President Obama and many members of Congress claim that Social Security must be cut to reduce the national deficit. Nothing can be farther from the truth! First, Social Security will run a surplus for the next 20 years. Second, Social Security is a $2.8 Trillion insurance policy prepaid by the beneficiaries and by law is not permitted contribute to the national debt. Third, the national debt is now falling on its own accord (the Congressional Budget Office projects the current fiscal year deficit to be 4.0% down sharply from 7.0% last year) ...and any further reduction of the deficit would be a drag on the economy.

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 theREALnews                                                                               Permalink

Social Security Act Turns 78

Signed into law in 1935, the Social Security Act launched an integral social safety net program, but is it still sustainable? - August 14, 2013

Blogger's Note: The part in my header having to do with the spontaneous reduction in the National deficit was found here: http://www.businessinsider.com/the-deficit-is-shrinking-2013-8

Paul Jay: "President Obama delivered his State of the Union speech Tuesday night in Washington. And, of course, if you watched American news media, all the discussion was about the bargain with the Republicans. Would he have the grand bargain? Well, some people have suggested what's being talked about is a grand betrayal." In this video, economist Bill Black states that it's betrayal, but more than this, Black says that cutting the safety net would prolong and deepen the present recession, whereas what is needed to recover is more public sector investment, including the social net (which actually increases employment), and definitely not privatization of present public sector functions such as Medicare and Medicaid, which would cost more while making the poor even poorer and sicker.

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 theREALnews                                                                               Permalink

February 13, 2013

SOTU: Obama Opens Door to Grand Betrayal

Bill Black: President Obama offered up "reform" of medicare and social security, that is cuts at a time of deep recession


Bio

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.

Economist Bill Black: "The fundamental insanity at all times was that [Obama and the Congress] put together, one, we must avoid the fiscal cliff because that's austerity and it'll throw us into recession, and two, therefore we must make far greater budget cuts, adopt far greater austerity. Now, obviously, that's insane logic.

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 theREALnews                                                                               Permalink

January 3, 2013

Cliff Deal a "Moderate" Betrayal

Bill Black: Compromise on tax hikes on rich and allowing payroll taxes to rise sets the ground for a "grand betrayal" yet to come


Bio

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.

Economist Bill Black: "Everyone involved in creating the fiscal cliff acted irresponsibly and inhumanely in seeking to inflict austerity, cause a recession, and unravel the safety net." "The fiscal cliff was an act of idiocy in pursuit of a policy of depravity called 'the Grand Bargain' that was actually the Grand Betrayal." "President Obama wants to begin to unravel the safety net and cut social programs even though an overwhelming majority of Democrats oppose it and even though doing so will inflict even greater austerity. That will cause a deeper recession and likely make the deficit larger, so it is as nonsensical as it is cruel."

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President Obama and House Speaker John Boehner. (photo: Saul Loeb/AFP/Getty Images)

 

 

 

 

 

 

Kill the 'Fiscal Cliff' Instead of the Economy

By William K. