Deadbeat Nation: RJ Eskow

We've spent billions of dollars - perhaps trillions - to rescue big banks. But instead of dialing back on the risky behavior that shattered the economy in 2008, they're doubling down on it. And when their bill comes due we won't just be asked to pay it again. We'll be asked to take the blame for it again, too.

But who are the real deadbeats in this country? Banks ran up a huge bill in the years leading up to the financial crisis - a bill which the rest of us have been paying since 2008. And guess what? They're doing it again.

Take student loans. Americans owe more than a trillion dollars in student loans, a figure that's growing by $50 to $60 billion every month. Now we've learned that as many as 27% of these loans are delinquent, meaning they're more than thirty days past due. That amounts to roughly $270 billion in troubled loans - most of which have been guaranteed by the US taxpayer.

We've already rescued American banks with hundreds of billions in public money, which saved them from the consequences of their incompetent underwriting of mortgage loans. Now we're about to do the same thing with student loans.

They "privatized" Sallie Mae, the government-sponsored enterprise (GSE) created to help students borrow for their education, and its greed-crazed executives went on a grotesque spending spree.They used their government backing to pay themselves inflated salaries and bought corporate jets so they could travel in luxury. Yet, without irony, their backers and shills shrieked "socialism!" when wiser heads wanted to stop private-sector skimming at the expense of our nation's students. (See "Sallie Mae's Jets.")

And now that their loans are going bad, who will pick up the tab? It won't be those high-flying executives.

Student loans aren't the only burden young people - and the rest of us - are carrying today. Today's college seniors are also graduating with an average of more than $4,000 in credit card debt - and then entering an economy where only 46 percent of their peers in the 18-24 year old age group have jobs. That's the lowest percentage since the government began tracking these figures in 1948.

Credit card debt is another exploding area of risk for America's too-big-to-fail banks - and therefore for the Federal government. In this country there are now more than 50 million American Express credit cards in circulation, along with 176 million Mastercard credit cards and 261 million Visa credit cards. That's nearly half a trillion active credit cards from these three companies alone.

Credit cards are unsecured debt, meaning that nothing has been put up as collateral if the borrower defaults. Credit-card holders owed a reported $771 billion - more than three-quarters of a trillion dollars - in the second quarter of 2011. The average amount owed by a credit-card-holding household was more than $16,000.

And the debt train's picking up speed. Lenders wrote off about $250 billion in bad credit card debt between 2008 and 2011. Credit card debt increased by more than $36 billion in the fourth quarter of 2011, which was 30 percent more than the increase in the same quarter of 2010 and and more than twice the increase during the same quarter in 2009. (Source: CardHub.com)

But banks aren't pushing this kind of risky debt on consumers anymore, are they? They've learned their lesson, right? Wrong. Credit card solicitations were up in 2011. And the worst offender is Citigroup, the too-big-to-fail superbank that only exists because of Washington's 'bipartisan' agreement to allow the merger that created it. Last year it mailed out more credit-card solicitations than there are people in the United States (346 million credit card offers in a nation of roughly 308 million people, according to the Wall Street Journal).

In fact, the total number of direct-mail solicitations mailed out by credit-card lenders in 2011comes to nearly five billion.

But then, why not chase down those bad risks and write as many as you can, if you're a too-big-to-fail bank? Someone else will pick up the tab if they go wrong.

When you add up all the forms of consumer debt in this country - medical bills, mortgages, credit cards, student loans, car loans, and other forms of indebtedness - the Federal Reserve Bank of New York says the total amount owed by consumers is now more than $11.5 billion. These runaway debts aren't just another big bill the taxpayer may have to pay to the banks someday soon. They're a burden to individuals and families - and an obstacle to economic recovery.

The banks pay out huge fees to advertisers, psychologists, and other consultants so that all of their solicitations and offers are as persuasive as possible. So first they'll convinced Americans to borrow money - something that's easier to do now that the banks' own recklessness has left many people with no alternative but to borrow.

Then, when billions of dollars' worth of those loans turn out to be unpayable, they'll blame the very same consumers they've just prodded, pressured, and persuaded into borrowing. We'll be subject to another round of lectures about 'reckless consumers' who are 'living beyond their means,' even as we're writing fat checks to the people who got rich convincing them to borrow the money in the first place.

