Seeing the Forest: Making It In America Archives

March 11, 2010

Why Won't Obama Label China A Currency Manipulator?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

There is a great deal of pressure on the Obama administration to declare China as a currency manipulator, and with very good reason: they are manipulating their currency. This manipulation gives goods made in China a huge price advantage over goods made in other countries, and is a large part of the reason so many of our companies move manufacturing and jobs from here to there. This is, of course, not "free trade" it is a stacked deck.

In What Chinese Currency Manipulation Looks Like, Eric Lotke shows how China gains this trade advantage,

The dollar exchange with China “defies the laws of monetary physics.” During this U.S.-led global recession, dollars aren’t worth as much as they once were. The natural physics of exchange makes U.S. goods relatively less expensive for others to buy, but makes foreign goods more expensive for Americans to buy. In a free market for currency, that would help bring accounts back into balance.
[. . .] In the American heartland the issue isn’t exchange rates, of course. The issue is jobs. American workers can compete dollar for dollar against Chinese workers. They can’t compete dollars against manipulated Yuans.

Many say the resulting price advantage is 25% or more. The Peterson Institute for International Economics in Washington has estimated that the yuan is undervalued by about 40 percent against the U.S. dollar. So before any other factors in the competition for goods, Chinese-made goods have a 25-40% advantage out the door. That's hard to compete with and a trip through any Wal-Mart will demonstrate the results - as does a look at any chart of American manufacturing job losses. This job-devastation has occurred since the conservative "free traders" got their hands on US policymaking.

Last month in Our Great Recession is China and Southeast Asia's Great Opportunity Leo Hindrey wrote,

In just the last year, China's share of our nation's trade deficit in manufactured goods jumped from 69% to an almost unbelievable 80% today, while its share of U.S. imports overall, non-resources and resources combined, increased 20%. In dollars, China right now is exporting about $330 billion annually to the United States, while purchasing less than $90 billion here.
. . . Something on the order of 90% of China's domination in manufactured goods vis-à-vis the U.S. is due to its subsidies to domestic and foreign-owned manufacturers alike - subsidies based around plant sitings and financings, taxes and of course currency - and to its extremely low environmental standards. And the sad reality is that after years of accumulating market share and building the infrastructure it needed in order to dominate much of the global marketplace, all with the help of massive (often illegal) subsidies and a massively undervalued currency, China's trade advantages in many vital industries are now so embedded that they will exist for years to come even if President Obama is successful in confronting China's manipulated exchange rate, which of course is far from assured.

Please read the whole post, there is much more to learn.

The Obama administration has twice declined to state the obvious and declare China a currency manipulator. Of course we don't know what is going on behind the scenes leading to these decisions. Perhaps there are threats to dump the bonds the hold. Or perhaps previous administrations have tied our hands with secret deals. But our government is supposed to be transparent and we are supposed to be informed and in charge, so these are not excuses. And, if we are ever going to pay off those bonds, we have to regain manufacturing so we can earn the money to do it with.

Next month the President again must decide whether to label China as a manipulator. If he does this regulations require that we enter into negotiations that could end up with trade sanctions.

It is time to state the obvious. The Obama administration is starting to look like Ben Bernanke did when he said there was no housing bubble and that it wouldn't hurt the economy when it popped.

Last month 15 senators, including an astonishing 6 Republicans wrote a letter to Commerce Secretary Gary Locke "expressing serious concerns about the department's failure to conclude that China's currency manipulation is in fact a "countervailable subsidy" to its domestic exporters." So the pressure is on for the President to put it on the record that China is doing what everyone knows they are doing, and start the process of readjusting and rebalancing, so we can get things back on track.

Tomorrow (Friday) there is an all-day Economic Policy Institute forum, Currency manipulation: how should the US respond? Panelists include Paul Krugman and Steelworkers union President Leo W. Gerard. Click through for details. The forum will start at 9 AM at The Mayflower Room in the East Room.

If you can't make it to the forum be sure to watch the live webcast here.

Posted by Dave Johnson at 4:42 PM | Comments (0) | Link Cosmos

March 10, 2010

It Is Time To Put Our Foot Down: Ten Steps We Can Take To Stop Closing Factories And Eliminating Jobs

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

The economy is still getting worse more slowly. We lost "only" 36,000 jobs last month. We need to create 11 million new jobs just to get back to where we were before "free-market" conservatives took over our government and dismanted the protections and regulations that had protected us from this.

Jobs lost, communities devastated, lives destroyed. Over and over again. Yet with all of this going on companies like Whirlpool and Toyota are still closing factories, laying of American workers, and moving manufacturing out of the country! Toyota is closing the NUMMI plant in Fremont, California, which could lose up to 50,000 jobs across California. Whirlpool -- recipient of stimulus dollars from the government -- is closing a factory in Evansville, Indiana and moving the jobs to Mexico where people will be paid $70 a week and certainly won't be buying anything made in America.

It's the system. While the executives collect bonuses and tax breaks for their destructive actions We, the People have to pick up the tab. We pay the unemployment, the stimulus, etc. Our communities pay the cost of losing the jobs and the tax base, our economy pays the cost of losing the manufacturing capability. And the executives and private equity firms and Wall Street get rich. So of course they do more of it.

How crazy is this? In the middle of this terrible jobs crisis companies are still closing factories here and shipping the jobs out of the country. Why do we allow this?

Whirlpool and Toyota (and Wall Street's $140 billion bonus pool this year) ought to be the last straw. It is time for We, the People to put our foot down and say not one more factory closed, not one more job sent out of the country! In fact, it is time to start bringing jobs BACK.

It is time to stop letting goods into the country that are made by exploited workers in areas with no environmental protections without a tariff to take away the price advantage gained from going around the protections that We, the People have fought so hard for.

There is only one way the country can earn the money to pay back what we borrowed from China, Japan and others. That is to make and sell things to others!!! THAT is what "trade" means. "Trade" does not mean allowing greedy executives to sidestep the laws and regulations and protections that We, the People fought so hard to get.

Look around us. Jobs lost, communities devastated, homes foreclosed, lives destroyed, governments going broke. All because of a runaway system that encourages the destruction of our economy. Our system actually encourages executives to close factories and lay people off! Executives make profits and get bonuses (that benefit from tax cuts) if they can figure out how to eliminate YOUR job or close a factory or cheapen a product or keep you from talking to customer support or make you pay an extra fee, etc.

Wall Street and executives benefit from this -- and get tax cuts, tax breaks and subsidies for doing it. But the economy-at-large is destroyed by these same actions when they are widespread. On top of that, we know that when we lose the factories we have to borrow money to buy the things we used to make. But we give tax breaks instead of penalties to companies that do this.

Here are just some steps that We, the People can take to start turning this around:

- A border tariff on imports to remove the price advantage of goods produced by exploited, underpaid workers.

- A border tariff to remove the price advantage of goods produced in ways that harm the environment.

- A border tariff on goods from countries that are not democracies, to remove any pricing advantage gained from not allowing people to vote and set rules that benefit themselves.

- A border tariff on goods from countries that restrict workers from organizing to improve their wages and working conditions, to remove any pricing advantage gained from not allowing workers to bargain. (America currently doesn't meet this standard.)

- Remove tax benefits and instead impose tax penalties and fines on companies that close factories here. Don't let it be profitable to do this!

- Increase taxes on the big monopolistic companies to remove the advantages that help them destroy America's smaller, regional and local businesses -- the very job creators we need.

- Increase income taxes on high incomes to reduce the incentive to pursue short-term windfalls instead of long-term interests. Make it take a long time to accumulate a fortune. Making a fortune is great but it should be a reward for helping our economy and society, not destroying them.

- Break up the "too big to fail" Wall Street firms that wrecked the economy. And get the money back -- all of it.

- Explore the use of Eminent Domain to keep factories in communities and workers in the factories.

- Formulate and follow a national economic/industrial strategy to build a new green manufacturing economy

Please add some ideas in the comments. I will have more to say on all of this.

Posted by Dave Johnson at 12:20 PM | Comments (1) | Link Cosmos

March 4, 2010

California Factory Closing - HUGE Impact - Steps You Can Take

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Toyota is planning on closing the New United Motor Manufacturing, Inc. NUMMI auto-manufacturing plant in Fremont, CA on March 31. The immediate effect is a loss of 5,000 jobs. But, as with any factory closing, the effects ripple out well beyond the immediately obvious. The public has put up a lot of money to have the plant here, and the costs this closing will put on the public will be enormous.

Toyota takes off with a ton of cash, we pay the costs, it's the way the system is set up -- by us.

The effect? From The California Labor Federation, Toyota NUMMI Closure Would Kill Jobs, Destroy Communities,

...more than 5,000 autoworkers at the plant will be out of work, and another 1,500 Teamsters who transport the cars from the NUMMI plant to the dealerships will also be jobless. Additionally, as many as 50,000 workers at hundreds of businesses in California are completely dependant on NUMMI to stay afloat, from the suppliers that manufacture car parts to the restaurants where the NUMMI workers go for lunch and even the shoe stores where the plant workers buy their specialized work boots.

Toyota has benefited tremendously from this plant, as well as receiving state and federal money. A study released yesterday by the NUMMI Blue Ribbon Commission says,

The United States is Toyota’s largest market in the world. California accounted for almost 18 percent of Toyota’s U.S. sales and 5 percent of the automaker’s global sales in 2007. Toyota led California sales with a quarter of the market, more than the combined share of General Motors and Ford in 2009.
. . . Toyota has benefitted considerably from federal and state programs over the years. ... the automaker captured first place in “Cash for Clunkers” sales ... In a similar program in Japan at about the same time, U.S.-based automakers were excluded initially.

California has invested heavily in NUMMI ... The state has given NUMMI more than $18 million for training
since the plant’s inception... Millions more have gone to NUMMI suppliers for training. Major infrastructure improvements have been done explicitly for the plant and to meet its needs. The Port of Oakland, for example,
was dredged 12 years ago to accommodate the kinds of cargo ships the plant requires at a cost of $410 million.

When the plant closes the public takes up the costs -- paying unemployment, for example, for the up-to-50,000 people expected to become unemployed. The Federal Government will pick up the costs of the workers' pensions.

The Pension Benefit Guaranty Corporation (PBGC) announced yesterday it will assume responsibility for the underfunded pension plan of the 5,800 employees and retirees of New United Motor Manufacturing (NUMMI), pending the plant's liquidation by the end of the month.

Just as I wrote this week about Whirlpool, this is the way WE have chosen to make the system work. We can and must change the way the system works.

This is what companies today do. It is just the way the game is played, the way the system works. ... There aren't "good" or "bad" companies; ANY company will do these things because if they don't they lose out to the companies that do. BECAUSE WE LET THEM. In fact, by letting this happen we make it happen because, as I just wrote, if one company doesn't the next will, and the company that doesn't loses out. The system.
So here is what we have to do. We have to change the rules to stop these jobs from leaving the country.

We are going to have to put our foot down, as a people, and take control of the system to make it work for us. This is not only something we can do, it is our responsibility to do this.

Call Congress and demand that they stop companies -- ALL companies -- from closing factories in the US and moving the jobs out of the country.

I have more coming about this.

Here is one immediate action you can take. American Rights At Work has an action page with a petition: Take Action: Tell Toyota: Don't Abandon Your Workers

Toyota got its start in America 25 years ago when it opened a plant in Fremont, CA. But on March 31, Toyota plans to close the plant.
Laying off 5,000 people will only be the beginning. 50,000 workers, vendors, and suppliers – and the families who depend on them – could immediately lose their livelihoods. And hundreds of thousands more will be affected by the loss of tax revenue and consumer spending.

Will you help us demand Toyota do right by the workers who helped it get a foothold in America?

Posted by Dave Johnson at 10:14 PM | Comments (0) | Link Cosmos

March 3, 2010

Friedman On Competitiveness: Identifies Problem, Offers Exactly Wrong Solution

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Americans who travel out of the country will tell you about how the US is so visibly falling further and further behind the rest of the world. This hurts our ability to compete economically. The cause of the problem was tax cuts. The solution is certainly not more tax cuts.

Thomas Friedman, in A Word From the Wise flies in from Asia and, using LAX as an example, observes how the US infrastructure is starting to fall apart because of deferred maintenance. He writes,

Walking through its faded, cramped domestic terminal, I got the feeling of a place that once thought of itself as modern but has had one too many face-lifts and simply can’t hide the wrinkles anymore.

Like so many problems we have today this one traces directly to failed conservative policies. Conservatives cut taxes for the rich, which forced the country to defer maintenance and borrow money. So we don't keep things in good shape and we certainly don't invest in new 21st-century infrastructure. Friedman writes,

We are the United States of Deferred Maintenance. China is the People’s Republic of Deferred Gratification. They save, invest and build. We spend, borrow and patch.

The problem goes beyond crumbling buildings, slow trains, and potholes. The long-term cost is that we fall behind the rest of the world in our ability to compete economically. Other governments are investing in 21st-century infrastructure, and we are not, because of our tax cuts:

"... a 2009 study ... measured ... ‘the rate of change in innovation capacity’ over the last decade — in effect, how much countries were doing to make themselves more innovative for the future. The study relied on 16 different metrics of human capital — I.T. infrastructure, economic performance and so on. On this scale, the U.S. ranked dead last out of the same 40 nations. ... When you take a hard look at the things that make any country competitive. ... we are slipping.” (emphasis added)

So what is the solution? The column advocates engaging in a race to the bottom by lowering corporate tax rates even more! So Friedman (a billionaire) and the CEO of Intel identify the problem and then get the solution exactly wrong (in a way that enriches billionaires, CEOs and big companies at the expense of the rest of us). He starts by saying we have been deferring maintaining our infrastructure (which is the result of tax cuts) and then says we need to CUT corporate taxes!

Tax cuts are the reason we are not maintaining our infrastructure and reducing our country's competitiveness -- so let's do it more? What is the matter with this guy? How are we ever going to bring our country's infrastructure and education up to 21st-century standards if we further weaken our financial position with even more tax cuts?

Another way that we are falling behind other countries in the global economic competition is that other countries have strategies to take our factories and jobs but we have no strategy for fighting back. Again, this is the result of our slavery to conservative policies. Conservatives say it is wrong for our government to get involved. They say "free markets" will come up with the solution.

How is this "free-market" keep-government-out-of-it approach working out? Friedman interviews Intel CEO Paul Otellini on the advantages of building new manufacturing facilities in other countries,

... If I build [a] factory in almost any other country in the world, where they have significant incentive programs, I could save $1 billion,” because of all the tax breaks these governments throw in. ... “And it wasn’t because the labor costs are lower. ... when you look at it after tax was substantially lower and you have local market access.”

In other words, in order to seize the manufacturing capacity from us these countries lose money on the deal, with their governments putting up subsidies in the form of tax breaks. isn't this "dumping" -- selling below cost, paid for by government subsidies -- which is illegal under trade laws? The idea is to seize the manufacturing capacity today, make us pay later.

The right solution is to fight back - not further weaken ourselves. When other countries are cheating we have to fight back. It is time to develop a national economic/industrial strategy.

Countries that use tax breaks to subsidize products are already fighting a trade war with us - and winning because we refuse to engage. If other countries want to play the game that way then we should play the same game back.

The US is still a huge market and companies want to sell things here. Let's use that. If they want to subsidize goods to cost less here, let's make their goods cost more here instead. Impose a border tariff that compensates for subsidies, cheap labor, lax environmental standards, etc., so their goods do not cost less here. This way we capture the revenue that other governments are pumping into subsidies. Then we use that revenue to 1) modernize our own infrastructure and maybe even 2) subsidize our own exports.

We need to stop weakening ourselves. Increase taxes so we can stop borrowing, start building a 21st-century infrastructure, and make our country competitive again.

Posted by Dave Johnson at 12:12 PM | Comments (1) | Link Cosmos

March 2, 2010

Whirlpool Tells Callers: Call Congress. They're Right!

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

In the middle of this terrible jobs crisis Whirlpool is closing a factory in the US and sending the jobs to Mexico. Their Mexican workers will be paid $70 a week. As I wrote the other day,

Our system is broken when "the market" encourages companies like Whirlpool to close factories, destroy the lives of American workers, devastate the surrounding communities and ultimately destroy the very economy that the Whirlpools depend on.

No one getting $70 per week is going to buy any refrigerators from Whirlpool. That is the bigger picture here. When American companies close down a factory and lay off workers they are also eliminating customers. Ultimately, as we are seeing, the economy breaks down.

So I received this email today:

One of my coworkers just got off the phone with Whirlpool. She called the number that the AFL or ARAW is providing for folks to complain to the company.

Her call was shuffled around till she ended up talking with someone at HR who identified herself as "Security". The woman at Whirlpool told her "My boss told me to tell you guys to contact congress about it and not call us"

Wow. Can you believe it? I guess Whirlpool wants us to change trade policy so they aren't allowed to close their plant and move it to mexico?!?! Yeah right.
I love how they take NO responsibility for the situation.

Here's the thing: I think Whirlpool is right -- we need to call Congress.

It isn't entirely Whirlpool's fault that "the market" and "the system" is forcing companies like Whirlpool to destroy workers' lives, the surrounding communities and the economy. The system itself is broken and Congress must address the core issues here.

It has become crystal clear that "free markets" don't exist, "free trade" doesn't work, and deregulation doesn't lead to positive results. Because of the failed "free market" and "free trade" and "deregulation" nonsense all we are doing is sending our manufacturing capacity and our jobs out of the country, killing our economy and borrowing more and more to make up for the losses. (And with no national economic/industrial strategy in a world of countries that do have strategies, it just keeps getting worse.)

Things Companies Do These Days

Whirlpool is closing factories, even while receiving millions of dollars from our Federal Government stimulus dollars. And they get government contracts. And when they lay people off our government steps in and provides unemployment, etc. And our local governments also are put on the spot with lost taxes, while providing local services. And, of course, Whirlpool pits states against each other for tax breaks and subsidies just to keep a few jobs, like what they are doing with Indiana vs Iowa. This is called socializing the costs and privatizing the profits.

This is what companies today do. It is just the way the game is played, the way the system works, the way the incentives are structured, the way the ball bounces, the way the cookie crumbles...(someone stop me, please)... There aren't "good" or "bad" companies; ANY company will do these things because if they don't they lose out to the companies that do. BECAUSE WE LET THEM. In fact, by letting this happen we make it happen because, as I just wrote, if one company doesn't the next will, and the company that doesn't loses out. The system.

So here is what we have to do. We have to change the rules to stop these jobs from leaving the country.

We have to write into Federal contracts that companies that get these contracts can't close factories here and move the jobs there.

We have to write into Federal tax breaks that companies receiving the break can't close factories here and move the jobs there.

We have to write into Federal stimulus bills that companies receiving the stimulus money can't close factories here and move the jobs there.

We have to write trade treaties that respect pay and benefits and workers' rights and communities and the environment. We have to set up a tariff structure that respects our own workers' democratically-obtained pay and benefits, and the environmental protections that we fought for.

These are just a few of the things we have to start doing.

Whirlpool asked us to call Congress, not them. This is partly right. Call Congress and demand that they stop companies -- ALL companies -- from closing factories in the US and moving the jobs out of the country. AND keep the pressure on Whirlpool.

I have more coming about this.

Posted by Dave Johnson at 5:17 PM | Comments (0) | Link Cosmos

March 1, 2010

Green Jobs Are NOT A Myth!

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Last week the Washington Post ran an op-ed with the curious headline, “The Green Jobs Myth.”

Oil and coal lobbyists everywhere, well-aware that most people only read headlines and a few paragraphs at most, were giving each other high-fives. You see, a headline like this “propels the propaganda” that anything remotely environmentally-conscious “costs jobs.” And being in the Washington Post, it signals that the “powers-that-be” are officially poo-pooing the concept.

The op-ed begins by setting up a straw man to knock down. It claims that the Obama administration has the “assumption that a "clean-energy" economy will generate enough jobs to mitigate today's high level of unemployment … and to meet the needs of future generations”, But seriously, has anyone, anywhere, ever said that new green jobs alone will solve the jobs crisis? Just asking.

The basis for the headline’s premise that green jobs are a myth was that installing smart electric meters means there will be fewer meter-readers employed. Well duh! But this op-ed -- with its curious headline -- uses some curious math to reach its conclusion that automating meters means fewer meter-readers will be employed. It claims that only 400 installation jobs would be created to install 20 million meters, 1600 if the rate of installation is increased. Huh? Then it gets better. To calculate how many meter-reader jobs will be lost it claims that meter-readers only read 30 meters an hour, causing 28,000 meter-reading jobs to be lost.

Now, I was already sold on the idea that automating meters means fewer meter-readers would be employed, but come on! Clearly the Post is betting that most people don't read past the first few paragraphs if they're thinking this kind of "let's play tricks with math" will just slip by.

Curiously, the op-ed doesn’t mention that people will be employed to manufacture these 20 million smart-meters! How many jobs will be created to manufacture 20 million smart meters? The op-ed doesn't say. perhaps saying how many would negate the curious title.

How Many Green Jobs Are There?

But never mind smart meters. If we’re going to talk about green jobs we need to talk about the jobs that would be created by:

retrofitting every building and home in America to be energy efficient, and the management, supply chain, transportation, tools, etc.

manufacturing, installing and maintaining wind turbines

manufacturing, installing and maintaining rooftop solar installations

manufacturing, installing and maintaining solar power generation facilities

everything associated with biofuels, geothermal power generation, nuclear power, advanced batteries, hydro power, carbon sequestration, carbon credit trading and transportation alternatives including building an advanced high-speed rail system connecting every major city in the country.

Think about the huge number of jobs all of this involves – and the huge payoff to our economy. And remember, these will all be in addition to the existing energy infrastructure, for now.

I suspect that the reason we see curiously misleading op-eds like this one in outlets like the Washington Post is that all of these coming technologies mean lower profits for the big, monopolistic oil and coal giants.

They can try to stop the green manufacturing revolution but it is coming. The question is, do we let op-eds like this one stop it from being Made in America?

Posted by Dave Johnson at 8:34 AM | Comments (0) | Link Cosmos

February 25, 2010

Now Whirlpool Threatens Workers Who Protest Plant Closing

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

The other day I posted Whirlpool Bites Hands Of American Taxpayers That Feed It saying, in summary,

A Whirlpool spokesperson responded, leading to the post, Whirlpool Exec Responds: The System Made Us Do It, taking a look at the bigger picture that forces our companies like Whirlpool to do these things that destroy people, communities and our economy,

"The spokesperson for Whirlpool is exactly right. It is the system that makes them do this. They are only following the market’s orders."

I thought that was the end of it, but whoa, what's this? Whirlpool Threatens Workers: Protesting Plant Closure Risks 'Future Jobs'

A major corporation planning to shut down a factory in Indiana has warned its union workers that they'll endanger their future job prospects if they protest the plant's closing.
. . . Activists planned a high-profile protest for this Friday, with AFL-CIO president Richard Trumka visiting the plant for the first time. But Whirlpool says the effort is futile -- they are fully committed to shutting the plant down. The company, however, still seems quite wary of the potential for bad publicity. In a memo sent to its employees and passed along to the Huffington Post, Paul Coburn, division vice president for Whirlpool's Evansville Division, offers a fairly explicit warning to his workers: If they join Trumka's protest they would seriously risk future employment opportunity.

