Posts tagged with 'jobs'
Weekly Audit: Business Press Gets Nasty as Economy Worsens
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by Zach Carter, Media Consortium blogger
The economy is terrible. Jobs are nowhere to be found. Wall Street bonuses are through the roof. But mainstream business journalism is still praising the con-men who created this mess, yet attacking anybody who takes real solutions—like government spending to create jobs—seriously.
Whatever corporate journalists say, the American economy will not recover until policymakers and the media acknowledge the mistakes of the past and move forward with a new economic agenda focused on middle-class prosperity, rather than financial evisceration by elites.
Creating jobs is key
As Annie Lowrey notes for The Washington Independent, while President Barack Obama’s economic stimulus package has dramatically slowed the pace of job losses, it hasn’t been enough to make a serious dent in the unemployment rate, which currently stands at 9.6 percent. Without a serious new set of stimulus measures, we’ll see that rate stay near double-digits for years to come. (more…)
Weekly Audit: Why Do Deficit Hawks Hate Social Security?
by Zach Carter, Media Consortium blogger
Last week, Social Security advocates learned something they had long suspected. Arguments for cutting Social Security aren’t really about economics or the deficit. They’re all about waging war on social services.
In short, some very prominent policymakers are out to dismantle Social Security on ideological grounds. The most recent example of this view comes from Alan Simpson, a former Republican Senator from Wyoming who now serves as co-Chair of President Barack Obama’s Federal Debt Commission. Earlier this summer, Simpson was caught on video spreading absurd lies about Social Security, but his latest outburst explains why he’s been so willing to distort the facts. Simpson simply hates Social Security.
As Joshua Holland highlights for AlterNet, Simpson fired off a nasty email to Ashley Carson, who advocates for elderly women, in which he referred to the most successful social program in U.S. history as “a milk cow with 310 million tits.” (more…)
Weekly Audit: Save Affordable Housing, Help Revive America’s Middle Class
by Zach Carter, Media Consortium blogger
Over the past decade, Fannie Mae and Freddie Mac transformed themselves into some of the worst-run companies in recent history. But contrary to current talking points, the firms’ failings had almost nothing to do with their programs for low-income borrowers. As policymakers debate what should be done with the mortgage giants, a battle is now beginning in which the very availability of affordable housing for the middle class may be at stake.
A history of affordable housing
As Tim Fernholz emphasizes for The American Prospect, before the U.S. government created Fannie Mae in 1938, mortgages were very pricey 5-year loans, so expensive that only very wealthy Americans could ever hope to own a home. Fannie Mae changed all that by rolling out the 30-year mortgage, which lowered monthly payments for borrowers by providing a government guarantee against losses for banks. It worked.
But as Fernholz notes, without some kind of government involvement in the housing market, home ownership will revert to its pre-Depression status a privilege reserved for elites. Policymakers will have to implement significant changes in the mortgage finance system to ensure stability in the U.S. housing market, but whatever changes may come, a robust role for the government in housing will be essential.
Fannie and Freddie have been justifiably but inaccurately maligned in the aftermath of the mortgage crisis. In recent years, their executives ran the firms like out-of-control hedge funds, lobbied Congress like arrogant Wall Street banks and did nothing beyond the bare minimum required by law to help low-income borrowers. But Fannie and Freddie did not go headlong into subprime mortgages—the primary source of their losses came from loans to relatively high-quality borrowers.
The terrible mortgages that crashed the economy were issued by banking conglomerates and Wall Street megabanks—Fannie and Freddie were almost entirely divorced from that line of business. The problem with Fannie and Freddie was largely structural– investors and managers saw the potential for big profits from taking on loads of risk, but believed (accurately) that the government would eat losses if those risks backfired. So Fannie and Freddie ramped up risk, taking on as many mortgages as they could while keeping as little money as possible on hand to cushion against losses. Eventually the strategy destroyed them.
Fixing the mortgage system
Exactly how the government stays involved in the mortgage market is still open to debate, as Annie Lowrey emphasizes for The Washington Independent. Nearly every member of the private sector who testified at a recent housing forum sponsored by the Treasury Department endorsed some kind of government backing for the housing market. This was a meeting of private-sector bigwigs—no community groups or affordable housing advocates were invited to speak at the meeting. Proposals ranged from scaling back government support for some types of mortgages, to the full nationalization of Fannie Mae and Freddie Mac (Fannie was a nationalized entity for the first 30 years of its existence).
