Dear Reader,
Contents of this web site:
___________________*******************************______________________
I write essays on economics.
The most recent essays are at the top, oldest at the bottom.
If you read only one essay, choose
August, 2008, Half Own 2.5%, Half Earn 15%.
That will get you going.
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Click the ? in the Contents area to open the month and see the essays for any month.
27. A lengthy letter to Obama advising that he nationalize the failed banks.
I quote James Galbraith at length.
__________________________________________________________________
26. A Reply to Warren Brussee about the causes of the recession.
25. Jack Rasmus’ Alternative to the Obama Recovery. I summarize this plan by economist and writer for Z Magazine.
24. U.S. Ranks 75th out of 126 Nations -- inequality of income
23. Why We Need Full Employment
This is my shortest, a one page effort full of facts well documented.
December 29, 2008
22. The Case for Full Employment
Both a historical overview of previous government actions, and a review
two scholars’ approach to solving paucity of jobs in our economy.
I think this is sound policy and a good, brief look at the employment problem.
21. Full Employment
Basic logic on full employment.
20. Meltdown/Bailout Suggestions
Two suggestions about nationalizing banks and reworking underwater
home mortgages.
19. Nationalize the Banks or Bail Them Out
I quote a professor, Peter Dorman, and a financial consultant, John Hussman। Both offer plans radically different than Treasury Secretary
Paulson’s. I review radio program This American Life, to explain the
subprime mess. I wrote it for my sister.
18. Understanding the Financial Crisis
William Springer, head of the economics department at Howard University
made the same comments on the radio the week after I wrote this.
I claim that the financial part of the crisis is phase one. Much more bad news will unfold.
17. Justice Revolution
A little more documentation, but basically the same essay as the last.
It is better in some ways.
16. Half Own 2.5%, Half Earn 15%
Read this one if you read no other.
15. Celebrate $100,000 a year as the average U.S. income
Hard to believe, but that’s correct. Read it to believe it.
14. Infectious Greed Overwhelms the U.S. Economy
I quote Marriner Eccles about the Great Depression. I tried to simply
the previous essay for a friend who has no background.
13. Economic Rights for the Two Out of Seven Who Are Not Making It
July 22, 2008
Inequality, weak purchasing power, Roosevelt’s State of the Union, ‘44,
and much more. Not too pessimistic. About 3,000 words.
Really interesting says the author.
12. What the Government Can Do
May 1, 2008
A two page reduction of the essay There Are Solutions. A quick read on
ways to increase employment and incomes without stalling the economy.
Maybe my ‘Best.’ Short, to the point.
11. Three Short Pieces
June 15, 2008. To the KPFA Morning Show, The Next Wave of Political Reform, and another review of Robin Hahnel’s book Economic Justice and Democracy.
10. My Second Letter to Pete Stark, Congressman
A little note about shrinking aggregate demand, how to grow an economy,
and why worldwide depression is possible. I had just read Jeff Madrick’s
Why Economies Grow.
9. There Are Solutions
This 4,000 word essay details and reviews three plans for revitalizing the American economy.
First, I take a look at Frank Stricker’s book Why America Lost the War on Poverty --- and How to Win It, and his 17 point plan called What Needs to Be Done.
Second I look at the Center for American Progress’ plan “From Poverty to
Prosperity.”
Finally, I review “Decent Work and Public Investment,” a plan authored by members of the National Jobs for All Coalition, Helen Lachs Ginsburg and Gertrude Shaffner Goldberg.
8. White Birds --- a poem not about economics. About love.
7. A Wealth Tax to Eliminate Poverty
This may be my best effort. It is a reduction of my original essay A Modest Proposal to Tax Wealth Annually in the U.S.A.
6. The Art of Living Together
A short vagrancy, a fissure, an errant meander, a lunacy. Something burst.
5. A Letter to My Congressman, Pete Stark. February 5, 2008
I break down wealth and income distribution, and suggest sources for
the Congressman to pursue.
4. A book review of Robin Hahnel’s Economic Justice and Democracy
This essay was published in the Alameda County Green Party News in
October, 2007.
3. Odd, Very Odd. March, 2008. A recapitulation of old ideas. Nothing special.
2. Is There a Middle Class?
The 40 to 1 ratio between two halves of the U.S. population impressed me. I was listening to Michael Krasny on KQED FM radio talk about the middle class. He did not take my e-mail, so I wrote this essay and sent it to him.
1. Progressive Economic Reform, 2008
January, 2008
This essay presents an array of eleven different sources that argue that our economy does not serve the American people.
The people at Econo-atrocity, the commentary site at Center for
Popular Economics, posted it. It’s my third favorite after What Government Can Do, and
A Wealth Tax to Eliminate Poverty, second best.
Sunday, April 5, 2009
Saturday, April 4, 2009
Why Obama should nationalize the banks
Dear Mr. Obama, March 26, 2009
Why you should nationalize the failed banks
This letter tries to persuade you to lift the low income group in our nation, and stop the hemorrhage of public money going to the wealthy bankers. The New Yorker magazine keeps a file of “Letters We Never Finished Reading.” The first letter begins with the words, “Dear Fathead . . .” This is not that type of letter.
In 2006 the net worth of the entire U.S.A. was estimated at over $50 trillion, according to the Federal Reserve report “Currents and Undercurrents” by Arthur Kennickell. Between 2001 - 2007 the combined net debt of the U.S.A. --- including consumer, government and corporate debt --- grew from $27 trillion to $49 trillion, a $22 trillion or 81% increase in net indebtedness in seven years (according to the Flow of Funds report from the Federal Reserve). Of the $22 trillion increase in indebtedness, $18 trillion originated from financial corporation debt. This was the Credit Default Swap market.
It is very obvious that the size of the American economy could never generate that much genuine business loan activity. Another species of loan had to be created, and it was the Credit Default Swap market, an unregulated insurance business, better understood as a gambling casino. According to Frank Partnoy, business law professor at U.C. San Diego, it serves as a ballast against unwise investments, but there is no reason that government should not require full transparency of its shadowy valuation. An article in the MultiNational Monitor by Robert Weissman details the regulation needed in this area, March, 2009.
When the subprime housing mortgages began to default in late 2007 it caused the tail to wag the dog, according to Partnoy, that is, the value of the mortgages was much smaller than the mountain Credit Default Swaps tied onto the mortgages. They were tied on as gambling stakes in a casino market that has no contractual connection with the underlying values. As in a cock fight, the value of the wagers exceeded the value of the cocks.
We have no business committing tax revenue to the losses of this insane casino, nor offering non-recourse loans to anyone to entice them to buy up this junk.
A non-recourse loan is essentially a gift of money to the holder of the loan if the loan goes bad, becomes uncollectable.
Writing at EconoSpeak.org, on March 27, 2009, one professional economist offers a companion to the Obama plan:
There is one bailout bill waiting for some action. The Los Vegas casinos are hurting. I know: boo hoo. How could the government bail them out? They could lend me money to gamble. I will be obligated to share my winnings with the government, but they agree that I do not have to repay the loans if I lose. So, I would stand to gain a great deal with little risk.
How is my casino plan different from the present plan of creating a market for "legacy" [Isn't that nicer than saying toxic] assets, other than that financial firms will have to put up a wee bit of their investment.
The best we can hope for from Obama would be to continue to embarrass himself with the obsequiousness toward rich and powerful in such a way as to spark a massive protest comparable to the 1960s. Let's stop dithering. Any takers?
Another economist at EconoSpeak.org had this to say,
Remember that old Gary Larson cartoon in which two scientists are standing before a blackboard crammed with math? One furrows his brows and says he has doubts about Step 3. Standing apart from all the Greek letters and operators above and below it, Step 3 says, “And then a miracle occurs....”
I believe that Mr. Geithner should leave your cabinet. He seems committed to betting other people’s money, our tax dollars, on the wrong horse, over and over again. Furthermore, it is unconstitutional for the executive branch to commit revenues without the approval of Congress. A growing popular disapproval and consensus feels that these Credit Default Swaps are non-enforcable contracts that amount to pure gambling.
Another economist, Peter Dorman, writes about setting up an independent government financial entity, bypassing the “negative frozen assets” or “toxic” or relatively worthless assets fictitiously insured by AIG, held by major banks, hopefully to be purchased by PIMCO and other private investors.
Incidentally, there are two routes to public banking. The most direct, which I have advocated in this blog since last September, is to simply set up the system from scratch right now and capitalize it with funds redirected from bailouts. I admit there are loose ends to be dealt with, especially having to do with resolving the international obligations of the existing system, but that’s to be expected with any program. The second route is to hang onto the existing banks after nationalizing them. I have argued against this idea, since it would put the liabilities of these institutions on the public ledger. Perhaps this downside could be reduced by giving the banks’ creditors and counterparties a Paulson-style haircut, but this strikes me as very difficult to pull off, and, at the limit, it simply converges with the “good new (public) bank” proposal I have been pushing.
So: (1) This is a fantastic article by Jamie. [James Galbraith’s article “No Return to Normal” in the Washington Monthly, March 19, 2009, posted at CommonDreams.org] I hope it is widely read and discussed. (2) I think we need to be willing to go a little further on the financial front and to take more account of how economically interwoven our world has become.
James Galbraith, "No Return to Normal"
James Galbraith is highly skeptical of the Geithner-Obama plan, saying in part,
Geithner's banking plan would prolong the state of denial. It involves government guarantees of the bad assets, keeping current management in place and attempting to attract new private capital. (Conversion of preferred shares to equity, which may happen with Citigroup, conveys no powers that the government, as regulator, does not already have.) The idea is that one can fix the banks from the top down, by reestablishing markets for their bad securities. If the idea seems familiar, it is: Henry Paulson also pressed for this, to the point of winning congressional approval. But then he abandoned the idea. Why? He learned it could not work.
