparked by a natural event that became a catastrophe when regulators failed to take the necessary precautions. The lesson from both Katrina and the financial crash is not that government always screws up—we have plenty of examples of government preventing floods and economic calamity. The lesson we should learn is that people who don’t believe in government will never do a good job governing. As Hayes notes:
If Greenspan couldn’t figure things out, that doesn’t mean others can’t. In fact, developing systems for doing just that is called—quite simply—progress, and Alan Greenspan continues to be one of its enemies.
That is exactly the task that now presents itself before Congress: Developing a system to prevent and constrain economic destruction wielded by Wall Street. The U.S. had a system that did exactly this for more than fifty years. For the last thrity years, it has been systematically dismantled. How well Congress lives up to that challenge will define much of our economic future for decades to come.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.by Zach Carter, Media Consortium blogger
Last week, the Securities and Exchange... more
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by Zach Carter, Media Consortium blogger
Next week, the debate over financial reform will begin in earnest when Congress returns from its Easter break. Both political parties are gearing up for a major fight, and the stakes couldn’t be higher. An out-of-control banking sector has cost the economy over 7 million jobs since 2007, and without major reforms, Wall Street could repeat this disaster in just a few years’ time. But thanks to Wall Street’s lobbying might, all of the necessary reforms are currently in jeopardy.
Key Reforms
Writing for The Nation, Christopher Hayes offers a useful primer on financial regulation, highlighting three reforms that are crucial to any bill.
* With no effective regulation of consumer protection issues for years, the existing banking regulators were more focused on preserving bank profitability than on going to bat for ordinary citizens. If banks could make big profits with unfair gimmicks (or even fraud), regulators usually looked the other way. The solution is a strong, independent Consumer Financial Protection Agency (CFPA) charged with nothing but protecting consumers from banker abuses, an agency with the broad authority to both write rules and enforce them.
* We need to rein in the $300 trillion market for derivatives, the complex financial contracts brought down AIG. Unlike ordinary stocks and bonds, derivatives are not traded on exchanges, so nobody really knows what is going on in this tremendous market. When something goes wrong, like with the collapse of Lehman Brothers, nobody can tell who the problem will effect. Without information, markets panic, and the entire financial system can collapse within a matter of days. Fortunately, this problem has a simple solution: require all derivatives to be traded on exchanges.
* Too-big-to-fail is too big to exist. The U.S. has never had banks as large as those that exist today, and their size gives them enormous political clout. It’s part of the reason why regulators didn’t make banks obey consumer protection laws, and why banks have been so effective in derailing reform. It’s been almost two years since the Big Crash, yet we are still wrangling over reform because giant banks deploy giant lobbying teams, and have almost unlimited resources to devote to their lobbying efforts. If we can’t scale back the banks’ power by breaking them up into smaller institutions, it’s unlikely that other reforms will be effective.
As Margaret Dorfman emphasizes for American Forum, a strong CFPA would help protect small businesses, since a huge proportion of them are financed with credit cards and home equity loans (Dorfman is CEO of the U.S. Women’s Chamber of Commerce, an advocacy group for women that should not be confused with the U.S. Chamber of Commerce—a nasty lobbying front for a few hundred high-flying executives). As Dorfman notes, small businesses are where most new jobs come from– if a regulator can ensure that these businesses are not pushed around by abusive banks, they can help repair our jobs.
Unfortunately, all three reforms are in real jeopardy as the bill moves to the Senate floor for a vote, as Simon Johnson notes in his Baseline Scenario blog carried at AlterNet. Senate Banking Committee Chairman Chris Dodd (D-CT) hasn’t included any language on breaking up the banks, he has significantly watered down the CFPA proposal President Obama put forward, and derivatives reform was almost entirely gutted in the House.