In other words, the government is going to have to keep subsidizing housing, but it will have to find new ways to do it. The old Fannie and Freddie model didn’t work, but the private sector will be unable to get the job done by itself. Private-sector banks and mortgage brokers, after all, were the source of all the predatory loans issued during the subprime crisis, and the source of all of the most offensive loans that drove the economy off a cliff.
Inefficient and often predatory players on Wall Street are still causing problems today. As Ellen Brown highlights for Yes! Magazine, the mortgage system is so bizarre that banks are finding themselves unable to document their right to foreclose on properties—and courts are (fortunately) refusing to let them do it.
It’s a rare situation in which borrowers may actually hold the higher legal ground against powerful corporations. About 62 mortgages are registered through an electronic documentation system called the Mortgage Electronic Registration System (MERS), which helps banks with the foreclosure process. But MERS has repeatedly been unable to show proper documentation assigning a mortgage to a specific bank, and courts are now challenging its right to foreclose on behalf of big banks.
That’s good news, Brown notes, because MERS’ shoddy documentation has made it very difficult for borrowers to figure out who actually owns their loan. If you don’t know who owns your mortgage, it’s impossible to modify it if you find yourself unable to pay it off.
As Shamus Cooke argues for Truthout, even successful innovations like the 30-year mortgage are beginning to look a little outdated in an era of heavy, chronic unemployment. Many people can no longer expect to be gainfully employed for three decades on end. If the government refuses to repair our damaged jobs infrastructure, even simply maintaining the status quo in housing could become impossible.
Deficit reduction is not a cure-all
That brings us to another favorite conservative bogeyman, the federal budget deficit. The deficit and jobs generally stand in direct opposition. Creating jobs costs money, and spending that money expands the deficit. Cutting the deficit, by contrast, means cutting support for jobs.
As Steve Benen emphasizes for The Washington Monthly, conservative lawmakers are still harping on deficit reduction as a cure for everything that ills the nation, when the real solution to our problems is a serious jobs bill.
Even if the deficit were a huge problem, trying to cut important social services in the middle of a deep recession is not a good way to go about solving it. Drastic cuts to government spending in a recession result in lower tax returns for the government, which can often be self-defeating, especially in the face of expanding joblessness. The resulting push for deficit reduction—known in economic circles as an “austerity policy,” is better understood as the active pursuit of economic decline. As economist Robert Johnson notes in a New Deal 2.0 piece carried by AlterNet:
Deterioration of government services is bad enough, but imposing austerity due to lack of trust in a time of high unemployment and slack resources is tragic. It is a means to accelerate the decline of living standards of those who have taken a beating since 2007. Double dip or stagnation is too subtle a distinction. We are amidst an unfolding collective choice to pursue a downward spiral.
The government has taken several dramatic steps to repair the nation’s financial system, but it has done almost nothing to help troubled borrowers and not nearly enough to create jobs. Some of this is due to misguided policies enacted by President Barack Obama, and much of it is due to cynical obstructionism. But we cannot repair the economy without fixing jobs and housing. Both are still in a full-blown crisis, and policymakers should feel an urgent need to deal with them.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
Weekly Audit: Are Handouts For Billionaires More Important Than Feeding Children?
by Zach Carter, Media Consortium blogger
The crazy conservative assault on government spending has become one of the most irrational economic policy debates in recent years.
The Republican Party is trying to maintain the fiction that direct economic relief for millions of working Americans is a fiscally irresponsible splurge, while simultaneously backing hundreds of billions of dollars worth of economically useless tax cuts for the wealthy. The demands are staggering: cut food stamps for the poor, but preserve perks for billionaires.
As Tim Fernholz notes for The American Prospect, serious economists do not believe that President George W. Bush’s tax cuts for the rich are an effective way to stimulate the economy. Rich people don’t spend money, they save it. We need lots of consumer spending to reinvigorate economic growth and put people back to work.
If we want to create jobs, we need to put money in the hands of people who will spend it. At minimum, that means directing aid to the unemployed and providing federal assistance to states, so that local governments don’t lay off hundreds of thousands of teachers and cops. This is not only the decent, humane thing to do when the economy is struggling, it actually helps. Money the government spends to save a teacher’s job goes out into the economy to pay bills and buy products. For states, this also means that basic public infrastructure is preserved—kids learn and the streets stay safe.
Stonewalling aid
But as the editors of The Nation highlight, Republican politicians have made it nearly impossible to get that critical aid out to American families. They’ve demanded strict measures for these benefits, forcing Democrats to cut food stamps—that’s right, food stamps—in order to keep teachers in school and cops on the street.