Paulson faced two insuperable problems. One was quantity: there were too many bad assets. The project of buying them back could be likened to "filling the Pacific Ocean with basketballs," as one observer said to me at the time. (When I tried to find out where the original request for $700 billion in the Troubled Asset Relief Program came from, a senior Senate aide replied, "Well, it's a number between five hundred billion and one trillion.")
The other problem was price. The only price at which the assets could be disposed of, protecting the taxpayer, was of course the market price. In the collapse of the market for mortgage-backed securities and their associated credit default swaps, this price was too low to save the banks. But any higher price would have amounted to a gift of public funds, justifiable only if there was a good chance that the assets might recover value when "normal" conditions return.
That chance can be assessed, of course, only by doing what any reasonable private investor would do: due diligence, meaning a close inspection of the loan tapes. On the face of it, such inspections will reveal a very high proportion of missing documentation, inflated appraisals, and other evidence of fraud. (In late 2007 the ratings agency Fitch conducted this exercise on a small sample of loan files, and found indications of misrepresentation or fraud present in practically every one.) The reasonable inference would be that many more of the loans will default. Geithner's plan to guarantee these so-called assets, therefore, is almost sure to overstate their value; it is only a way of delaying the ultimate public recognition of loss, while keeping the perpetrators afloat.
Delay is not innocuous. When a bank's insolvency is ignored, the incentives for normal prudent banking collapse. Management has nothing to lose. It may take big new risks, in volatile markets like commodities, in the hope of salvation before the regulators close in. Or it may loot the institution-nomenklatura privatization, as the Russians would say-through unjustified bonuses, dividends, and options. It will never fully disclose the extent of insolvency on its own.
The most likely scenario, should the Geithner plan go through, is a combination of looting, fraud, and a renewed speculation in volatile commodity markets such as oil. Ultimately the losses fall on the public anyway, since deposits are largely insured. There is no chance that the banks will simply resume normal long-term lending. To whom would they lend? For what? Against what collateral? And if banks are recapitalized without changing their management, why should we expect them to change the behavior that caused the insolvency in the first place?
I’m going to make this essay a little longer because the James Galbraith piece is so good and important any reader at this point should read more of his essay.
A new paper by the economist Marshall Auerback has usefully corrected this record. Auerback plainly illustrates by how much Roosevelt's ambition exceeded anything yet seen in this crisis:
[Roosevelt's] government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York's Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown. It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country's entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.
In other words, Roosevelt employed Americans on a vast scale, bringing the unemployment rates down to levels that were tolerable, even before the war-from 25 percent in 1933 to below 10 percent in 1936, if you count those employed by the government as employed, which they surely were. In 1937, Roosevelt tried to balance the budget, the economy relapsed again, and in 1938 the New Deal was relaunched. This again brought unemployment down to about 10 percent, still before the war.
The New Deal rebuilt America physically, providing a foundation (the TVA's power plants, for example) from which the mobilization of World War II could be launched. But it also saved the country politically and morally, providing jobs, hope, and confidence that in the end democracy was worth preserving. There were many, in the 1930s, who did not think so.
What did not recover, under Roosevelt, was the private banking system. Borrowing and lending-mortgages and home construction-contributed far less to the growth of output in the 1930s and '40s than they had in the 1920s or would come to do after the war. If they had savings at all, people stayed in Treasuries, and despite huge deficits interest rates for federal debt remained near zero. The liquidity trap wasn't overcome until the war ended.
And to conclude with Galbraith:
A brief reflection on this history and present circumstances drives a plain conclusion: the full restoration of private credit will take a long time. It will follow, not precede, the restoration of sound private household finances. There is no way the project of resurrecting the economy by stuffing the banks with cash will work. Effective policy can only work the other way around.
...
Does the Geithner team, forged and trained in normal times, have the range and the flexibility required? If not, everything finally will depend, as it did with Roosevelt, on the imagination and character of President Obama.
I encourage to read the entire Galbraith essay at CommonDreams.org, March 19, 2009.
Pressing Problems and Inequality
Our nation has pressing problems far more important than the solvency of billionaire hedge fund managers and their cohort, whom you are so intent on protecting. Nationalizing the banks seems at this point to be the most rational and efficient solution to the financial system meltdown. Let the chips fall, as it were.
The driving force for this unpleasant mess has been the 30 year growth in inequality, since Reaganomics took hold. This period has seen the top one percent of households double their ownership share of the nation’s property. The lower half of the U.S. households own 2.5% of the nation’s wealth, while the other half own 97.5% of it. For every one dollar owned by half the other half owns 39 dollars. When comparing the bottom half, 58 million households, with the top one percent, 1.1 million households, the ratio is one dollar owned by the lower 50% to 668 dollars owned by the top one percent. The top one percent own more than the bottom 91% of households, or 3 million people have a net worth equal or greater than that of 273 million people.
You were elected to relieve the tension that inevitably is created when resource allocation is so unequal or disparate. Many pressing social problems grow out of this misbalance of resources, and you were placed in your position of authority and power to adjust this gross imbalance. Your years of work in the Chicago neighborhoods of poverty should make you keenly aware of this injustice. Presently the annual income of the top one percent exceeds the income of the bottom 60%, and if rewards are to be justly allocated according to sacrifice, then this is a gross imbalance and a serious social injustice.
Throwing tax money at the financial casino is immoral, in my view. I think you should be able to cut the losses, nationalize the failed banks, re-regulate the entire system, and move on to solving the problems of those who do not eat well, have no place to sleep at night, can’t afford healthcare, childcare or education.
We elected you for that job, not to wipe up the stupid mess of stupid gambling addicts. We are with you and support you.
Yours truly, Ben Leet in San Leandro, California
Footnotes,
About the subprime tail wagging the Credit Default Swap dog listen to Terry Gross’s conversation on Fresh Air, NPR, March 25, 2009, with Frank Partnoy, law professor at U. C. San Diego. See economics professor Jack Rasmus’ article “Epic Recession Revisited” about the explosion of financial corporation indebtedness from 2001 - 2007 at KyklosProductions.com. For details about U.S. wealth distribution see the aforementioned Federal Reserve report, Currents and Undercurrents. For details on the distribution of annual national income see State of Working America, 2006/2007, page 79. Regarding the collapse of the financial sector read MultiNaitonal Monitor, March 2009, Robert Weissman, Thomas Donahue.
Why you should nationalize the failed banks
This letter tries to persuade you to lift the low income group in our nation, and stop the hemorrhage of public money going to the wealthy bankers. The New Yorker magazine keeps a file of “Letters We Never Finished Reading.” The first letter begins with the words, “Dear Fathead . . .” This is not that type of letter.
In 2006 the net worth of the entire U.S.A. was estimated at over $50 trillion, according to the Federal Reserve report “Currents and Undercurrents” by Arthur Kennickell. Between 2001 - 2007 the combined net debt of the U.S.A. --- including consumer, government and corporate debt --- grew from $27 trillion to $49 trillion, a $22 trillion or 81% increase in net indebtedness in seven years (according to the Flow of Funds report from the Federal Reserve). Of the $22 trillion increase in indebtedness, $18 trillion originated from financial corporation debt. This was the Credit Default Swap market.
It is very obvious that the size of the American economy could never generate that much genuine business loan activity. Another species of loan had to be created, and it was the Credit Default Swap market, an unregulated insurance business, better understood as a gambling casino. According to Frank Partnoy, business law professor at U.C. San Diego, it serves as a ballast against unwise investments, but there is no reason that government should not require full transparency of its shadowy valuation. An article in the MultiNational Monitor by Robert Weissman details the regulation needed in this area, March, 2009.
When the subprime housing mortgages began to default in late 2007 it caused the tail to wag the dog, according to Partnoy, that is, the value of the mortgages was much smaller than the mountain Credit Default Swaps tied onto the mortgages. They were tied on as gambling stakes in a casino market that has no contractual connection with the underlying values. As in a cock fight, the value of the wagers exceeded the value of the cocks.
We have no business committing tax revenue to the losses of this insane casino, nor offering non-recourse loans to anyone to entice them to buy up this junk.
A non-recourse loan is essentially a gift of money to the holder of the loan if the loan goes bad, becomes uncollectable.
Writing at EconoSpeak.org, on March 27, 2009, one professional economist offers a companion to the Obama plan:
There is one bailout bill waiting for some action. The Los Vegas casinos are hurting. I know: boo hoo. How could the government bail them out? They could lend me money to gamble. I will be obligated to share my winnings with the government, but they agree that I do not have to repay the loans if I lose. So, I would stand to gain a great deal with little risk.
How is my casino plan different from the present plan of creating a market for "legacy" [Isn't that nicer than saying toxic] assets, other than that financial firms will have to put up a wee bit of their investment.
The best we can hope for from Obama would be to continue to embarrass himself with the obsequiousness toward rich and powerful in such a way as to spark a massive protest comparable to the 1960s. Let's stop dithering. Any takers?
Another economist at EconoSpeak.org had this to say,
Remember that old Gary Larson cartoon in which two scientists are standing before a blackboard crammed with math? One furrows his brows and says he has doubts about Step 3. Standing apart from all the Greek letters and operators above and below it, Step 3 says, “And then a miracle occurs....”
I believe that Mr. Geithner should leave your cabinet. He seems committed to betting other people’s money, our tax dollars, on the wrong horse, over and over again. Furthermore, it is unconstitutional for the executive branch to commit revenues without the approval of Congress. A growing popular disapproval and consensus feels that these Credit Default Swaps are non-enforcable contracts that amount to pure gambling.