Threatening workers who show up at the protest that they risk future employment? Click through to read the entire report and to see Whirlpool's letter.

And take action: Tell Whirlpool: Keep It Made in America and Save Our Jobs.

Posted by Dave Johnson at 8:12 AM | Comments (0) | Link Cosmos

February 23, 2010

Jobs: Bail Out States, Yes Or No?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

In Big Push Needed For Win 60 Votes For State Aid ... And More Private Sector Jobs, Bill Scher writes of the need for,

...a major grassroots push to secure critical aid for fiscally distressed state governments and help tackle the jobs crisis.

There is good reason for this. The warnings are dire. Just yesterday, for example: Recession Tightens Grip on State Tax Revenues,

The recession can now claim another troublesome record: state tax collections shrank at the end of 2009 for a fifth consecutive quarter, the longest period of continuing state revenue declines since at least the Great Depression...

How dire? States and localities face a 3-year, $469 billion shortfall,

Ethan Pollack, a policy analyst at the Economic Policy Institute, .. estimates the combined shortfalls for state and local governments at $469 billion over the next three fiscal years. "At the best, that can lead to a protracted, slow, jobless recovery, and at the worst, a double-dip recession."

Here is the problem. In this recession shortfalls at the state level - and resulting job cuts - can cancel out federal job-creation efforts. If we want to get out of the recession, we need those jobs! This is why the "stimulus' gave aid to the states. A lot of last year's "stimulus" money - about $87 billion - went to states through the Federal Medical Assistance Percentages (FAMP).

And, of course, now the states are asking for more. Jobs Bill Missing Medicaid Money For States, Governors Call For Change

The $15 billion jobs bill that passed the Senate Monday does not include additional matching funds for state Medicaid programs, but governors are continuing to ask for its inclusion as they look for other ways to plus state budget holes made from Medicaid liabilities.

As I said above: If we want to get out of the recession, we need those jobs!

BUT

There are some problems with "bailing out" states. Let me explain.

I live in California. We, the People of California, in our wisdom, have decided through ballot initiatives to make it impossible to fix our budget problems. We have a "2/3 rule" allowing a minority of legislators to block budgets from passing. So a small extremist minority that hates government is able to block everything, and is trying to force the state into bankruptcy. They insist on cutting the budget but refuse to specify what to cut, all the while insisting on tax cut after tax cut. (Does that sound strangely familiar?)

Did you know that last year, in the middle of our state budget crisis (caused by a revenue shortfall), while firing teachers and gutting essential government services, California gave a big tax CUT to large corporations? Did you know that California won't tax oil companies for the oil they take to sell back to us?

Should the federal government be sending billions of taxpayer dollars to states like California so they can cut taxes on big corporations and keep from raising taxes on the wealthy?

So there are some problems with assisting states during this crisis.

* What if, like California, they use that money to pass tax cuts or give subsidies to a favored few?

* What about states that give breaks and subsidies to big corporations to move jobs there from other states. Should federal tax dollars be sent to these states?

* What about states that act responsibly, like Oregon. Oregon voters recently passed tax increases on the wealthy and corporations. So they have less of a budget shortfall than other states. Should they receive less federal tax dollar assistance because they did this?

Any aid to states should be passed with oversight, conditions and restrictions. They should be required to raise taxes to cover the shortfall in future years. States that act responsibly should receive cash consistent with states that have budget shortfalls. States that give tax breaks and subsidies to lure jobs from other states should not receive this aid. States that refuse to sufficiently tax corporations and the wealthy should not receive this assistance.

Posted by Dave Johnson at 12:06 PM | Comments (0) | Link Cosmos

February 22, 2010

Whirlpool Exec Responds: The System Made Us Do It

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

In last week’s post, Whirlpool Bites Hands Of American Taxpayers That Feed It, I wrote about Whirlpool closing a factory in Evansville, Indiana. In summary,

This would be just one more “dog bites man” story – a company closes a plant and moves production out of the country, destroys workers’ lives, devastates communities and small businesses, sets states against each other, increases their profit margin, and Wall Street cheers. We read the same story over and over again for decades now, and the economy and the country of course have reached a limit of what can be lost. So what? What else is new?

But at Huffington Post a Whirlpool spokesperson responded, saying the post is “based on misinformation that’s floating around the Internet.” He wrote that their decision was based on “competitive factors.” In other words, Whirlpool says that the system made us do it. (The response in full is at the end of this post)

The spokesperson for Whirlpool is exactly right. It is the system that makes them do this. They are only following the market’s orders.

Set aside for a minute the lack of humanity in Whirlpool's response, the lack of patriotism, the placing of market values (privatize the profits, socialize the costs) above human values, and the lack of concern for the destructive effect of their moves on the larger American economy. The system - the market - lets Whirlpool plead that those things are not Whirlpool’s job or concern. They are only trapped in the rules of the playing field and it is the job of We, the People to set those rules. It's OUR fault, not theirs...

So to the extent that we are upset that Whirlpool moves jobs to Mexico, devastates surrounding communities, sets Indiana and Iowa bidding against each other for a few scraps and killing off the supplier and other businesses it isn’t Whirlpool’s fault, “WE” have fallen down on the job. WE have allowed a few large monopolistic corporate giants to take over the job of defining national policy. And of course those monopolist giants set the rules to their own advantage and against the interests of the rest of us, including all of the Whirlpools (unless Whirlpool becomes lucky enough to be the biggest, then THEY get to set the rules.) A few monopolistic giants benefit greatly from keeping this system the way it is, so their lobbying power keeps the country from changing the rules to benefit anyone else.

The rules are what they are. Yes, that’s a huge part of the problem.

BUT while Whirlpool pleads a “competitive factors” case, let’s look at Whirlpool’s competitor GE. GE isn’t perfect, but they are finding ways to move jobs BACK to the US. For example, look at this recent news report,

General Electric announces new product coming to Appliance Park

GE announced Appliance Park will get a new product - a "hybrid" or energy efficient water heater. The product line will arrive in 2011 and bring with it 400 new jobs.

How was GE was able to make Louisville work for producing durable goods, when Whirlpool is not able to make Evansville work? Is it a lack of corporate imagination on Whirlpool’s part? Why isn’t Whirlpool inspired to go the extra mile to find ways to keep jobs here, to help the communities that surround them and to help the workers who build their products for so many years? Are Whirlpool's executives just happy enough with their profit margins, and this is all that matters? Will Whirlpool work to change the system that makes them do the things they do?

And more importantly in the big picture, I conclude this post with the same question as the previous post concluded: Will Congress listen?

Here is the Whirlpool spokesperson’s response:

Dear Dave Johnson and readers of the Huffington Post:

In reviewing your blog post, I noticed it appears to be based on misinformation that’s floating around the Internet. I’d like to contribute the following facts for the sake of context and clarity.

• Whirlpool has approximately 17,000 U.S.-based manufacturing employees - more than any of our competitors.
• We produce the majority of our major appliances in the U.S., while some of our competitors do not produce any of their major appliances in the U.S.
• The economic downturn and other factors lead us to expect lower demand for the refrigerators produced by our plants in Evansville, Indiana and Apodaca, Mexico, and we therefore decided to consolidate their manufacturing in one location.
• We based our decision to consolidate in Apodaca on a full analysis of all the competitive factors between the two plants.
• We worked with Indiana state and local officials to keep the company’s Product Development Center of 300 design engineers in Evansville.
• As a recipient of $19 million in stimulus funds from the Department of Energy’s (DOE) Smart Grid Investment Grant program, we are required to match that amount with an investment of equal value in the development of new smart products. The grant and related investment are completely unrelated to the manufacturing of existing product lines such as these refrigerators.
• We have honored the Union and others’ requests for meetings to discuss the decision, but given the competitive nature of the industry and the state of the markets, no combination of changes proposed at those meetings could make the plant competitive.

We appreciate the support shown for our Evansville employees, and hope that this message helps clarify the facts.

Thank you,

Christopher Wyse
Corporate Director
Communications and Public Affairs
Whirlpool Corporation

Posted by Dave Johnson at 12:13 PM | Comments (0) | Link Cosmos

February 21, 2010

Create Real Jobs That Pay Off: Update Our 1970'S Infrastructure

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

One legacy of the Reagan tax cuts is that we stopped maintaining - and never mind modernizing - our infrastructure. As a result there is a LOT of work that needs doing. And there are a very, very large number of unemployed people. Hmmm...

There are so many more ways our economy suffers as the consequences of Reagan-era choices come home to roost. The current economic doldrums are in great part the result of Reagan-era choices:

* The deferred infrastructure maintenance and modernization that resulted from the tax cuts mean that our economy is no longer world-class. Bob Herbert has been writing about this problem for a while. From his most recent,

Schools, highways, the electric grid, water systems, ports, dams, levees — the list can seem endless — have to be maintained, upgraded, rebuilt or replaced if the U.S. is to remain a first-class nation with a first-class economy over the next several decades. And some entirely new infrastructure systems will have to be developed.

So here we are with a massive infrastructure deficit that is harming our ability to compete economically in the world. Just one example: China has 42 high-speed rail lines coming into operation connecting their major cities, and we are just starting our first one connecting ... Tampa to Orlando?

* The education cutbacks then are really hurting now.

* Energy. Cancelling all of Carter's efforts to solve our energy problems has left the economy dependent on last century's expensive and polluting energy sources and the monopolistic giants that control them.

* Debt. Tax cuts creating "structural deficits" have built up tremendous debt and the accompanying burden of paying interest on that debt and dependence on those who fund our borrowing habit.

* Militarization. We spend more on military than every other country on earth combined. The big defense corporations keep us from doing anything about it. Historically this kind of military spending and the resulting debt has ruined empires and kingdoms, and here we are.

* Government. Outsourcing/cutting/destroying/hating government and the commons has left us ill-equipped to catch up with China and others, and deal with monopolistic multinational corporate giants.

Schools, highways, power grid, ... everything. And all this work needs to be done on top of the need to retrofit all of our country's buildings to be energy efficient. Or we will just continue to fall forther behind. There is so much work that needs to be done. I wonder how the cost compares to the amounts that have been transferred to the very rich since the tax cuts started.

Hmmm... Let's see ... high unemployment ... lots of work that needs doing ... massive wealth accumulated at the very top ... hmmm... dot. dot. dot. And on top of that, there is all that evidence that past investment in infrastructure leads to great prosperity in the years following the investment ... dot. dot. dot. hmmm... Ideas are forming... connections are being made...

I can hear the shrieking from the "free market" conservative bunch now, just for thinking such thoughts: "But ... but .. that would be just WRONG to just ... give people jobs doing what needs to be done!!! and taxing the RICH -- the very beneficiaries of past infrastructure investment -- to pay for it? How can you even dare suggest such a thing???!!!"

Public works projects -- infrastructure. Example: In the 1950s, with top tax rates at 90%, we started the massive public works project that is the Interstate Highway System. How did that investment work out for our economy? How many companies benefitted from the ability to deliver trucked goods across the country in a short time? How did those top taxpayers do economically as a result of such investments?

Hmmm...

Posted by Dave Johnson at 12:12 PM | Comments (0) | Link Cosmos

February 19, 2010

Whirlpool Bites Hands Of American Taxpayers That Feed It

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Whirlpool, recipient of federal stimulus "smart grid" dollars, is closing an Evansville, Indiana freezer-topped refrigerator and icemaker production plant and moving the 1,100 jobs to Mexico.

Whirlpool knows that taxpayers will shoulder the unemployment and other costs. Closing a plant like this also means all the supplier, transportation and other third-party jobs go away. For example, 100+ Disabled Workers Could Lose Jobs

Whirlpool employees aren't the only ones losing their jobs when the plant closes. More than 100 blind or disabled individuals could also be left jobless. The Evansville Association for the Blind has issued a public plea, asking businesses to consider using their employees.

There will be more home foreclosures, and local businesses are stressed or have to go out of business. Whirlpool is profiting from making all this someone else's problem.

Whirlpool is even playing nearby Iowa against Indiana, shaking the state down for millions to move just 60 of the 1,100 jobs there.

So, of course, Wall Street celebrates the move, the setting states against each other, the cost-shifting and the resulting "increase in margins."

The workers are still trying to do something about this. Inside Indiana Business writes about a rally on February 26,

Organizers have invited guests including AFL/CIO President Richard Trumka and Jim Clark, president of the IUE-CWA union with which Local 808 is affiliated.

Employees with the least seniority are expected to lose their jobs first, March 26. The remaining workers will be let go until production ceases in early summer.

Richard Trumka, AFL-CIO President, writes:

The Whirlpool Corp. is closing a refrigerator manufacturing plant in Evansville, Ind., putting more than 1,100 people out of work. Even worse, Whirlpool will continue to produce these refrigerators, but not in Evansville and not anywhere else in America. They are planning to manufacture them in Mexico, where weaker labor and environmental laws make them “cheaper” for Whirlpool to produce.
This is outrageous and unacceptable, especially in light of Whirlpool’s profitability and the $19 million dollars in economic recovery money Whirlpool recently received from the federal government as a part of the American Recovery and Reinvestment Act. Those are OUR economic recovery funds, not Mexico’s.

You can sign their Whirlpool: Keep It Made in America petition here.

Will Congress listen?

Posted by Dave Johnson at 11:32 AM | Comments (3) | Link Cosmos

February 18, 2010

Yes, Nuclear

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

I believe that global warming is the most serious threat humanity faces. So we need to use every possible technology we can to replace energy sources that put greenhouse gases into the air. This includes nuclear energy.

One big problem with nuclear is figuring out what to do with the dangerous radioactive waste. But here's the thing, when we burn coal and oil we're just putting the dangerous waste product into the air and it is destroying the planet. So we can't make the perfect the enemy of the good -- nuclear waste is not destroying the planet and fossil-fuel waste is. We simply have to replace coal and oil as our energy source.

Climate change is an emergency. We need to do everything we can. This means we need to put up every windmill we can, every solar panel we can, every solar power plant, biofuel and geothermal facility that we can. We need to retrofit every building to be energy efficient, switch to electric cars, stop eating meat that is not grass-fed. We need to do research into finding ways to sequester carbon from coal. And we need to build nuclear power plants. What part of "everything we can" did I miss?

Please, let's make this a discussion. Please join the discussion and leave a comment with your thoughts on this.

BUT

As we proceed with this, we need to learn some lessons from the past. As we build a new generation of reactors there are some things that need to be clear from the outset.

Make them safe. This means a highly regulated effort, not a free-for-all for profits. Tax dollars are involved, and even if they were not public safety must be the primary focus. Newer reactor designs eliminate Chernobyl-style "meltdown" fears but we need close supervision by government. We need the government "meddling" and "interfering" and "snooping" every step of the way. We, the People need to be sure that every best practice is followed and no corners are cut to make a buck.

Buy American. If we are building nuclear power plants we should regulate that they create American jobs, not offshore in China or anywhere else. There are federal funds guaranteeing loans for these projects and they should specify that we Buy American. Use American –made components, right down to the steel. China's and other country's governments are helping their own economies, let's us help our own economy this time.

There are also safety concerns for Buy American. We need very close inspection of every component and material that is used in these plants. How would we monitor the manufacturing of the components and the quality of the steel if it is done outside the US? Do you remember the faulty welds in the Chinese components that shut down San Francisco's Bay Bridge last year?

Protect the environment. There is also the environmental impact of making steel in China and then shipping it versus making it here -- in our highly productive steel industry. China creates three times the greenhouse emissions when they make steel that our own steel plants create. This is one reason their steel costs less. What is the point of building nuclear to lower greenhouse gas emissions and using greenhouse gas-creating processes?

So I say Yes, Nuclear, and make sure that we use Big Government oversight to keep it safe, create American jobs and mostly to protect the environment.

Posted by Dave Johnson at 1:06 PM | Comments (2) | Link Cosmos

February 15, 2010

News Flash: Nations Compete

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

I have a regular spot on the radio show, The Fairness Doctrine, currently in Massachusetts but going national. The show has a liberal and a conservative host and they present and discuss differing viewpoints -- without shouting.

On the show today we talked about my post from last week, With Washington Stalled, China and Others Race Past Us. In that post I wrote,

One party in Washington is following a strategy of obstructing everything, believing that the public will blame the other party for nothing getting done. The other party refuses to use the powers it has to act on the nation's agenda, fearing that the public will thing they're being mean or something. So we're stuck, standing still, getting nothing done. And the rest of the world moves forward with the green manufacturing revolution, taking the jobs, taking the industries, taking the momentum, taking the future.

Here is my point: We're standing still, and other nations are moving ahead. Literally. High-speed rail is an example of this difference. Compare China's investment in public infrastructure like high-speed rail with our own.

At Open Left Saturday, Paul Rosenberg wrote a post about China's wonderful new high-speed rail system, Whose near future is our far future: Europe, China or California?, saying,

"It's really amazing how much rail they're going to have built within the next two years, 42 lines including connections between China's most important cities. ... The US, in contrast, will have one line built in four years, connecting Tampa and Orlando. Tampa and Orlando? That's not so much a high-speed rail line, more an overgrown Disney ride."

China has a national strategy of massive investment in public infrastructure to create jobs and stimulate manufacturing. This investment then leaves behind a modernized manufacturing infrastructure as well as a much more efficient transportation system. This is part of a larger strategy to develop an economy that is much more energy efficient than their competitors, which means they will be better able as a nation to compete economically.

President Obama has been trying to get our own country to invest strategic projects like this. If we can invest in a more efficient economy then WE will be more competitive in the future than we are today. This means more jobs and a higher standard of living in the future, as these investments pay off. But his efforts meet resistance every step of the way. Just one example of this is how the entrenched oil and coal interests take advantage of the corruption of Washington, especially the Senate, to block these efforts. They also invest heavily in poisoning the information that reaches the public, like funding "climate skeptics" and think tanks that pump out "ideology" that isn't really ideas but is propaganda that serves their own financial interests. They and others are doing everything they can to block us from investing in the green manufacturing revolution while the rest of the world is moving ahead.

America is stuck in this weird ideology that says government is bad, and it is wrong for government to help the people by planning and investing in our future. There is a "market fundamentalism" that says that markets must decide things, not democracy. They say our people through our government will make bad decisions, that companies are much more efficient at making decisions, so we should instead let the people who run the largest companies decide how to use our country's resources, labor force, and capital. They say this is much more "efficient" than letting democracy make decisions.

Here is a fact: nations compete. You might believe this is an outmoded concept. It might not fit with the business model of multinational corporations. But we still have countries that see themselves as unified nations with a shared identity, and these nations compete. They compete with US. China is competing with US and the rest of the world, to bring manufacturing to itself, and using national strategies. We are not responding as a nation.

When someone is in a fight with you, you have a much better chance of winning if you at least understand that you are in a fight and get yourself organized to do something about it! How hard is that to understand? China and other countries are in a fight with us for economic dominance. Manufacturing is the key to economic power, and they are fighting to win manufacturing business away from us.

I don't say this to particularly criticize China. The Chinese don't owe me a job. China is just taking care of its own. It should. That is what nations are supposed to do. So to the extent that we still see ourselves as a NATION, we need to take care of OUR own. We need a national economic/industrial strategy, where we say THIS is how WE are going to compete.

If America is still a nation with a democracy we're going to have to step up to the plate and compete as a country and as a people.

Posted by Dave Johnson at 4:58 PM | Comments (0) | Link Cosmos

February 13, 2010

With Washington Stalled, China And Others Race Past Us

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Bob Herbert has a column today, Watching China Run, asking our country's leaders to get moving on the country's problems,

Our esteemed leaders in Washington can’t figure out how to do anything more difficult than line up for a group photo. Put Americans back to work? You must be kidding. Health care? We’ve been working on it for three-quarters of a century. Infrastructure? Don’t ask.

Meanwhile China and other competitors are moving ahead with their national plans. (We don't even have a national economic/industrial plan to move ahead with.)

“China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world’s largest maker of wind turbines and is poised to expand even further this year.”
China also has become the world’s largest manufacturer of solar panels and is pushing hard on other clean energy advances. ... “These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.”

We’re in the throes of an awful and seemingly endless employment crisis, and China is the country moving full speed ahead on the development of the world’s most important new industries.

One party in Washington is following a strategy of obstructing everything, believing that the public will blame the other party for nothing getting done. The other party refuses to use the powers it has to act on the nation's agenda, fearing that the public will thing they're being mean or something. So we're stuck, standing still, getting nothing done. And the rest of the world moves forward with the green manufacturing revolution, taking the jobs, taking the industries, taking the momentum, taking the future.

Mr. Herbert concludes,

And what’s at stake is the future of the American economy. The low-carbon era is coming. We can be dragged into that newer, greener world by leading countries like China; or we can take up the challenge and become the world’s leader ourselves.

Posted by Dave Johnson at 9:15 AM | Comments (0) | Link Cosmos

February 10, 2010

Who Is Really "Anti-Business"?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

In the Bloomberg story today, Obama Doesn’t ‘Begrudge’ Bonuses for Blankfein, Dimon, President Obama, spoke up about the huge Wall Street bonuses handed out this year,

“I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”

Free-market system? These huge bonuses are for the Wall Street robber-barons that caused the financial collapse, took taxpayer dollars to prop up their fortunes, and get free money from the Federal Reserve with which to "trade" -- speculate, gamble, call it what you want. Meanwhile they spend hundreds of millions of dollars "lobbying" (bribery) to fight any kind of financial reforms or consumer protections from enactment, and to make sure that no such think as a "free market" with honest competition never threatens their dominance of business and government.

So why is the President talking like this [note: see update below], at a time when so many Americans are out of work, losing their homes, and falling into poverty? Because he doesn't want to be perceived as "anti-business." From the story,

Obama sought to combat perceptions that his administration is anti-business and trumpeted the influence corporate leaders have had on his economic policies. He plans to reiterate that message when he speaks to the Business Roundtable, which represents the heads of many of the biggest U.S. companies, on Feb. 24 in Washington.

Meanwhile a Senate filibuster blocked the President's great nominee, Craig Becker, from serving on the National Labor Relations Board. So the Labor Board remains non-functional. The filibuster kept workers from being fairly represented, and the Board itself from having a tie-breaking vote so they can resolve labor disputes so the "free market" can function as it should, with workers able to bargain for better wages, benefits and working conditions.

These two stories this week present quite a contrast, and send mixed and demoralizing signals to the country. President Obama doesn't want to "appear" to be "anti-business." Meanwhile giant, monopolistic corporations and Wall Street are chewing up Main Street and keeping smaller businesses from competing, while their lobbyists keep the legislature from getting anything done at all.

Let's talk about this "anti-business" label and how it is used.

I wrote a post the other day titled, Tax Cuts HURT Small And Medium Businesses, championing small and medium businesses in their struggle to survive against the giant monopolistic corporations that are crushing them. Summary: struggling businesses don't pay taxes, so tax cuts only give more ammunition to the giants that are crushing them. In the comments at one of the places it was posted I was accused to being “anti-business.”