Millions of families all over the country depend on food stamps. In the middle of the worst recession since the Great Depression, Republican politicians took a stand to take food from the mouths of children—and they did it while supporting a $300 billion a year in handouts for the rich.
There is no immediate budget crisis. The government can borrow money at record low interest rates, meaning that investors don’t believe the federal budget deficit is too big. But if conservatives were really serious about shrinking the deficit, they’d be encouraging economic growth, not backing billionaire giveaways.
Banking on predation
Our perverse economic policy preferences aren’t limited to budget priorities. As Amy Goodman and Juan Gonzalez emphasize in a segment for Democracy Now!, inadequate rules governing bank lending practices were a fundamental cause of the recession, and are actively hampering the economy’s recovery today.
The Community Reinvestment Act of 1977 (CRA) required banks to make good loans to credit-worthy borrowers in the bank’s community. The idea was simple: If a bank wants to benefit from a community’s resources, it has to give something back and help strengthen the local economy.
Conservatives have lashed out at CRA, blaming it for the mortgage crisis, but the truth is that CRA loans had almost nothing to do with the subprime disaster. CRA loans are affordable loans to creditworthy borrowers—the whole point of subprime lending was to charge outrageously high rates to borrowers with poor credit.
In reality, policymakers’ refusal to expand CRA exacerbated the crisis. Only traditional banks are subject to CRA guidelines, and during the past two decades a host of independent mortgage companies have taken over large swaths of the mortgage market. These unregulated firms issued a lot of lousy loans, often working under direct, explicit instructions from bigger banks, who outsourced their lending in order to get around CRA rules and rip off whole neighborhoods.
Lending is critical to moving the economy out of the recession, and CRA provides reliable, proven rules to get banks back in the business of helping our communities and our economy.
Overdrafting the banks
But a host of other banking policies are also making the recession worse. One of the most egregious is the overdraft fee, which, as Annie Lowrey notes for The Washington Independent, scored banks over $38 billion in 2009 alone. To put that in perspective, the entire banking industry earned a combined profit of $12.5 billion last year, which means that the banks are making their money from gotcha fees, not from productive lending.
Banks have spent years charging overdraft fees without telling their customers that they’re subject to such gouging. Lowrey notes that the average fee is $35 on an average charge of $17. But they also have engaged in a backdating scam, rearranging the order of their customers’ purchases in order to charge more overdraft fees. As I explain for AlterNet:
“Say you’ve got $80 in your checking account, and you decide to pay some bills and run some errands. You spend $30 on gas and another $20 on your water bill. Later, you head to the grocery store and spend $81—oops!—on groceries. To reasonable people, it looks like you’re going to get hit with an overdraft fee. That last purchase put you over the line. But instead, the banks reorder your transactions, processing the groceries first. Now you’re below zero, and they can charge additional fees for your gas and water bills. Wells Fargo charged up to $39 per overdraft. This one mistake cost you $117, and nobody even bothered to tell you it was going to happen.”
Fortunately, a federal judge in California just ruled that this backdating scam was grossly illegal, and ordered megabank Wells Fargo to pay back every penny that it swindled from its California customers with the practice since 2004. But Wells Fargo was not alone—every large bank in the United States does the exact same thing, and it’s allowed them to score billions in deceptive profits. A similar ruling in a larger case against all of the big banks could end a transparent outrage, and restore an enormous amount of unfairly seized wealth to citizens all over the country.
We don’t need to be pushing policies that benefit billionaires at the expense of everyone else. The Bush tax cuts are an unnecessary economic waste. Financial policy that puts the interests of a few giant predatory banks above those of the entire citizenry makes no economic sense.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
Weekly Audit: Silencing Conservative Deficit Hawks
by Zach Carter, Media Consortium blogger
The same conservatives who spent the past year senselessly screaming about the U.S. budget deficit are now demanding an extension of the Bush tax cuts for the rich. The extension simply doesn’t make sense, and the policies implied are a recipe for massive job loss in the middle of the worst employment crisis in 75 years.
Deflation nation
As William Greider explains for The Nation, the major problem facing the U.S. economy is not the budget deficit, but the prospect of deflation. Deflation was one of the driving forces behind the Great Depression. Under deflation, the value of money increases, which drives prices down. When millions of Americans are deep in debt, deflation makes those debts much larger. It also creates total economic paralysis, as Greider explains:
Deflation essentially tells everyone to hunker down and wait. Instead of buying big-ticket items, consumers wait for prices to fall further. Instead of investing in new production, companies wait for cheaper opportunities, cheaper labor. (more…)
Weekly Audit: Why Are Unemployment Benefits A Major Political Fight?
by Zach Carter, Media Consortium blogger
Congress finally authorized an extension of unemployment benefits on Wednesday, providing a critical lifeline to families across the country and an absolutely essential boost to the economy.