Another economist, Peter Dorman, writes about setting up an independent government financial entity, bypassing the “negative frozen assets” or “toxic” or relatively worthless assets fictitiously insured by AIG, held by major banks, hopefully to be purchased by PIMCO and other private investors.
Incidentally, there are two routes to public banking. The most direct, which I have advocated in this blog since last September, is to simply set up the system from scratch right now and capitalize it with funds redirected from bailouts. I admit there are loose ends to be dealt with, especially having to do with resolving the international obligations of the existing system, but that’s to be expected with any program. The second route is to hang onto the existing banks after nationalizing them. I have argued against this idea, since it would put the liabilities of these institutions on the public ledger. Perhaps this downside could be reduced by giving the banks’ creditors and counterparties a Paulson-style haircut, but this strikes me as very difficult to pull off, and, at the limit, it simply converges with the “good new (public) bank” proposal I have been pushing.
So: (1) This is a fantastic article by Jamie. [James Galbraith’s article “No Return to Normal” in the Washington Monthly, March 19, 2009, posted at CommonDreams.org] I hope it is widely read and discussed. (2) I think we need to be willing to go a little further on the financial front and to take more account of how economically interwoven our world has become.
James Galbraith, "No Return to Normal"
James Galbraith is highly skeptical of the Geithner-Obama plan, saying in part,
Geithner's banking plan would prolong the state of denial. It involves government guarantees of the bad assets, keeping current management in place and attempting to attract new private capital. (Conversion of preferred shares to equity, which may happen with Citigroup, conveys no powers that the government, as regulator, does not already have.) The idea is that one can fix the banks from the top down, by reestablishing markets for their bad securities. If the idea seems familiar, it is: Henry Paulson also pressed for this, to the point of winning congressional approval. But then he abandoned the idea. Why? He learned it could not work.
Paulson faced two insuperable problems. One was quantity: there were too many bad assets. The project of buying them back could be likened to "filling the Pacific Ocean with basketballs," as one observer said to me at the time. (When I tried to find out where the original request for $700 billion in the Troubled Asset Relief Program came from, a senior Senate aide replied, "Well, it's a number between five hundred billion and one trillion.")
The other problem was price. The only price at which the assets could be disposed of, protecting the taxpayer, was of course the market price. In the collapse of the market for mortgage-backed securities and their associated credit default swaps, this price was too low to save the banks. But any higher price would have amounted to a gift of public funds, justifiable only if there was a good chance that the assets might recover value when "normal" conditions return.
That chance can be assessed, of course, only by doing what any reasonable private investor would do: due diligence, meaning a close inspection of the loan tapes. On the face of it, such inspections will reveal a very high proportion of missing documentation, inflated appraisals, and other evidence of fraud. (In late 2007 the ratings agency Fitch conducted this exercise on a small sample of loan files, and found indications of misrepresentation or fraud present in practically every one.) The reasonable inference would be that many more of the loans will default. Geithner's plan to guarantee these so-called assets, therefore, is almost sure to overstate their value; it is only a way of delaying the ultimate public recognition of loss, while keeping the perpetrators afloat.
Delay is not innocuous. When a bank's insolvency is ignored, the incentives for normal prudent banking collapse. Management has nothing to lose. It may take big new risks, in volatile markets like commodities, in the hope of salvation before the regulators close in. Or it may loot the institution-nomenklatura privatization, as the Russians would say-through unjustified bonuses, dividends, and options. It will never fully disclose the extent of insolvency on its own.
The most likely scenario, should the Geithner plan go through, is a combination of looting, fraud, and a renewed speculation in volatile commodity markets such as oil. Ultimately the losses fall on the public anyway, since deposits are largely insured. There is no chance that the banks will simply resume normal long-term lending. To whom would they lend? For what? Against what collateral? And if banks are recapitalized without changing their management, why should we expect them to change the behavior that caused the insolvency in the first place?
I’m going to make this essay a little longer because the James Galbraith piece is so good and important any reader at this point should read more of his essay.
A new paper by the economist Marshall Auerback has usefully corrected this record. Auerback plainly illustrates by how much Roosevelt's ambition exceeded anything yet seen in this crisis:
[Roosevelt's] government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York's Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown. It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country's entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.
In other words, Roosevelt employed Americans on a vast scale, bringing the unemployment rates down to levels that were tolerable, even before the war-from 25 percent in 1933 to below 10 percent in 1936, if you count those employed by the government as employed, which they surely were. In 1937, Roosevelt tried to balance the budget, the economy relapsed again, and in 1938 the New Deal was relaunched. This again brought unemployment down to about 10 percent, still before the war.
The New Deal rebuilt America physically, providing a foundation (the TVA's power plants, for example) from which the mobilization of World War II could be launched. But it also saved the country politically and morally, providing jobs, hope, and confidence that in the end democracy was worth preserving. There were many, in the 1930s, who did not think so.
What did not recover, under Roosevelt, was the private banking system. Borrowing and lending-mortgages and home construction-contributed far less to the growth of output in the 1930s and '40s than they had in the 1920s or would come to do after the war. If they had savings at all, people stayed in Treasuries, and despite huge deficits interest rates for federal debt remained near zero. The liquidity trap wasn't overcome until the war ended.
And to conclude with Galbraith:
A brief reflection on this history and present circumstances drives a plain conclusion: the full restoration of private credit will take a long time. It will follow, not precede, the restoration of sound private household finances. There is no way the project of resurrecting the economy by stuffing the banks with cash will work. Effective policy can only work the other way around.
...
Does the Geithner team, forged and trained in normal times, have the range and the flexibility required? If not, everything finally will depend, as it did with Roosevelt, on the imagination and character of President Obama.
I encourage to read the entire Galbraith essay at CommonDreams.org, March 19, 2009.
Pressing Problems and Inequality
Our nation has pressing problems far more important than the solvency of billionaire hedge fund managers and their cohort, whom you are so intent on protecting. Nationalizing the banks seems at this point to be the most rational and efficient solution to the financial system meltdown. Let the chips fall, as it were.
The driving force for this unpleasant mess has been the 30 year growth in inequality, since Reaganomics took hold. This period has seen the top one percent of households double their ownership share of the nation’s property. The lower half of the U.S. households own 2.5% of the nation’s wealth, while the other half own 97.5% of it. For every one dollar owned by half the other half owns 39 dollars. When comparing the bottom half, 58 million households, with the top one percent, 1.1 million households, the ratio is one dollar owned by the lower 50% to 668 dollars owned by the top one percent. The top one percent own more than the bottom 91% of households, or 3 million people have a net worth equal or greater than that of 273 million people.
You were elected to relieve the tension that inevitably is created when resource allocation is so unequal or disparate. Many pressing social problems grow out of this misbalance of resources, and you were placed in your position of authority and power to adjust this gross imbalance. Your years of work in the Chicago neighborhoods of poverty should make you keenly aware of this injustice. Presently the annual income of the top one percent exceeds the income of the bottom 60%, and if rewards are to be justly allocated according to sacrifice, then this is a gross imbalance and a serious social injustice.
Throwing tax money at the financial casino is immoral, in my view. I think you should be able to cut the losses, nationalize the failed banks, re-regulate the entire system, and move on to solving the problems of those who do not eat well, have no place to sleep at night, can’t afford healthcare, childcare or education.
We elected you for that job, not to wipe up the stupid mess of stupid gambling addicts. We are with you and support you.
Yours truly, Ben Leet in San Leandro, California
Footnotes,
About the subprime tail wagging the Credit Default Swap dog listen to Terry Gross’s conversation on Fresh Air, NPR, March 25, 2009, with Frank Partnoy, law professor at U. C. San Diego. See economics professor Jack Rasmus’ article “Epic Recession Revisited” about the explosion of financial corporation indebtedness from 2001 - 2007 at KyklosProductions.com. For details about U.S. wealth distribution see the aforementioned Federal Reserve report, Currents and Undercurrents. For details on the distribution of annual national income see State of Working America, 2006/2007, page 79. Regarding the collapse of the financial sector read MultiNaitonal Monitor, March 2009, Robert Weissman, Thomas Donahue.
Sunday, March 22, 2009
Blog Contents, December, 2008
Warren Brussee answers questions at his blog, and this is my comment of March 22, 2009.
Warren says, “Well, actually it was the CONSUMER who got us into this mess.”
Since solutions to the ongoing problem will be tied to the cause, I offer another viewpoint. Probably the expansion of the economy (GDP/percapita) outpaced the expansion of wages, and this snapped the economy. A short version is to say that inequality caused the downturn. GDP grew 77% between 1980 and 2005, productivity grew by 62% and hourly wages by 14%. As Marriner Eccles said of the Great Depression, when the losers run out of credit the poker game is over. The “losers” could no longer buy the stuff they were producing. This gets into a long discussion, and I’m an amateur, but I’ll give it a try. Professors Edward Wolff and Emmanuel Saez say, between them, that in the last 35 years over 50% of the economic gains (growth of GDP) went to the top one percent. Saez says (Striking It Richer) that the share national income of the top ten percent of households grew from 35% in 1980 to 49.7% in 2005. The share of the bottom 80% is now 40% of national income, and for the bottom 60% of households it is 20% (page 79 of State of Working America, 2006/2007, from a Brookings/Urban Institute Tax Policy Center report). Because of that I do not think the “consumer” drove the economy over the cliff. Recently I read from another professor of economics, Jack Rasmus, (at Z Magazine and KyklosProductions.com) that in 1978 the financial portion of the national debt was 11% of the total national debt, and in 2005 the financial portion was 33% of the national debt. He says that of the $49 trillion national debt, 22 trillion was added since 2001, and of that 22, 18 trillion was financial debt. He gets his figures from the BEA Flow of Funds report. Therefore he concludes that, ““In the U.S. alone, over the past three decades since 1978, total debt --- i.e. finance sector, consumer, government and non-finance business debt --- has risen from $3.6 trillion in 1978 to more than $47.7 trillion! . . . The answer is the orgy of speculative finance and speculative investing. Speculative investment and finance has been the driver of the massive debt run-up. . . . This is not a case of workers and consumers buying too many cars or houses they cannot afford. Workers-consumers debt is the consequence of the increased use of credit cards and housing refinancing in order to maintain standards of living and make up for the essential freeze in pay, adjusted for inflation, since 1982। According to U.S. government Labor Dept. data, the 110 million non-supervisory production and service workers in the U.S. --- the heart of the American working class --- earn less real take home pay in 2008 than they did in 1982 as a group. . . . The massive debt run-up in the U.S. economy is thus clearly financial debt.”