Apparently championing small and medium businesses - America's job-creating, innovative engine - is "anti-business." If you look around, being anything but a servant to Wall Street and the giant monopolistic corporations earns you the label, "anti-business."

The Power Of Words

This got me thinking about the ways this label, "anti-business," gets used. It is always used by corporate/conservative types, against anyone who questions the power of Wall Street and the giant monopolistic corporations that are strangling smaller businesses, workers and democracy.

The President nominates a great candidate for the Labor Board, then worries that he is perceived as "anti-business." Labels like "anti-business" are powerful accusations and come from very, very powerful people. (Like this or this.)

Last year, in the post Misuse Of The Words Protectionism And Trade Is Making Us Poorer I wrote,

Language has tremendous power. People like George Lakoff and Drew Westin, who study the use of language in political discussion, say that our choice of words has the power to actually affect the “wiring” or neuron circuits that our brains use to think.
The corporate marketers and political persuaders have certainly learned the power of language to influence us. It has even gotten to the point where “neuromarketing” uses MRI and EEG to study how our brains react to certain stimuli so they can be used to market and persuade.

In politics I think that we have even reached a point where we give words more power and importance even than the ideas the words represent. In the Bush years we learned that the persuaders believed they could “create their own reality.”

[. . .] words are used as weapons by professionals who wish to distract us from things that are in front of our own faces.

So how do we fight this? One way is to recognize our own power as citizens in a democracy. In America the people – Main Street – are supposed to be in charge of things, and the purpose of business and finance is supposed to be to serve our interests and needs, not the other way around. Why else would We, the People have set this system up, anyway? So we need to internalize this understanding, and believe in it. We are supposed to be in charge. We, the People are supposed to be telling businesses how they are supposed to operate, setting the rules and regulations, defining the playing field on which they operate. We need to have a sense that it is improper for businesses to be involved at all in the decision-making about the rules under which businesses operate. It must be this way because business interests will always, always try to tilt the rules against the free market and in their own favor, giving them advantages over other businesses.

This isn't about being "anti-business" at all, it is about being in favor of a level playing field, where the innovative small and medium companies have a fair chance to compete. It is the giant monopolistic corporations that are "anti-business."

Believe it.

Update - Greg Sargent looked at the transcript and has a more nuanced interpretation.

Posted by Dave Johnson at 1:09 PM | Comments (1) | Link Cosmos

February 5, 2010

Senator Shelby's "Holds" Show Need For National Industrial Policy

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Senator Shelby is placing "holds" (filibusters) on ALL OF the President's nominees, all by himself

Richard Shelby puts hold on President Obama's nominees

Shelby is frustrated over the Pentagon’s bidding process for air-to-air refueling tankers, which could lead to the creation of jobs in Mobile, Ala.

Over at firedoglake, emptywheel writes,

The key issue is that Shelby wants the Air Force to tweak an RFP for refueling tankers so that Airbus (partnered with Northrup Grumman) would win the bid again over Boeing. ... Airbus calculated that it would not win the new bid, and started complaining.
Essentially, then, Shelby’s threat is primarily about gaming this bidding process to make sure Airbus–and not Boeing–wins the contract (... this is the truly huge potential bounty for his state).

. . . But underlying the refueling contract is the question of whether the US military ought to spend what may amount to $100 billion over the life of the contract with a foreign company, Airbus. Particularly a company that the WTO found preliminarily to be illegally benefiting from subsidies from European governments.

$100 billion contract to build air to air tankers -- that's a lot of jobs and lots of them in Alabama.

This shows why we need a national industrial policy. The country has no policy to promote jobs and manufacturing so members of Congress are forced to do things like this to try to keep manufacturing in their district or state - competing with every other district or state. And in this case, even fighting to lose the contract for an American company!

Senator Shelby is fighting for jobs in his state, because the country is not. It is time for a coordinated national economic/industrial strategy -- just like every other country has -- so we're all working together instead of fighting over the scraps that are left behind.

Posted by Dave Johnson at 8:40 AM | Comments (0) | Link Cosmos

February 1, 2010

SOTU - A List Not a Vision

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

In last week’s State of the Union speech President Obama talked about jobs. It was a great speech. It was SO satisfying to see him scold the Supreme Court for enabling monopoly corporatocracy to replace democracy, scold the Republicans for obstructing every single bill, and scold Democrats for being chickens**ts and running for the hills. But in the end he presented a laundry list – a good list, but a list – instead of a vision for a new economic structure.

First, he summarized the effects of the “stimulus,”

“Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed. Two hundred thousand work in construction and clean energy; 300,000 are teachers and other education workers. Tens of thousands are cops, firefighters, correctional officers, first responders.”

Then the jobs list:

“I'm proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.”

“I'm also proposing a new small business tax credit-– one that will go to over one million small businesses who hire new workers or raise wages.”

“let's also eliminate all capital gains taxes on small business investment, and provide a tax incentive for all large businesses and all small businesses to invest in new plants and equipment.”

“put Americans to work today building the infrastructure of tomorrow . ... There's no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products.”

“put more Americans to work building clean energy facilities…”

“and give rebates to Americans who make their homes more energy-efficient, which supports clean energy jobs.”

“it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America.”

On Exports - Also A List

“we need to export more of our goods”

“a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America.”

“launching a National Export Initiative that will help farmers and small businesses increase their exports”

“seek new markets aggressively, just as our competitors are”

“enforcing those agreements so our trading partners play by the rules”

What’s missing?

The most important jobs item missing from the President's speech was aid to states. The problem is that the states are cutting their budgets, which means layoffs and cutbacks from maintaining their infrastructure and investing in new infrastructure. With this happening in many of the 50 states, the scale threatens to undo the positive effect of the stimulus.

But President Obama faces two problems when considering aid to the states. First, helping the states would mean even more borrowing, on top of the borrowing forced on us by the years of conservative policies. Second, many of the troubled states are in their predicament because of their own conservative anti-tax policies. California, for example, is cutting jobs because the conservative minority is able to block any revenue-raising measures, and last year was even able to force even more corporate tax cuts in exchange for letting the state pass any budget at all.

But maybe Oregon is showing other states the way out of this trap. Last week voters raised taxes on corporations and the wealthy. Oregon voters pass tax increasing measures by big margin,

Oregon voters bucked decades of anti-tax and anti-[government] sentiment Tuesday, raising taxes on corporations and the wealthy to prevent further erosion of public schools and other state services.

If the people in the states rise up and start demanding that the wealthy and corporations pay their fair share, they can dig themselves out of this mess.

Buy American

Another path out of the jobs mess is to include Buy American procurement clauses in stimulus, infrastructure and jobs bills. A report by Alliance for American Manufacturing, titled, Buy America Works: Longstanding United States Policy Enhances the Job Creating Effect of Government Spending argues for a strong “Buy American” clause in the new jobs bill.

“Including domestic sourcing requirements in job creating legislation would be the most effective way to ensure taxpayer dollars are used to create and maintain jobs and manufacturing capacity to the maximum extent possible, thereby vastly improving the stimulative effect of government spending.

[. . .] Given the dire problems the economy has experienced and continues to experience, the inclusion of domestic sourcing requirements in an upcoming job creation bill is the smart thing to do.”

Reinforcing this, a recent Gallup poll finds that Americans think the “best way to address the problem of growing unemployment in the United States [is] … to keep manufacturing jobs in the U.S.”

Keep Jobs Here

Bloggers have pointed out that the job-creation tax credit doesn’t prohibit offshore outsourcing of the jobs that receive the tax credit! Come on people, this is pretty basic.

Finally, Tell The Senate: JOBS NOW!

Campaign for America's Future is reaching out the 27 million Americans who have lost their jobs and are scrambling to get by – and the rest of us who know them and stand with them – to contact their Senators and say: Tell the Senate: We need action on jobs NOW! Click here to take action.

Posted by Dave Johnson at 11:39 AM | Comments (0) | Link Cosmos

January 29, 2010

America's Competitors Will Use Supreme Court Ruling To Block Our Green Jobs Effort And Close Our Factories

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

It's not personal, it's business.

The Supreme Court recently ruled 5-4 that ~~George Bush will be President~~ corporations can spend unlimited amounts to support or oppose candidates. Corporations! Since there are no restrictions on the citizenship of the owners of corporations foreign companies and governments now have a direct way to manipulate our laws and regulations.

Outside interests have been influencing American opinion for decades, but have not before this been able to directly support or oppose candidates. The Washington Times, Fox News, and other corporations with significant foreign ownership already work full-time to turn American public opinion against our own government. "Free trade" advocacy groups with funding from outside our borders work to get us to open our markets to imports that close our factories, outsource our jobs, lower our standard of living and drive us into ever-increasing debt. We have seen this with "grassroots" lobbying on important issues like climate change, trying to make people think that the science is a "hoax": see Grassroots’ Opposition to Clean Energy Reform Bankrolled by Foreign Oil, Petro-Governments.

But this new ability to directly support or oppose candidates offers a vastly more effective and immediate way for America's competitors to achieve their goals. What will they go after first? Of course a top goal of our competitors is to take down our manufacturing capacity -- the foundation of a country's economic power.

And, of course, this is exactly what is happening. Oil countries are already planning strategies to use this ruling to block our alternative energy and green jobs efforts. According to Think Progress:

For instance, Saudi Arabia has already signaled that the progressive effort to build a clean energy American economy is its “biggest threat”:

Saudi Arabia’s economy depends on oil exports so stands to be one of the biggest losers in any pact that curbs oil demand by penalizing carbon emissions. “It’s one of the biggest threats that we are facing,” said Muhammed al-Sabban, head of the Saudi delegation to U.N. talks on climate change and a senior economic adviser to the Saudi oil ministry. [...] Climate talks posed a bigger threat, Sabban said, and subsidies for the development of renewable energy were distorting market economics in the sector, he said."

Presumably because of the Citizens United ruling, Saudi Arabian-owned subsidiaries operating in the United States can now spend unlimited amounts advocating the defeat of candidates who support clean energy legislation. According to a ThinkProgress investigation, foreign-oil backed lobbyists in America are already instigating efforts to kill clean energy legislation.

What are we doing about it? What is our plan? Every other country has economic/industrial policies, but for one reason or another the American public has been persuaded that America should not have an economic/industrial policy of our own. We're bombarded with propaganda that says having a plan would be government - that We, the People thing - "interfering" with "the market." This ideology is like an anchor on our country, holding us back from progress.

We must rally and take back control of our democracy and our future. This Supreme Court decision must be countered with immediate legislation or it means the loss of so many things that we value. And we must develop an economic/manufacturing policy for our country's future. This time it's personal.

Posted by Dave Johnson at 10:28 AM | Comments (0) | Link Cosmos

January 14, 2010

Another Jobs Disappointment With No Clear Path Forward

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

On top of last week's bad news on unemployment, with 85,000 more jobs lost in December, today's initial claims for unemployment insurance benefits report was 444,000, an increase of 11,000 from the previous week's revised figure of 433,000

The "rule of thumb" break-even point for this number is said to be 425,000. This means as many people are hired as laid off in a given week. (Even now new people get hired in our vast economy -- somewhere.) So the conventional wisdom is that when this number is 425,000 it is break-even and the economy is not losing or gaining jobs.

BUT what happens when the economy is not only laying people off, but also is not hiring at the usual rate? Then 425,000 layoffs isn't going to be breakeven, and this is what appears to be our situation now. Calculated Risk, BLS: Near Record Low Job Openings in November,

Openings near a series low can't be a positive sign. Separations [layoffs] have declined sharply, but hiring has not picked up. This also suggests that eventually (possibly when the March 2010 benchmark revision is announced in Feb 2011), the November net change in employment will be revised down.

Whether or not 425,000 people are still being hired every week this week 444,000 people were laid off, so we are clearly still losing jobs.

Government is the only positive force in the economy right now. President Obama's "stimulus" saved or created about 2 million jobs. Imagine where we would be without the stimulus. It would not just be worse by 2 million jobs, it is possible the panic that was happening might have continued or even increased. And imagine if we didn't have the FDIC insuring people's bank accounts. Every bank would have failed, and people who didn't get their money out in time would be flat broke. And imagine if we didn't have unemployment benefits, COBRA subsidies for the unemployed, Food Stamps, etc. Just imagine.

But what we don't have is a clear path out of this, triggering the rest of the economy to perform for us again. (and never mind doing so in a way that is sustainable, environmentally sound, healthy, etc.) We have government assistance until the economy gets better but we do not have a clear government plan to make the economy get better. We still have this failed conservative "free market" thinking standing in the way of We, the People working together to get things going again. This used to be called "industrial policy." Of course, not having an industrial policy is an industrial policy -- a really, really bad one -- especially when almost every competing country does have policies they are acting on.

China, for example, has very strong government policies for promoting Chinese companies and industries. And as a result China's economy is said to be strongly recovering, even as our own continues to stagnate. China's policies include holding their currency artificially low and otherwise subsidizing companies to gain market share at the expense of the rest of the world.

But a policy to help our economy doesn't have to be at the expense of others. It can be a policy to help bring workers in other countries up to our standards, so they can become customers for our own products and services. This lifts the economy in our country as well as for our trading partners (not competitors). We can apply tariffs at the border on products that are made by people who are not fairly paid, or who are not allowed to organize unions, or who are not allowed to vote for government officials who would protect their safety, wages, environment, etc.

So let's start thinking about how our government can work with us to help us, instead of this weird, failed conservative "everyone on your own" free-market approach that led to collapse, please.

Posted by Dave Johnson at 12:12 PM | Comments (0) | Link Cosmos

January 12, 2010

Right Wing Catches On That Conservative Trade Policies Hurt Us

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Be afraid. Over at The Drudge Report, under a photo of a Chinese soldier (but no siren), are three headlines:

CHINA ENDS AMERICA'S REIGN AS LARGEST AUTO MARKET...

Becomes biggest exporter, edging out Germany...

China banks eclipse American rivals...

So OK, conservatives seem to be FINALLY starting to notice that their so-called "free trade" policies caused a problem!

When Ronald Reagan took office we had a trade surplus with China - we exported to China more than we imported from China. But the conservative "free market" ideologues said that "the market" must determine everything instead of the people in our democracy, that government is bad, that "free trade" lifts all boats, etc. -- even though there is no such thing as "free" trade or "free" markets... They negotiated trade agreements guaranteed to give away our strong trade position, stopped enforcing old or new trade laws, and got rid of any idea of having a national industrial policy.

By the time Bill Clinton took office instead of a trade surplus we had a trade deficit with China of almost $23 billion - importing from China much, much more than we exported to them. Under President Clinton, influenced by conservative "free trade" arguments, this trade deficit grew to $83 billion.

Then, under George W. Bush this trade deficit grew to $268 billion in a single year! Time after time Bush refused to enforce trade agreements and the imbalance just got worse and worse.
(WSJ)
By last year the trade imbalance with China was 69% of our entire trade deficit.
(EPI)
So NOW the conservatives are looking at what they have done, and they are very afraid. They borrowed from China year after year, and now they are afraid that China will use all that borrowed money to collapse the dollar. If you are on any right-wing mail lists half of the emails you receive are saying that dollar could collapse any minute.

So a big headline at Drudge! I guess even they are ready to admit that their policies were bad for the country.

Posted by Dave Johnson at 7:29 PM | Comments (0) | Link Cosmos

January 7, 2010

Why Is Moving A Factory Called "Trade"?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

I have a simple question: Why is moving a factory across a border called "trade"?

The process of building up a country is long and difficult. People over time unite and engage in a long, hard struggle to form a democratic government for themselves and build strong public structures -- a system of laws, environmental protections, wage and hour rules, worker protections, product safety standards, etc. -- all of which work to raise the standard of living for everyone. These strong public structures enable economic growth and empower the people and companies to prosper while protecting the investment that built it all. So people return a portion of the resulting prosperity as taxes to invest in building and maintaining this infrastructure.

That is how good, solid self-government should work. The people build the public structures that enable each other to prosper and that protect the investment. And it worked for us.

But then, along come the quick-buck artists, looking to grab what they can for themselves, as fast as they can, without doing their part or sharing their gains or leaving anything but a mess behind. And they found a way to accomplish this. They found places outside of our borders where the people had not yet built up the solid, democratic governmental institutions that protect people and the environment as ours do. They fired the workers who had built up the companies and communities, packed up the machines that made the products, closed the factories, and opened factories on the other side of those borders.

Moving factories across borders is just a way of evading our laws and our protections, that we have fought so hard to get in place. So why do we let them bring the same products that we used to make here, back across those borders to sell in the prosperous market that our hard-won public structures enabled?

People fought and died so we could maintain our own strong government that protected us and enabled our prosperity. We built up our prosperity over time and with many hard fights, and that is what has made our county the market that everyone wants access to. We should use that market power to set the terms of what can be brought in to this country. We should help the people in countries that have not yet build up the kind of strong, democratic governments that can protect them from the quick-buck artists and exploiters instead of letting those manipulative consters wipe out our jobs and tear down our own government and rules. We should say that before products get access into our market the workers that make them should be paid well, and the environment they are made in is protected. Maybe we shouldn't allow goods from undemocratic countries in at all. What do you think?

We worked hard to build what we have, and we are letting that be taken away from us. It is time to stop allowing our factories to be closed and moved across borders as a way to get around the rules and standards we fought so hard to put in place.

Posted by Dave Johnson at 4:11 PM | Comments (1) | Link Cosmos

December 2, 2009

Fixing Jobs: Normal Isn’t An Option

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

The “Jobs Summit” is Thursday. Are they going to try to get things back to normal? I hope not!

“Normal” isn’t an option anymore, because it is what led to where we are.

The financial sector bailout is based on the idea that things will get back to “normal” if the credit machine is restarted and consumers and businesses are able to borrow more. The stimulus is based on the idea that the economy is an engine that runs smoothly and just needs to be restarted and things will get back to “normal.” While we wait for “normal” to return the government is stepping in to make up the slack in demand, and to help those hit hardest by the downturn. (Never mind that COBRA subsidies start expiring as you read this and unemployment has been extended and extended.)

The idea that you can get the financial sector and the economy back to “normal” desperately assumes that a sustainable “normal” existed in the structure of the 20th-century western economy. It assumes that there really is an “invisible hand” that takes care of things without human intervention. It assumes that perpetual growth of consumers and their incomes and of consumables could just go on and on.

This all assumes that “normal” was OK. This is such a nice, comforting idea. It is wrong.

What if that “normal” system really was unsustainable and that is what led to its collapse? What if there was a limit to how many jobs can be outsourced, wages cut, factories closed, people born, trees cut down, fish taken from the sea, nutrients taken from the soil, water taken from the aquifers? And, of course, the big one: what if there is a limit to how much carbon can be put into the atmosphere?

If people and nature and markets finally reached a limit, and things broke down -- what then? What then is we need to give up on returning to that “comfortable” dream and get to work designing a sustainable system that benefits and respects all of us and the planet we rode in on.

We need a restructuring, a redesign, a new direction. Our "normal" system has turned into a low-wage, everything-to-the-top economy and this must be restructured.

The Restructuring

The core of what needs to be restructured is that we have a system where people with power and wealth benefit when they figure out how to cause other people to receive lower pay and benefits -- or just lose their jobs. The incentives come down to this: if someone can figure out how to cut your pay and benefits or just get rid of you (“eliminate your position”) they get to pocket what you were making, and you get nothing. If you don't own the company you're out of luck.

Now that is a perverse incentive if there ever was one. (Another perverse incentive: People with power and wealth benefit when they "externalize" costs like environmental or health damages. If they figure out how to hurt you or the planet without having to pay the costs of healing those harms, they get to pocket the savings.)

In the past this perverse incentive was mitigated by people banding together in governments and/or unions and forcing the wealthy and powerful to share. But modern marketing science has been successful at making people believe that government and unions are bad for them.

This was also mitigated by the ongoing need to find people to do the jobs that needed to get done. But with continual improvements in technology this need is reduced. For example, here is a story about a factory that builds large-screen TVs without any employees.

Also, this perverse incentive assumes an infinite pool of customers to sell to, ignoring that the transaction of benefiting from eliminating a job also eliminates a customer. But modern business has become so efficient at job elimination that this comes into play. Who will be able to buy theTVs that the employee-eliminating factory makes, if all the employees are eliminated and have no income?

Three decades ago productivity and wages decoupled. Where wages used to always increase along with productivity Reagan initiated an era where that increase was no longer shared, and the benefits of our economy now increasingly flow to the few at the top. Now they have all the money, and everyone else is loaded with debt from just trying to keep things "normal."

You might be lucky enough to still have a job today but you probably haven’t had a raise for a long time. And if you did rising costs of health care, etc. took it back. But even if you are ahead, what about tomorrow? Do you have a job that absolutely can't be outsourced or replaced by technology? If you think so I have news for you, millions of newly-unemployed can see that you have a rare necessary job, and they're all going to try to get it from you.

So good luck with the Jobs Summit. But if we don't hear about a fundamental restructuring that involves changing basic ideas of what work means and who "owns" the companies and shares the wealth in a technologically advanced, overpopulated and overproducing world, well, I won't think we're hearing the answers we need to hear. Put more simply, my example of the employee-eliminating TV factory is becoming more and more real. But certainly something can be done with a situation where there are plenty of TVs being made, and everyone has a lot of free time because there aren't enough jobs. How obvious is the answer to that?

Yes, I'll be posting ideas so check back for future posts on this. In the meantime please leave a comment with your ideas.

Posted by Dave Johnson at 7:57 AM | Comments (0) | Link Cosmos

November 30, 2009

Obama Enforced Trade Agreement - Jobs Already Returning

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

In September, President Obama Enforces Trade Law In China Tire Case!

President Obama signaled a new direction in America's trade policies by deciding to enforce the ITC's recommendation to impose tariffs on Chinese tire imports.

In November, Findlay's Cooper Tire will add 100 new jobs,

“Last year at this time we were worried about losing Cooper,” said Sehnert.

Now the company has announced a $10 million dollar investment in the plant, mostly in automation.

With the company's expansion comes the real good news for Findlay residents, 9.1% of whom are unemployed.

The plant will need to fill 100 new jobs.

“That's 100 more people working. That's 100 more people spending their money in our community, paying their bills, paying their taxes so it means a lot,” said Sehnert.

“Looks like business is picking up,” said Larry Williams, a sales forecaster at Cooper's Findlay headquarters.

The background is that China was flooding the US market with cheap tires, costing thousands of American jobs and forcing factories to close. Our agreement when China joined the WTO was that we could impose a tariff when "disruptions" occurred, and this was a disruption. President Bush refused to enforce trade agreements and we suffered 8 years of job loss and factory closings, but President Obama enforced it, and we are already seeing jobs return.

Posted by Dave Johnson at 9:05 PM | Comments (0) | Link Cosmos

November 18, 2009

The Problem With A Jobs Bill – And With Everything Else

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

The country needs a jobs program and needs it right now. Cash for Caulkers would be a good start. A new Civilian Conservation Corps would be another. But let's not allow a jobs program to cover over the need for real changes in the structure and core principles of our economy.

Yes, an effective jobs program can help people hold out a while longer - until necessary changes are made. It can make the unemployment rate will look better, for a while, and maybe the GDP will climb a little bit. But our low-wage, everything-to-the-top economy is not sustainable and needs to be redesigned and reregulated. The economy has to be changed so that it works for all of us, instead of just a few.

