We are starting to see the early signs of a possible change in economic policy in Washington, DC.
The recent jobs report showed no change in the unemployment rate, with a barely acceptable 175,000 jobs created. The sad truth is the United States is still 10 million jobs away from normal. And a UCLA Anderson forecast paints a dismal picture of “Economic Recovery”. As one UCLA economist said, “It’s not a recovery. It’s not even normal growth. It’s bad.”
But, we may FINALLY be seeing some signs of sanity in the Washington, DC establishment. One pillar of the Democratic Party establishment, the Center for American Progress, issued a report calling for a reset of the fiscal debate and they announced they were walking away from Grand Bargain negotiations. The Center is virtually part of the administration so they would not have taken this step without the president’s approval.
And, on the right, the director of economic policy at the American Enterprise Institute called on the government to directly hire people and take steps to get private businesses to create jobs – even paying the first year of someone’s job in private industry. Kevin Hassett, a top economic adviser to Mitt Romney, is saying that direct hiring with Obama stimulus funds could have created 23 million jobs and saved the government a boatload of money. He was moved because he realized the extreme cost of the long-term unemployed on government services.
And, the Washington, DC based International Monetary Fund now recognizes it made serious mistakes in handling the Greek economic collapse, by underestimating the impact austerity would have on the Greek economy. Greek media recently quoted IMF managing director Christine Lagarde describing 2011 as a “lost year” partly because of miscalculations by the EU and IMF.
These mistakes by the Obama administration, Congress and the Troika in Europe were obvious to many as we have been reporting them since the beginning of the economic collapse. Now it is evident that economic austerity policies have hampered job growth and economic recovery. Indeed, rather than creating much-needed public jobs, the government is destroying them. This still remains true today.
The time is now for the government to become a hawk on creating jobs especially to repair a rapidly eroding infrastructure that desperately needs attention. There is no question that public sector jobs do not crowd out private sector jobs. In fact, if more people have good paying jobs, the private sector will expand as well. Economist Joseph Stiglitz points to Japan as a model – after an economic collapse in 1989 and more than two decades of failed policies much like those of the US and Europe today, the Japanese have finally gotten it right. They are combining monetary policy that makes money available with government spending to create jobs and policy to encourage entrepreneurship.
At the Public Banking Institute conference last week, Landon Carter, gave an excellent explanation of why money is scarce. He explains that because we have given bankers the monopoly on money creation and they do so by loaning money, that puts everyone in debt. It creates an “impossible contract” that requires us to keep taking money out of circulation, thereby creating money competition and money scarcity. But it doesn’t have to be this way. We could manage money through public institutions such as public banks and a public Federal Reserve.
In addition to privatized debt-based finance, the tax laws create unfairness and inequality. A report by the Congressional Budget Office finds that Washington spends more on tax breaks then on Medicare, the military or Social Security. And, the group that benefits most from tax breaks is the wealthiest.
A study by the Economic Policy Institute finds US corporate tax rates are low by historic and worldwide standards, and that higher corporate taxes do not hinder growth. Corporations evade these low taxes in unethical ways, even the co-founder of Apple is criticizing his company for their tax avoidance. Tax writer, David Cay Johnston, shows how it is government policy that has created the wealth divide and traces it back to the 1986 Reagan-era bi-partisan tax cuts to the wealthy and corporations.
As financial fraud investigator, Bill Black, writes this is all part of economic hucksters who join with the looting class and corrupt government to create widespread fraud epidemics. The deeply corrupt economy is seen at many levels.
Retail workers are mistreated according to a new report on Wal-Mart’s low-wage policies and their cost to tax payers. The study found that one Wal-Mart can cost tax payers $900,000 in public expenses. This includes costs like Medicaid, school breakfasts and lunches, subsidized housing and energy among many others. Wal-Mart makes up 10 percent of retail workers so its bad business practices affect all of us.