Americans have become indentured servants working in thrall to their lenders, manipulated into borrowing money by their culture and chained to bad debts by their FICO scores. When things go wrong with their own finances they pay the price. And when things go wrong with the finances of the banks that lent them all this money - often at usurious rates - they pay for that, too. And they'll go on paying until it becomes politically unacceptable to protect Wall Street at Main Street's expense.

There are those who will fight any attempt to rescue underwater homeowners on the grounds that it would "reward the undeserving" - and will then fight just as hard to protect banks from the consequences of their own actions. They'll lecture Americans on their "exorbitant" borrowing while rescuing the institutions that spent billions of dollars persuading them to borrow in the first place.

The real debt in this nation is the one that bankers owe the rest of the country. And as long as our politicians are allowed to rescue banks while ignoring consumers, it's a debt that will continue to go unpaid. And it's a debt that will continue to grow.

We need to tell the deadbeats that their credit's no good with us anymore - and that it's time to make good on what they already owe.

Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future and the host of The Breakdown, which is broadast on WeAct Radio, AM 1480 in Washington DC.

CBO: TARP to cost US double initial estimates

http://www.presstv.ir/usdetail/216421.html

estimates

Sun Dec 18, 2011 3:32PM GMT

The government's bailout of banks may cost U.S. taxpayers nearly two times more than originally estimated, according to the Congressional Budget Office (CBO).

The Troubled Asset Released Program, better known as TARP, will cost the federal government $34 billion, the CBO reported on its director's blog. That's $15 billion higher than the agency's previous estimate in March. The increase in the estimate is mostly due to a drop in the market value of the government's investments in American International Group and General Motors.

In addition to the TARP loan, the Federal Reserve provided financial institutions with loans totaling more than $1 trillion in December 2008, at the height of the credit crisis, according to Bloomberg.

Federal officials engineered TARP in October 2008, arguing that giving banks billions of dollars would help them withstand the credit crunch and stymie financial disaster. Critics allege that the money, which was supposed to spur lending to American businesses, never made it to Main Street. More recently, the contrast between the government bailouts bankers received and ordinary Americans' lingering jobs and housing woes has become a rallying cry for Occupy Wall Street.

In fact, many of the banks went back to making the same high-risk bets that got them into trouble in the first place, according to a September study from the University of Michigan. Banks treated the money and the limited guidelines that came with it as an implicit reassurance that the government would help them in the event of future disaster.

Though Treasury Secretary Timothy Geithner told a watchdog panel in June 2010 that the banks had repaid 75 percent of the bailout money they received, there's still billions outstanding. Financial institutions owe the government $18 billion, while AIG still needs to repay $50 billion, according to a CBO infografic.

While the CBO boosted its estimate, it's guess is still lower than that of other agencies. The Office Of Management and Budget estimates that the bailout will cost the federal government $53 billion, according to the CBO blog. Huffington Post

FACTS & FIGURES

Beyond the $700 billion bailout known as TARP, which has been used to prop up American banks and car companies, the U.S. government has created an array of other programs to provide support to the struggling financial system. Through April 30, 2011, the government has made commitments of about $12.2 trillion and spent $2.5 trillion - but also has collected more than $10 billion in dividends and fees. NY Times

The first-ever Congressional audit of the U.S. Federal Reserve reveals that the central bank, between 2007 and 2010, gave $16 trillion in loans at zero percent to corporations and national banks throughout the world. The loans have not been paid back. United Liberty

While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger. Bloomberg

The Fed didn't tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn't mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. Bloomberg

U.S. banks reaped an estimated $13 billion of income by taking advantage of the Fed's below-market rates. Bloomberg

OUTRAGE OF THE DAY: Do You Realize That The Government Is Still Paying Banks Not To Lend...?

Henry Blodget | Aug. 17, 2011, 12:10 PM

Read more: http://www.businessinsider.com/government-paying-banks-not-to-lend-2011-8#ixzz1VKTG8vEg

Read more: http://www.businessinsider.com/government-paying-banks-not-to-lend-2011-8#ixzz1VKT2w554

One of the most outrageous "open secrets" of U.S. government policy these days is that the Federal Reserve is still paying big banks not to lend money.