But with the jobless rate hovering near 10 percent, minimum measures like unemployment benefits shouldn’t be a source of controversy. Lawmakers should be debating big-picture jobs packages to get people back to work, not drips and drabs that keep a worst-case-scenario from getting unbearable.
As Annie Lowrey notes for the Iowa Independent, Senate Republicans blocked the unemployment benefits bill for two months, causing benefits to lapse for 2.6 million Americans. That’s a humanitarian outrage. When people don’t have access to this minimal support, they can’t pay bills or feed their kids. There is no excuse for anyone in a position of power to cut off access to such basic social necessities. So what’s the hold up? (more…)
Weekly Mulch: How Reid’s Energy Bill Undermines Senate Climate Efforts
by Sarah Laskow, Media Consortium blogger
Yesterday, Senate Majority Leader Harry Reid (D-NV) introduced a limited energy bill that responds to the oil spill and promotes energy efficiency. Reid’s action is a signal that the Senate will not pass climate legislation before November, although Sen. John Kerry (D-MA) said that a climate bill could come up in the lame-duck session following the election.
“The Senate’s climate bill is officially dead,” Kate Sheppard writes at Mother Jones. “And given that Democrats will almost certainly hold fewer seats in Congress next year, major action on the climate is unlikely to be revived anytime soon.”
Since 2009, expectations for a bill regulating carbon emissions have steadily declined. After this latest failure in the Senate, the best near-term hope for addressing climate change comes from the Environmental Protection Agency, which still has the power to regulate carbon emissions.
At the Washington Independent, Andrew Restuccia reports that Sen. Reid’s bill will likely hold oil companies more financially accountable for spills by lifting the cap on their liability for economic damages and will nudge homeowners towards energy efficiency. (more…)
Weekly Audit: Congressional Inaction Feeding Unemployment Crisis
by Zach Carter, Media Consortium Blogger
After months of modest gains, the U.S. economy lost 125,000 jobs during June. That’s the worst jobs-related news this year. Without serious action soon, the struggling U.S. economy is going to get even uglier. Unfortunately, President Barack Obama’s economic team was slow to recognize the severity of the jobs crisis, and now seems unable to get Congress to actually do something about it.
As David Corn notes for Mother Jones, the recent jobs data is actually much worse than the 125,000 figure implies:
“The economy needs about 150,000 new jobs a month to keep up with population growth and new entries into the jobs market. It needs a lot more than that to make up for the 8 million or so jobs lost in 2008 and 2009.”
Weekly Audit: Senate Republicans Nix Jobs Bill
by Annie Shields, Media Consortium blogger
It looks as if election-year strategies are trumping any actual problem-solving efforts from Republican lawmakers. In the midst of one of the worst unemployment crises in U.S. history, Senate Republicans killed a jobs bill last Thursday by a 56-40 vote.
As congress carries on with the seemingly impossible task of helping the unemployed while keeping Republicans happy, over 15,000 progressives and 1,300 organizations will convene in Detroit this week for the U. S. Social Forum (USSF) to explore alternative solutions to the jobs crisis. Editor’s note: Stay tuned for USSF coverage from Media Consortium members throughout the week in The Audit, The Pulse, The Diaspora and The Mulch.
Killed bill
Democrats trimmed over $20 billion in unemployment benefit extensions from the bill to appeal to Senate Republicans and Blue Dog Democrats. The efforts were to no avail, according to The Michigan Messenger. In addition to extending emergency unemployment benefits for the long-term unemployed, the Senate bill would have increased Medicaid funding and prevented a 21% pay cut for Medicare doctors. (more…)
Weekly Audit: Financial Reform Makes Headway, Jobs And Social Security In Jeopardy
by Zach Carter, Media Consortium blogger
Two critical Wall Street reforms, once declared dead by U.S. megabanks, are suddenly close to Congressional approval. As the House and Senate iron out the differences between their financial overhauls, it now appears that lawmakers are finally willing to ban banks from gambling with taxpayer money by implementing a strong Volcker Rule, and to end taxpayer subsidies for risky derivatives operations.
These reforms will help stabilize the U.S. economy by clamping down on the naked speculation the drove financial markets off a cliff in 2008. But while lawmakers are finally waking up to the economic and political necessity of strong Wall Street reforms, conservatives have blocked key efforts to ease unemployment. President Barack Obama also appears ready to surrender to an assault on Social Security later this year. (more…)