What if the government passes a jobs bill, and these new jobs follow the current American job model of paying too little with no benefits? What if the government uses contractors, as they now do for so many government functions, and the contractors “reduce costs” by paying very low wages and no benefits, sending the rest of the cash to a few at the top? Does it really help the economy and the country to provide a bunch of low-paying jobs with no benefits, and make a few wealthy executives even wealthier? Or suppose the government starts a massive infrastructure modernization project? Does it help the economy if they hire construction firms that pay as little as possible or use Chinese steel?

Even if a government jobs effort provides good-paying jobs with good benefits, this still won’t change the need to restructure the rest of our economy so that it, too, provides good pay and benefits to all of us instead of concentrating all wealth and income at the top.

As long as our economy is structured to pass everything up to a few at the top, stimulus can’t work well, jobs bills can't work well. Either can anything else. In the end things will just revert to the old ways and we'll need more bailouts, stimulus and jobs programs.

The problem is that there are two economies now. There is an economy for the top few and an economy for the rest of us. And this problem is global. The world’s economy is structured to send almost everything to a global top few.

Everything just goes to the top now. Companies are structured that way, jobs are structured that way, taxes are structured that way and now even our government is structured that way. Our economy has been turned into a machine that sends every dollar to an already-wealthy few. So efforts to stimulate economic recovery using traditional methods cannot work. It will just make a few at the top even richer.

We need a jobs bill because the economic system has broken down. We needed a stimulus package because the economic system has broken down. All the bailouts and jobs bills and stimulus are just one more stopgap effort to keep a broken system going, for the continued benfit of the few at the top. Changes must be made.

One barrier to fixing our broken economy problem is the structural corruption of our Congress. Every effort to help the people seems to get hijacked - and never mind working on the needed reregulating and restructuring. The recent extension of unemployment insurance, for example, included only $2.4 billion for the unemployed, but had more than $20 billion tacked on, going directly or indirectly to (owners of) big homebuilding companies. Another example, the health care reform bill is turning into a law ordering people to buy insurance from the big insurance companies. This year’s big stimulus package was watered down with even more tax cuts for the few, like getting rid of the Alternative Minimum Tax.

The biggest example, of course, was last year’s financial sector bailout. Taxpayer dollars saved the asses of the companies that caused the collapse and are now serving up $140 billion for financial-sector bonuses but 10% unemployment for the rest of us!

If we want to get out of this mess we have to restructure and reregulate the whole system. We have to change the structure of our economy so that regular people receive the benefits. It is time. There is no more getting around it.

Next post: some of the structural problems that must be changed.

Posted by Dave Johnson at 1:32 PM | Comments (1) | Link Cosmos

November 16, 2009

Washington Times Against Protectionism Before They Were For It

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

President Obama is visiting Asia, and is blasted over and over about America's supposedly "protectionist" policies.

"China on Monday accused the United States of increasing protectionism..."
Think about it, the country with the massive trade surplus accuses the country with the massive trade deficit of being "protectionist." Call it The Audacity Of Projection.

Our trade opponents have learned that all they have to do is shout the word “protectionist” and their American enablers will quickly run from doing anything that might help American companies and workers. But what happens later, when the consequences start hitting home? Do the "free trade" shouting, foreign-competition enablers take the blame and accept responsibility when Amercan dollars are spent overseas and American workers lose jobs and American factories close? Who could have known that they would point the finger at the President instead of themselves?

Here is what I am talking about:

On February 8, 2009, during the debate over the stimulus package, the conservative Washington Times joined the "free trade" chorus, denouncing the package's proposed "Buy American" requirements as the same kind of "protectionism" that conservative mythology says caused the Great Depression: EDITORIAL: How to cause a depression,

...Tucked within the economic stimulus bill the House passed last week was a clause requiring state and local public works agencies to buy American iron and steel for their reconstruction projects, and the Senate expanded it to all manufactured goods.

[. . .] The stimulus bill has a way to go before it reaches Mr. Obama's desk, but if strong "buy American" mandates are present at that time, he will have no choice but to veto the bill. Otherwise, he will be forever known as Barack H. (Hoover or Hawley) Obama.
Conservative free-traders got what they demanded. In response to these and other cries of “protectionism!” the Senate backed away from the Buy American clause, changing it to vague language requiring that the money be spent in ways consistent with existing treaties.

Since this wording gives the President some discretion in how the money is spent conservatives started demanding the President spend it ... outside of the country. For example, a Washington Times editorial on March 24, EDITORIAL: The Mexican-American War of 2009, ended by blasting President Obama for wanting American stimulus dollars to stimulate America's economy:

"Wasn't Mr. Obama going to be the "international" president who was going to get the rest of the world to love us? The path to improving relations does not involve destroying jobs in other countries as well as in our own."
So now it turns out that many stimulus dollars are being spent according to the wishes of the "free trade" conservatives, with money to purchase wind turbines creating jobs in Europe and China, and who could have known, the very same free-trade conservatives are JUST OUTRAGED that President Obama is sending American stimulus dollars out of the country! For example, a Washington Times editorial on November 13, EDITORIAL: Stimulus creates jobs in China, begins,

Of the $1 billion in clean-energy stimulus money spent since the beginning of September, $850 million has gone to foreign wind companies. It doesn't take a bunch of experts at a hastily planned "jobs summit" to discover this isn't the way to bolster employment in America.

Indeed, the 11 U.S. wind farms that received stimulus money from the Treasury have imported 695 of the 982 wind turbines to be installed, creating 4,500 jobs overseas. That's far more overseas work than the stimulus money has created in the United States.
Yes, how DARE they not require that American stimulus dollars be spent in America! This from the very same Washington Times editors who earlier in the year demanded exactly that.

Who could have known that conservatives would attack President Obama for the consequences of giving in to conservative demands??!! The Washington Times was against protectionism before they were for it. Call it The Audacity Of Hypocrisy.

The lesson to be learned here is to stop listening to these conservative, "free trade" clowns. They are only interested in making the rich richer at the expense of the rest of us and will say whatever advances that goal. We should start just doing what is right for the country, our workers, our factories, our companies and our jobs.

Posted by Dave Johnson at 3:30 PM | Comments (3) | Link Cosmos

November 11, 2009

$140 Billion for Bonuses, Zero for America’s Future

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Here is another story about Wall Street’s war on the real economy.

US Steel was planning to invest $1 billion in building an environmentally-friendly new “coke battery” plant in Clairton, PA. The new battery would dramatically reduce the emissions used in the process, and use the gases to produce electricity. According to the Pittsburgh Post-Gazette,

The strategic investment would build two new coke batteries at Clairton, install top-flight environmental controls and add a cogeneration plant that would make electricity from gas produced by coke-making, which will help power all three U.S. Steel sites.

Another Post-gazette story explains,

Coke is a baked coal that is used to fuel blast furnaces at the company's Edgar Thomson plant in Braddock and U.S. Steel's other North American operations. The Clairton plant can produce 4.7 million tons of coke annually and just under 1 million tons are consumed at the Braddock plant.

U.S. Steel broke ground on the project on October 22, 2008. Along came the financial crisis, and financing for the plant dried up. They had to suspend work in April, 2009. U.S. Steel puts hold on $1B Clairton project.

U.S. Steel is suspending indefinitely the $1 billion modernization of its Clairton coke plant, a massive, multi-year project that was expected to create more than 600 construction jobs.
The Pittsburgh steel producer said it was forced to make the "difficult but necessary decision" because of the economic slowdown that has prompted it to lay off about 7,000 union workers in recent months.

When the financial crisis hit, George W. Bush and Henry Paulson came up with – and Congress approved – the massive bailout scheme that has rewarded Wall Street for the actions that collapsed the economy. We gave the financial sector of the economy – commonly called “Wall Street” – hundreds of billions of direct dollars and trillions in guarantees, supposedly to fix the credit crisis and get the financial sector working again as the sector of the economy that provides financing for projects like the US Steel Clairton Coke Battery.

This is November and US Steel still has not found financing at reasonable rates to get back to work building this plant. They need $1 billion and this project is good for America's industrial capability, workers and environment. But, apparently, Wall Street needs to pay out $140 billion in bonuses this year, speculate on life insurance plans, do “flash trading” on stocks, etc. instead.

What Wall Street Is Supposed To Be Doing

Wall Street and the financial economy are supposed to be to supporting the real economy by playing the role of middleman, connecting sources of money with companies needing that money to allocate capital where it is needed. This is supposed to be a constructive process that helps We, the People fund innovative startup companies, build factories and schools,allocate capital for company expansion and fund other large-scale projects that require a pooling of resources and dilution of risk. That is their essential role in the economy.

But there is a problem with the way Wall Street has been and is operating. Instead of playing a background role supporting the real economy Wall Street has been dominating the economy, influencing the government and running quick-buck schemes, creating bubbles, speculating up prices on commodities and generally running wild. Before the financial meltdown Wall Street was not allocating capital productively, it was allocating capital destructively. In the companies-as-buy/sell-commodities posts I have been exploring how Wall Street's practices has been destroying companies, eliminating jobs and generally wrecking our economy while making a very few vastly wealthy. The company-buyout game turns good companies into debt-ridden, job-shedding shells. The greed-based drive for ever-higher returns tries to destroy companies like Costco because they are “overly generous” to their customers and employees. Wall Street has turned into a machine that grinds up jobs and communities, forcing wage cuts, dehumanization of workplaces, and corruption of our democracy.

When the financial sector broke down as a result of quick-buck risky investments (that didn’t allocate capital), massive leveraging (that didn’t allocate capital), Ponzi-like scams (that didn’t allocate capital), outright but not-yet-prosecuted fraud (that didn’t allocate capital), etc., our government stepped in to rescue the sector. But instead of fixing the system, Wall Street still is not allocating capital where it is needed. They are, however, taking huge profits and giving out huge bonuses.

Let’s make finance the servant of the real economy again, rather than its master. Let's invest our money in our industry, not bailouts and bonuses for a few. There are so many incentives for Wall Street to destroy factories, etc, and so few incentives to build the economy. Let's develop a strategy to build a new, sustainable economy that respects the environment and us as workers, customers and citizens. Let's develop a national economic/industrial strategy/policy -- call it what you want -- so our country has a plan to create jobs, invest in research and development and solve our problems. Other countries do this but our policy and strategy is to not have a policy and strategy and just let things continue in the wrong directions. I'm tired of that. What about you?

Posted by Dave Johnson at 7:46 AM | Comments (1) | Link Cosmos

November 4, 2009

Wall Street's War Against the Real Economy & We, the People

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

At a meeting with bloggers before last week's Building The New Economy conference, AFL-CIO President Rich Trumka talked about how we have developed two economies, one real and one financial. As he said, originally the financial sector was designed to support the real economy by providing capital as needed for building manufacturing facilities, public infrastructure, etc. But in recent decades the power of Wall Street has twisted that relationship until the real economy now feeds the financial economy.

As I have been writing about, for decades the real economy has been "financialized" by the Wall Street types -- sold off piece by piece providing short term profits for a very few. We lost more than 50,000 manufacturing facilities in just the last decade! If you sell your house you might have some cash in your own pocket for a while but your family doesn't have a place to live and the present state of our economy demonstrates the long term cost of this kind of short-term thinking: a few Wall Street types have a bunch of cash and the rest of us don't have an economy anymore.

As each factory closes and its jobs are eliminated the companies that supplied machines, parts and supplies also go away. The effect on those of us still employed (for now) has been profound as we work longer hours for less pay and fewer benefits with ever-higher stress levels. A few get ever richer, the rest of us have ever-lower standards of living and quality of life. And our country's ability to bounce back becomes ever more compromised.

Along with others at CAF I have been exploring how We, the People became the servants of Wall Street and what to do about it. The post Companies As Buy-And-Sell Commodities - Workers, Customers and Country As Costs laid out the pattern of company buyouts and takeovers since Reagan. Here is the company-buyout pattern that has turned into a machine with no human concerns:

buying up good companies, shedding and outsourcing the workers, cutting their pay and benefits, outsourcing and cheapening the product or service, fleecing and mistreating the customers, closing the offices and factories and running up debt.

The post Caught In A Machine That Grinds Us Up talked about the incentives that created this inhuman machine:

I have described here a destructive, unsustainable system that creates company- and society-breaking machines. These exist because of the economic and social incentives that our government has set up and we allow to stay in place. Breaking unions, stealing pensions, outsourcing jobs and squeezing customers all depend on government not enforcing laws and regulations – especially labor, consumer and environmental rules. …

Certainly there is no incentive at the top to stop this. This system helps a wealthy few get ever wealthier and not feel the consequences. The people who do this are celebrated as "successful." And if they don’t like the resulting devastation to the economy, community, country and world they can just hop into their private jet or yacht to retire to their private island or tax haven.

This is conservative economics and the long-term consequences. Since Reagan supposedly stopped government from "picking winners and losers" our government has indeed been picking winners and losers with Wall Street winning and the rest of us losing. This brought about a concentration of wealth so severe that a very few now control almost all of the wealth of the country.

Over and over again we see the consequences of conservative economics and Wall Street domination: Short-term profits for a very few with devastating long-term consequences for the rest of us.

We see these consequences now as the economy supposedly enters “recovery” – Wall Street is reaping vast profits and paying astonishing bonuses – enabled by taxpayer dollars – while the taxpayers themselves face loss of houses, raises or jobs, pensions, health care, etc. Gains for a few at the expense of the rest of us.

Wall Street vs Costco

Just as with the private equity game, Wall Street and market ideology has been at war with any part of our economy that benefits customers or workers. For example, in 2005 the NY Times took a look at Wall Street’s war against Costco, How Costco Became the Anti-Wal-Mart. The complaint? Costco treats its customers and workers well. The article quotes one after another Wall Street “analyst” complaining that Costco is “altruistic” or “overly generous.” One makes it clear, saying the company “could force employees to pick up a little more of the burden.” In their eyes a business serving customers or employees is wrong. From the article,

Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco's customers but to its workers as well.

Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."

The head of Costco explained that they take a longer-term view:

Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. "On Wall Street, they're in the business of making money between now and next Thursday," he said. "I don't say that with any bitterness, but we can't take that view. We want to build a company that will still be here 50 and 60 years from now."

And how does he do for himself?

Despite Costco's impressive record, Mr. Sinegal's salary is just $350,000, although he also received a $200,000 bonus last year. That puts him at less than 10 percent of many other chief executives, though Costco ranks 29th in revenue among all American companies.

"I've been very well rewarded," said Mr. Sinegal, who is worth more than $150 million thanks to his Costco stock holdings.

So in 2005 Wall Street’s short-term view of how Costco should operate was to squeeze the workers, cheapen the products, fleece the customers and grossly overpay the CEO. Costco did none of that, and now it is 2009 – the long term. How is Costco doing? I looked over their annual report and they are going just fine. According to The Motley Fool,

The retailer of pianos, coffins, and, yes, 30-pound jars of mayonnaise -- along with hundreds of other goods in bulk -- has managed to continue growing during the recession, impressively avoiding any layoffs in the process.

By the way, last year Sinegal’s salary was still $350,000. And a week ago US News and World Report wrote about Sinegal that he still “has a habit, which sometimes irks stockholders and almost certainly annoys his competitors, of taking excellent care of his employees.”

So Costco, a real company, was under attack from Wall Street for providing actual service to customers and actual pay and benefits to employees who were actually in the United States. And Costco came out OK through the 2008 financial crisis and aftermath.

But then, what we call Wall Street came out of this OK as well. Thanks to their stranglehold on our political and economic systems Wall Street came out of all this enriched and emboldened, using taxpayer dollars to pay bonuses and increase their lobbying. Many of the individuals who might have looted and destroyed companies and communities are rich and gone, others are still collecting bonuses. As far as the public sees, few of them have faced negative consequences for what they did -- virtually guaranteeing that such activities will continue.

Lessons

What lesson should we take away from this? Costco is a rare exception to the new rules. How many companies can get away with ignoring the demands of Wall Street that they cheapen the products, squeeze the employees and drain their surrounding communities? Why do we allow a system that enriches a very few in the short term while harming the rest of us, and how do we change this? Why do we tolerate IBG-YBG, the "I'll be gone - you'll be gone" take-the-money-and-run attitude that understands that there are no consequences when you take as much as you can from everyone else?

Now that Wall Street and short-term, unsustainable profit-taking have brought us to inevitable collapse, where do we go from here? Well obviously too-big-to-fail is just too big and that is a starting point. We were forced by their size to bail out these institutions, actually making them even bigger, and now they use our money to lobby against taxpayer interests, lobby for more bailout dollars, lobby against compensation curbs and taxes, lobby against politicians who want to change things, against rules to protect consumers, and anything that might change the short-term destructive approach. Using our dollars to do this - did I mention? We should break them up, like England is doing. But our government is, for whatever reasons, not doing so.

The recent Building The New Economy conference provided some guidelines that we can follow as we look for paths out of this. Take a look at the blog posts from conference participants that try to tackle these questions. (There is also a highlights video and should be more video when available.) The themes from the conference included the need for the Obama administration to develop a national industrial/economic policy, a rebalancing of trade, increasing the manufacturing that we do IN the U.S., a new emphasis on increasing research and development, modernizing and maintaining our infrastructure, an infrastructure bank to finance public projects, improving education and access to education including vocational education, and passing the financial reforms currently before Congress.

And how about using taxpayer stimulus dollars to actually stimulate OUR economy?

So how do we reign in Wall Street? Leave a comment.

Posted by Dave Johnson at 7:29 AM | Comments (0) | Link Cosmos

October 29, 2009

Wall Street Pukes On Our Shoes

At the New Economy Conference, Leo Gerard of the United Steelworkers just said that deregulating Wall Street was like leaving a 3 year old in a candy store unsupervised for a day. When you come back the kid is stuffed full of candy, candy falling out of the pockets -- but when you are driving home the kid pukes on your shoes. It's time to stop Wall Street from puking on our shoes.

Posted by Dave Johnson at 12:24 PM | Comments (3) | Link Cosmos

Building The New Economy

I am in DC at the Building The New Economy conference. There is a Listen Live button at that site, so you can attend as well. My computer clock says 5:40am as I type this so California readers are discovering this half way through the conference. :-0

Yesterday I attended a blogger roundtable with Rich Trumka, President of the AFL-CIO. I'll write about this later.

Speakers:

Gov. Ed Rendell, Commonwealth of Pennsylvania
Sen. Sherrod Brown, D-Ohio
Rep. Rosa DeLauro, D-Conn.
Rich Trumka, President, AFL-CIO
Leo Gerard, President, United Steelworkers
Prof. Suzanne Berger, director of the MIT International Science and Technology Initiatives
Jeff Madrick, author, "The Case For Big Government"
Robert Kuttner, author, "The Squandering Of America"
Kate Gordon, Apollo Alliance

Conference agenda (times are EST):
LESSONS OF THE FALL

9:30 a.m. There Is No Way Back: A New Strategy is Essential

BUILDING THE NEW ECONOMY

10:10 a.m. A New Foundation: Strategic Public Investment
11 a.m. Making It In America: Manufacturing in a Global Economy
12:05 p.m. Luncheon Keynote: Towards a New Economic Strategy
1:30 p.m. Global Challenge: A Sustainable Balance for Growth
2:30 p.m. Getting There: The Next Steps

Posted by Dave Johnson at 5:37 AM | Comments (0) | Link Cosmos

October 25, 2009

Building The New Economy

Bill Scher interviews me on Building The New Economy:

Building The New Economy: The Interview | OurFuture.org

Posted by Dave Johnson at 7:52 PM | Comments (2) | Link Cosmos

October 23, 2009

Palin vs Krugman On The Dollar -- Who Is Right?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

The other day I wrote about how the dollar is falling - but not against the Chinese Yuan. A falling, or "weak" dollar is great for American manufacturers, and therefore American jobs, because it makes American goods cost less everywhere else. This means our exports should rise, reducing our trade deficit and helping us pay off the huge amounts decades of conservative budget policies forced us to borrow from other countries.

Conservatives, though, are trying to use the complexities of the relative value of the dollar in currency markets as an anti-Obama political issue. They must have polling that shows people reacting to way the words "strong" and "weak" are used. This misunderstanding of "strong" and "weak" reminds me of how I used to be confused by "debit" and "credit" when I learned double-entry accounting. (Sorry, I probably shouldn't mix corporate finance humor with blog posts.)

For example, earlier this month Sarah Palin (or someone) wrote on her Facebook page that a falling dollar makes us "vulnerable." This is a brilliant play on the "weak" theme, and is used to further scare people. (Republicans like to scare people - remember how Iraq was going to spread smallpox?) She earns her Exxon check, writing that we need to "Drill, baby, drill" for energy independence to solve this. She writes nothing about conservation, alternative energy sources like wind or solar, or about smart grids, or developing a 21st century economy -- Exxon wouldn't like that.

Palin's ghostwriter confuses several issues at the same time. This is brilliant agitprop but terrible, terrible policy.

Paul Krugman, America's other master economist, writes in the NY Times today that the problem is China, not Obama. China "pegs" their currency to the dollar so when the dollar drops the Yuan drops along with it. This keeps goods made in China at a nice, low price relative to everyone else, reducing any advantage we might gain from market forces. Krugman writes,

If supply and demand had been allowed to prevail, the value of China’s currency would have risen sharply. But Chinese authorities didn’t let it rise. They kept it down by selling vast quantities of the currency, acquiring in return an enormous hoard of foreign assets, mostly in dollars, currently worth about $2.1 trillion.
Many economists, myself included, believe that China’s asset-buying spree helped inflate the housing bubble, setting the stage for the global financial crisis. But China’s insistence on keeping the yuan/dollar rate fixed, even when the dollar declines, may be doing even more harm now.

Krugman says it is no time to be timid. We have to confront China on this manipulation.

The thing is, right now this caution makes little sense. Suppose the Chinese were to do what Wall Street and Washington seem to fear and start selling some of their dollar hoard. Under current conditions, this would actually help the U.S. economy by making our exports more competitive.

A a Bloomberg today story demonstrates why we need to bring the dollar down relative to the Yuan,

“The stable yuan helped us increase sales by about 20 percent this year,” Cody Hu, a sales manager at the Yongkang- based company, said at the China Sourcing Fair in Hong Kong.

. . . “Competitors in China are doing good,” said Suresh Sranavasan, a distribution manager at the company. “They have pricing advantages from the government’s stable yuan policy.”
I'm with Paul, not Palin. A lower dollar means JOBS.

---

Take a look at the agenda for the Building the New Economy conference, Thursday, October 29, 2009 -- 9:30 a.m.-3:30 p.m. at the Washington Court Hotel in Washington, D.C.
This conference sounds the call for the new economy we must build out of the ruins of the old. It focuses on the need for a new agenda to revive manufacturing in America. It's free. But you have to RSVP.

Posted by Dave Johnson at 9:09 AM | Comments (0) | Link Cosmos

October 21, 2009

Caught In A Machine That Grinds Us Up

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

This is Part II of Companies As Buy-And-Sell Commodities. See Part I, Companies As Buy-And-Sell Commodities - Workers, Customers and Country As Costs.