And it's doing that while screwing average Americans who have been responsible and lived within their means.

Huh?

Seriously:

The Federal Reserve is quietly continuing with one of the many outrageous bank-bailout programs it initiated during the financial crisis--the one in which it pays big banks interest on their "excess reserves."

What are "excess reserves"?

Money that the banks have but aren't lending out--money that banks are just keeping on deposit at the Fed.

The Fed is paying banks 0.25% interest on this money.

0.25% interest may not sound like much, but it's more than the banks are paying you to keep money in your savings or money-market account. It's also more than you'll earn if you lend the Federal government money for 2 years.

Oh, by the way, why, exactly, are you earning so little interest in your savings accounts and money-market funds?

Well, because, thanks to another one of its bank-bailout programs, the Fed is keeping short-term interest rates at zero.

In other words, the Fed is paying banks not to lend money and screwing you, American citizens, because you're dumb enough to have saved money.

This is just so bass-ackwards it's not to be believed.

Why on earth is the Fed paying banks not to lend? Well, back in the financial crisis, the Fed wanted to find ways to secretly bail out the banks without it being screamingly obvious to every American that that was what it was doing. And this particular bailout program was one of the more successful ways it discovered of doing that. Over the past few years, this program has secretly funneled about $10 billion in risk-free cash (rough estimate) directly to the banks, just for being banks and not lending. Don't you wish you could get in on that game?

How much money are banks keeping in "excess reserves" that they might be encouraged to lend if the Fed weren't paying them not to?

Money for nothing.

Image: St. Louis Fed.

Oh, only $1.6 trillion. (See chart)

 

The Fed pays banks about $4 billion of interest a year on that money--the money the banks aren't lending. And bankers get big bonuses based on that interest, for being so smart as to not lend money and instead just take the free interest from the Fed.

Meanwhile, you earn next to nothing (or nothing) on the money you've saved.

We don't think GOP presidential candidate Rick Perry should have threatened to kill Ben Bernanke the other day, but we can certainly understand his frustration.

Publish Post

God, it's great to be a banker.

Boy, does it suck to be an average responsible American.

SEE ALSO: How To Make The World's Easiest $1 Billion Dollars

Read more: http://www.businessinsider.com/government-paying-banks-not-to-lend-2011-8#ixzz1VKSOGmzg

God's gift to banks.

Resistance and Austerity in Europe ~13 min excellent video ~

Resistance and Austerity in Europe

Richard Wolff reports on the mass movements against austerity policies in Europe

Fiscal FactCheck

Does Washington have a spending problem or an income problem? We offer some key facts.
July 15, 2011 

 Summary

Washington's spending has recently been higher as a percentage of the nation's economic output than at any time since World War II. But by the same measure, Washington's revenues are the lowest in more than 60 years.

So does the U.S. have "a spending problem," as Republicans keep repeating in the current debate over how to reduce the nation's record deficits? Or is the problem that taxes are not high enough? Those questions frame a long-running partisan debate, and as usual we won't offer an opinion one way or the other. But for those seeking their own answers, we can offer some fiscal history and factual context.

Some key facts we think are worth considering:

*  Federal spending ("outlays" in budget jargon) is expected to equal 24.1 percent of the nation's gross domestic product in the current fiscal year, which ends Sept. 30. The figure was 25 percent in fiscal year 2009, highest since 1945.

*  On the other hand, federal revenues are expected to drop to 14.8 percent of GDP this year, lower even than the 14.9 percent attained in both 2009 and 2010. There has been only one year since World War II when revenues have been as low as in any of these years: 1950, when the figure was 14.4 percent.

*  These historically high rates of spending and low rates of taxation have combined to produce a chain of deficits that are also the highest since WWII. The deficit was 10.0 percent of GDP in fiscal 2009. It declined to 8.9 percent last year as the economy started to recover, but is projected to go up to over 9 percent this year. Each of these deficits is larger than in any year since 1945, measured as a percentage of GDP.