I think this accounts for the growth of hedge funds, LBO operations, SIVs (shadow bank entities, or Special Investment Vehicles) that shifted the majority of investment from banks to these other non-regulated entities. I mention all this, because, as an amateur, an armchair detective, I don’t think the high unemployment rate and other corresponding economic dysfunctions will be over until the differential between wages and GDP growth is pulled into closer alignment। That will mean a serious jobs creation and retention program, and that policy will run directly counter to the prevailing sentiment of a major political party that almost won the last election। And it will be expensive, but not as expensive as a Depression. The part that scares me is when I heard Martin Wolf, writer for the Financial Times, state that the one possible outcome, out of three better ones, of our mess was that “income destroys capital.” That means that the spiral goes on and on, and the capital base of our economy is severely damaged. Not a pleasant thought. So, the consumer had a role, but not the decisive role, more like a trigger that set-off this train of defaults, bankruptcies, layoffs, and lower expectations. And thank you for the very thought provoking blog, and your participation. (I wrote a summary of Rasmus’ articles at my blog, http://benL8.blogspot.com)
Warren says, “Well, actually it was the CONSUMER who got us into this mess.”
Since solutions to the ongoing problem will be tied to the cause, I offer another viewpoint. Probably the expansion of the economy (GDP/percapita) outpaced the expansion of wages, and this snapped the economy. A short version is to say that inequality caused the downturn. GDP grew 77% between 1980 and 2005, productivity grew by 62% and hourly wages by 14%. As Marriner Eccles said of the Great Depression, when the losers run out of credit the poker game is over. The “losers” could no longer buy the stuff they were producing. This gets into a long discussion, and I’m an amateur, but I’ll give it a try. Professors Edward Wolff and Emmanuel Saez say, between them, that in the last 35 years over 50% of the economic gains (growth of GDP) went to the top one percent. Saez says (Striking It Richer) that the share national income of the top ten percent of households grew from 35% in 1980 to 49.7% in 2005. The share of the bottom 80% is now 40% of national income, and for the bottom 60% of households it is 20% (page 79 of State of Working America, 2006/2007, from a Brookings/Urban Institute Tax Policy Center report). Because of that I do not think the “consumer” drove the economy over the cliff. Recently I read from another professor of economics, Jack Rasmus, (at Z Magazine and KyklosProductions.com) that in 1978 the financial portion of the national debt was 11% of the total national debt, and in 2005 the financial portion was 33% of the national debt. He says that of the $49 trillion national debt, 22 trillion was added since 2001, and of that 22, 18 trillion was financial debt. He gets his figures from the BEA Flow of Funds report. Therefore he concludes that, ““In the U.S. alone, over the past three decades since 1978, total debt --- i.e. finance sector, consumer, government and non-finance business debt --- has risen from $3.6 trillion in 1978 to more than $47.7 trillion! . . . The answer is the orgy of speculative finance and speculative investing. Speculative investment and finance has been the driver of the massive debt run-up. . . . This is not a case of workers and consumers buying too many cars or houses they cannot afford. Workers-consumers debt is the consequence of the increased use of credit cards and housing refinancing in order to maintain standards of living and make up for the essential freeze in pay, adjusted for inflation, since 1982। According to U.S. government Labor Dept. data, the 110 million non-supervisory production and service workers in the U.S. --- the heart of the American working class --- earn less real take home pay in 2008 than they did in 1982 as a group. . . . The massive debt run-up in the U.S. economy is thus clearly financial debt.”
I think this accounts for the growth of hedge funds, LBO operations, SIVs (shadow bank entities, or Special Investment Vehicles) that shifted the majority of investment from banks to these other non-regulated entities. I mention all this, because, as an amateur, an armchair detective, I don’t think the high unemployment rate and other corresponding economic dysfunctions will be over until the differential between wages and GDP growth is pulled into closer alignment। That will mean a serious jobs creation and retention program, and that policy will run directly counter to the prevailing sentiment of a major political party that almost won the last election। And it will be expensive, but not as expensive as a Depression. The part that scares me is when I heard Martin Wolf, writer for the Financial Times, state that the one possible outcome, out of three better ones, of our mess was that “income destroys capital.” That means that the spiral goes on and on, and the capital base of our economy is severely damaged. Not a pleasant thought. So, the consumer had a role, but not the decisive role, more like a trigger that set-off this train of defaults, bankruptcies, layoffs, and lower expectations. And thank you for the very thought provoking blog, and your participation. (I wrote a summary of Rasmus’ articles at my blog, http://benL8.blogspot.com)
Wednesday, March 18, 2009
A Man A Plan, Jack Rasmus' Recovery Plan
A Man, A Plan, A Canal Panama ---
Jack Rasmus Presents an Economic Stimulus You Can Believe In
Our economic boat is sinking, and one year from now, March of 2010, we may be taking in water even faster than today. It would be wise --- now, today --- to look for a better bailing mechanism, a real industrial gauge bilge pump. In about ten months, January, 2010, more than one in three workers will be in trouble: 10% will be unemployed, another 10% will be working part-time or will have dropped out of the workforce, and still another 16% will be working for less than the poverty level income. Low income equals low consumption, equals low corporate profits, equals more jobless workers. After Christmas of 2009, people will question if and how Obama’s recovery program has had any effect. That’s fifty million workers, and Obama’s plan is to restore or create only 3.5 million jobs.
A much more aggressive alternative, a bilge pump with capacity, can be found in the plan proposed by Jack Rasmus, Ph.D., economics professor, and writer for Z Magazine. His plan is a comprehensive $2 trillion alternative to the Obama program, it’s been been published by Z Magazine, March, 2009, and is available also at his web site KyklosProductions.com. (There are other plans, but none so large nor as comprehensive. The web pages for extremeinequality.org, EPI.org, sharedprosperity.org, have plans, and of course piece meal proposals have been offered by Demos, Campaign for America’s Future, and Center on Budget and Policy Priorities. All are well and good, but none so thorough as Rasmus’ plan.)
Rasmus says we are between a normal post-World War II recession and something bigger and more damaging. He coins the term Epic Recession। He says that by the end of the year there may be 20 million jobless workers, 12.5% of the workforce. The summary of his plan reads,
“An effective economic recovery and stimulus program must be one that addresses these two primary tasks: jobs creation-retention and housing market stabilization. The recovery proposals that follow require a minimum of $1.5 trillion to fund a comprehensive jobs retention and creation program that will create and retain a minimum of 13 million jobs — i.e., the minimum amount that is needed just to check and contain the economic collapse. The housing program proposals that follow call for an additional $950 billion in spending, necessary to stop the collapse of housing asset prices and to provide a major consumption boost to the economy without reducing taxes and exacerbating budget deficits that will already exceed $1.5 trillion in 2009. The third section includes proposals to finance the $2 trillion program. The fourth section addresses several long-term income restoration elements associated with pensions, health care, and education that are necessary to sustain long-term consumption demand, ensuring the recovery does not falter once again after two years.”
Rasmus divides his plan in four sections, with 20 action points. Part I deals with the housing market stabilization and it is funded with Treasury and Fed funds already at hand, Part II is a jobs creation and retention proposal, Part III is a method to finance the $1 trillion jobs program, and Part IV proposes a long-term consumption stimulus, as the decline of consumption, caused by chronic wage stagnation for 80% of workers over a thirty year period, has been the source cause of the downward spiraling economy.
The problem of the economy is several fold: the bursting housing market asset bubble is sinking home prices and throwing one of ten homeowners out of their homes, and placing one in five mortgage owners “underwater” with their mortgages; the banks and financial system are bankrupt; joblessness is rising rapidly at 600,000 a month or higher; the government is trying to fund a small-sized jobs program through borrowing; and the basic low-income, low-savings problem of 80% of the households must be addressed if this cycle is not to repeat.
Robert Kuttner warns that a Depression is imminent. He, like Rasmus, says we are in the middle of a recession that may grow into a Depression. (“Worse than 1929?” in the American Prospect, March 12, 2009)
“This great collapse doesn't have to be a second Great Depression – if government does nearly everything right, and soon. And when we come out the other side, we could have a more decent and sustainable society.
But if government doesn't do more, and fast, this could be worse than the 1930s.
Why? Three big reasons:” and he goes on to list the failed financial system, the drop in asset value for housing and stocks, and the weakness of the U.S. dollar and what a dollar collapse would mean for the world’s biggest borrower.
“Roosevelt was said to be a big spender, but his biggest peacetime deficit was only about 6 percent of gross domestic product. This year, the deficit will exceed 11 percent, and the recession will deepen all year. It took the truly massive deficits of World War II -- nearly 30 percent of GDP -- to finally end the Great Depression.”