In Part I I wrote about a pattern we see over and over again: buying up good companies, shedding and outsourcing the workers, cutting their pay and benefits, outsourcing and cheapening the product or service, fleecing and mistreating the customers, closing the offices and factories and running up debt. If you want to make a few hundred million, here is the game:

Find a good company that still respects its workers, paying decent wages and benefits, still respects its customers and produces a quality product or service, still respects and has ties to its community and keeps a plant open, maybe sponsors a little league team, etc. These are all "costs" to cut.

Use other people's money: Work with an investment bank to finance the buyout, with the company itself as collateral, and pay the banking fees from the financing.

Cut. Cut costs, including the quality of the product or service and customer support operations. Externalize environmental costs onto the community. Wait for the union contract to expire and offer wage cuts and elimination of benefits and refuse to negotiate (where are they going to get other jobs?), fire union organizers, threaten to close the operations and move them overseas, and don't worry about labor laws - they aren't enforced anymore.

After breaking the union and cutting costs, close the plant. outsource production to China.

Now the books look better because of reduced costs, so take on new financing and pocket it.

Further stoke up the books for a couple of quarters using gimmicks like pushing product into distribution channels to make sales look better than they are, find another buyer and pass what’s left to them to repeat the cycle – there are always more costs to cut.

Pocket your millions, then go back to step 1 and repeat the process with another company.

This is the buyout game and it is part of the story of what has happened to our economy, our jobs, our communities and our country. It has become a machine, with profits fueled by tax and social incentives. These incentives create a formula that follows the steps described above, with an inevitability to the consequences. Because it CAN be done, of course it IS done. It is a great game for short-term profits for a few. It is justified as "finding efficiencies" and the ideology behind it insists that the profits prove the market demands the behavior.

Machines do not have human concerns, they just do what they are designed to do. Their engines burn the fuel that powers them, their gears turn. As an example of what I mean take a look at what happens when this machine encounters companies that provide assisted living for the elderly A year ago I was helping the SEIU get the word out about the private equity game and especially the firm Lazard, which had been purchasing assisted living, retirement and nursing homes and putting them through the machine. I wrote then, in When Seniors Are the Product. Look at how they were treating our most vulnerable people,

OK, we have the perfect combination here. We have elderly, frail, sick, vulnerable, and they have some money. They are a captive audience, too, because people in this situation are not people who can pack up and move somewhere else. Senior care is a big business. You're talking about chains with hundreds of facilities each with dozens or even hundreds of living units you're talking REAL money. So in today's economy you're talking about a perfect target for exploitation.

[. . .] Atria was set up by Lazard LLC., a "financial advisory and asset management firm." Lazard is a private equity, or "buyout" firm. Yep, one of those big Wall Street outfits that you are reading more and more about. Lazard is supposedly based in Bermuda even though it lists [pdf] its "principal offices" as New York, London, Paris and Milan. (Its website doesn’t even list Bermuda on its "global presence" map. Wink, wink, nod, nod.) On their website they say that a core value is Citizenship,

[. . .] Here is what is going on: Atria has been reducing services, raising rates, cutting wages, and generally treating the residents and employees like money trees that exist to be squeezed.

In Extreme Wealth Just Isn't Enough, I looked at what could be motivating the people who do this,

Already extremely wealthy, it just isn't enough. It's never enough and it seems the more you get the more you need. You need it bad enough to squeeze more and more money out of old people too frail to even shower without help. You need to so bad that you keep the wages of people as low as you can and you do everything in your power to keep them from forming a union. You need that money. You need that money. You need that money. And you do what you have to do to get even more.

In Living and Working at Atria, I described how the machine turns people into nothing more than economic units

We are people, not economic units, and there is a difference. This may be a difficult concept to grasp after three or four decades of constant corporate-funded "free market" propaganda. But people make decisions for higher reasons than just making or saving a buck or two. Most people, anyway.
[. . .] The caregivers at Atria, at every level, deserve to be treated with respect and compensated fairly for their work.
But they're not. Of course.

Of course, this is all exactly what Atria and Lazard and Bruce Wasserstein are counting on. This is what the people and pension funds and others who park their money at Lazard are counting on. To them the seniors and the workers are just economic units, revenue streams and costs to cut, to be replaced if they don't perform efficiently.

And in Gouging Vulnerable Seniors -- What Can Be Done? I looked at the effect over time as this machine grinds on,

Many people and organizations recognize that such a system is not sustainable, harms the people who work for the companies, the communities around them, the customers and the economies in which they operate. Sure, a few executives make out like bandits for a while, but over time it doesn't do the rest of us any good, not even their companies. (Lazard and the Lazard fund that owns Atria, for example, have not been performing all that well. Meanwhile Wasserstein personally took home $42 million last year - even as Lazard stock lost 14%.)

More recently we saw the same pattern play out with the company Stella D’oro. The company went through the same buy-and-sell pattern. Stella D’oro was bought by Nabisco in 1992. Then Nabisco became part of Kraft in 2000. In 2006 Kraft sold the company to Brynwood Partners - a private-equity company. Brynwood bought the company with a plan to break the union and then drastically cut wages and slash benefits to lower costs and then resell. (Just like "flipping" a house.)

From last year, No Sweets When Striking the Cookie Factory,

The workers ... say there has been no effort to negotiate in good faith. They accuse Brynwood of having a plan to force them out of their jobs, noting that replacement workers were lined up before they even went on strike.
. . . “The financiers and speculators have brought the American economy to its knees,” they wrote. “The financiers at Brynwood Partners are trying to bring 135 workers to their knees, hiring scabs to do their work. The Stella D’Oro workers are taking a stand against the wrecking of our economy.”

But the union sued the company for unfair labor practices and won, so Brynwood “pulled a Wal-Mart,” closed the plant in retaliation, laid off the workers, and sold the remains to yet another company,

While Stella D'oro isn't in bankruptcy, its owner, Greenwich, Conn., private equity firm Brynwood Partners, in September announced that it would be shutting the company's doors and putting the company up for sale. Brynwood reportedly decided to sell the Bronx, N.Y.-based cookie company after a National Labor Relations Board judge had ruled in July that it had negotiated employee wages and benefits with the union that represents them in bad faith. That ruling apparently prompted the PE firm to make the sale, which has left 138 employees out of work.
Company, jobs, factory gone, surrounding community devastated. As the pattern repeats itself, the rest of us worry that it could happen to us, that our own employer could be next. What many of us take from this is not to fight this, but to keep our heads down. We learn that we are a cost. We can be replaced. Don't ask for raises. Don't even think about joining a union. Keep your head down or they’ll single YOU out and cut your pay or “eliminate your position.” Across the economy the pressure builds, hours and workloads are increased while wages and benefits decline. Workers burn out and families are destroyed by the psychological fallout.

I have described here a destructive, unsustainable system that creates company- and society-breaking machines. These exist because of the economic and social incentives that our government has set up and we allow to stay in place. Breaking unions, stealing pensions, outsourcing jobs and squeezing customers all depend on government not enforcing laws and regulations – especially labor, consumer and environmental rules. (The last administration’s Labor Dept actually gave advice on how to break unions.) As long as we let the economic incentives call us "costs" and getting rid of us "efficiency" this will continue.

Certainly there is no incentive at the top to stop this. This system helps a wealthy few get ever wealthier and do not feel the consequences. The people who do this are celebrated as "successful." And if they don’t like the resulting devastation to the economy, community, country and world they can just hop into their private jet or yacht to retire to their private island or tax haven.

Of course, in the last year we have seen that this was not a sustainable system. The economy collapsed because everyone in the system – the workers, consumers, companies, banks, Wall Street – all hit the limits of how much debt you could pile on our backs. But we haven’t started to make any changes in the design of the system, or in the machines that unsustainably grind up our companies, workers, customers and country. And we haven't changed the ideology and rationalizations used to justify destroying lives and companies and our long-term prospects for short-term profits for a few.

But imagine if instead we put in place economic and social incentives that set up a sustainable system with company-making machines that direct all of this capital and energy toward building good companies that serve all of our interests. Call them "green machines." What if we set things up so people could get rich doing this instead? Then people would create green machines that would grind through the economy, finding companies and transforming them into businesses that serve their customers and communities, creating rewarding and fulfilling jobs in stimulating and enjoyable work environments, and building a better future for all of us.

On that note: Take a look at the agenda for the Building the New Economy conference, Thursday, October 29, 2009 — 9:30 a.m.-3:30 p.m. at the Washington Court Hotel in Washington, D.C.
This conference sounds the call for the new economy we must build out of the ruins of the old. It focuses on the need for a new agenda to revive manufacturing in America. It's free. But you have to RSVP.

Posted by Dave Johnson at 2:07 PM | Comments (0) | Link Cosmos

Dollar Weak? Not Against Yuan!

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Conservatives are blasting President Obama, saying he is causing a "weak" dollar. The Drudge Report has a headline or a story pretty much every day blasting this message out. Republican e-mails warn that the dollar is "collapsing" under Obama. Blogs and talk show hosts declare that civilization will cease, urging listeners to buy as much gold as they can.

But conservatives should know that the dollar is steady where it counts - against the Chinese Yuan. Yesterday, October 20, the exchange rate was 6.82653. On May 6 it reached a low of 6.82157 and on June 17 a high of 6.83743.

Conservatives react intensely to words like "strong" and "weak" without understanding the meaning. Here is what it means: Things made in America cost less when the dollar is lower, or "weak." A lower dollar creates an incentive for others to purchase things made in America, which means factories are busy, new factories can open, and jobs are created.

But while the dollar drops against every other currency the Chinese Yuan remains the same, and Chinese goods don't get more expensive - at least here. So our factories are not busier, the import/export imbalance stays the same and American jobs are not created.

One might ask, "How is this possible in a free market?" Indeed.

-----

Take a look at the agenda for the Building the New Economy conference, Thursday, October 29, 2009 — 9:30 a.m.-3:30 p.m. at the Washington Court Hotel in Washington, D.C.
This conference sounds the call for the new economy we must build out of the ruins of the old. It focuses on the need for a new agenda to revive manufacturing in America.
-- Oh, it's free. But you have to RSVP.

Posted by Dave Johnson at 10:04 AM | Comments (0) | Link Cosmos

October 16, 2009

Companies As Buy-And-Sell Commodities - Workers, Customers and Country As Costs

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

As we consider what we need to do to get our economy working again it is useful to look back at the things that went wrong.

The way people used to think about why you start a business was to make a product or provide a service. The business provides something that people need and if you do a good job and serve your customers well over time they will reward you for it. The better you do at that, the better you do for yourself. Right?

It's a pretty basic business model: a business does what it is in business to do, and people like it or don't, and the people who run the business do well or not accordingly.

For example, you would think that a mattress company was in the business of making mattresses, and a bakery was in the business of baking. You would think that an assisted living facility or nursing home company was in the business of caring for the people who came to them for care.

Maybe not – at least not for the owners and even managers of many of these companies. It turns out they’re not in those businesses. Sometimes, they’re not even there. Either way, they certainly don't care about mattresses or nursing homes or baking cookies. This is because of the rise of Wall Street dominance of American business. For the Wall Street crowd business models are something else entirely, and making something and serving customers is just not in the picture. In fact those things are in they way -- between the Wall Streeter banksters and their bonuses.

I’m talking about the private equity business, where the model is not unlike house-flipping during the insane housing boom. The model for them is get in, cut everything, grab all the cash you can and get out, never mind what it does to the companies, the customers, the employees or the country – that’s the new business model.

I wrote the other day about the Wall Street way of doing business:

Short-term gains for a few. Long-term harm to the rest of us.
… Our country let this happen because a wealthy few benefited in the short term from policies that harmed the rest of us over the long term. The wealthy few used some of the $$ gained to buy off lobby and contribute to campaigns of politicians who let them get away with it.

. . . The short-term benefits-to-a-few that were exchanged for long-term harm to the rest of us are now harming the rest of us here in the long term. We owe the rest of the world huge amounts of money. The economy has fallen apart because so many of us can't afford anything - like paying back the debts we had to take on to get by. Now the government can't do anything important because We, the People don't have the funds.

This is another story of a wealthy few selling off the country’s people and future, treating companies and people as commodities to be bought and sold for a quick short-term profit, with long-term harm done to the rest of us. The private equity company-buyout game works like this: buy a company, borrow against the company name and assets and put the proceeds straight into your pocket, sell off assets, outsource jobs, lay people off, cut pay and benefits for the rest, close facilities and factories, externalize costs onto the community, cheapen whatever the company makes or does, run up the debt some more, squeeze money out and pocket it and then sell. Hopefully you make off with the pension fund in the process.

Take a look at a recent NY Times story by Julie Creswell, about the destruction of Simmons Bedding, the mattress company, Profits for Buyout Firms as Company Debt Soared

Simmons says it will soon file for bankruptcy protection, as part of an agreement by its current owners to sell the company — the seventh time it has been sold in a little more than two decades — all after being owned for short periods by a parade of different investment groups, known as private equity firms, which try to buy undervalued companies, mostly with borrowed money.

Bought and sold by a parade of investment groups,

For many of the company’s investors, the sale will be a disaster. Its bondholders alone stand to lose more than $575 million. The company’s downfall has also devastated employees like Noble Rogers, who worked for 22 years at Simmons, most of that time at a factory outside Atlanta. He is one of 1,000 employees — more than one-quarter of the work force — laid off last year.

People wiped out,

But Thomas H. Lee Partners of Boston has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined.
. . . Wall Street investment banks also cashed in. They collected millions for helping to arrange the takeovers and for selling the bonds that made those deals possible. All told, the various private equity owners have made around $750 million in profits from Simmons over the years.

While a few made out like bandits.

They didn’t care about the employees. They didn’t care about the company. They didn’t care about the customer. They didn’t care about the country.

There were not in the business of making mattresses. And now America loses another company that made something.

Simmons is one of hundreds of companies swept up by private equity firms in the early part of this decade, during the greatest burst of corporate takeovers the world has ever seen.

Please read the entire story if you can. It’s the story of America since Reagan. The company was systematically plundered, slashing “costs” (aka the company’s future), cutting jobs and stealing pensions. (Bonus, read about how the CEO, while making $40 million, rarely showed up at headquarters, running the company from his yacht, with the company even paying the captain’s $92,000 salary. )

He didn't even bother to come in to company headquarters!

The chain of Simmons owners starts with William E. Simon, one of the architects of the modern conservative movement, buying the company, looting it. Then,

“A succession of private equity buyers came and went. Merrill Lynch Capital Partners bought Simmons in 1991 for … Merrill sold it to Investcorp, an investment group based in Bahrain, ... Two years later, Investcorp sold the company to Fenway ...

Then Thomas H. Lee Partners, known for Snapple, Rush Limbaugh’s early big advertiser, bought the company, and engaged in some financial magic. They:

“… created a holding company that it used to issue $300 million more in debt, which paid an additional $238 million dividend to the private equity firm. With that, THL had recouped its entire $327 million equity investment in Simmons.”

Yes, they borrowed against the company, paid themselves back what they paid for the company, sticking the lenders with the tab. And, of course, like the Wall Street bonuses from taxpayer bailous they get to keep that money, because … well just because.

THL was hardly alone in undertaking this sort of financial engineering, known as a dividend recapitalization. From 2003 to 2007, 188 companies controlled by private equity firms issued more than $75 billion in debt that was used to pay dividends to the buyout firms.

That was the story of one company destroyed by this private equity/hedge fund/ Wall Street game. Here is another, from May (also by Julie Creswell): Oh, No! What Happened to Archway?

Longstanding cookie makers with an extremely loyal fan base, Archway and its sister company, Mother’s, had their share of troubles in recent years as the once-family-controlled business that owned both brands was passed along from buyer to buyer — first to an Italian company, Parmalat, in 2000, and then, after an accounting scandal at Parmalat, to Catterton Partners in 2005.

The company was passed from buyer to buyer …

[. . .] “Those guys were stepping over quarters to pick up pennies,” he said. “They cut here and cut there and some of the things they needed to do. But, in my opinion, they threw away a lot of profits by a lot of bad decisions.”
After Catterton took over, Archway began ratcheting back spending on in-store promotions, which distributors contended made their cookies less competitive in stores. Catterton also abruptly shut a bakery and distribution plant in Oakland, Calif., which had made Mother’s Cookies for several decades. Operations were shifted elsewhere.

The product cheapened …

Besides putting 230 of the Oakland plant’s employees out of work, the closure had another negative effect. It lengthened the time between when the cookies were baked and when they hit store shelves around the country.
Some also believe that Archway altered its recipes or ingredients. Mr. Gallagher, the distributor, said that as time went on, he ended up having to eat a lot of cookies that he couldn’t sell. “I noticed, over time, they were getting worse and worse.”

Mr. Zinzer is more blunt: “Our cookies turned to crap. They were nowhere near as good as they used to be.”

A former employee inside the headquarters, who declined to be identified because of continuing litigation, said that as the company’s troubles worsened, the company began using less expensive ingredients in its cookies.

Customers treated like ATM machines,

When Mr. Pfeifer called Archway, however, to get a credit for the opened cookies, rather than simply filling out a form as he had done in the past, he said he was told he had to cut the individual seals on all of the wrappers on the pallet.
“Clearly that was meant to deter me from asking for credit. I said, ‘Forget it,’ ” Mr. Pfeifer said. “I took it all to the dump.”

Inevitably the story ends with this in the news last week: Mother's Cookies abruptly shut down

Mother's Cookies, an Oakland institution for 92 years, has been shuttered, its owner seeking bankruptcy protection for the company.
The ending was abrupt: Workers for the company, which shifted its baking and distribution operations to plants in Ohio and Canada in 2006, told workers Friday that operations would cease and cookies would no longer be made as of Monday.

. . . The owners did not comply with the federal law that requires a 60-day notification of any layoffs

Another plant shut down. More people laid off. Some very rich people pocketed a lot of money...

Next: Part II: Assisted living and nursing homes that aren't really in the assist or nurse business, and Stella D-Oro.

Notes -

SEIU's Behind the Buyouts site.

Flipped. How Private Equity Dealmakers Can Win While Their Companies Lose -- NYT Videos on the private equity game.

Also -

Take a look at the agenda for the Building the New Economy conference, Thursday, October 29, 2009 — 9:30 a.m.-3:30 p.m. at the Washington Court Hotel in Washington, D.C.
This conference sounds the call for the new economy we must build out of the ruins of the old. It focuses on the need for a new agenda to revive manufacturing in America.
-- Oh, it's free. But you have to RSVP.

Posted by Dave Johnson at 7:49 AM | Comments (0) | Link Cosmos

October 11, 2009

Manufacturing And Outsourcing -- What Were We Thinking?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

I'm reading a a review of"Capitalism: A Love Story" at naked capitalism, and came across this,

"I grew up in small towns dominated by manufacturing plants, and I remember that they were prosperous, optimistic, and stable. People who had good jobs at the local mill were not the top of the social order; that was reserved for businessmen and successful professionals, like doctors and lawyers. But they could afford decent homes, creature comforts, vacations, and send their kids to college (not the fanciest, often a state school unless they got a scholarship, but their children could nevertheless hope to do better than their parents). But that had started fading by the 1970s as America’s economic dominance started to slip. Moore clearly is pained at the loss of the America that was (while pointing out it depended on the special circumstances of our post World War II political and manufacturing dominance) and our naivete in trusting in an economic model that has been been turned against the common man."

Remind me, why did we think it was a good idea to stop manufacturing things in America? Why did we outsource the jobs? Why doesn't our government have an industrial policy -- a plan to keep us economically strong?

Looking back at the past few decades I'm not really clear on this. I feel like we are waking up from that scene in Moore's movie where the hypnotists are mesmerizing their victims, looking around at the economic devastation that is the aftermath of decades of conservative economic rule and wondering, What were we thinking?

Posted by Dave Johnson at 10:19 AM | Comments (0) | Link Cosmos

October 9, 2009

Here We Go Again - American Glass Industry Losing Jobs And Factories To Chinese Subsidies

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Short-term gains for a few. Long-term harm to the rest of us.

Again and again we have seen American industries exported, the plants closed, the jobs lost, and government officials just letting it happen. The workers in the other countries are almost always paid less than workers here, sometimes dramatically less, which means they can't afford to buy things made in America. They often suffer from dangerous working conditions and the factories they work in often spread pollution that that harms people there and even affects us here.

Our country let this happen because a wealthy few benefited in the short term from policies that harmed the rest of us over the long term. The wealthy few used some of the $$ gained to ~~buy off~~ lobby and contribute to campaigns of politicians who let them get away with it. Often the very politicians and their staffs were soon ~~bribed~~ hired by these wealthy few, for very high amounts. (Look at the sources of money raised by the Bush presidential campaigns, and the places where administration trade officials are employed since Bush left office for examples of what I am talking about.)

The result of these trade policies has been a huge and ever-increasing balance-of-trade deficit, year after year, which means America has to borrow more and more money to buy things we used to make here, or to buy things that we could have traded for if we still made things here. Yes, a wealthy few benefited greatly, many becoming billionaires many times over. Vast amounts of wealth have concentrated at the top in recent years. Short-term gains for a few. Many of the rest of us suffered dramatic pay cuts or lost jobs, lost houses, lost our health insurance, lost our pensions, etc. Long-term harms for the rest of us.

The short-term benefits-to-a-few that were exchanged for long-term harm to the rest of us are now harming the rest of us here in the long term. We owe the rest of the world huge amounts of money. The economy has fallen apart because so many of us can't afford anything - like paying back the debts we had to take on to get by. Now the government can't do anything important because We, the People don't have the funds.

So here is just the latest outrage. The Economic Policy Institute released a report yesterday, Through China’s looking glass—Subsidies to the Chinese glass industry from 2004-08,

Data and calculations in this report reveal that China’s glass industry received total subsidies approximating at least $30.3 billion from 2004 to 2008.

The accompanying press release tells us about the effect of this on American jobs,

The rapid growth of the Chinese glass industry, despite ongoing product quality issues, has already been felt keenly in the U.S. industry, which has contracted by about 30 percent (nearly 40,000 jobs) since 2001. States such as Arkansas, California, Florida, Illinois, Indiana, Massachusetts, Michigan, North Carolina, New Jersey, New York, Ohio, Pennsylvania, South Carolina, Virginia, and West Virginia have lost at least one out of four – or many more – of their glass industry jobs since 2001.

President Obama made the right decision when he enforced the trade laws in the case of Chinese tires by imposing a tariff on imports. In this case he can let China know that America is determined to keep our factories and jobs and will trade on a fair, even-handed basis from now on.

It is time to get angry about these policies that benefit a few in the short term but harm the rest of us in the long term. We need to reform our trade and manufacturing policies. We need to insist on two-way trade and a strong American manufacturing base.

Posted by Dave Johnson at 7:00 PM | Comments (0) | Link Cosmos

September 30, 2009

A New Economy from Old Roots?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

How do we build a new economy out of the collapse of the old economy? How do we start fresh to begin creating jobs again, while building in economic and environmental sustainability, as well as workplaces that respect human needs and rights? How do we change things so that we all get to share the benefits of the economy rather than just contributing to the increasing wealth of a few vastly wealthy people?