What’s at stake
So what’s at stake? For some perspective, consider last week’s jobs report. As Steve Benen notes for The Washington Monthly, the U.S. economy added 160,000 jobs in March, the first significant monthly gain since the start of the recession, and the best jobs report in three years. But while it’s good to see the economy actually adding jobs, at the March rate, it would take more than three-and-a-half years to win back the 7 million jobs lost since 2007.
This jobs disaster was not caused by faceless and unpreventable forces—it was the direct result of a reckless and unregulated banking system. Without major reforms, banks will always have this economic leverage when that recklessness overpowers them: bail us out, or watch your economy collapse.
This is an issue of basic democratic fairness, as Noam Chomsky explains for In These Times. Wall Street has purchased the right to bend public policy to anything that benefits banks—the rest of society is not their concern. The bailouts of 2008 and 2009 make that clear. After wrecking the economy to enrich themselves, bank executives then looted the public coffers with the threat of still further economic havoc.
And the political clout of America’s largest banks insulates them from criticism when they profit from abuses—particularly when those activities don’t spark wider economic crises. As Andy Kroll highlights for Mother Jones, J.P. Morgan Chase is currently making a killing by financing mountaintop removal mining (MTR). MTR is an ecological nightmare—literally a bombing campaign in which entire mountains in Appalachia are destroyed to make way for cheap coal. That’s meant billions in profits for J.P. Morgan, and an environmental catastrophe for the United States.
Obama and Congress have a choice. They can play financial reform for campaign contributions, pushing a watered-down bill that will function as a set of reforms-in-name-only. Alternatively, they can do their jobs, confront a dangerous financial oligarchy head-on, and help build an economy that works for everyone.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.by Zach Carter, Media Consortium blogger
Next week, the debate over financial... more
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By Lindsay Beyerstein, Media Consortium blogger
While President Obama signed the final piece of the health care reform bill into law on Tuesday, opponents are not taking the defeat lying down. This week’s prize for the most bizarre objection to health care reform goes to Glenn Beck’s guest host Doc Thompson who alleged that a tax on tanning salons is racist. Andy Kroll of Mother Jones explains:
Filling in for Glenn Beck on his radio show, conservative radio host Doc Thompson recently made the stunningly outrageous claim that a tax on indoor tanning salons, as included in the health care reform bill, is racist. Such a tax, Thompson claimed, discriminates against “all light-skinned Americans” because only white-skinned Americans use tanning salons. Never mind the deadly effect tanning beds and the like have on your skin and health, nor the fact that the tax would generate $2.7 billion over ten years to help pay for health care. No, that couldn’t have anything to do with why the tax was included in the health care bill.
Governors vs. AGs
Christina Bellantoni of TPM Election Central reports that various Republican state attorneys general are clashing with their Democratic governors over plans to challenge health care reform in court. When Michigan Attorney General Mike Cox (R) joined an anti-reform lawsuit, Gov. Jennifer Granholm (D) reminded everyone that “no one in the executive branch has authorized [Cox] to take this position.” The lawsuits are a good way to grab media attention, but Cox and his fellow AGs may end up with egg on their faces if these challenges actually go to court.
Reform and the Constitution
Some anti-reform activists allege that health care reform is unconstitutional because the government doesn’t have the right to force people to carry health insurance (aka the “individual mandate”). On, The Breakdown podcast, Chris Hayes of the Nation interviews Gillian Metzger a professor of constitutional law at Columbia who explains why the constitutionality of health care reform is “pretty much a no-brainer.” Another Nation contributor, Aziz Huq, puts it this way: “Among constitutional scholars, the puzzle is not how the federal government can defend the new law, but why anyone thinks a constitutional challenge is even worth making.”
SEIU Sues Dissident Local
Speaking of lawsuits, Carl Finamore of Working In These Times is covering a major court battle in California between two large health care unions. The 1.8 million-member Service Employees International Union is suing the former elected officers, staff and organizers of its third-largest national affiliate, United Healthcare Workers–West (UHW). The 26 defendants defected from SEIU to form a new union, National Union of Healthcare Workers (NUHW), which is also being sued. The conflict started a few years ago when national SEIU decided to remove 65,000 health care workers from a UHW local without the local’s consent. Finamore sees this lawsuit as a test of the principle of local self-governance: can SEIU sue a dissident local into submission?