An 11% deficit is $1.5 trillion of red ink. Rasmus’ plan calls for $2 trillion of red ink. It appears that we need something three times greater than Obama’s plan for a minimum of four years. See the article in the Monthly Review, January, 2009, “A New New Deal for Obama?” for details on government spending during the 1930s. In short, FDR’s spending up till the 1940s simply replaced the decline in spending by states that fell precipitously throughout the 30s. Replaced, not supplemented.
I’ll list off the twenty points of Rasmus’ proposal and you can see the scope of his plan.
Part I, Housing Market Stabilization and Consumption Restoration
1. Reset Mortgage Rates for All Loans Originated 2002-2007
2. Reset Principle Loan Balances for All Loans Originated 2002-2007.
3. Create Federal Homeowner-Business Loan Corporation (HSBLC) to Provide Direct lending to the Homeowner-Small Business Property Markets.
4. One Year Moratorium on all Foreclosures and Default Proceedings.
5. Optional Homeowners 40 year Fixed Loan Extension
6. 15% Homeowners’ Investment Tax Credit
7. Restoration of ‘Regulation Q’, dealing with usury laws and interest rate caps.
Part II, $1 Trillion Jobs Creation and Retention Program
8. $300 billion for infrastructure jobs.
9. $100 billion for further stimulating growth-sector jobs.
10. $100 billion for manufacturing industry job retention and creation.
11. $300 billion Government Sector Job Creation-Retention.
12. $125 for bailout and consolidation of the Auto Industry
13. $125 billion for emergency Unemployment Insurance and Special Domestic Assistance Retraining.
Part III, Financing the $1 Trillion Jobs Program
14. Retroactive Windfall Taxes: Oil-Energy Industry Windfall Profits, Executive Compensation, and Corporate Foreign Retained Earnings Taxes.
15. Capital Incomes Tax Rate Rollbacks (“The severe shift and maldistribution in income in the U.S. since Reagan is heavily responsible for the runaway speculative investment contributing to the current financial crisis, as well as to the collapse of consumer spending so abruptly and deeply in recent months. No long term recovery is therefore possible without a basic re-restructuring of the tax system in the U.S., starting with capital incomes taxation.”
16. Repatriation of $2 Trillion from Offshore Tax Havens.
17. 6.25% FICA Tax on all Unearned Incomes above $332,000.
Part IV, Providing a Long-Term Consumption Stimulus,
18. Establish a National 401K Pool
19. De-Privatize the Student Loan Market
20. Single Payer Universal Health Plan.
Placing all the elements of the recovery connects the dots, gives a holistic picture of the danger we face. A Depression is serious non-business. “Income destroys capital,” is the last option that we want to avoid, commented Martin Wolf, economist and writer for the Financial Times in an interview with Doug Henwood in September of 2008. There are three possible outcomes, he said; one, we muddle through slowly, two, the Obama restoration less slowly pulls the economy back to health, and three, “Income destroys capital.” That means the spiral goes on so long and affects such a broad range of businesses and consumers that in the end the capital value, the investments of our society, are destroyed because no one will have income to continue to buy their products or be employed in their production. “Income destroys capital.” I think he was drawing on his knowledge of Keynesian economics. Grave stuff.
While Rasmus may not have all the solutions in perfect order, he at the least gives us a powerful strategy that draws on the immense underutilized wealth of our country to reinvigorate consumer buying power, aggregate demand, after a thirty year wage freeze that has crippled a large portion of Americans. The latest Federal Reserve report on wealth in America, just out, shows that the lowest half of U.S. households still cannot survive independently on their personal savings for more than 6 months. Yet these 50% of U.S. citizens go to work, for the most part, everyday to pay their bills if not to save.
To elucidate just a little further, Rasmus in another of his articles,
“Speculative Capital, Financial Crisis, and Emerging Epic Recession,” recounts the growth of the credit market over the past 30 years. In 1978 the portion of national debt that was financial debt was 11.3%, but by 2007 the financial portion had grown to 33.4%, or it had tripled relative to entire national debt picture. Half of the increase occurred between 2000 and 2007.
“In the U.S. alone, over the past three decades since 1978, total debt --- i.e. finance sector, consumer, government and non-finance business debt --- has risen from $3.6 trillion in 1978 to more than $47.7 trillion! . . . The answer is the orgy of speculative finance and speculative investing. Speculative investment and finance has been the driver of the massive debt run-up. . . . This is not a case of workers and consumers buying too many cars or houses they cannot afford. Workers-consumers debt is the consequence of the increased use of credit cards and housing refinancing in order to maintain standards of living and make up for the essential freeze in pay, adjusted for inflation, since 1982. According to U.S. government Labor Dept. data, the 110 million non-supervisory production and service workers in the U.S. --- the heart of the American working class --- earn less real take home pay in 2008 than they did in 1982 as a group. . . . The massive debt run-up in the U.S. economy is thus clearly financial debt.”
A loan is a gamble on future earnings, but earnings have not kept up with the pace of too many loans. Credit bubble, credit collapse, banks declare bankruptcy (or petition government for bailout funding) and world economy goes south.
In another of his articles, “Epic Recession Revisited”, Rasmus states,
“For example, more than $22 trillion of the current total U.S. $49 trillion debt (i.e. government, consumer, financial institution, and non-financial corporate combined) has been added just since 2001. [27 + 22 = 49] The current financial crisis is due to the ‘unwinding’ of that excess debt, $18 trillion of the $22 of which is corporate (financial and non-financial) debt. The financial crisis has been particularly intractable due to the huge volume of debt unwinding that has yet to be contained despite the Treasury-Fed throwing $4 trillion to date at it. The $4 trillion is likely just half that which will eventually be required.”
As readers of the blog http://benL8.blogspot.com will know already, the solution to our economic woes is to increase wages, savings, and employment for the 50% of households on the lower side of the income and wealth ladder. “Half Own 2.5%, Half Earn 15%” is the title of my favorite essay. This is the only lasting quality of life improvement we can hope for in the U.S.A. These proposals by Rasmus are consistent with my proposition, and are certainly presented with professional expertise and acumen.
Jack Rasmus Presents an Economic Stimulus You Can Believe In
Our economic boat is sinking, and one year from now, March of 2010, we may be taking in water even faster than today. It would be wise --- now, today --- to look for a better bailing mechanism, a real industrial gauge bilge pump. In about ten months, January, 2010, more than one in three workers will be in trouble: 10% will be unemployed, another 10% will be working part-time or will have dropped out of the workforce, and still another 16% will be working for less than the poverty level income. Low income equals low consumption, equals low corporate profits, equals more jobless workers. After Christmas of 2009, people will question if and how Obama’s recovery program has had any effect. That’s fifty million workers, and Obama’s plan is to restore or create only 3.5 million jobs.
A much more aggressive alternative, a bilge pump with capacity, can be found in the plan proposed by Jack Rasmus, Ph.D., economics professor, and writer for Z Magazine. His plan is a comprehensive $2 trillion alternative to the Obama program, it’s been been published by Z Magazine, March, 2009, and is available also at his web site KyklosProductions.com. (There are other plans, but none so large nor as comprehensive. The web pages for extremeinequality.org, EPI.org, sharedprosperity.org, have plans, and of course piece meal proposals have been offered by Demos, Campaign for America’s Future, and Center on Budget and Policy Priorities. All are well and good, but none so thorough as Rasmus’ plan.)
Rasmus says we are between a normal post-World War II recession and something bigger and more damaging. He coins the term Epic Recession। He says that by the end of the year there may be 20 million jobless workers, 12.5% of the workforce. The summary of his plan reads,
“An effective economic recovery and stimulus program must be one that addresses these two primary tasks: jobs creation-retention and housing market stabilization. The recovery proposals that follow require a minimum of $1.5 trillion to fund a comprehensive jobs retention and creation program that will create and retain a minimum of 13 million jobs — i.e., the minimum amount that is needed just to check and contain the economic collapse. The housing program proposals that follow call for an additional $950 billion in spending, necessary to stop the collapse of housing asset prices and to provide a major consumption boost to the economy without reducing taxes and exacerbating budget deficits that will already exceed $1.5 trillion in 2009. The third section includes proposals to finance the $2 trillion program. The fourth section addresses several long-term income restoration elements associated with pensions, health care, and education that are necessary to sustain long-term consumption demand, ensuring the recovery does not falter once again after two years.”
Rasmus divides his plan in four sections, with 20 action points. Part I deals with the housing market stabilization and it is funded with Treasury and Fed funds already at hand, Part II is a jobs creation and retention proposal, Part III is a method to finance the $1 trillion jobs program, and Part IV proposes a long-term consumption stimulus, as the decline of consumption, caused by chronic wage stagnation for 80% of workers over a thirty year period, has been the source cause of the downward spiraling economy.
The problem of the economy is several fold: the bursting housing market asset bubble is sinking home prices and throwing one of ten homeowners out of their homes, and placing one in five mortgage owners “underwater” with their mortgages; the banks and financial system are bankrupt; joblessness is rising rapidly at 600,000 a month or higher; the government is trying to fund a small-sized jobs program through borrowing; and the basic low-income, low-savings problem of 80% of the households must be addressed if this cycle is not to repeat.
Robert Kuttner warns that a Depression is imminent. He, like Rasmus, says we are in the middle of a recession that may grow into a Depression. (“Worse than 1929?” in the American Prospect, March 12, 2009)
“This great collapse doesn't have to be a second Great Depression – if government does nearly everything right, and soon. And when we come out the other side, we could have a more decent and sustainable society.