While we look for a vision for a new economy, we should examine what has worked in the past. America had periods in which regular people enjoyed sustained increases in their standard of living. For a long time it was a conventional wisdom that each American generation would do better than the previous generation, more people would receive good educations, medical care would get better, the middle class would grow, leisure time would increase, poverty rates would decrease, retirement would be easier, etc.

But this pattern stopped. Beginning in the late 1970s and especially in the 1980s incomes began to stagnate, wealth increasingly concentrated at the top, working hours and workplace pressures steadily increased, availability of good health care started to decrease, etc. The standard of living of most Americans began to and continues to decline. At the same time corporations became more predatory as consumer protections vanished. Meanwhile outsourcing, deunionization and other anti-worker policies led to increasingly unpleasant, stressful and unrewarding worklives for more and more people.

Many of today's problems are traceable directly to the policy results of anti-government propaganda that was blasted out from well-funded conservative think tanks starting in the 1970s. The anti-government campaign led to defunding of many national, state and local government programs that improved education, helped the poor or enriched people's lives. We suffered deregulation in many areas where the government had protected consumers, workers, investors and the environment. Huge reductions in taxes for the wealthy were either offset by tax increases for the rest of us or government borrowing. And that borrowing has led to increasing problems of paying the interest and threats to funding even basic programs like Social Security and education.

So what worked, before the conservatives trashed the place?

Regulation

One thing we know for sure now, learned the hardest way thanks to the financial crisis: regulation worked. Regulation was necessary, it worked, it kept firms from taking risks that could bring down the economy. And we can also see now how regulations protected consumers from predatory corporate activities, workers from wage theft or unsafe working conditions, and the environment from exploitation and destruction.

Taxes

Before Reagan the tax rates at the top were very high. After you reached - and took home - a certain very high income you paid a high percentage of the rest in taxes. This had many beneficial results – even for the people who paid higher taxes. Government could afford to keep the physical, education and legal infrastructure in good condition without borrowing. Government could afford to invest in programs that improved our standard of living, health, knowledge and technology, which helped businesses grow. Businesses thrived in such well-watered soil.

The high tax rates also kept the bad side of human nature in check. When it took years to build up a fortune businesspeople had to rely on the health of the greater community to nurture their own wealth-building enterprises and keep them thriving over a long period. They had to think and act long-term. The roads needed to be kept in repair, the schools needed to provide excellent education to potential employees, the courts needed to be functional to enforce contracts, and they wanted the communities they were going to have to stay in to be pleasant places to live.

But once taxes were lowered vast windfalls could be realized from a single event and it made more sense to try to fleece the community with quick-buck schemes than to rely on it. We began to see corporate raiders break up solid, ongoing companies, steal pension funds, etc., while encouraging communities to cut spending on schools, roads, etc. It became more profitable sell off or outsource our manufacturing capacity. And then, as things fell apart, the few who benefited could just fly away in their private jets or sail away in their huge yachts. The greater community was no longer any use to them except as crops to be harvested. Vulnerable consumers are the only crop that is coming up in this economy.

Big Government

Government is We, the People making the decisions. "Big government" is simply another way of saying that more of the important decisions are made by the people. Shrinking government means handing the decisions over to big corporations. In the real world this is the choice. And in the real world big corporations make decisions that benefit them, and only them. Before you badmouth government think carefully about what the alternative is.

Old-Fashioned Government Planning

As I said in a post a few months ago,

The phrase “industrial policy” sounds so Walter Mondale, 1970s, smokestacks and brick factory old-fashioned. I suspect the subject turns people off, eyes glaze over, hands reach under the table for iPhones and Blackberries…

But here we are without an industrial policy. How’s that working out for us? Every other country has one. China seriously has one. We instead have huge trade deficits. We don't make things here so we have to borrow money to buy things made elsewhere.

To add insult to injury, recently Deutsche Bank released a research note advising investors that the U.S. was not a good investment because of our lack of a government industrial policy. See Deutsche Bank: Absence of US Clean Energy Policy Will Send Global Capital Elsewhere.

While we envision a new direction for our economy, maybe we should also be looking at returning to a few old-fashioned ways of doing things, too.

Posted by Dave Johnson at 4:09 PM | Comments (0) | Link Cosmos

September 23, 2009

Enforcing Trade Rules Shocks "The Village"

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

The New York Times business section has this today, With a Receptive White House, Labor Begins to Line Up Battles. Oddly this "news" story incorrectly casts enforcement of trade agreements as opposing "free trade." From the story,

While labor’s opposition to free trade is nothing new, having an ear in the White House is. The Obama administration, though it says it supports free trade, has so far seemed more aligned with labor’s trade agenda than has any administration in decades.
What has alarmed America’s trading partners is the steelworkers’ victory when the president imposed a 35 percent tariff on Chinese tires under special trade rules that allow punitive measures without a finding of illegal trade practices.

... The president’s move has stirred worries that other unions and industries will rush to seek similar relief.
Here's the thing. This is not about opposition to free trade. This is about enforcement of existing agreements. This is nothing more than a request to the proper enforcement authorities to investigate if agreements are being violated, and to take the agreed-upon steps to remedy that if they are. But in recent years it because the expectation that the White House made decisions that were not based on rule of law, but rather on ... something else. From the article,

In four safeguard cases, President George W. Bush declined to impose penalties even though the United States International Trade Commission, a bipartisan panel, had found that Chinese imports hurt particular industries.
THAT should have been the shocking news, not the current news that agreements are going to have to be lived up to! A President of the United States sided with other countries, against American companies and workers, even after the trade enforcement bodies found clear violations of the agreements!

It seems that after eight years of general lawlessness we're at a point where it is expected that those with power can do anything they want regardless of agreements or laws. So now "the Village" (blogger term for comfortable "inside-the-beltway" Washington DC insiders) is shocked and offended when the rabble -- the rest of us -- actually wants the authorities to enforce the rules instead of deferring to power -- even when, as in this case, that power is being used against America. For example, when Attorney General Holder was looking into investigating whether laws against torture were broken, "the Village' was all atwitter and scandalized over the audacity of President Obama letting such a thing happen -- as if it was in any way appropriate for a President to make a political decision to keep the Justice Department from an investigation.

Under the previous administration it was expected that such decisions would be decided politically, based on who was donating the most to The Party or its supporting infrastructure of think tanks, etc., on any given day. Now we are seeing a return to rule of law. It's the same thing with this request to see if trade agreements are being honored.

The Village owes the concept of rule of law an apology.

Posted by Dave Johnson at 11:02 AM | Comments (0) | Link Cosmos

September 22, 2009

I Will be Blogging From The Pittsburgh G20 JOBS Summit

I am flying to Pittsburgh tomorrow and will be blogging Thursday and Friday from the G20 summit, at the Blog for OurFuture as part of the Campaign for America's Future's Making It In America project.

The G20 is a meeting of the Group of Twenty (G-20) Finance Ministers and Central Bank Governors of "systemically important industrialized and developing economies to discuss key issues in the global economy."

From their website,

The G-20 is made up of the finance ministers and central bank governors of 19 countries: Argentina,Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States of America [See, since Bush we are last on every list! - DJ]
The European Union, who is represented by the rotating Council presidency and the European Central Bank, is the 20th member of the G-20. To ensure global economic fora and institutions work together, the Managing Director of the International Monetary Fund (IMF) and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate in G-20 meetings on an ex-officio basis. The G-20 thus brings together important industrial and emerging-market countries from all regions of the world. Together, member countries represent around 90 per cent of global gross national product, 80 per cent of world trade (including EU intra-trade) as well as two-thirds of the world's population. The G-20's economic weight and broad membership gives it a high degree of legitimacy and influence over the management of the global economy and financial system.

We should call it the JOBS summit because that is what this is really about. How will the world restructure the economic system after the financial crisis? How can we change things to regular people share the wealth? Of course Wall Street wants everything kept just the way it is. But the rest of the world is demanding that we make changes.

Then there will be a lot of talk about "protectionism," because President Obama actually enforced a trade agreement! Here's the thing, agreements are not agreements unless they are enforced. By enforcing this agreement with China, it means we might start having fair, honest, balanced trade again.

Anyway, I look forward to this trip and to writing about the G20 Summit. Check in at Blog for OurFuture over the next few days. I think we're going to solve the world's problems -- don't miss out!

Posted by Dave Johnson at 3:21 PM | Comments (0) | Link Cosmos

September 18, 2009

Myths Of Protectionism Are Spread To Exploit Workers and the Environment

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

“Protectionism” is a very powerful word. In fact, simply evoking the word is capable of ending debate on any subject related to trade. Invoking the magic words, “You can’t do that, it would be protectionist,” settles all arguments.

Why, exactly, is protectionism so bad? Why can't we have fair trade that lifts workers and protects the environment instead of unregulated free trade that exploits workers and the environment? Well, after spending time looking for evidence to support the "protection is bad" arguments what I find boils down to, basically: "Because it is. Shut up."

Here is how it works, in the current discussions of how to fix the problems that led to the financial crisis there are established discussion-enders. Often the 1930s depression is invoked. For example, if you want to bail out big financial corporations and executives (and their bonuses) you say it was a “credit crunch” that caused the depression so we have to prevent another credit crunch. Booga-booga, end of discussion (even though lending is still declining even a year after the huge bailouts...) If you want to maintain low-cost import pressures to force low wages you say "protectionism caused the depression." For other arguments, you can say it was unions that caused the depression, or perhaps government regulations, or perhaps taxes. You get the picture. Booga-booga, end of discussion.

By the same magical mystique, current trade and economic discussion rules prohibit ever, ever suggesting that the depression and hence the current economic problems (because of course they are exactly the same thing, just as Vietnam was exactly like World War II) happened because of:
• extreme concentration of wealth at the top,
• monopolistic and predatory corporate practices,
• wages and compensation that are too low for regular people to participate in the economy,
• insufficient taxation of the wealthy,
• exporting manufacturing capacity,
• overconsumption,
• unsustainable practices,
• encouraging people and businesses to borrow too much,
• coziness between government and wealthy special interests,
• insufficient regulation of corporations,
• or any argument that might result in people thinking that regular people should participate fairly in the economy or have a degree of control over the government and corporate practices.

So with these rules in mind I would like to address a few of the myths about protectionism that have grown into a “conventional wisdom” that always serves the interests of the wealthiest few.

Myth: Protectionism caused the depression or made it worse. Thom Hartmann addresses this very well, so I’ll leave it to him. In 2004's, Democracy - Not "The Free Market" - Will Save America's Middle Class, Thom wrote,

When conservatives rail in the media of the dangers of "returning to Smoot Hawley, which created the Great Depression," all they do is reveal their ignorance of economics and history. The Smoot-Hawley tariff legislation, which increased taxes on some imported goods by a third to two-thirds to protect American industries, was signed into law on June 17, 1930, well into the Great Depression. In the following two years, international trade dropped from 6 percent of GNP to roughly 2 percent of GNP (between 1930 and 1932), but most of that was the result of the depression going worldwide, not Smoot-Hawley. The main result of Smoot-Hawley was that American businesses now had strong financial incentives to do business with other American companies, rather than bring in products made with cheaper foreign labor: Americans started trading with other Americans.
Smoot-Hawley "protectionist" legislation did not cause the Great Depression, and while it may have had a slight short-term negative effect on the economy ("1.4 percent at most" according to many historians) its long-term effect was to bring American jobs back to America. [emphasis added]

Myth: Protectionists are “against trade,” and the similar argument protectionism is about creating barriers or just keeping out foreign goods. This is a way to short-circuit the actual arguments that trade should be fair to both sides instead of just unregulated and exploitative. Fair traders want trade to be conducted in ways that are fair and respectful of working people on both sides of the transaction. They want people to be paid fairly and their working conditions to be safe and they want the environment to be protected. When trade is conducted this way everyone benefits in the long run.

Myth: Protectionism costs jobs. This scare-tactic is used by opponents of almost every policy that benefits working people. "Raising the minimum wage costs jobs." "Taxing corporations costs jobs." Etc. Fair trade policies would increase the number of jobs because the workers making the goods that we import would be paid enough to buy the things we make here.

Myth: Protectionism ties up manufacturing resources in outdated uses. This is a valid criticism of protectionist trade policies if those policies were enacted as the result of lobbying by interests seeking to protect themselves from competition that is based on innovation and increased efficiencies. This is a key point and I want to repeat it. Fair trade advocates oppose exploitation of workers or the environment. Fair traders do not oppose fair competition, and it is important that trade regulations reflect this.

There is no question, as I pointed out earlier this week in Myths of Protectionism: Stories You Are Likely to Hear in the Wake of the China Tire Trade Tariff Case that protectionism can be misused by wealthy interests to feather their own bed in ways that harm the rest of us such as by companies that protect their franchise from fair competition. I wrote,

As with all rules they can be manipulated by the currently-powerful. This was done to keep some prices unreasonably high, encourage monopolistic practices, reduce access to localized or regionalized specialties ... So after we built up a manufacturing base the time came to start selling to others. This necessitated back-scratch trade agreements: you scratch my back by lowering your tariffs, we’ll scratch yours by lowering ours. Etc. And each country's markets expand - as does the competition.

We always have to protect against wealthy and powerful interests seizing the government's decision-making processes to further their own interests. That is just human nature. It is not an argument against the idea of having government and law, it is the reason it is necessary for us to be eternally vigilant of powerful interests and have systems and procedures in place to protect the rest of us. As with anything trade can be beneficial or harmful depending on how it is managed.

Fair traders want trade managed in ways that lift people and the environment up, increasing our standard of living and protecting the environment. Yes, we want to protect our workers and our manufacturing capacity but this is the key to prosperity and economic power. Wealthy interests are using trade as a way to pressure us to force lower wages, loss of benefits and removal of restrictions on polluting the environment.

Posted by Dave Johnson at 11:52 AM | Comments (0) | Link Cosmos

September 14, 2009

Myths of Protectionism: Stories You Are Likely to Hear in the Wake of the China Tire Trade Tariff Case

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

President Obama has decided to enforce our trade laws and imposed a 3-year tariff on Chinese tires. I suspect the country is about to witness a corporate hissy fit that will surely rival any righteous teabagger’s demands to see the President’s birth certificate.

Here is what is going on: when the US endorsed China entering the World Trade Organization the agreement was that if any of our industries were significantly disrupted, we could call “time out” and give those industries 3 years to adjust. In case after case President Bush refused to enforce this agreement as China took over one industry after another. Since we then had to buy what we used to make, our balance of trade deteriorated and we now owe China vast sums.

In this case the U.S. International Trade Commission found that America’s tire industry was, to say the least, disrupted by a surge of imports of cheap tires. As with so many industries, cheap Chinese imports quickly dominated the market, American factories closed, American workers were laid off, American communities were devastated and instead of having to pay wages and maintain factories, American CEOs and Wall Street executives pocketed more and more short-term profits at the long-term expense of their own companies and our country's economy.

So this time President Obama is enforcing the agreement and applying tariffs. In fact he is applying a lower tariff than the 55% that was recommended, but the tariff of 35% is still substantial and may save jobs, preserve some manufacturing capacity, and hold the trade deficit down just a bit.

The corporate hissy fit is beginning right on schedule. The word being shouted loudest is “protectionism” and there are threats that this will lead to a trade war.

The headline at the Drudge Report screams: “CLASH OF THE TIRES LEADS TO TRADE WAR,” linking to a Financial Times story that doesn’t actually say anything about a “trade war.” In the story China’s minister of commerce Chen Deming says, “This is a grave act of trade protectionism,” and Eswar Prasad, professor of trade economics at Cornell University, calls the enforcement of the agreement “protectionist measures” while at the same time saying the tariffs are not “substantive restraints on trade.”

The Washington Post, rather than lead with the pro-American viewpoint, chose to lead with China's, “China blasts US tire duties as protectionist blow.” Many other corporate-dominated media outlets followed in a similar vein, arguing how this is a bad decision. Wall Street Journal, “A Protectionist Wave” and "Tariff on Tires to Cost Consumers". Others, like Business Week, just reported the news: “In China Tires Case, Obama Strikes Middle Ground.” (Forbes, to its credit, led with a neutral pun, “China and US: Tire-d of Fighting.”)

So what is “protectionism” and why is it supposed to be wrong for a government to protect a country’s manufacturing interests? Isn’t America borrowing so much money from other countries because we don’t manufacture enough goods here anymore to sell and thereby pay for the things we buy?

In the past a major portion of America’s tax revenue came from collecting tariffs on imported goods. This helped fund development of our competitive infrastructure while maintaining internal markets that encouraged development of industry to make goods here both for use in the country and for export. This led to manufacturing jobs. Every country that has built up a manufacturing base has done so by restricting competitive imports.

But there were problems with this “mercantalistic” approach. As with all rules they can be manipulated by the currently-powerful. This was done to keep some prices unreasonably high, encourage monopolistic practices, reduce access to localized or regionalized specialties and discourage others from importing our domestically-made goods. So after we built up a manufacturing base the time came to start selling to others. This necessitated back-scratch trade agreements: you scratch my back by lowering your tariffs, we’ll scratch yours by lowering ours. Etc. And each country's markets expand - as does the competition.

Unfair competition led to the idea of protecting our standard of living. Unfair labor costs, kept low by use of child or prison labor, exploitive wages in non-democratic countries, even use of forced labor or slaves undercuts our own companies’ ability to compete. Failing to provide worker safety protections, or allowing pollution also provide trade advantages to offshore competitors. So to protect ourselves we imposed tariffs that raised the store price on those goods to prevent them from undermining our own standard of living and safety and pollution standards. We protected our national interest.

The idea of these "protection" policies is to encourage these competitors to pay better wages, improve worker safety and/or stop polluting. This way their own economy and environment could improve and their workers would be able to buy the things that we make. Used this way, the policy of protectionism improves living standards for workers everywhere, while growing our economy and improving our standard of living in the process.

The idea of “free trade” theorizes that without “government” involvement these disadvantages will disappear and prices will eventually reflect supply and demand instead of tariffs and regulations. Of course, this ignores that government as constituted in democracies is a banding together of the citizens for mutual protection, empowerment and benefit. The result of "free trade' is a downward spiral of wages, benefits, worker protection and environmental standards as countries race to the bottom in competition.

Expansion of trade is beneficial to all parties if done fairly. Of course, “fairly” is a difficult state to attain when powerful interests compete for dominance in rule-making. In this case we have the competing interests of American workers and manufacturers pitted against Chinese manufacturers. There are also the powerful interests of distributors and retailers who make a percentage off a sale, whatever the source of the goods, and Wall Streeters who buy up companies and demand short-term profits, and profit from debt.

This is where the opposition comes from. Certain powerful interests are doing just fine without any of this goody-goody do-gooder stuff, thank you, and they want things kept that way. So they will fight against changed in the status quo, no matter how necessary or beneficial to the rest of us. We see this so clearly in the health care reform fight and soon we will be hearing some outrageous lie on the order of "death panels" and "government takeover" to try to scare people away from fighting for their own jobs, wages and benefits by asking for reasonable trade and manufacturing policies.

Their primary scare word in use today is "protectionism."

Part II will examine some of the specific myths surrounding the mystical and powerful word “protectionism.”

Posted by Dave Johnson at 3:16 PM | Comments (2) | Link Cosmos

September 9, 2009

"China Tire Case": Obama Trade Policy Decision Nears

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

President Obama faces a tough decision soon that will signal how his administration will tackle the problem of balancing our trade policies. This is the upcoming "Section 421 Tire Case" decision. Summary: American has been importing more and more tires from China while closing tire plants here. The surge in imports violates an agreement known as "Section 421" that we made with China when they entered the World Trade Organization. The US International Trade Commission has ruled that China is violating Section 421 and recommended tariffs on tire imports. Obama has until September 17 to choose to implement this remedy, ignore it or do something in between. (Click through to a post with a number of links to background information on this decisions.)

When these trade issues came up in the past President Bush always decided against American manufacturers, allowing China and others to capture one industry after another, forcing more and more American factories to close and building up the huge trade deficit that forces us to borrow ... from China. The resulting trade deficit meant that we had to borrow more and more money to buy things that we used to just make for ourselves.

And this meant fewer and fewer well-paying jobs for our citizens. This also meant that the American consumer, the “engine” of the world economy, finally ran out of shopping power. The economic collapse shows that trade policies that make the American people poorer just make everyone else poorer, too.

So this case is part of a bigger picture. The real issue goes beyond trade. The real issue is getting America's economy back in balance for the long term with real jobs that are not dependent on financial or housing or stock market bubbles. The issue is the larger economic paradigm, not the resulting slowdown. To get there America needs a real industrial policy that takes a national view of the importance of manufacturing and supports it through: investment, education, R&D, etc. as well as trade policy.

One trade ruling doesn't do that, but it will signal whether President Obama is ready to take on a tough fight and tackle this problem. The appointment of Ron Bloom as Senior Counselor for Manufacturing Policy is a solid beginning in the right direction. According to the White House Bloom will assist with “the President’s agenda to revitalize the manufacturing sector.” Just having an agenda to revitalize the manufacturing sector is an important and and promising step!

Of course, at the same time, this is a tough challenge. Obama's predecessor dug the country into a deep hole. Thanks to the "free trade" policies that got us where we are today, China is our banker and it is very difficult to go against your banker's wishes. However, our trade partners would do well to recognize that the American consumer is the engine of economic growth, and well-paying jobs are the engine of that consumption. Trade policies based on raising living standards on both sides of the border solves this problem.

Bob Borosage writes today, in Obama's Next Speech: Telling Our Banker We Want Out of Debt,

Next week, the president will address the convention of the labor federation, the AFLCIO ... That same week, he must decide what to do about the ruling of the International Trade Commission recommending that he slap tariffs of up to 55% on rubber tires being dumped in the U.S. market by the Chinese.

[. . .] We can't recover the old economy -- and shouldn't want to. … We were shipping jobs, not goods abroad, losing three million manufacturing jobs under Bush before the crash while the economy was growing. Not surprisingly, wages stagnated, family incomes lost ground, debts soared. And that was in the good times.

[. . .] [China] lends us the money to buy the goods that American companies make with jobs and technology they sent there. It does so because it pursues what has been a remarkably successful mercantilist policy designed to make it the dominant global center of manufacturing, a 21st century version of what the U.S. did in the late 1800s and early part of the 20th century.

. . . China has to be weaned of its export addiction, just as America has to revive its ability to make things in America. This is best done cooperatively, with a grand bargain revaluing the Chinese currency, while both nations join others in creating a more balanced global economy. But at the end of the day, it won't happen unless the U.S. is ready to stand up and act to protect its interests.

Some predict Obama will take the middle ground. From The Hill today,
“The deadline for his decision comes on the eve of the G-20 heads-of-state meeting in the Steel City on Sept. 24-25. G-20 leaders have pledged to avoid protectionism, and just last week Treasury Secretary Timothy Geithner joined other finance ministers in the group to reaffirm the U.S. commitment to fight all forms of protectionism.

[. . .] The best option for Obama might be to find middle ground. He can go along with the ITC’s recommendation, and he may also reject it completely. He can also impose tariffs somewhat smaller that those proposed by the commission, which might make both sides unhappy but allow the president to say he has found a middle ground.”