This post features links to the best independent, progressive reporting about health care by members of The Media Consortium. It is free to reprint. Visit the Pulse for a complete list of articles on health care reform, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Audit, The Mulch, and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.By Lindsay Beyerstein, Media Consortium blogger
While President Obama signed the... more
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By Zach Carter, Media Consortium blogger
Now that health care reform has finally been enacted, a host of critical economic issues are taking center stage, including financial reform, unemployment and deeply rooted economic inequality. But it’s important to note that with its health care vote, the U.S. House of Representatives actually approved a very important, and often overlooked financial reform: Student lending.
Pedro de la Torre III of Campus Progress explains the current student loan nightmare in an interview with The American Prospect’s Rebecca Delaney. For years, the U.S. government has paid massive subsidies to some of the worst-run companies in the country.
Thanks a lot, Sallie Mae
As de la Torre notes, instead of directly making loans to students, the government spent years funneling money to firms like Sallie Mae to actually make the loans. When things went sour, taxpayers covered the lender’s losses from student loans that ultimately went bad.
Taxpayers were also footing the bill for the loans and taking on the risk, while private companies and their executives enjoyed the benefits. The executives made quite a haul. In 2008 alone, Sallie Mae CEO Albert Lord took home an astonishing $46 million. Even among CEOs, that’s a princely sum—more than double what Halliburton CEO David Lesar made the same year. All of that money could have financed a lot of college educations.
Fortunately, the student loan landscape is almost certain to change as a result of the health care vote. The House bill included a provision to end student loan subsidies and boost funding for direct grants from the government to students.
Since the student loan reform and health care were both eligible for reconciliation in the Senate (meaning only 51 votes are needed for passage instead of the 60 to clear a filibuster), House Democrats decided to move on both at the same time. It’s a significant reform, and one that will soon become law with President Barack Obama’s signature.
What would an overhaul of the consumer finance industry entail?
The student loan system is just one aspect of the consumer finance industry that needs a major overhaul. On mortgages, credit cards, overdrafts, and payday loans, the banking status quo is one of outright predation. As Heather McGhee of Demos explains to The Nation’s Christopher Hayes, there’s a reason why federal agencies do a lousy job regulating consumer banking abuses.
Right now there is no agency responsible for consumer protection alone. Every regulator also focuses on making sure banks don’t fail, which generally means that regulators support anything that increases short-term profits. Egregiously predatory practices generally lead to big short-term gains in banking.
A new consumer financial protection bureau
Last week, Senate Banking Committee Chairman Chris Dodd (D-CT) introduced a bill that would create a new bureau of consumer financial protection, with no constraints from bank profitability. It’s a step in the right direction, but as McGhee notes, there are plenty of problems with Dodd’s proposal. Most problematically, the bill gives existing agencies a veto power over any new consumer protection rules. That’s a terrible loophole. Existing regulators have actively opposed consumer protections in the past, and there is every reason to expect that practice to continue.
Rapid tax refunds scam the poor
It’s late March, which means tax season is getting into full swing. All over the country, mascots from Liberty Tax are spilling into the streets wearing goofy costumes, trying to win your business. But millions of Americans don’t realize that Liberty, along with H&R Block, Jackson-Hewitt and hundreds of smaller businesses are engaged in a monstrous scam disguised as a complicated accounting service.
As Alexander Zaitchik emphasizes for AlterNet, these tax preparers have used deceptive advertising and slick salesmanship to con people into taking out “refund anticipation loans,” also known as “rapid refunds” and a handful of other pleasant euphemisms. It’s a simple gimmick: H&R Block does your taxes, and then presents you with your tax refund, right away, no waiting. But the check you receive is not actually your tax refund—it’s your tax refund minus a truckload of fees that you didn’t realize were being deducted. This is the tax-time equivalent of payday lending.