But if government doesn't do more, and fast, this could be worse than the 1930s.
Why? Three big reasons:” and he goes on to list the failed financial system, the drop in asset value for housing and stocks, and the weakness of the U.S. dollar and what a dollar collapse would mean for the world’s biggest borrower.
“Roosevelt was said to be a big spender, but his biggest peacetime deficit was only about 6 percent of gross domestic product. This year, the deficit will exceed 11 percent, and the recession will deepen all year. It took the truly massive deficits of World War II -- nearly 30 percent of GDP -- to finally end the Great Depression.”
An 11% deficit is $1.5 trillion of red ink. Rasmus’ plan calls for $2 trillion of red ink. It appears that we need something three times greater than Obama’s plan for a minimum of four years. See the article in the Monthly Review, January, 2009, “A New New Deal for Obama?” for details on government spending during the 1930s. In short, FDR’s spending up till the 1940s simply replaced the decline in spending by states that fell precipitously throughout the 30s. Replaced, not supplemented.
I’ll list off the twenty points of Rasmus’ proposal and you can see the scope of his plan.
Part I, Housing Market Stabilization and Consumption Restoration
1. Reset Mortgage Rates for All Loans Originated 2002-2007
2. Reset Principle Loan Balances for All Loans Originated 2002-2007.
3. Create Federal Homeowner-Business Loan Corporation (HSBLC) to Provide Direct lending to the Homeowner-Small Business Property Markets.
4. One Year Moratorium on all Foreclosures and Default Proceedings.
5. Optional Homeowners 40 year Fixed Loan Extension
6. 15% Homeowners’ Investment Tax Credit
7. Restoration of ‘Regulation Q’, dealing with usury laws and interest rate caps.
Part II, $1 Trillion Jobs Creation and Retention Program
8. $300 billion for infrastructure jobs.
9. $100 billion for further stimulating growth-sector jobs.
10. $100 billion for manufacturing industry job retention and creation.
11. $300 billion Government Sector Job Creation-Retention.
12. $125 for bailout and consolidation of the Auto Industry
13. $125 billion for emergency Unemployment Insurance and Special Domestic Assistance Retraining.
Part III, Financing the $1 Trillion Jobs Program
14. Retroactive Windfall Taxes: Oil-Energy Industry Windfall Profits, Executive Compensation, and Corporate Foreign Retained Earnings Taxes.
15. Capital Incomes Tax Rate Rollbacks (“The severe shift and maldistribution in income in the U.S. since Reagan is heavily responsible for the runaway speculative investment contributing to the current financial crisis, as well as to the collapse of consumer spending so abruptly and deeply in recent months. No long term recovery is therefore possible without a basic re-restructuring of the tax system in the U.S., starting with capital incomes taxation.”
16. Repatriation of $2 Trillion from Offshore Tax Havens.
17. 6.25% FICA Tax on all Unearned Incomes above $332,000.
Part IV, Providing a Long-Term Consumption Stimulus,
18. Establish a National 401K Pool
19. De-Privatize the Student Loan Market
20. Single Payer Universal Health Plan.
Placing all the elements of the recovery connects the dots, gives a holistic picture of the danger we face. A Depression is serious non-business. “Income destroys capital,” is the last option that we want to avoid, commented Martin Wolf, economist and writer for the Financial Times in an interview with Doug Henwood in September of 2008. There are three possible outcomes, he said; one, we muddle through slowly, two, the Obama restoration less slowly pulls the economy back to health, and three, “Income destroys capital.” That means the spiral goes on so long and affects such a broad range of businesses and consumers that in the end the capital value, the investments of our society, are destroyed because no one will have income to continue to buy their products or be employed in their production. “Income destroys capital.” I think he was drawing on his knowledge of Keynesian economics. Grave stuff.
While Rasmus may not have all the solutions in perfect order, he at the least gives us a powerful strategy that draws on the immense underutilized wealth of our country to reinvigorate consumer buying power, aggregate demand, after a thirty year wage freeze that has crippled a large portion of Americans. The latest Federal Reserve report on wealth in America, just out, shows that the lowest half of U.S. households still cannot survive independently on their personal savings for more than 6 months. Yet these 50% of U.S. citizens go to work, for the most part, everyday to pay their bills if not to save.
To elucidate just a little further, Rasmus in another of his articles,
“Speculative Capital, Financial Crisis, and Emerging Epic Recession,” recounts the growth of the credit market over the past 30 years. In 1978 the portion of national debt that was financial debt was 11.3%, but by 2007 the financial portion had grown to 33.4%, or it had tripled relative to entire national debt picture. Half of the increase occurred between 2000 and 2007.
“In the U.S. alone, over the past three decades since 1978, total debt --- i.e. finance sector, consumer, government and non-finance business debt --- has risen from $3.6 trillion in 1978 to more than $47.7 trillion! . . . The answer is the orgy of speculative finance and speculative investing. Speculative investment and finance has been the driver of the massive debt run-up. . . . This is not a case of workers and consumers buying too many cars or houses they cannot afford. Workers-consumers debt is the consequence of the increased use of credit cards and housing refinancing in order to maintain standards of living and make up for the essential freeze in pay, adjusted for inflation, since 1982. According to U.S. government Labor Dept. data, the 110 million non-supervisory production and service workers in the U.S. --- the heart of the American working class --- earn less real take home pay in 2008 than they did in 1982 as a group. . . . The massive debt run-up in the U.S. economy is thus clearly financial debt.”
A loan is a gamble on future earnings, but earnings have not kept up with the pace of too many loans. Credit bubble, credit collapse, banks declare bankruptcy (or petition government for bailout funding) and world economy goes south.
In another of his articles, “Epic Recession Revisited”, Rasmus states,
“For example, more than $22 trillion of the current total U.S. $49 trillion debt (i.e. government, consumer, financial institution, and non-financial corporate combined) has been added just since 2001. [27 + 22 = 49] The current financial crisis is due to the ‘unwinding’ of that excess debt, $18 trillion of the $22 of which is corporate (financial and non-financial) debt. The financial crisis has been particularly intractable due to the huge volume of debt unwinding that has yet to be contained despite the Treasury-Fed throwing $4 trillion to date at it. The $4 trillion is likely just half that which will eventually be required.”
As readers of the blog http://benL8.blogspot.com will know already, the solution to our economic woes is to increase wages, savings, and employment for the 50% of households on the lower side of the income and wealth ladder. “Half Own 2.5%, Half Earn 15%” is the title of my favorite essay. This is the only lasting quality of life improvement we can hope for in the U.S.A. These proposals by Rasmus are consistent with my proposition, and are certainly presented with professional expertise and acumen.
Thursday, March 5, 2009
Tax Wealth, Create Public Jobs
The U.S. Ranks 75th out of 126 Nations
The United Nations’ Human Development Index ranks the United States at 15th place, in 2009, out of 177 nations in its composite of rankings for human development, but in the category of “Income or Expenditure Inequality” the U.S. ranks down at 75th place. The inequality measure compares the incomes of the top 20% of households with the bottom 20%. All of the advanced economies rank higher than the U.S. In the top 50 nations only Hong Kong, Singapore, Argentina, Chile, Uruguay, and Costa Rica rank below the U.S. When the comparison is the top 10% vs. the bottom 10% the U.S. ranks at 81st place among 126 nations.
Using the Gini index, used by economists to determine inequality, the U.S. also ranks high on the inequality scale, 40.8, compared to western Europe and Japan, nations that score in the mid 20s. Here is a select listing of scores among a wide group of nations to compare inequality.
Nation Gini 20% vs 20% 10% vs 10% GDP/capita
Japan २४.9 ३.4 ६.1 35,484
Norway २५.8 ३.9 ४.5 63,918
France ३२.7 ५.6 ९.1 34,936
Germany २८.3 ४.3 ६.9 26,893
U.S. 40.8 ८.4 १५.9 41,890
Hong Kong ४३.4 ९.7 १à¥.8 25,592
Singapore 42.8 ९.7 १à¥.7 26,893
Mexico ४६.1 १२.8 २४.6 7,454
Brazil ५à¥.0 २४.8 ५१.3 4,271
China ४६.7 १२.3 24.6 1,713
Bolivia ६०.1 ४२.3 १६८.1 1,017
Naturally Japan scores high in the HDI, 8th in quality of life score, because it is an advanced economy and the wealth and income are shared more so than all other countries. Comparing Denmark (14th) with Singapore (25th), while their GDP per capita is roughly the same, their Gini scores and inequality scores are widely different. The benefit of high income is not shared in Singapore, it is sequestered by the ownership class and quality of life lags behind Denmark. Perhaps Singapore’s long-term strategy will change that, but perhaps not. (See Robert Kuttner’s article in Foreign Affairs, October 2008 for a review of the Danish economy as an example of economic justice and progress.)
The U.S. also ranks 2nd in GDP per capita but 13 places lower in overall HDI. In contrast Cuba ranks at 93rd in GDP per capita but 42 places higher in HDI, indicating that Cuba does a lot with a little.
Turgor pressure we learn in school biology is the opposite of the word “wilting.” In a metaphor, aggregate demand is to an economy what turgor pressure is to a plant. That is the crux of my argument here. An economy with high inequality will not respond quickly to slumps or wilting since a major portion of its population base is bereft, short, and lacking in economic pressure, and the entire system has to depend on the purchasing demand of the small wealthiest portion to keep the least wealthy section employed. The U.S. GDP, July 2008, was $14.2 trillion, with 141 million workers, each producing on average $100,000 per worker. At that, half of the workers were earning less than $33,000, and a good portion of the lower half much less than $33,000. This is inequality of income. Also, of course, the wealth of the bottom 50% is a paltry 2.5% of the total national wealth (2006 report of the Federal Reserve, Currents and Undercurrents).