*  The U.S. is borrowing about 36 cents of every dollar spent so far this year. It borrowed 37 cents on the dollar last year, and 40 cents in fiscal 2009.

*  The largest components of federal spending are Social Security and Medicare programs for the elderly (33.5 percent of total outlays in 2010) and national defense (20.1 percent). Interest payments on the federal debt alone accounted for 5.7 percent of all federal spending, and that percentage is rising.

*  The federal income tax accounted for 41.5 percent of federal receipts in 2010 (down from 49.6 percent prior to the Bush tax cuts of 2001 – 2003). Corporate taxes brought in only 8.9 percent, also down sharply since the recent recession. Payroll taxes and other "social insurance" payments accounted for 40 percent of total receipts in 2010.

It's easy to argue one side or the other by just citing facts that support a particular view, and omitting others. In the Analysis that follows, we offer some graphics, details and documentation in an attempt to give our readers a quick look at the entire picture — both where the money goes, and where it comes from.

Analysis

A glance at this chart quickly puts our current fiscal mess in historical context. We created it using historical budget data from the federal Office of Management and Budget, updated with the most recent estimates of the current fiscal year's outlays and receipts from the nonpartisan Congressional Budget Office, issued June 22 as part of CBO's 2011 long-term budget outlook.

Not since the enormous effort required to defeat Nazi Germany and Japan in WWII has the gap between Washington's spending and its revenues been so large, as a portion of the economy. Then, taxes were increased sharply to pay for the war, but spending increased even faster. In recent years, Washington has increased spending while cutting taxes.

The current situation is a marked change from the booming 1990s. In those years revenues increased, due to a 1993 tax increase, which fell most heavily on those making more than $200,000 a year. Meanwhile spending decreased relative to the rapidly growing economy, partly because of an absolute decline in military spending following the collapse of the Soviet Union in 1991. Deficits were erased, and the government posted surpluses in fiscal 1998, 1999, 2000 and 2001.

But then a string of deficits began in the fiscal year 2002, and there is no end in sight. For the current year, the administration originally projected in February a deficit equal to 10.9 percent, a new postwar record. The Congressional Budget Office in April, using different economic assumptions, projected that enacting the president's budget would produce a deficit of 9.5 percent of GDP, and that making no changes to current law would result in a deficit of 9.3 percent of GDP.

What has produced these huge budget gaps? Tax cuts and wars have been big factors, as have recessions and expanded spending for health care in both Republican and Democratic administrations. For example:

• Income-tax receipts are down sharply since the Bush tax cuts. In fiscal 2000, the year before the cuts began to take effect, receipts from the federal income tax on individuals amounted to 10.2 percent of GDP. That figure was down to 6.2 percent of GDP last year.
• Spending for the military and for homeland security has risen substantially since the attacks of Sept. 11, 2001. Spending for national defense rose from 3.0 percent of GDP that year to 4.8 percent last year.
• Non-military spending also has continued to rise. President George W. Bush pushed through an expensive prescription drug benefit for seniors in 2003, the largest expansion of Medicare in its history. In the financial crisis of 2008, Bush also pushed for and signed for a massive banking bailout. In early 2009, President Barack Obama pushed for and signed an expensive stimulus measure, and after a long fight in Congress he signed another expensive plan, the health care law, in March of last year, aimed at expanding coverage for millions who lack health insurance.
• Two economic recessions have had their effect. The recession of 2001 began in March and lasted until November. And the worst downturn since the Great Depression began in December 2007 and continued until June 2009. In both cases unemployment remained high for long after business activity began to recover, holding back both wages and the taxes that jobless workers would have paid on them.

We won't attempt to assign blame to one party or the other for the deficits. There is plenty of blame to go around, some of which rests with an American public that won't accept cuts in the largest categories of public spending, and also resists tax increases on anybody but "the rich."

Where Does It Go?

The biggest share of federal spending now goes for Social Security (20.4 percent in 2010) and Medicare (13.1 percent), the two entitlement programs that big majorities of Americans want to protect from any reductions, according to a recent poll. Together these two programs for senior citizens consume more than one-third of spending, far more than national defense, which accounts for just 20.1 percent, despite the increases of recent years.