When the government sends in your actual, larger tax refund one-to-two weeks later, you won’t see it—it goes straight to H&R Block’s bank partner. Those banks are making big money taking from your tax returns. Here’s Zaitchik:
“In 2008, more than eight million Americans spent nearly a billion dollars paying interest and fees on RALs—often based on misleading or incomplete information—swelling the profits of tax preparers and their partner banks.”
The one break low-income people get under the U.S. tax code is the Earned Income Tax Credit (EITC), the nation’s largest anti-poverty program. Only about 16% of taxpayers qualify for the EITC, but as Zaitchik notes, nearly two-thirds of the people who take out refund anticipation loans receive the credit. Tax preparers are making a concerted effort to prey on the poor, making the EITC program more expensive and less efficient for all taxpayers—not just those who go to H&R Block or Liberty Tax.
More action needed on jobs
Beyond finance, the U.S. economy has a serious jobs problem. Last week, Congress approved an $18 billion jobs package that is simply far too small to make a serious dent in the nearly double-digit unemployment rate. As Art Levine explains for Working In These Times, the package will create 250,000 jobs at best. That number shouldn’t be acceptable to anyone watching the U.S. economy, which has shed about 7 million jobs since the recession began.
There are much stronger options available than the $18 million bill the Senate approved. Rep. George Miller (D-CA) has introduced a bill in the House that would quickly save or create one million jobs, and the House has already passed a separate $154 billion jobs package that would prevent 900,000 lay-offs. If the Senate moved on either one, the result would be a major economic boost.
The link between poor economies and poor health
All of these problems—unemployment, student loan scamming, refund anticipation loan sharking and other forms of financial predation—reinforce economic inequality in the United States, which is at levels unseen since before the Great Depression. That inequality is ultimately actively damaging to public health, as epidemiologist Richard Wilkinson explains in an interview with Brooke Jarvis for Yes! Magazine. Rampant economic inequality in the United States is literally making us sick.
“We looked at life expectancy, mental illness, teen birthrates, violence, the percent of populations in prison, and drug use,” Wilkinson says. “They were all not just a little bit worse, but much worse, in more unequal countries.”
With health care finally finished, Congress and the administration have an opportunity to make serious headway on the economy. They’ve got plenty of work to do.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.By Zach Carter, Media Consortium blogger
Now that health care reform has finally... more
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By Zach Carter, Media Consortium Blogger
One year after President Barack Obama secured passage of his critical economic stimulus package, the U.S. Senate is finally taking anther look at how to create jobs and repair the economy. These issues are more important than ever, but absurd Republican obstructionism and timid Democratic negotiation are once again threatening good public policy.
Not really bipartisan, is it?
As Steve Benen notes for The Washington Monthly, the Senate Finance Committee reached a “bipartisan” agreement to supposedly spur job creation last week. Republicans demanded billions in tax cuts for wealthy people, but kept on caterwauling about the federal budget deficit. In exchange for $80 billion to dedicate to jobs—an extremely modest figure given the state of the labor market—Republicans asked for hundreds of billions in giveaways for the rich. And that’s just to get the bill through the Finance Committee, much less the full Senate.
In a piece for Working In These Times, Michelle Chen notes that Senate Majority Leader Harry Reid pulled the plug on the Finance Committee “compromise,” but stripped out a critical extension of unemployment benefits for laid-off workers in the process.
The Republican uproar over such modest job figures is an economically preposterous political ploy, and Democratic cave-ins to their demands are both bad politics and bad economics. Chen notes that 70% of Americans support a $100 billion jobs bill. And we know what kinds of programs help spur employment—many of them were passed in the stimulus bill last year and have saved millions of jobs.