The major portion of the U.S. population that is lacking in purchasing demand is the lower 60% whose combined annual earnings amounts to 20% of the GDP, and whose combined wealth is, approximately, less than 5% of the national wealth. The article “Striking It Richer” by Emmanuel Saez, professor of economics at U.C. Berkeley, indicates that the top ten percent of annual earners now receive about 50% of the total earnings, compared to 28 years ago when they received only 35%. The top 10% also own about 70% of everything that has a price tag.
Take also into consideration that 16.2% of the labor force earns less than the poverty threshold for a four person family, and that The Economic Policy Institute predicts that the underemployed sector, involuntary part-time workers, will rise to 17.7% of workers in 2010, and unemployment will reach 10.2%. Then in a matter of months you will have 44.1% of the labor force earning very little. The turgor pressure for the economy will be low, to say the least. Let’s see, out of work, not working enough, not earning enough --- what does that equal for 44% of the population?
I’ve recently read (March 2009) the predictions of Warren Brussee about the stock market, how it depends on the ratio of dividends to prices, and the conclusion is that the value of stocks will continue to languish. Brussee wrote the book The Second Great Depression, published in 2005. The economic commentator John Mauldin also predicts the same in his newsletter of March 4, 2009, titled “While Rome Burns.” And, also consider that the European banks are facing a blow-up owing to the collapse of the economy in eastern Europe. Multiple signs of a very weak and slow world economy. A few years ago I read in a Charles Schwab Company report that about 53% of China’s economy was devoted to export production, and now massive layoffs are occurring in China.
Wealth Tax and Public Jobs
To counter all this bad news we all need to consider the power of public job creation and a tax on wealth. We have had both these policies for over 100 years, so it’s nothing new. The military is a public jobs program, and that dates back to George Washington. We spend $1.1 trillion on the military today, that’s about 8% of the GDP. (See Chalmers Johnson’s Going Bankrupt at Zmagazine.) FDR put public jobs creation on the map, and the Second World War made it the savior of the rotten Depression Era, along with pro-union policies and other factors. A tax on wealth is as old as the property tax and the estate tax. (See Gar Alperovitz for an article on a wealth tax in Dollars and Sense magazine.) Warren Brussee calculates that Obama’s job creation policy, his stimulus of nearly $800 billion, will employ 2.3% of the workforce over a three year period. (Remember that 40% of that amount goes to tax cuts, not job creation.) We can surmise that the Obama program reduces unemployment by 2.3% from 12.5%, holding it at 10.2%. Brussee says the program will have to be renewed after three years for another huge amount. This is starting to sound like professor Jack Rasmus’ prediction of an Epic Recession, something between a depression and a recession.
I wish I knew of someone who like me sees inequality as a structural impediment to a vibrant economy. I think Paul Krugman does, but I’m not that sure. It seems clear that we will flounder around for a few years and slowly come out of it, or we create those public jobs at a living wage. See the National Jobs for All Coalition for more argumentation along the lines of public job creation. They report, from BLS statistics, that 15.7% or 25 million people are un- and underemployed in January, 2009. That’s almost one out of six. And there are 9 unemployed for every 1 job opening. Unemployment among African-Americans is 12.6%, almost depression levels. The Economic Policy Institute carries similar data about unemployment; that in 24 months, January 2011, there will be LESS jobs than today. And the Republicans are promoting their same panacea, “free” markets and lower taxes, if you still have income to pay taxes on, and if any market still has customers.
And don’t forget, the U.S. ranks at 75th place in inequality or expenditures according to the U.N. Human Development Report. In other words, there is still plenty of money at the top to tax that will pay for public jobs, which will create aggregate demand, which is the equivalent of turgor pressure for our wilting economy, which will restore prosperity to not just a few.
The United Nations’ Human Development Index ranks the United States at 15th place, in 2009, out of 177 nations in its composite of rankings for human development, but in the category of “Income or Expenditure Inequality” the U.S. ranks down at 75th place. The inequality measure compares the incomes of the top 20% of households with the bottom 20%. All of the advanced economies rank higher than the U.S. In the top 50 nations only Hong Kong, Singapore, Argentina, Chile, Uruguay, and Costa Rica rank below the U.S. When the comparison is the top 10% vs. the bottom 10% the U.S. ranks at 81st place among 126 nations.
Using the Gini index, used by economists to determine inequality, the U.S. also ranks high on the inequality scale, 40.8, compared to western Europe and Japan, nations that score in the mid 20s. Here is a select listing of scores among a wide group of nations to compare inequality.
Nation Gini 20% vs 20% 10% vs 10% GDP/capita
Japan २४.9 ३.4 ६.1 35,484
Norway २५.8 ३.9 ४.5 63,918
France ३२.7 ५.6 ९.1 34,936
Germany २८.3 ४.3 ६.9 26,893
U.S. 40.8 ८.4 १५.9 41,890
Hong Kong ४३.4 ९.7 १à¥.8 25,592
Singapore 42.8 ९.7 १à¥.7 26,893
Mexico ४६.1 १२.8 २४.6 7,454
Brazil ५à¥.0 २४.8 ५१.3 4,271
China ४६.7 १२.3 24.6 1,713
Bolivia ६०.1 ४२.3 १६८.1 1,017
Naturally Japan scores high in the HDI, 8th in quality of life score, because it is an advanced economy and the wealth and income are shared more so than all other countries. Comparing Denmark (14th) with Singapore (25th), while their GDP per capita is roughly the same, their Gini scores and inequality scores are widely different. The benefit of high income is not shared in Singapore, it is sequestered by the ownership class and quality of life lags behind Denmark. Perhaps Singapore’s long-term strategy will change that, but perhaps not. (See Robert Kuttner’s article in Foreign Affairs, October 2008 for a review of the Danish economy as an example of economic justice and progress.)
The U.S. also ranks 2nd in GDP per capita but 13 places lower in overall HDI. In contrast Cuba ranks at 93rd in GDP per capita but 42 places higher in HDI, indicating that Cuba does a lot with a little.
Turgor pressure we learn in school biology is the opposite of the word “wilting.” In a metaphor, aggregate demand is to an economy what turgor pressure is to a plant. That is the crux of my argument here. An economy with high inequality will not respond quickly to slumps or wilting since a major portion of its population base is bereft, short, and lacking in economic pressure, and the entire system has to depend on the purchasing demand of the small wealthiest portion to keep the least wealthy section employed. The U.S. GDP, July 2008, was $14.2 trillion, with 141 million workers, each producing on average $100,000 per worker. At that, half of the workers were earning less than $33,000, and a good portion of the lower half much less than $33,000. This is inequality of income. Also, of course, the wealth of the bottom 50% is a paltry 2.5% of the total national wealth (2006 report of the Federal Reserve, Currents and Undercurrents).
The major portion of the U.S. population that is lacking in purchasing demand is the lower 60% whose combined annual earnings amounts to 20% of the GDP, and whose combined wealth is, approximately, less than 5% of the national wealth. The article “Striking It Richer” by Emmanuel Saez, professor of economics at U.C. Berkeley, indicates that the top ten percent of annual earners now receive about 50% of the total earnings, compared to 28 years ago when they received only 35%. The top 10% also own about 70% of everything that has a price tag.
Take also into consideration that 16.2% of the labor force earns less than the poverty threshold for a four person family, and that The Economic Policy Institute predicts that the underemployed sector, involuntary part-time workers, will rise to 17.7% of workers in 2010, and unemployment will reach 10.2%. Then in a matter of months you will have 44.1% of the labor force earning very little. The turgor pressure for the economy will be low, to say the least. Let’s see, out of work, not working enough, not earning enough --- what does that equal for 44% of the population?
I’ve recently read (March 2009) the predictions of Warren Brussee about the stock market, how it depends on the ratio of dividends to prices, and the conclusion is that the value of stocks will continue to languish. Brussee wrote the book The Second Great Depression, published in 2005. The economic commentator John Mauldin also predicts the same in his newsletter of March 4, 2009, titled “While Rome Burns.” And, also consider that the European banks are facing a blow-up owing to the collapse of the economy in eastern Europe. Multiple signs of a very weak and slow world economy. A few years ago I read in a Charles Schwab Company report that about 53% of China’s economy was devoted to export production, and now massive layoffs are occurring in China.
Wealth Tax and Public Jobs
To counter all this bad news we all need to consider the power of public job creation and a tax on wealth. We have had both these policies for over 100 years, so it’s nothing new. The military is a public jobs program, and that dates back to George Washington. We spend $1.1 trillion on the military today, that’s about 8% of the GDP. (See Chalmers Johnson’s Going Bankrupt at Zmagazine.) FDR put public jobs creation on the map, and the Second World War made it the savior of the rotten Depression Era, along with pro-union policies and other factors. A tax on wealth is as old as the property tax and the estate tax. (See Gar Alperovitz for an article on a wealth tax in Dollars and Sense magazine.) Warren Brussee calculates that Obama’s job creation policy, his stimulus of nearly $800 billion, will employ 2.3% of the workforce over a three year period. (Remember that 40% of that amount goes to tax cuts, not job creation.) We can surmise that the Obama program reduces unemployment by 2.3% from 12.5%, holding it at 10.2%. Brussee says the program will have to be renewed after three years for another huge amount. This is starting to sound like professor Jack Rasmus’ prediction of an Epic Recession, something between a depression and a recession.