Some categories that are unpopular with much of the public turn out to represent a fairly small part of total spending. Foreign aid, for example, amounts to less than 1 percent of the entire budget — even counting in military assistance to Israel, Egypt, Iraq and Afghanistan. All agriculture programs — including farm subsidies — make up just over one-half of 1 percent.

Where Did It Go? Major components of the $3.5 trillion spent in fiscal 2010
Social Security	20.4%
National Defense	20.1%
Medicare	13.1%
Medicaid/CHIP	8.1%
Interest	5.7%
Low-Income Assistance	5.3%
Unemployment Compensation	4.6%
Education & Training	3.7%
Federal Employee Retirement	3.5%
Veterans	3.1%
Transportation	2.7%
Other health care	2.6%
Parks & natural resources	1.3%
Space/Science	0.9%
Foreign aid	0.9%
Agriculture	0.6%
Everything else	3.5%

The wildly unpopular TARP program, used to finance banks, a big insurance company and two U.S. auto companies, is now actuallybringing billions back into the Treasury, as old loans are repaid and government-owned stock is sold to the public. The nonprofit investigative project Pro Publica figures that $322 billion has now flowed back into the Treasury, of the $573 billion loaned, invested or spent originally. And even the Obama administration's $787 billion stimulus program, so excoriated by Republicans, has nearly run its course. It was enacted in 2009, and according to the official Recovery.gov website, had spent 84 percent of the total as of June 30. That included 90 percent of the tax benefits, 83 percent of entitlements, and 78 percent of contracts, grants and loans.

Borrowing 36 Cents on the Dollar

The current gap between tax revenue and congressionally approved spending is so great that so far this fiscal year the federal government has borrowed an average of 36 cents of every dollar paid out. According to the most recent "Monthly Budget Review," issued by the Congressional Budget Office on July 8, the total spent through the end of June (the first nine months of the current fiscal year) was estimated at $2.705 trillion. But government receipts fell $973 billion short of spending, CBO estimates.

The good news — if it can be called that — is that the huge deficit is running at $31 billion lower than last year at this time. Spending is higher (Medicaid is up 6 percent over last year, for example), but federal income tax receipts are running higher as well. CBO credited "higher wages and more employment" than last year for the increase in tax revenue. And borrowing 36 cents on the dollar is an improvement of sorts. For all of fiscal 2009, the deficit amounted to 40 cents of every dollar spent, and it was 37 cents in fiscal 2010.

Where the Money Comes From

Taxes make up the vast bulk of federal revenues, of course. Individual income-tax payers supplied 41.5 percent of all federal revenues in fiscal 2010, but Social Security and Medicare payroll taxes paid both by workers and their employers made up nearly as much. Combined with federal unemployment insurance taxes and a few others, these social insurance taxes made up 40 percent of revenues. The income tax on corporations brought in just under 9 percent, while excise taxes, on such things as gasoline and diesel fuel, alcoholic beverages and telecommunications services, brought in just over 3 percent.

We found a surprising bit of news buried in the "other" category, which made up 6.5 percent of all revenue.

Breakdown of "other" in 2010
(Percent of total revenues)
Federal Reserve	3.5%
Customs	1.2%
Misc	1.0%
Estate & Gift	0.9%
Total "Other"	6.5%

It turns out that in 2010, more than half of that category came from profits made by the Federal Reserve System, whose lending operations expanded dramatically to address the financial crisis that started in 2007. The Fed's payments to the Treasury made up 3.5 percent of all federal revenue in 2010 — nearly $76 billion. The rest of the "other" category is made up of customs duties (1.2 percent of all revenue), federal estate and gift taxes (0.9 percent), and miscellaneous sources.

Who Pays?

Who pays all of these taxes? The best information on thatcomes from the Congressional Budget Office, which has tracked the tax burden for many years. The most recent complete data cover 2007. CBO figured in that year more than half of all federal taxes was paid by the top 10 percent of income earners. They paid 55 percent of all federal taxes in 2007, CBO said.

