Thursday, January 29, 2009

Economic Recovery

Economic Recovery Act Needs:
More Infrastructure Spending
No Tax Cuts for Business

Despite President Obama’s efforts and the inclusion of specific measures designed to appeal to Republicans, not a single GOP House member voted for the Economic Recovery Act, popularly known as the stimulus bill, that passed in the House of Representatives by a vote of 244 to 188 yesterday. Just 12 Democrats voted against the bill, which authorized $607 billion in direct spending and $212 billion in various tax cuts over two years to stimulate the economy.

Democratic Socialists of America (DSA) has been gravely concerned about these politically motivated tax cuts, largely sweetheart deals for business that will benefit the very financial institutions whose high-flying speculation created the economic crisis in the first place. They are bad legislation, and certainly have no place in a stimulus bill.

We believe the federal government should minimally allocate:
$200 billion in block grants to state and local governments to make up for the annual loss in state and local revenue
$100 billion to pay for half of the increased Medicaid costs states will face
$100 billion to pay for COBRA coverage for laid-off workers and to allow people over 55 to buy into Medicare
$50 billion to increase unemployment insurance and expand eligibility. (Currently only one-third of unemployed workers receive unemployment insurance!)
$100 billion to increase Pell grants and expand the number of its recipients.
$450 billion to the Social Security Trust Fund so that workers would receive a one-year respite from paying the regressive FICA tax. Such a measure would radically stimulate consumer demand.

Wednesday, January 21, 2009

Lets arrest the bank managers

No bottom in sight yet: a conversation with Doug Henwood
By Steve Perry | Published Wed, Jan 21 2009 8:07 am

Doug Henwood
For the past 20 years plus, journalist/author Doug Henwood’s Left Business Observer newsletter has been an essential source for economics news and analysis from a left-progressive viewpoint. Likewise his books, which include After the New Economy, a critique of the tech bubble years and “new economy” hoohah, and Wall Street: How It Works and for Whom, which is available for free download at the LBO website. He's currently working on a book about the American ruling class.
I spoke to Henwood (who also hosts a weekly radio show at WBAI in New York that’s archived at LBO) yesterday afternoon, just a couple of hours after Barack Obama took the oath of office, to see what he makes of the tea leaves and of Obama’s likely course.
SP: A great many economists--including Nouriel Roubini, who famously predicted the credit crisis back in 2006--now say that the likeliest scenario is a very steep recession that lasts through this year and part of next year. What's the most compelling case about the length of this downturn that you’ve encountered?
Doug Henwood: It’s hard to say. There are really no signs of it approaching a bottom yet. None of the leading indexes seem to have approached a bottom. If we were going to see some kind of stabilization by mid-year, that would start showing up in some of the leading indexes now or soon. So we’ll be looking for that, but there’s no reason to believe we’re anywhere near that point.
If you look at the history of financial crises--and there’s a good paper by a couple of economists, Kenneth Rogoff and Carmen Reinhart, that looks at some of the major financial crises of the past several decades and looks at what happens to real economies after them--the average increase in unemployment rates was about 7 points. We started at 4.5, which means we’d end at 11.5, which would be a post-1930s record. The authors also saw very, very steep declines in GDP, on the order of 9 or 10 percent. We’ve only seen a fraction of a percent so far.

So judging on the basis of past financial crises, we are not even halfway through this.

See the entire article here.

OK. So most people don’t know what to do. Here is one idea.
Lots of serious economists and observers are now saying that this economy is in crisis and needs a significant jolt to return confidence. ( see below) Well, most of them are not talking about what would produce confidence among working people.
So, I will give it a try.
I think the government should arrest the top 100 or so corporate CEO’s and prosecute them for theft. They have taken billions from investors, caused the decimation of pensions, and caused 1.2 trillion to be drained from the economy.
By any standard they are thieves.
On the other hand, they should receive a fair and impartial trial. Much of what corporate finance did with their derivatives was illegal until 2001 when Democrats and Republicans united in the U.S. Congress to make this looting legal.
See, William Black, The Best Way to Rob a Bank is to Own One, and David Cay Johnston, Perfectly Legal. and Free Lunch: How the Wealthiest Americans Enrich themselves at Government Expense (and stick You with the Bill).
My knowledgeable friends tell me that you can’t arrest these people. They claim that our major banks and industries would collapse. I don’t think so. If you arrested the top twenty executives at Citicorp, for example, there are at least 40 more officers just below them who could take over. And, If you arrested the top twenty, the next forty would be much more careful with the public’s money in the future.
Of course another option is to nationalize the major banks, but that seems radical.
Duane Campbell

Monday, January 12, 2009

Obama: End of an era of economic irresponsibility

An important speech.

Renegotiate NAFTA

Renegotiate NAFTA.
In 2008, we launched a policy proposal entitled "NAFTA Must be
Renegotiated; A Proposal from North America Civil Society Networks"
prepared jointly by Canadian, Mexican and U.S. organizations that
calls for a revision and renegotiation of NAFTA so as to establish
economic relations based on social justice within a paradigm of
sustainable development." In this proposal, we synthesize ten
priorities for the renegotiation of NAFTA based on our work of many
years, namely: agriculture, energy, foreign investment, financial
services, the role of the State in the provision of services,
employment, migration, environment, intellectual property rights and
dispute settlement provisions.

Friday, January 9, 2009

Obama stimulus

The Obama Stimulus
We first need to recognize that this is a Bush/Republican recession. And, it is the worst recession since 1945 when everything slowed down at the end of W.W.II. That’s quite a record.
In response, the Obama administration proposes a massive stimulus. This is the correct remedy. It is basic Keynesianism.
Now the Republican Senators ( who significantly caused this mess along with Larry Summers and others), want more money spent on tax breaks for the wealthy. Does that sound familiar?
After preaching about No ear marks, they are demanding the biggest ear mark of all; a major tax break for big business. There is every reason to be skeptical. Recall that we gave the finance industry 350 Billion to unfreeze the credit market and instead they spent it on themselves.
The perils of using tax breaks as a stimulus, or as a major part of the stimulus, are explained well by Howard Gleckman of the Tax Policy Center here:

So, the Republicans, after creating this mess, see tax cuts for the rich as the way out of this mess. Time for some street politics. See the articles on how the rich robbed the banks and stole your pensions at

Duane Campbell