Stopping the Bleeding
In an interview with Christopher Hayes of The Nation, Economic Policy Institute Fellow Josh Bivens explains that Obama’s economic stimulus package has worked well, effectively stopping the job hemorrhaging that the economy was experiencing immediately before Obama took office. Here’s Bivens:
“We haven’t returned to growth on employment … but the rate of contraction has slowed radically. Immediately before the Recovery Act is passed, we’re losing on the order of 700,000 jobs per month … In the past three months, we’re now down to something like between 50 and 75,000 jobs lost per month, on average … it really is a stark before and after.”
Racial inequality and the recession
The trouble is, the stimulus was only big enough to prevent the economy from getting much worse. It was not large enough to return the economy to serious job growth. And the brutal effects of the recession are not being shouldered equally. As LinkTV’s collaboration with ColorLines illustrates (video below), the Great Recession is hitting people of color much harder, but the story of racial inequality is being lost in stories about statistical economic recovery in the financial sector. The special profiles several families of color struggling to make ends meet in the worst recession since the Great Depression, which features Depression-era unemployment rates for African Americans.
“What we don’t see on TV are the [people] who never had a home or a good job to lose in the first place. These are the millions of poor people whose chance to cross the line into middle class has always been cut short by another kind of line, the color line,” says host Chris Rabb, founder of Afro-Netizen.
Rabb, ColorLines and LinkTV describe a social safety net that has been shredded by opportunistic politicians. Instead of focusing on ways to guarantee good jobs, politicians since the Reagan era have demonized black single mothers by exploiting racist stereotypes in an effort to justify slashing federal supports for the poor and unemployed. The result is a fundamentally unstable economy. Our society has weak demand for goods and services in good times, and that demand completely falls apart when economic conditions deteriorate. And while these socially destructive initiatives have been described as “pro-business,” the truth is, businesses don’t like societies where millions of people are impoverished. They don’t have any customers.
Predatory lending strikes again
The recession hasn’t exactly been a picnic for the middle class, either. In an article for Mother Jones, Andy Kroll profiles the mortgage mess that Ocwen Loan Servicing created for borrower Deanna Walters. Unlike millions of other borrowers dealing with mortgage headaches, Walters wasn’t actually behind on her payments. She was making payments regularly, but Ocwen was misplacing them, and charging her thousands of dollars in improper fees. Walters even paid the fees, but Ocwen eventually foreclosed on her home and sold it in an auction without even informing Walters.
As Kroll emphasizes, Ocwen’s antics aren’t unique. There is an entire class of companies known as mortgage servicers that specialize in deceiving and bullying borrowers out of their money. They often use illegal tactics, and as I note for AlterNet, have been systematically exploiting a badly designed foreclosure relief program from the U.S. Treasury Department.
Funding projects that will put people to work
As prominent economist Dean Baker argues for The American Prospect, there are dozens of productive programs that would put millions of people back to work—if they could just get the funding. The government could quickly and easily provide money to improve public transportation, develop open-source software, fund objective clinical drug trials and (my favorite) support writers and artists, whose work would subsequently be available for the public to enjoy for free.
Taxing financial speculation
The federal government can afford these programs right now, especially without any additional tax revenue. But if we’re really worried about the budget deficit, we can always turn to reasonable new sources for taxes. As Sarah Anderson details for Yes!, an obvious place to look is financial speculation. Since excessive and risky trading helped bring down the economy in 2008, a tax discouraging this behavior could make the economy stronger and reap as much as $175 billion a year for the public.
Our economy wouldn’t face troubles of the same order as those it must overcome today if so-called conservatives had not spend decades pursuing a radical agenda to shred the social safety net. The stimulus package has not spurred job growth to date because of cuts demanded by Congressional Republicans, nearly all of whom refused to vote for the bill anyway. Our economy needs a jobs bill now. It’d be nice if Republicans would show some interest in governing, but if they continue to refuse, Democrats must act on their own.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.By Zach Carter, Media Consortium Blogger
One year after President Barack Obama... more
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