That's a comprehensive figure, counting the income tax, payroll taxes, excise taxes and even the corporate income tax (borne by stockholders in the form of reduced dividends and appreciation). And perhaps surprisingly, the top 10 percent of earners pay a greater share of federal taxes now than they did before the Bush tax cuts, which Democrats constantly criticize as a giveaway to "the rich." The top 10 percent paid 50 percent of all federal taxes in 2001.

However, that comes in spite of lower tax rates at the top, not because of it. The reason the most affluent 10 percent pay a greater share of taxes is that they are getting a greater share of all income. Their share of all pre-tax income went from 37.5 percent in 2001 to 42 percent in 2007.

One figure that gets a lot of attention is the percentage of individuals and married couples who pay zero federal income taxes. Those figures come from the nonpartisan Tax Policy Center. The TPC's most recent report was released June 14, and it shows that this year 46.4 percent of "tax units" (individuals or married couples) had zero federal income tax liability. That's because of various exemptions and tax credits aimed at reducing the income-tax burden on lower-income workers and families with children. The figure is down from 2008 and 2009, when the percentage topped out at 50.8 percent.

But practically all workers (and their employers) pay Medicare taxes on every dollar of wages, and Social Security taxes on every dollar of wages up to $106,800. Consequently, those who pay no federal income or payroll taxes at all amount to only 18.1 percent this year, the Tax Policy Center figures.

There's plenty more where these figures came from. We could focus more closely on what was paid and earned by the top 1 percent, for example. Or we could zoom in to examine the role of rising medical and drug costs in pushing up spending for Medicare and Medicaid. We may well visit those subjects in future articles. For now, we've tried to give a quick, accurate and balanced look at the big picture: Both where Washington spends, and where its money comes from.

– by Brooks Jackson

Sources

Office of Management and Budget. "Fiscal 2012 Budget of the United States, Historical Tables:Table 1.3—Summary Of Receipts, Outlays, And Surpluses Or Deficits (−) In Current Dollars, Constant (Fy 2005) Dollars, And As Percentages Of Gdp: 1940–2016"  14 Feb 2011.

Congressional Budget Office. "CBO's Long-Term Budget Outlook: Supplemental Data" 22 Jun 2011.

U.S. Congress, Joint Committee on Taxation, "Estimated Budget Effects of the Revenue Provisions of H.R. 2264. (The Omnibus Budget Reconciliation Act of 1993) As Agreed to by the Conferees" 4 Aug 1993.

Office of Management and Budget. "Fiscal 2012 Budget of the United States, Historical Tables:Table 2.3—Receipts by Source as Percentages of GDP: 1934–2016 "  14 Feb 2011.

Office of Management and Budget. "Fiscal 2012 Budget of the United States, Historical Tables:Table 3.1—Outlays by Superfunction and Function: 1940–2016"  14 Feb 2011.

Connolly, Ceci  and Mike Allen "Medicare Drug Benefit May Cost $1.2 Trillion; Estimate Dwarfs Bush's Original Price Tag" Washington Post. 9 Feb 2005.

Johnson, Allen "Bush signs $700 billion financial bailout bill" MSNBC.com. 3 Oct 2008.

The Associated Press, "Obama: Stimulus lets Americans claim destiny: President signs $787 billion program into law in Denver Tuesday" 17 Feb 2009.

Stolberg, Sheryl Gay and Robert Pear, "Obama Signs Health Care Overhaul Bill, With a Flourish" New York Times. 23 Mar 2010.

National Bureau of Economic Research, "US Business Cycle Expansions and Contractions" undated. Accessed 15 Jul 2011.

King, Jr., Neil and Scott Greenberg "Poll Shows Budget-Cuts Dilemma: Many Deem Big Cuts to Entitlements 'Unacceptable,' but Retirement and Means Testing Draw Support" Wall Street Journal 3 March 2011.

Cohen, Jon and Dan Balz, "Poll shows Americans oppose entitlement cuts to deal with debt problem," Washington Post. 20 Apr 2011.

U.S. Department of State, "Foreign Assistance Budget" undated. Accessed 11 Jul 2011.

U.S. Treasury, "$1.7 Billion Additional TARP Funds Returned to Taxpayers, Positive Return on TARP Bank Programs Reaches $10 Billion" press release. 5 Jul 2011.