From U.S. Steel Pushes Obama to Choose Workers Over Trade,

“The one thing that is on the line here is the president’s credibility,” said Scott Paul, executive director of the Alliance for American Manufacturing, a coalition of steel companies such as Pittsburgh, Pennsylvania-based U.S. Steel and the steelworkers union. “If they want to pursue an activist trade agenda, they need to pursue an active enforcement agenda, and this is the first thing on their plate.”

On April 14, 2008, candidate Obama spoke to the United Steelworkers in Pittsburgh, a week before the contested Democratic primary in Pennsylvania.

“I have consistently supported in the Senate going after China,” Obama said then, after embracing union President Leo Gerard. “Here’s the thing that people don’t understand: China needs our market. Their economy is dependent on exports to the United States. We have bargaining power.”

Keep an eye on this. It is not just about tire imports, it will signal the direction that the Obama administration will take.

Posted by Dave Johnson at 10:18 AM | Comments (0) | Link Cosmos

September 8, 2009

Who Else is Against American Manufacturing?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

"A country’s economic power comes from manufacturing. But while other countries have industrial policies, America has a de-inustrialization policy. We have handed our country’s manufacturing capacity over to other countries, and as a result we have to borrow more and more to be able to buy the things that we used to make. How did this come to be? Who would be against American manufacturing?"

In Who Would Be Against American Manufacturing? I wrote about,

“representatives of foreign interests lobbying in the US for trade policies that benefit companies in other countries at the expense of America’s factories, workers, companies, communities and economic power. It is to be expected that a country will work to increase manufacturing within its borders – even if we don’t – and these firms helping the efforts of other countries are required to register with the Department of Justice as “foreign agents.” I traced an anonymous comment left at my own blog back to one of these ...”

Of course other countries have an interest in taking the business away from us to have for themselves.

In Part II, Who Opposes American Manufacturing? II I wrote about Cato Institute, a conservative “ideological” think tank that opposes manufacturing in America. But they receive funding from interests outside of America – the very interests who do the very kind of fighting for trade policies that the Cato Institute opposes for us.

"WHY would Cato Institute advocate this? Is it just weird libertarian cult ideology? Perhaps a look at who is paying for this advocacy will provide a clue. While mostly funded by individuals, Cato’s funders include many of the usual right-wing funding suspects: Koch, Scaife, tobacco companies, Exxon and other oil companies, Wall Street… But one sponsor jumped out at me: the Korea International Trade Association. (Honda, Mazda, Mitsubishi, Toyota and Volkswagon are sponsors as well.) Dots connected: Cato is receiving funding from the Korea International Trade Association, and then turning around and advocating that American hand over its manufacturing capacity to other countries!
So I checked, and did not find that Cato Institute registered as a “Registered Foreign Agent.” Why not?"

Beyond explicitly foreign interests and possible foreign-interest-funded lobbying, are there other reasons that Americans would advocate that we just hand over our manufacturing capacity and instead just borrow to get by? There are domestic interests that benefit from America giving up our manufacturing capacity because there are domestic interests that benefit when the rest of us borrow.

Part III – Americans Opposing American Manufacturing

Our beloved-and-bailed-out financial sector has done very well for itself in the decades since we embarked on the great “free market” and “free trade” experiment. Wall Street has greatly increased its share of our economy. While finance expanded the manufacturing sector shrank until just before the crash the financial sector had risen to 40% of all corporate profits.

Kevin Philips wrote in 2008’s post, The Destructive Rise of Big Finance,

Over the last five years, financial services has reached a swollen 20-21% of U.S. GDP -- the largest sector of the private economy.
Manufacturing led financial services by 2:1 back in the 1970s, but by 2006 beaten goods production had shrunk to just 12% of GDP.

As Wall Street doubled, manufacturing declined.

Profits incentivize corporate behavior and these giant Wall Street corporations profit from our ever-increasing levels of debt. They profit from the transactions that occur when companies move their operations out of the United States. They profit from convincing communities to privatize infrastructure. They profits when companies externalize costs onto the larger community. They profit from the transaction involved when the country borrows to fund our government and trade deficits.

Wall Street profits from debt. So they have an incentive to encourage debt. Who do you think it was that convinced Americans it is normal and even preferable to carry debt and to use credit cards? Marketing works, and the following is based on marketing we have all been exposed to:

Making minimum payments on credit card debt? $250 a month.

Making car payments for five or six years? $400 a month.

Being in debt for the rest of your life, forever making interest payments and being forced to work at corporate jobs? Priceless!

Phillips again,

During Greenspan's 1987-2005 tenure, the sum of public and private debt in the United States quadrupled from just over $10 trillion to $43 trillion. Finance became the industry that was not allowed to fail but was permitted to enlarge and metastasize its behavior almost at will.

In the movie Wall Street, based on actual events and people in the news at the time, the greedy corporate raider Gordon Gecko buys companies, chops them up, steals the workers’ pensions, destroys people’s lives and their communities, etc. and pockets the profits. Gecko claims that because he can profit from doing these things, “the market” wants it done, demands it in fact, and therefore he plays an important economic role of making things more “efficient.”

To Gordon Gecko and market fundamentalists the fact that they can profit from something is proof that it should be done. “The Market” is for them a God that takes responsibility and ethics and morality and humanity out of their hands. “The Market - God - says it must be this way and who are you to question?” (Convenient for them.)

Of course, a large part of why Gordon Gecko could pocket such a profit so fast was because un President Reagan the country had just changed the tax laws. Before Reagan there was a very high top tax rate that prevented people from amassing a vast fortune in a short time (usually at the expense of the rest of us). This tax policy encouraged long-term thinking and planning instead of short-term greed, and encouraged business to maintain interdependency with the larger community and its interests. If it takes ten or twenty years to amass a huge fortune you and your business rely on other businesses and on the community’s infrastructure to be maintained and modernized so it will support your business activities. And you want a thriving, educated community surrounding you

But in a quick-buck scenario you are incentivized to feed off of rather than rely on the greater community. If you can defer infrastructure maintenance and pocket the savings then that is what you will demand. If you can chop up the supply chain and pock the proceeds that is what you will demand. If you can profit from exploiting and abusing skilled workers who would otherwise be needed in coming years, that is what you will demand. and if the community around you deteriorates it doesn't matter because you'll be cashing in big soon, and flying away in your private jet to your tax-haven privatized island. It is no coincidence that pensions started being stolen, companies started outsourcing, communities started privatizing, etc. right after top tax rates and regulations were cut.

Wall Street has an interest in helping dismantle manufacturing in America. (pun intended)

Posted by Dave Johnson at 7:32 AM | Comments (0) | Link Cosmos

September 3, 2009

Who Opposes American Manufacturing? II

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

A country’s economic power comes from manufacturing. But while other countries have industrial policies, America has a de-industrialization policy. We have handed our country’s manufacturing capacity over to other countries, and as a result we have to borrow more and more to be able to buy the things that we used to make. How did this come to be? Who would be against American manufacturing?

The other day, in the first Who Would Be Against American Manufacturing? post I wrote about representatives of foreign interests lobbying in the US for trade policies that benefit companies in other countries at the expense of America’s factories, workers, companies, communities and economic power. It is to be expected that a country will work to increase manufacturing within its borders – even if we don’t – and these firms helping the efforts of other countries are required to register with the Department of Justice as “foreign agents.” I traced an anonymous comment left at my own blog back to one of these, after I wrote about President Obama's upcoming "China tire case" trade decision.

But are all foreign agents registering, as they are supposed to? The other day I came across an interesting example of an organization that is working to convince Americans to hand over our manufacturing capacity to other countries. In my post, National Association Of Manufacturers Blasts … American Manufacturing? I wrote,

“Why is the NAM blasting Meyerson for writing a column promoting American manufacturing? ... They quote Daniel J. Ikenson of the Cato Institute. . . . Cato receives a great deal of financial support from non-manufacturing interests including commodities and securities traders, tobacco companies, communications companies, software companies and oil companies. They also receive support from non-American manufacturing interests, including the Korea International Trade Association.”

Let’s connect the dots. For some reason NAM blasts a writer for supporting American manufacturing, and quotes the Cato Institute for support. The mission statement of the Cato Institute Center for Trade Policy Studies promotes “open markets. They claim that “open markets mean wider choices and lower prices for businesses and consumers.” They advocate that the United States open its markets to anyone, no matter what, even advocating American policies that “are not contingent upon reciprocal policies in other countries.” They say, “Studies by Trade Center scholars have found benefits in the elimination of U.S. trade barriers regardless of what other countries choose to do.”

Got that? They are saying we should allow other countries to cheat and like it, that free trade as a one-way street where we only buy and they only sell is just fine, and basically that we should just give up our manufacturing capacity and let other countries have it without a fight. Just let them take it from us – and by the way anything else is “protectionism” and “politicization of trade.” America should not “dictate marketplace results, or increase bureaucratic interference in the economy as a condition of market access.” The mission statement goes on about how the United States should lead by example and just open our markets, etc… It’s just amazingly anti-American. Go read it.

WHY would Cato Institute advocate this? Is it just weird libertarian cult ideology? Perhaps a look at who is paying for this advocacy will provide a clue. While mostly funded by individuals, Cato’s funders include many of the usual right-wing funding suspects: Koch, Scaife, tobacco companies, Exxon and other oil companies, Wall Street… But one sponsor jumped out at me: the Korea International Trade Association. (Honda, Mazda, Mitsubishi, Toyota and Volkswagon are sponsors as well.) Dots connected: Cato is receiving funding from the Korea International Trade Association, and then turning around and advocating that American hand over its manufacturing capacity to other countries!

So I checked, and did not find that Cato Institute registered as a “Registered Foreign Agent.” Why not?

Also, according to SourceWatch, Cato provides “substantial” funds to several other “like-minded” think tanks. It would be interesting to see how many of those think tanks also advocate that America hand its manufacturing capacity over to other countries, and I am certainly interested in finding out whether Cato possibly serves as a “pass-through” for funds from outside of the United States. Is there “intellectual money-laundering” going on here?

Is funding from non-American sources reaching into our internal trade-policy discussion without disclosure? If so, we need to know about it. Let me be more specific: Is the Justice Department enforcing the Foreign Agent Registration Act, and investigating potential violations? Is there a public-interest group that will investigate potential “intellectual money-laundering”?

More Funny Business

In the previous Who Would Be Against American Manufacturing? post I brought attention to the American Coalition for Free Trade in Tires, which had commissioned a “Rutgers economist” to come up with some rather fascinating numbers claiming that if we don’t turn our tire manufacturing over to China it would cost 12 to 25 jobs for every manufacturing job we lose if we do. Good one! Scary!

While researching the story I came across an interesting article about American government officials leaving and taking lobbying jobs selling out American manufacturers, Chinese Tire Producers Hire Top Former U.S. Government Trade Officials In '421' Dumping Case

It didn't take long for a handful of the Bush administration's top trade officials to start representing foreign business interests. … five recently departed senior trade officials at the Department of Commerce who are representing Chinese tire companies in the "Section 421" case that was recently brought before the International Trade Commission ... have been hired by the "American Coalition for Free Trade in Tires"...

This is serious stuff and they are getting serious money cashing in from the jobs they did for the government, to sell out the country. Go look at who these people are, and who they worked for in the government. Clearly there was a culture of helping the other side for cash during the Bush years. Look at what these people are doing! Perhaps things like this helps explain why President Bush never followed through with remedies each time the ITC found that China was taking over another American industry with low prices.

Next Post: Who Else is Against American Manufacturing?

So in the previous post I found actual foreign agents working to undermine American manufacturing capacity. In this post I looked at some American groups who are working very closely, perhaps too closely, with foreign interests while they work to undermine American manufacturing capacity. In the next post I will look at how some purely American interests profit from undermining American manufacturing capacity.

Wealth comes from making things. Economic power comes from manufacturing. Every other country knows this. It’s time we remembered it.

Posted by Dave Johnson at 9:20 AM | Comments (0) | Link Cosmos

September 1, 2009

Who Would Be Against American Manufacturing?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

The definition of “anti-American” might be up for grabs after so many years of conservatives using the label like a club, but can we all agree that when other countries are working against the interests of America, that it is fair to call that “anti-American?” I discovered something truly anti-American when I caught a registered foreign agent posting a comment on my blog.

We are all used to hearing lobbyists argue against the broad public interest for their various clients. Often some big corporation is trying to get a rule changed to give them an advantage over their competitors or otherwise line their CEO’s pockets. Other times it is wealthy people trying to get tax breaks. All too often it is some representative of Wall Street trying to convince us that our wages are too high, we shouldn’t receive health or retirement benefits, taking on more debt is good or schemes that externalize costs onto the community while privatizing the profits…

For example, Wells Fargo, recipient of $25 billion of bailout funds from taxpayers, is cutting off credit and forcing a plant that is one more component of America’s manufacturing supply chain to close because the too-big-to-fail bank would make themselves a few dollars today, rather than allowing the company to sell or stay open and maintain America’s manufacturing infrastructure. It costs only $1.6 million to keep the plant open, but will cost the community $6.1 million in jobs, tax revenue etc. to close it. Wells Fargo doesn’t care, they aren’t losing the $6.1 million – they won’t even accept offers to buy the plant, because they get a little bit more from closing it. Never mind the harm done to American companies, workers and communities. This is not a "buggy whip" factory, it is an active business.

We are used to this kind of bad – really bad – antisocial, economically destructive behavior from self-interested American companies, organizations and people. And for some reason we seem to tolerate it because we are so inured to it. But is this kind of lobbying always just done for the usual terrible reasons -- profits at the expense of the rest of us? Maybe not. Maybe sometimes it is from a source with a different kind of agenda that we just don’t expect.

Let me tell you a story:

Last week I wrote a post explaining the details of a trade decision that President Obama will soon make, “President Obama's Upcoming "Section 421 Tire Case" Trade Enforcement Decision” and cross-posted it at my own blog, Seeing the Forest. Someone calling themselves “TheFacts” left a comment there. The comment begins, “This is absolute drivel. Let me count the ways” and ends by saying I am advancing “a union-driven agenda.”

Bloggers know that posts on current issues affecting big corporations are frequently swarmed with people presenting the corporate viewpoint. Sometimes when we trace them (when the source is not well-masked) we find these comments originate at corporate-funded firms paid to lobby on the issue. I traced the IP address of the person who posted this comment to the DC office of the international law firm White & Case, a large firm representing clients on international trade issues, among other things.

This got me thinking. The Foreign Agents Registration Act (FARA) of 1938 requires those “acting as agents of foreign principals in a political or quasi-political capacity to make periodic public disclosure of their relationship with the foreign principal, as well as activities.”

I checked at the Department of Justice database, and White & Case is registered as a “foreign agent.”

White & Case is registered with the Justice Department as a foreign agent because White & Case represents foreign interests. This registration is required so that Americans can make judgments based on the knowledge that they are hearing from sources that do not represent America’s interests and instead represent interests that might be opposed to America's interests.

So what does it mean when someone from a firm that is registered with the Justice Department as representing foreign interests posts arguments anonymously at blogs like mine -- arguing that we should allow American factories to close, and instead import goods from other countries? Was this done for a client? Was it an employee acting without authority?.

How were the readers of this anonymous post supposed to know that they were hearing from someone at a firm that is registered as a foreign agent? Was this anonymous posting part of an effort to subvert the intent of the Foreign Agents Registration Act? Is this part of a larger effort by this firm, and if so how much is being done in ways intended to get around the Foreign Agents Registration Act?

What this foreign-interest representative is advocating is that Americans close factories and borrow money to buy imports from countries that take over the business that we give up. We have to borrow the money because America has given up so much of its manufacturing capacity already – to companies in other countries – that we aren’t earning our own money anymore with which to buy imports. This is not only not in our country’s interests, it is often being advocated by the paid representatives of the countries that benefit from this at our expense! And, of course, the other countries involved aren't giving up any of their manufacturing to us.

By the way, one of the arguments the foreign-agent commenter made was,

“According to Rutgers economist Thomas J. Prusa, the proposed tire tariffs would ripple through the U.S. economy. Prusa calculates that each job “saved” by the ITC’s tariffs would come at the cost of at least 12 jobs lost, and possibly more than 25.”

While checking out the aggressively hyperbolic statistic (already refuted by the ITC) that saving each job would cost 12 to 25 jobs I located the source in a Wall Street Journal piece, followed by this:

“Prusa’s research was commissioned by a group called the American Coalition for Free Trade in Tires.”

The American Coalition for Free Trade in Tires is a coalition of six tire importing companies – one is even named “Foreign Tire Sales Inc.” And by the way again we find the term “free trade” used as a club to try to shut down discussion of merits of closing factories and wiping out American jobs, industries and communities. "Free trade" is an ideological label for a theory that seems only to apply to the US, certainly not to the industry-subsidizing, tire-dumping China that the tire case is about. So the authority cited in the foreign agent's comment, while not a foreign agent himself, was not as represented either. He may be a “Rutgers economist” but in this capacity he was commissioned by the American Coalition for Free Trade in Tires to say this. (Rutgers allows that? Ouch.) So much for the 12 or 25 jobs statistic – and for the aura of independence and credibility that comes from citing a “Rutgers economist.”

I will have more on the American Coalition for Free Trade in Tires in the next post.

So here is what it comes down to. It is one thing to hear from American interests who are trying to convince us to give up America’s manufacturing capacity, just so they can make a quick buck at everyone else's expense. We’re used to that these days. But would you feel differently and consider the opinions in a different light if you knew that you were hearing from a Greek or Korean or Chinese manufacturer, trying to convince you that it is a good thing for America to give up our manufacturing capacity and let them do it, and let them make the money and have the jobs instead? Perhaps you would. If you knew.

NEXT: What about when you are hearing from lobbyists and organizations that are funded from other countries, but are not registering as “foreign agents?” Also I will tell you about the “revolving door” of American officials who leave the government and immediately go to work for interests who lobby the very offices where they worked, asking us to close factories, lay people off, etc.

Posted by Dave Johnson at 1:10 PM | Comments (0) | Link Cosmos

August 28, 2009

President Obama's Upcoming "Section 421 Tire Case" Trade Enforcement Decision

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

When China was accepted into the World Trade Organization, they agreed that if we experienced import surges of Chinese goods that caused "market disruption," we would be allowed to limit the import of those goods. The particular section of the agreement is called "Section 421."

When the U.S. International Trade Commission (ITC) determines that the level of imports from China cause or threaten to cause market disruption to American producers of competitive products, it proposes a remedy that can include quotas or other relief. The President of the United States then makes a decision whether to enforce that recommendation.

President Bush repeatedly (seven times) refused to enforce Section 421 even when our own ITC found that American companies, factories and jobs were being lost. Bush claimed at the time that the destructive effects of dramatic, sudden increases in Chinese imports that Section 421 was meant to mitigate were actually good for the U.S. economy. Bush's policy was the opposite of "protectionism" -- it actually favored China's companies over our own! (I think we've seen how that has worked out.)

Very soon we will have an opportunity to see where President Obama comes down on this issue. The ITC has decided by a 4-2 vote that the U.S. tire industry has been harmed by a large increase in imports. They have recommended increasing tariffs starting at 55%, falling to 35% over three years. The Office of the U.S. Trade Representative now has to give its recommendation on this to the White House by Sept. 2.

President Obama has until Sept. 17 to make a decision. This is just one week before the upcoming G-20 summit in Pittsburgh. There is considerable pressure on him to to signal that the US will restore trade balance and help manufacturing in America, by following the rules of the WTO that China agreed to.

According to the United Steel Workers, which represents workers in the tire industry, thousands of jobs are being lost and tire plans in the US are shutting down. Also at this page is a chart from the ITC showing that the benefits of enforcing remedies "are two-and-a-half times greater than the costs" to consumers.

Mike Elk wrote the other day at the Campaign for America's Future blog,

President Obama stands at a crossroads in the fight to rebuild the American economy.
President Obama has made a commitment in the past to uphold previously signed trade agreements. China, however, is violating these agreements by flooding the market with a massive 300 percent increase in tire imports in an attempt to wipe out American tire manufacturers. In 2004, China sent 14 million tires to the U.S. valued at $453 million. By last year, that had increased to 46 million tires valued at $1.7 billion.

Mike also points out,

Chinese importers, in conjunction with the Chinese Chamber of Commerce, have ironically formed a lobbying front group ironically named American Coalition for Free Trade in Tires. The coalition is run by Jochum, Shore & Trossevin, a Washington D.C. lobby firm run by former Bush trade officials who are cashing in on their years of U.S. government service to advise foreign competitors.

Jim Wansley, former USW Goodyear local president, testified about the impact of the closing of the Goodyear plant in Tyler, Texas where he had worked for 39 1/2 years:

The closure put hundreds of workers, many of whom had given decades of service to the plant, out of work. The closure was devastating to the workers and their families, but it is also being felt throughout the community of Tyler, Texas. Tyler has a population of about 100,000. Like many small and medium-sized towns that depend on manufacturing for middle class jobs, the loss of these jobs has taken its toll. The Goodyear plant directly benefitted the local economy by supporting local small businesses who served as its suppliers and service providers.
The plant also provided enormous indirect benefits. Jobs at the plant paid good wages and benefits, enabling workers to lead decent middle class lives, buy homes, send their kids to college, and save for retirement. These are the kind of jobs that support an entire community as families pay their doctor bills, buy new cars, and contribute to local charities. The plant and its workers were also an important source of tax revenue for the city, the county, and the state.

. . . The victims will not only be the workers and their families, but the suppliers, service providers, local businesses, and entire communities that depend on the industry. In sum, there is an enormous cost to doing nothing. If more plants like Tyler close, we can expect to suffer total additional losses of almost a billion dollars per plant, per year.

On the other hand, The Washington Post points out,

If Obama backs the tariff, he risks upsetting the Chinese at a time when the United States needs China to keep buying U.S. government debt to fund stimulus efforts.

This is not just an intellectual discussion. This, like all trade issues, is about American workers losing their livelihoods and communities losing their economic base. At the same time the policies of the Bush administration -- borrowing trillions of dollars from them while allowing our manufacturing base to deteriorate -- have placed China in a very strong position of economic advantage which gives them the power to demand concessions.

For more information:

USW fact sheets, background, other info related to tire trade case against China

Statements by Senators, other lawmakers supportive of USW unfair trade case claim against Chinese tires

More Members of Congress, Senate praise ITC ruling in tire trade case

A post at TradeReform.org: Trade Community Awaits President’s Decision on China Tire Safeguard

Testimony of Senator Sherrod Brown before the U.S. ITC on the tire issue.

Gilbert B. Kaplan, Former Deputy Assistant and Acting Assistant Secretary of the U. S. Department of Commerce, writing at Huffington Post on this and other trade issues with China.

ManufactureThis.org: Making the Case for Relief from Chinese Tire Imports

One group in opposition to this ruling is American tire distributors, who benefit from the low prices of Chinese imports. (Note this is published by the Chinese Xinhua News Agency.)