A Wal-Mart competitor, Costco, the second largest retailer in the country, shows it does not have to be this way. Costco has seen its profits soar while paying good wages to employees, in contrast to its low wage competitors who are struggling. They pay their employees an average of $20.89 an hour and have seen their sales increase 39 percent and their stock value double since 2009. No doubt, the employees are also some of the best customers at Costco. Wal-Mart would find the same thing, but for some reason shuts its eyes to the obvious win-win of higher wages leading to higher profits.
Sadly, instead Wal-Mart drives the race to the bottom. In fact, the Bureau of Labor Statistics reported a productivity increase during the first quarter of 2013. Compared with the first quarter of 2012, productivity was up 0.9 percent but hourly compensation fell 3.8 percent in the first quarter. This is a 5.2 percent wage drop when inflation is factored in, the largest decline since records were kept in 1947. The major factor in this steady decline is the shrinking of unions. Added to that are increased technology and globalization which also lead to lower wages.
The rigged economy and corrupt government have resulted in American households regaining less than half of the wealth lost during the recession while the wealthiest have actually gained since the crash, according to a report by the St. Louis Federal Reserve. Sixteen trillion in wealth was destroyed and only 45 percent has been recovered. Many families have not experienced any recovery at all, and some are still losing wealth especially in black, Hispanic and young households. Indeed, being African American and gifted, makes getting a job and building wealth almost impossible.
And, the long history of women being paid low wages is creating widespread problems in families as working moms are now the main bread winners in 40 percent of US households with children. Yet, 50 years after the Equal Pay Act, women still earn 77 percent of what a man earns for the same job.
In addition to the possibility that Washington, DC is waking up to the reality of their failed policies, the grass roots is showing the potential of a new economy based on economic democracy. There is more use of participatory budgeting, which allows people to determine how tax dollars are spent in direct democracy, rather than corrupt representative democracy.
And the Public Banking Institute conference tripled in size from a year ago as more people understand the need to get their tax dollars out of Wall Street and into their communities. At the conference, people linked public banks to the funding of the new economy. The need for cooperative economics to replace big finance capitalism is becoming more evident. More and more people are developing an economic and political transformation program. Here is one that puts forward a realistic, radical re-making of the economy:
(1) public support of worker co-ops and buyouts of capitalist businesses;
(2) legislation prodding traditional firms in the direction of profit sharing and workplace democracy;
(3) legislation affording the right of workers to purchase their companies;
(4) legislation requiring that bailed-out corporations be nationalized and revamped as worker-owned companies;
(5) “democratization and reregulation” of the banks;
(6) the establishment of public banks;
(7) the replacement of the corporate income tax with a capital assets tax;
(8) “reregulation of transnational capital flows,” taking the “Tobin tax” as a start;
(9) the reintroduction of government as employer-of-last-resort legislation (ELR);
(10) tariff-based trade “when there are significant wage and environmental regulation disparities between the trading countries”;
(11) giving these tariff revenues to “worker-friendly” private and public institutions in poor nations;
(12) the replacement of the income tax with a “wealth tax”;
(13) campaign finance reform similar to the “publicly funded credit cards” and anonymous donations recommended by Yale Law School professors Bruce Ackerman and Ian Ayres.
While we push forward with new ideas and are re-making the economy into an economic democracy, we also need to prevent further concentration of power. Perhaps the greatest threat today is President Obama’s secretly negotiated trade agreement, the Trans-Pacific Partnership. Obama does not want you to notice this global corporate coup, but information is finally getting out as this excellent op-ed in the New York Times shows. We know the TPP can be stopped because as Obama’s former trade negotiator said, if people knew what was in the text, it would raise such opposition that it could make the deal impossible to sign. Sign up to join the campaign to stop the TPP here. We can stop transnational corporate power and build on that success.
As the obvious has become obvious – the faulty economic policy emanating from Washington, the corrupt economy that spirals wealth to the top and secret trade deals that empower corporations over people, among others – the opportunity for change escalates. We see it happening on many levels. Action by the people will make transformation to the new economy a reality.