Pro Publica, "The State of the Bailout" undated. Accessed 11 Jul 2011.

U.S. Government, Recovery.gov "Overview of Funding" undated. Accessed 11 Jul 2011.

Congressional Budget Office, "Monthly Budget Review" 8 Jul 2011.

Congressional Budget Office, "Monthly Budget Review" 5 Nov 2010.

Office of Management and Budget. "Fiscal 2012 Budget of the United States, Historical Tables:Table 2.5—Composition of "Other Receipts": 1940–2016"  14 Feb 2011.

Board of Governors of the Federal Reserve System, "What does it mean that the Federal Reserve is 'independent within the government'?" 17 Jun 2010.

Congressional Budget Office, "Average Federal Taxes by Income Group" Jun 2011.

Congressional Budget Office, "Shares of Federal Tax Liabilities for All Households, by Comprehensive Household Income Quintile, 1979-2007" Jun 2010.

Congressional Budget Office, "Pre-Tax Income Shares All Households, by Household Income Category, 1979-2007" Jun 2010.

Urban-Brookings Tax Policy Center, "T11-0173 – Tax Units with Zero or Negative Tax Liability, Current Law, 2004-2011" 14 Jun 2011.

POSTED BY BROOKS JACKSON ON FRIDAY, JULY 15, 2011 AT 4:38 PM
FILED UNDER ARTICLES · TAGGED WITH DEFICIT, FEDERAL BUDGET, SPENDING, TAXE

SHAMUS COOKE FOR BUZZFLASH AT TRUTHOEver since the Great Recession shook the foundations of the U.S. economy, President Obama has been promising recovery.  Evidence of this recovery, we were told, was manifested in the massive post-bailout profits corporations made. Soon enough, the President assured us, these corporations would tire of hoarding mountains of cash and start a hiring bonanza, followed by raising wages and benefits. It was either wishful thinking or conscious deception. The recent stock market meltdown has squashed any hope of a corporate-led recovery.  The Democrats fought the recession by the same methods the Republicans used to create it: allowing the super rich to recklessly dominate the economy while giving them massive handouts. This strategy, commonly referred to as Reaganomics or Trickle Down Economics, is now religion to both Democrats and Republicans; never mind the staged in-fighting for the gullible or complicit media.  When it becomes obvious to even the President that the economic recovery never existed beyond the bank accounts of the rich, questions will have to be answered. Why, for example, did nobody in either political party foresee the disastrous consequences of the bailouts? Not only did the U.S. deficit drastically increase but the same U.S. corporations that caused the recession were given reinforcement for their destructive actions, ensuring that it would continue unabated.  In his book, "Crisis Economics," Nouriel Roubini outlines the insane response to the recession by Republicans and Democrats. Because both parties simply threw money at the banks and hedge funds instead of punishing them, a condition of "moral hazard" was created, meaning, that banks would assume another bailout would come their way if they destroyed the economy again -- too big too fail, remember? Roubini explains how the Democrats allowed the "too big" banks to get even bigger; how Wall Street salaries based on short-term profits went unregulated; how the regulations that were put into place were inadequate and filled with loopholes; how nothing of any significance changed.   Roubini has also written extensively about how the post-bailout Federal Reserve policies were fueling a commodity bubble that may be in the midst of bursting, possibly triggering a double dip recession. Essentially the big banks and rich investors were borrowing cheap dollars from the Fed and investing abroad in commodities with the hopes of higher returns. Roubini states:   

"The risk is that we are planting the seeds of the next financial crisis...this asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals." (October 27, 2009).  

This investor-created commodity bubble pushed up prices in oil, food, and other basic products, causing further pain for working families and the economy as a whole. This speculative bubble was easily predictable but ignored by both political parties, since they claimed the bubble was a sign of recovery.  

Another mainstream economist, Paul Krugman, also admits that the rich's death-grip on the U.S. political and economic system is causing pain for everybody else:  

"Far from being ready to spend more on job creation, both parties agree that it's time to slash spending - destroying jobs in the process - with the only difference being one of degree...policy makers are catering almost exclusively to the interests of rentiers [rich investors] - those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else's expense." (June 10, 2011).