Posted by Dave Johnson at 10:25 AM | Comments (4) | Link Cosmos

August 27, 2009

A New Deal - Style Industrial Policy is Crucial

Here is a great post. Please read it. Excerpt:

A New Deal - style industrial policy is crucial as well for over the politically elusive, white working class. The New Deal was successful in creating a lasting political coalition because it created lasting political constituencies. As a result of the wide range of people it helped: Social Security for seniors, labor unions for workers, subsidies for small farmers, and jobs for the unemployed, these groups were brought into the Democratic party and stayed there for nearly forty years.

Stop The Teabaggers, Give Them Green Jobs: Lessons From the Coalfields of West Virginia

Posted by Dave Johnson at 2:30 PM | Comments (1) | Link Cosmos

August 26, 2009

The Bonuses and the Damage They Do

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

This is a story we are all too familiar with: Wall Street vs. Main Street. Irresponsible behavior leads to bonuses for Wall Street while working hard and playing by the rules leads to unemployment and foreclosure for Main Street.

You've heard the elements of the story: For quite some time Wall Street and the banks were operating irresponsibly, fomenting a huge credit bubble which led to the financial collapse. At the end of 2008 millions and millions of regular people – popularly known as “Main Street” – began losing their jobs, losing their houses, losing their savings and forgetting about ever retiring.

Wall Street: Huge Wall Street bonuses are in the news: Bank Bonus Tab: $33 Billion

Nine banks that received government aid money paid out bonuses of nearly $33 billion last year -- including more than $1 million apiece to nearly 5,000 employees -- despite huge losses that plunged the U.S. into economic turmoil.
… The nine firms in the report had combined 2008 losses of nearly $100 billion. That helped push the financial system to the brink, leading the government to inject $175 billion into the firms through its Troubled Asset Relief Program.

The Cost: The same amount, used for the people, would bring over 2.5 million good-paying jobs.

The "financial collapse" bonus pool is $33 billion. For comparison, look at what $30 billion could buy for We, the People, if only we had some control over things. $30 billion is the amount requested in Senator Sherrod Brown’s (D-Ohio) Impact Act. $30 billion = more than 2.5 million jobs:

“IMPACT (Investments for Manufacturing Progress and Clean Technology) creates a $30 billion Manufacturing Revolving Loan Fund to help small and medium-sized manufacturers finance retooling, shift design, and improve energy efficiency.
. . . the IMPACT Act could create 680,000 direct manufacturing jobs nationally and 1,972,000 indirect jobs over the next five years.”

Gas Prices and Bonuses: Do you remember those soaring gas prices that hit Main Street so hard last year. They play a part in this bonus story. For some background, see Matt Taibbi's Rolling Stone piece, Inside The Great American Bubble Machine,

So what caused the huge spike in oil prices? Take a wild guess. . . . [Wall Street] persuad[ed] pension funds and other large institutional investors to invest in oil . . . The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.
[. . .] But it wasn't the consumption of real oil that was driving up prices — it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.

This fits our story because the top bonus-getter this time around is Andrew J. Hall. Hall "earned" it by helping to run up the price of oil last year. Hall is getting a $100 million bonus. (Thanks to previous years' bonuses Hall already owns a 1000-year-old castle called Schloss Derneberg. Go look at some of the pictures of what these nice Wall Street bonuses can buy.)

Here's some more bonus news: Goldman may pay out largest bonus pool ever,

Looks like things are back to normal, or perhaps even better, at Goldman Sachs Group Inc. (NYSE:GS) as the firm is reportedly on track to pay out its largest bonus pool in the firm's 140-year history thanks to soaring profits in the first half of 2009.

Yes, that’s right "back to normal." Huge bonuses, in some cases the largest ever.

Main Street: Also back to "normal," the rest of the country remains mired in debt, unemployment, foreclosures, budget cuts and a health care crisis looks on, helpless to do anything about it because the functioning of their government has been captured by a wealthy few. Even before the financial collapse things were pretty bad. Wages had been near-stagnant for decades while costs rose, resulting in soaring credit card and other household debt. The savings rate had actually gone below zero. But not for Wall Street. While this was happening the finance sector had quadrupled to nearly 40% of all corporate profits and insiders were reaping tens and hundreds of millions and even billions for themselves.

There are many who say that these problems of debt and stagnant wages are because of Wall Street. Wall Streeters encourage companies to focus on maximizing short-term profit rather than investing in long-term stability. Wall Street pressure encourages companies to cut benefits, outsource jobs, increase workloads and eliminate customer services as much as possible.

These changes in business practices occurred partly because of the huge cuts in the top tax rates from the Reagan through the Bush years. It used to be that people built fortunes over time by carefully building businesses. But the tax cuts enabled "get rich quick" schemes that let a few benefit from chopping up and selling off once-stable companies, raiding pension funds, and so many of the business practices that have destroyed Main Street livelihoods.

This also happened because of deregulation. People were convinced that regulation of business "cost jobs," or a hundred other things we were told. Well it turned out that regulation was important. And it turned out that a few people reaped massive fortunes from the experiments in deregulation and tax cuts.

The Damage Done: While the bonuses are the largest ever, for public trust in their government and elected leaders this may equate to some of the most damage ever. People see these bonuses being handed out, paid for with taxpayer money, and they understand that their money is going out to the very people who destroyed the economy and their dreams. This kind of unfairness and injustice can tear apart the fabric of society. We are seeing elements of this in the disruptions at the Town Hall meetings on health care. People are angry at the way they are being treated, and the corporate right is channeling that anger into further demands for deregulation and favors for a few at the top.

While the stage was set for the bailouts and bonuses by the Bush administration, President Obama was elected to change things. Immense damage has been and continues to be done to the Obama administration in the public mind by these huge Wall Street bonuses. This set the stage for opposition to the health care plan. People feel that the President should find a way to stop this travesty. But instead he is seen as continuing it. His advisors are seen as being from Wall Street and unwilling to stand up against their friends and social and professional circles in which they live.

The Hope: President Obama has appointed a "Pay Czar." Kenneth Feinberg, who previously worked for free as head of the September 11th Victim Compensation Fund, has the job of "Special Master for Compensation." He will look at the compensation of the top 25 executives at these firms and decide if it is fair.

I think I speak for a lot of people when I say I want Mr. Feinberg to be aware that this bonus pool comes from taxpayer money, that the firms giving these bonuses wouldn't even be here if the taxpayers hadn't bailed them out, that the rest of the country - Main Street - hasn't seen a raise in a very long time, largely because of the policies of Wall Street, and that the bonus pool just happens to match the amount that would create 2.5 million jobs on Main Street through the IMPACT Act.

Mr. Feinberg, claw it back. Don't let these people get these bonuses, and be very public about it. The public needs to have their trust restored.

But more than that, the conditions that enabled Wall Street to benefit from destroying the livelihoods of the rest of us need to be reversed. Strong regulation needs to be reintroduced by the administration and backed up as necessary by the Congress. Top tax rates need to be increased back to where they were before Reagan to discourage this terrible "get rich quick" behavior and to reverse the concentration of the country's wealth among a top few. Most important: strong campaign finance and lobbying rules need to be implemented to remove Wall Street's ability to influence government. Truest and fairness need to be restored to our system.

Posted by Dave Johnson at 7:22 AM | Comments (0) | Link Cosmos

August 19, 2009

National Association of Manufacturers Blasts … American Manufacturing?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Last week Harold Meyerson wrote a great column in the Washington Post, Just One Word: Factories, promoting American manufacturing. Meyerson wrote,

“Since 1987, manufacturing as a share of our gross domestic product has declined 30 percent. Once the world's leading net exporter, we have become the world's leading net importer. In 2007, we exported $1.2 trillion worth of goods and services but imported $1.8 trillion. If there were a debtor's prison for nations, we'd all be in the clink.

[. . .] What makes the decline of American manufacturing particularly galling is that we're not falling behind because we're inefficient: American factories are among the most productive on the planet, as McCormack notes. But alone among the world's industrial powers, we have left the task of enticing manufacturers not to the federal government but to state and local governments, which try to attract factories and research facilities with tax abatements and public investments that are dwarfed by the efforts of national governments in other lands. …
It's not just that the United States uniquely lacks an industrial policy. It's that the United States uniquely has an anti-industrial policy.”

This sounds good to me. If we are going to restore American economic power we need to promote American manufacturing.

So who comes out to blast Meyerson for his column promoting American manufacturing? Was it the European Manufacturers Association? Was it the China Manufacturers Association? Was it the Korean Manufactures Association? No, it was America’s own National Association of Manufacturers (NAM). Yes, the American NAM, not the European, Chinese, Japanese or Korean NAM, but the American NAM. They say American manufacturing is in fine shape and doesn't need any help from the government to keep it strong.

WTF?

Why is the NAM blasting Meyerson for writing a column promoting American manufacturing? A clue might be the source of the anti-American-manufacturing information they use. They quote Daniel J. Ikenson of the Cato Institute. Cato is an anti-government “libertarian” think tank that supports “free trade” and is against any kind of regulation of business, including any restrictions on imports. This could be because Cato receives a great deal of financial support from non-manufacturing interests including commodities and securities traders, tobacco companies, communications companies, software companies and oil companies. They also receive support from non-American manufacturing interests, including the Korea International Trade Association.

What I want to know is: Why is America’s National Association of Manufacturers echoing the Cato Institute’s views against American manufacturing? Has this organization lost its way? Does the NAM membership know about this?

Posted by Dave Johnson at 12:57 PM | Comments (0) | Link Cosmos

August 18, 2009

China Is Being Smart On Trade. Will We?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Trade is not complicated. Trade is just an exchange of goods. You trade something for something. I buy something from you, and in exchange you buy something from me. It is simple. It is a win-win bargain because we both end up with something we needed. The wealth of each of us is increased.

In modern times we use money as an intermediary instead of making a direct and immediate trade of one good for another. You have the money I used to buy from you, and you can use it to buy from me in the future. Of course, we both have to agree on what to use as money and its value for exchanges, but once we do our transactions proceed smoothly.

Trade between countries works the same way: we buy tings made in Factorystan and Factorystan gets richer, then the Factorystanis buy from us and we get richer. Both of us have things we didn’t have before.
Add in additional countries and the equations become more complicated. But it comes back to the same principle. Goods are exchanged. Each side benefits.

So obviously the more goods a country makes or grows, the stronger its position in this global system.
Just as the intermediary of money enable individuals to trade more easily, it introduces ways for international transactions to proceed. We agree on the value of the money using “exchange rates.” This allows a balancing mechanism. As countries accumulate an excess of the money without exchanging it for goods made elsewhere the exchange rates fluctuate according to the rules of supply and demand, making their goods more expensive to others. Therefore goods made in the other countries become less expensive and the exchange flows should come into balance.

In free markets things come back into balance. But this natural balancing is not occurring today. China has been building up their economic power for some time. China should be the economic powerhouse now. According to the rules of currency and balance its currency should be extremely strong. Its products should be the most expensive on the planet. Its people should be rich, enjoying the consumption of things made elsewhere. This should be providing strong incentives to open factories in our own country.

This is not what is happening. Instead China’s currency is not strong, so the prices for their goods continue to undercut everyone else’s. China is manipulating the exchange rate so that its currency stays low. This keeps the price of its goods low, and keeps the business flowing to its factories. They are not buying from us. In fact they are even requiring that internally they buy Chinese.

This is occurring under the current rules described as “free trade.” Of course this is not free trade. It is manipulated and enables China to capture much of the world’s manufacturing. China is rising up and seizing the world’s means of production.

China is just being smart. The problem is that we are not responding and protecting our own interests. Our country’s leadership appears to be hamstrung, unable or unwilling to challenge this and develop a long-term economic and manufacturing plan. Part of the reason for this is that a wealthy Wall Street few profits from this in the short term, as we bleed away our country’s long-term interests. Our country’s decision-making processes appear to be under the control of that wealthy Wall Street few. And they are selling China the rope with which it is hanging us.

Theorists tell us that eventually economic forces should force a rebalancing of China’s currency and a shift in the world economic order. But there are a number of problems with sitting back and waiting for this to occur. It could take decades, and things could get (and may already be) so far out of whack that any rebalancing will be “disorderly,” meaning another – and worse – chaotic economic crash. And there is no guarantee that a rebalancing will ever occur. As China increases its economic power it increases its ability to bend the rules in its favor. The lesson learned so far is that manipulating the rules is highly profitable and brings few, if any, consequences.

Even if a rebalancing does eventually occur there is no guarantee that it will help us. When a factory closes we lose more than the jobs. We lose the know-how – the intellectual infrastructure that supports modern technological processes. We lose the supply chain. We lose the customer base. We lose the economic power that could enable us to rebuild. We lose more of our manufacturing capacity every day this situation is allowed to continue.

Our country’s leadership must engage and develop policies to fight this and restore our economic power. We need an economic plan. We need a manufacturing plan. We need an accountability plan, holding Wall Street and China accountable, making them follow the rules. We need to know that our leadership is on our side and is fighting for us.

Trade is a two-way street and it is time that the goods flow in both directions. "Free" trade is not "free" if only one side plays by the rules.

Posted by Dave Johnson at 11:33 AM | Comments (1) | Link Cosmos

August 14, 2009

Steel: Important To Us But Not Important To Us

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

I had the opportunity to tour a steel plant outside of Pittsburgh yesterday. (I am here for the Netroots Nation convention.)

The word that keeps coming into my mind is "intense."

I experienced intense heat, intense colors in the molten steel, and intense faces on the workers. We wore protective clothing, boots, earplugs, gloves and protective eyeware. Safety is a prime concern because without careful attention to detail this can be a very dangerous undertaking. The workers in these plants depend on safety procedures and each other to a degree that you do not find in many other occupations.

One of the notable things about this tour was the security. It was intense. I won't get into some of the details, but plants like these are considered to be very important to the Department of Homeland Security and special precautions are taken. You need special permission to even enter the grounds. ID is carefully checked. We not only couldn't even take pictures of the facilities but they will confiscate a cell phone if they see it out of your pocket. (You can have it back later.)

Let that sink in: Manufacturing plants like these are considered vitally important to the security of the United States and are assigned special protection.

Unfortunately our own government does not feel the need to protect plants like this beyond the vague post-9/11 threat of "terrorism." They check your ID at the gate, but they aren't concerned with making sure plants like this one stay in the United States. The two blast furnaces at this plant are the last two operating in the whole state of Pennsylvania. There used to be a dozen just at this plant. Nationally the decline is similar. We all know this but we do not seem to be capable of doing something about it.

This decline is not the "buggy-whip" phenomenon where an industry is being replaced or is evolving. Quite the opposite. Steel is the core component of the bridges, buildings, appliances, cars, etc. that we build. But now much of that steel comes from other countries. And much of it is inferior quality or produced in ways that harm the planet. This plant produces 1/3 the carbon emissions of similar plants in China. And then there is the carbon-emitting shipment across oceans to consider. But harming the planet is apparently someone else's long-term problem when money is to be made today.

The problem is not even labor costs. Labor is not a large component of our steel costs. The cost of raw materials is a larger part of the lower cost of imported steel. When you hear about hundreds of people trapped in mines in other countries you are hearing about lower cost of raw materials. Lives can be cheap and it is someone else's problem when money is to be made.

We have stood by and allowed other countries take over industries like this one by pursuing national strategies to build their economies at the expense of our own, or their own workers and of the environment. When competition is allowed to occur by continually moving the work to cheaper and less protective (of both lives and the environment) regions the result has to be a continued downward spiral of living standards. This is not sustainable and we are all living the results of this constant downward pressure.

Manufacturing is the key to economic power. Yet we worry about some fanatics in a cave somewhere, but we don't seem to worry about losing the steel plants and other industries and the jobs and the economic benefits to us and the world. This practice of checking ID at the gate but standing back and letting the plant itself close because another country allows worker or environmental exploitation is beyond short-sighted. It is self-destructive.

Posted by Dave Johnson at 7:33 AM | Comments (0) | Link Cosmos

August 11, 2009

New Report: Pittsburgh —The Rest of the Story

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Campaign for America’s Future has released a report, Pittsburgh —The Rest of the Story (pdf file, 12 pages). This report tells the story of "Pittsburgh's transition from the old to the new."

A lot is happening in Pittsburgh this summer and fall. Netroots Nation is taking place in Pittsburgh this week, then next month the AFL-CIO annual conference and the G-20 Summit. (See also.)

But a lot more has been happening in Pittsburgh so there’s a good story to tell.

Pittsburgh, known as "Steel City," was a center of the “rust belt” – so-called because so much of our manufacturing, once America’s economic powerhouse, has been “outsourced.” This is the process where the contents of the factories are packed up and sent to another country to make the same things that were made here, using the same raw materials, and shipping the same items back here to sell. For propaganda reasons that is called “trade,” even though it isn’t trade it’s really just paying off politicians to let them externalize costs onto the local communities and pocket the profits. (Our laws even let the companies pay lower taxes at the very time they are transferring so many costs onto the rest of us.)

At the same time, competitors arrive from countries that understand that manufacturing is the key to economic power. They have national policies to build their own manufacturing base. So the might subsidize their industries, or hold the value of their currencies low, or exploit their workers or the environment, giving their companies a pricing advantage. Or, they might just "dump" products into our market

The result is closed factories, eyesores rusting in the sun and rain, taking up local space. Hence the name, “rust belt.”

Pittsburgh has been working to do something about the rust-best phenomenon. From the report,

In the 1990s, the city reinvented itself. The story often told is one of transition from heavy industry to a new post-industrial age, with a high-end service economy built around health care and higher education. Grant-funded research led to entrepreneurial opportunity in software and biotechnology. The University of Pittsburgh Medical Center replaced U.S. Steel as the region’s largest employer. Pittsburgh built the world’s first Gold LEED-certified convention center. Once a giant consumer of dirty energy, Pittsburgh positioned itself for leadership in the new energy economy.
The good news is true enough, although many problems are far from solved. But it is only half of the story. Behind the good news are two unseen parts of the story.

I'm not going to tell the story here. Instead you have to read it for yourself. It's a good read.

Posted by Dave Johnson at 11:10 AM | Comments (0) | Link Cosmos

August 6, 2009

Manufacture Or Borrow (Until We Can't)

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

When things are going wrong it is often good practice to go back and review the basics, and start again. In baseball you go back to batting and fielding practice. To master a musical instrument you practice your scales every day.

Things have gone wrong with our economy. So let’s go back to some basics and see if we can figure out where we went wrong. Let’s start with the most basic of basics in an economy: wealth comes from making things that you can trade with others.

It is a simple concept worth repeating: if you make something you can trade it for things other people make. As you make things and trade them you build wealth. In an economy making and trading things creates good jobs and brings to the people income and goods they need.

So obviously manufacturing is the key to a healthy economy. Trade means fairly trading the things you manufacture for things that others manufacture. And it is a simple jump from there to understanding that if you don’t make things you have to borrow to be able to pay for things other people make, or you go without. You can borrow and borrow – until you can’t.

Everything else in the economy flows from the manufacturing. When it comes down to it you can't have a healthy service sector unless you are manufacturing items to sell and trade because you can't pay for the restaurant bill or insurance or hotel room or lawyer or even the doctor if you don't make something to sell and trade. And mostly you can't keep buying the things made elsewhere. You can only borrow for so long.

But somehow as country we have lost sight of this most basic idea. Instead of maintaining and promoting manufacturing we say it isn’t important anymore. We say that we have instead transitioned to a “post-industrial” service economy and/or a knowledge / information economy. (What does that even mean -- instead of making and trading, we serve and think? And borrow I guess.)

I read an important post about this yesterday, It's All About Jobs! by Leo Hindery, Jr., Leo W. Gerard and Sen. Don Riegle – a CEO, a labor leader, and a former Senator. They come to us from these different sectors of society to warn us that giving up our manufacturing has meant giving up our jobs. They wrote,

“Importantly, we need to be just as worried about the fact that our economy has mostly hemorrhaged jobs in the very sector -- manufacturing -- that must grow in order for us to move permanently away from debt-financed consumption as the principal engine of economic growth. And it is the current and now decades-long persistent manufacturing jobs collapse that unites the three of us as friends and as colleagues, despite coming from very different backgrounds.”

And how do they feel our country’s “transition” away from a manufacturing economy is working out for us?

“Just since this recession began, manufacturing has lost 13% of its workforce; manufacturing industries now represent a meager 11.7% of GDP; people working in manufacturing now account for only 8.7% of the jobs in the country; a quarter of the nation's 282,000 remaining manufacturing companies -- 90,000 in all -- are now deemed severely "at risk"; and we have run an average annual trade deficit in manufactured goods of more than $500 billion over the past five years.”

What do they say we need to do about this?

“Congress and the Administration, working together, need to immediately enact a robust industrial policy that puts American workers first and is comparable to the policies of our major trading partners. And then we need to integrate this policy with efforts to be the world's dominant manufacturer of green technologies and components, which offer us such enormous opportunities.”

So again back to basics: Trade requires giving and getting. And you can’t trade FOR things without having things TO trade. Which means that you have to have manufacturing. The more you have manufacturing, the stronger your economy. Pretty basic, no?

As I said above, it is a basic that if you don’t make things to trade you can, for a while, borrow to buy the things that others make. And for some time, since we started this transition to the “post-industrial” economy we all have been borrowing to buy the things we need. Individual, business and government debt started increasing rapidly at the same time as people started believing that we were undergoing such a transition. Our trade deficit has shot up through the roof, and now we collectively now owe a tremendous, massive debt to others.

But guess what? When you have a lot of debt, someone is making a lot of money. In The Quiet Coup, Simon Johnson writes,

From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent.

Paul Krugman has noted a similar trend,

On the eve of the current crisis, finance and insurance accounted for 8 percent of G.D.P., more than twice their share in the 1960s. By early last year, the Dow contained five financial companies — giants like A.I.G., Citigroup and Bank of America.

Ethan Porter, reviewing Kevin Phillips' book, Bad Money, drives the point home,

In 1950, manufacturing contributed 29.3 percent to the GDP, and financial services 10.9 percent. By 2003, the totals were almost reversed: manufacturing made a 12.7 percent contribution; financial services, 20.5 percent.

[. . .] All this is a fancy way of saying that we don’t make things anymore. We import most of our products from overseas.

So what they are saying is that what we have been doing, namely packing up our factories and sending them to the trading partner countries, isn’t “trade” it is something else. (The word “stupid” suggests itself.) And as a result of doing that we have a massive, massive “trade deficit.” We buy things but we don’t sell enough things because we don't make enough things anymore. And over time this means we get poorer and poorer. We borrow more and more, which drives up profits in the financial sector - while the borrowing continues. That can only go on so long.

So here is the question that we face: what are we going to do about it? And by we, I mean We,the People. So what’s the plan? What is our plan, our strategy, our policy for rebuilding and maintaining our manufacturing base? We obviously have a national financial strategy (a strategy that involves even more borrowing to execute) but none for getting back to the basics of creating wealth by manufacturing things.

Having a national policy for manufacturing is about as basic as it gets. China does. India does. Japan does. Russia does. France does. Germany does. Et Ceterastan does.

What is America’s manufacturing policy? What is our strategy? What is our plan?

Posted by Dave Johnson at 7:38 AM | Comments (5) | Link Cosmos