I wish I knew of someone who like me sees inequality as a structural impediment to a vibrant economy. I think Paul Krugman does, but I’m not that sure. It seems clear that we will flounder around for a few years and slowly come out of it, or we create those public jobs at a living wage. See the National Jobs for All Coalition for more argumentation along the lines of public job creation. They report, from BLS statistics, that 15.7% or 25 million people are un- and underemployed in January, 2009. That’s almost one out of six. And there are 9 unemployed for every 1 job opening. Unemployment among African-Americans is 12.6%, almost depression levels. The Economic Policy Institute carries similar data about unemployment; that in 24 months, January 2011, there will be LESS jobs than today. And the Republicans are promoting their same panacea, “free” markets and lower taxes, if you still have income to pay taxes on, and if any market still has customers.
And don’t forget, the U.S. ranks at 75th place in inequality or expenditures according to the U.N. Human Development Report. In other words, there is still plenty of money at the top to tax that will pay for public jobs, which will create aggregate demand, which is the equivalent of turgor pressure for our wilting economy, which will restore prosperity to not just a few.
Monday, December 29, 2008
Blog Contents
Dear Reader,
Contents of this web site:
I write essays on economics.
The most recent essays are at the top, oldest at the bottom.
If you read only one essay, choose
August, 2008, Half Own 2.5%, Half Earn 15%.
That will get you going.
December, 2008, has me writing The Case for Full Employment.
Click the ? in the Contents area to open the month and see the essays for any month.
23. Why We Need Full Employment
This is my shortest, a one page effort full of facts well documented.
December 29, 2008
22. The Case for Full Employment
Both a historical overview of previous government actions, and a review
two scholars’ approach to solving paucity of jobs in our economy.
I think this is sound policy and a good, brief look at the employment problem.
21. Full Employment
Basic logic on full employment.
20. Meltdown/Bailout Suggestions
Two suggestions about nationalizing banks and reworking underwater
home mortgages.
19. Nationalize the Banks or Bail Them Out
I quote a professor, Peter Dorman, and a financial consultant, John Hussman. Both offer plans radically different than Treasury Secretary Paulson’s. I review radio program This American Life, to explain the subprime mess. I wrote it for my sister.
18. Understanding the Financial Crisis
William Springer, head of the economics department at Howard University
made the same comments on the radio the week after I wrote this.
I claim that the financial part of the crisis is phase one. Much more bad news will unfold.
17. Justice Revolution
A longer essay with a little more documentation, but basically the same essay as the last.
It is better in some ways. I trace international methods to create global economic justice.
16. Half Own 2.5%, Half Earn 15%
Read this one if you read no other.
15. Celebrate $100,000 a year as the average U.S. income
Hard to believe, but that’s correct. Read it to believe it.
14. Infectious Greed Overwhelms the U.S. Economy
I quote Marriner Eccles about the Great Depression. I tried to simplify
the previous essay for a friend who has no background.
13. Economic Rights for the Two Out of Seven Who Are Not Making It
July 22, 2008
Inequality, weak purchasing power, Roosevelt’s State of the Union, ‘44,
and much more. Not too pessimistic. About 3,000 words.
Really interesting says the author.
12. What the Government Can Do
May 1, 2008
A two page reduction of the essay There Are Solutions. A quick read on
ways to increase employment and incomes without stalling the economy.
Maybe my ‘Best.’ Short, to the point.
11. Three Short Pieces
June 15, 2008. To the KPFA Morning Show, The Next Wave of Political Reform, and another review of Robin Hahnel’s book Economic Justice and Democracy.
10. My Second Letter to Pete Stark, Congressman
A little note about shrinking aggregate demand, how to grow an economy,
and why worldwide depression is possible. I had just read Jeff Madrick’s
Why Economies Grow.
9. There Are Solutions
This 4,000 word essay details and reviews three plans for revitalizing the American economy.
First, I take a look at Frank Stricker’s book Why America Lost the War on Poverty --- and How to Win It, and his 17 point plan called What Needs to Be Done.
Second I look at the Center for American Progress’ plan “From Poverty to
Prosperity.”
Finally, I review “Decent Work and Public Investment,” a plan authored by members of the National Jobs for All Coalition, Helen Lachs Ginsburg and Gertrude Shaffner Goldberg.
8. White Birds --- a poem not about economics. About love.
7. A Wealth Tax to Eliminate Poverty
This may be my best effort. It is a reduction of my original essay A Modest Proposal to Tax Wealth Annually in the U.S.A.
6. The Art of Living Together
A short vagrancy, a fissure, an errant meander, a lunacy. Something burst.
5. A Letter to My Congressman, Pete Stark. February 5, 2008
I break down wealth and income distribution, and suggest sources for
the Congressman to pursue.
4. A book review of Robin Hahnel’s Economic Justice and Democracy
This essay was published in the Alameda County Green Party News in
October, 2007.
3. Odd, Very Odd. March, 2008. A recapitulation of old ideas. Nothing special.
2. Is There a Middle Class?
The 40 to 1 ratio between two halves of the U.S. population impressed me. I was listening to Michael Krasny on KQED FM radio talk about the middle class. He did not take my e-mail, so I wrote this essay and sent it to him.
1. Progressive Economic Reform, 2008
January, 2008
This essay presents an array of eleven different sources that argue that our economy does not serve the American people.
The people at Econo-atrocity, the commentary site at Center for
Popular Economics, posted it. It’s my third favorite after What Government Can Do, and
A Wealth Tax to Eliminate Poverty, second best.
Contents of this web site:
I write essays on economics.
The most recent essays are at the top, oldest at the bottom.
If you read only one essay, choose
August, 2008, Half Own 2.5%, Half Earn 15%.
That will get you going.
December, 2008, has me writing The Case for Full Employment.
Click the ? in the Contents area to open the month and see the essays for any month.
23. Why We Need Full Employment
This is my shortest, a one page effort full of facts well documented.
December 29, 2008
22. The Case for Full Employment
Both a historical overview of previous government actions, and a review
two scholars’ approach to solving paucity of jobs in our economy.
I think this is sound policy and a good, brief look at the employment problem.
21. Full Employment
Basic logic on full employment.
20. Meltdown/Bailout Suggestions
Two suggestions about nationalizing banks and reworking underwater
home mortgages.
19. Nationalize the Banks or Bail Them Out
I quote a professor, Peter Dorman, and a financial consultant, John Hussman. Both offer plans radically different than Treasury Secretary Paulson’s. I review radio program This American Life, to explain the subprime mess. I wrote it for my sister.
18. Understanding the Financial Crisis
William Springer, head of the economics department at Howard University
made the same comments on the radio the week after I wrote this.
I claim that the financial part of the crisis is phase one. Much more bad news will unfold.
17. Justice Revolution
A longer essay with a little more documentation, but basically the same essay as the last.
It is better in some ways. I trace international methods to create global economic justice.
16. Half Own 2.5%, Half Earn 15%
Read this one if you read no other.
15. Celebrate $100,000 a year as the average U.S. income
Hard to believe, but that’s correct. Read it to believe it.
14. Infectious Greed Overwhelms the U.S. Economy
I quote Marriner Eccles about the Great Depression. I tried to simplify
the previous essay for a friend who has no background.
13. Economic Rights for the Two Out of Seven Who Are Not Making It
July 22, 2008
Inequality, weak purchasing power, Roosevelt’s State of the Union, ‘44,
and much more. Not too pessimistic. About 3,000 words.
Really interesting says the author.
12. What the Government Can Do
May 1, 2008
A two page reduction of the essay There Are Solutions. A quick read on
ways to increase employment and incomes without stalling the economy.
Maybe my ‘Best.’ Short, to the point.
11. Three Short Pieces
June 15, 2008. To the KPFA Morning Show, The Next Wave of Political Reform, and another review of Robin Hahnel’s book Economic Justice and Democracy.
10. My Second Letter to Pete Stark, Congressman
A little note about shrinking aggregate demand, how to grow an economy,
and why worldwide depression is possible. I had just read Jeff Madrick’s
Why Economies Grow.
9. There Are Solutions
This 4,000 word essay details and reviews three plans for revitalizing the American economy.
First, I take a look at Frank Stricker’s book Why America Lost the War on Poverty --- and How to Win It, and his 17 point plan called What Needs to Be Done.
Second I look at the Center for American Progress’ plan “From Poverty to
Prosperity.”
Finally, I review “Decent Work and Public Investment,” a plan authored by members of the National Jobs for All Coalition, Helen Lachs Ginsburg and Gertrude Shaffner Goldberg.
8. White Birds --- a poem not about economics. About love.
7. A Wealth Tax to Eliminate Poverty
This may be my best effort. It is a reduction of my original essay A Modest Proposal to Tax Wealth Annually in the U.S.A.
6. The Art of Living Together
A short vagrancy, a fissure, an errant meander, a lunacy. Something burst.
5. A Letter to My Congressman, Pete Stark. February 5, 2008
I break down wealth and income distribution, and suggest sources for
the Congressman to pursue.
4. A book review of Robin Hahnel’s Economic Justice and Democracy
This essay was published in the Alameda County Green Party News in
October, 2007.
3. Odd, Very Odd. March, 2008. A recapitulation of old ideas. Nothing special.
2. Is There a Middle Class?
The 40 to 1 ratio between two halves of the U.S. population impressed me. I was listening to Michael Krasny on KQED FM radio talk about the middle class. He did not take my e-mail, so I wrote this essay and sent it to him.
1. Progressive Economic Reform, 2008
January, 2008
This essay presents an array of eleven different sources that argue that our economy does not serve the American people.
The people at Econo-atrocity, the commentary site at Center for
Popular Economics, posted it. It’s my third favorite after What Government Can Do, and
A Wealth Tax to Eliminate Poverty, second best.
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