Krugman explains that this process continues because the rich dominate the political system through campaign contributions, "access to policy makers," promises of high paying corporate jobs after their congressional term is over, and good o'l fashion corruption. Because he's a true blue Democrat at heart, Krugman nevertheless focuses most of his rage on Republicans.  

Krugman's repeated calls to Democrats and Republicans to create jobs have fallen on deaf ears. Both parties agree that the "private sector" [corporations] should create jobs; until they decide to hire, nothing will happen. This is not merely "bad policy," as liberals like Krugman like to fret about, but the conscious agenda of the rich. Corporations and rich investors love high unemployment. The Kansas City Star explains why:  "Last year [2010], for the second year in a row, U.S. companies got more work out of their employees while spending less on overall labor costs." (February 3, 2011).  It really is that simple. High unemployment creates a downward pressure on wages, allowing employers to work the remaining employees harder and thus to increase profits. This dynamic, combined with the above commodity speculation, has been the entire basis for the corporate recovery, while working people have literally seen nothing beneficial.

 This process is an extension of the bailouts, in the sense that more wealth is being transferred from working people to the corporations. Since consumer spending accounts for 70 percent of the U.S. economy, policies like these ensure that another crisis is inevitable.  

Further complicating matters is the ending of the Federal Reserve's Quantitative Easing program (printing money), which amounted to the Fed buying $600 billion in U.S. Treasury bonds since last fall, essentially funding the U.S. debt and driving down interest rates.

Since the Fed was buying 60 percent of the bonds, a new creditor will need to be found; and this lender will likely require higher interest rates before loaning to the U.S. government, to make sure the loan is profitable.  And although different nations buy U.S. debt for different reasons, much of this debt is bought by rich U.S. citizens, who will put the squeeze on the rest of us that have to pay back this debt. The Washington Times explains:   

"...Bill Gross, the head of America's own Pimco bond fund, the largest buyer of bonds worldwide, recently reduced Pimco's holdings of Treasuries to zero out of concern that they weren't yielding enough given the risks of inflation and deficit spending." (June 7, 2011). When the Federal Reserve raises interest rates to satisfy these rich investors, the economy will likely take a further nosedive.  It appears, then, that the rich have a win-win situation: they got free bailout money, which increased the deficit; and because the deficit is too high, the rich want higher interest rates for investing in U.S. Treasury Bonds. In both instances working people pay the bills.  This insanity cannot be stopped by conventional measures, since politicians are tone deaf to anything that doesn't ring of corporate cash. The jobs crisis continues as a result of the policy agreed to by both Democrats and Republicans. The labor movement has a special role to play in reversing the above policies.

The corporate-led discussion around cutting social programs to fix the deficits -- on a state and national level -- can be challenged by a nationally coordinated campaign of unions and community allies demanding: Tax the Rich! This demand is significant because it can address both the deficits and the jobs crisis: a massive public works program can be funded by taxing the corporations and the wealthy to pre-Reagan levels. And it makes complete sense because the growing inequalities in wealth over the past three decades has meant a spectacular concentration of wealth at the top. The rich have plenty of money to spare.   

Organized labor needs to bring masses of people in the street all over the country in order to get attention and pressure the government to respond to these demands. And it can succeed, especially if it organizes a serious, protracted campaign and especially if this campaign does not get funneled into supporting Democratic candidates, the surest way to kill campaign momentum.AFL-CIO President Richard Trumka recently spoke in favor of a strong, independent labor movement. This is the direction it must take, rather than relying on the Democrats. The labor movement must get its act together, unite to put up a fight and demand specific policies that can concretely address the crisis faced by millions of working people.    

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action (www.workerscompass.org)  He can be reached at shamuscooke@gmail.com

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atlyygQuBLUI 

http://www.nytimes.com/2011/06/10/opinion/10krugman.html?_r=1&hp

http://www.kansascity.com/2011/02/03/2631479/productivity-increased-in-2010.html#ixzz1OzV4hhF8

http://www.washingtontimes.com/news/2011/jun/7/lack-of-buyers-may-force-treasury-to-boost-interes/?page=all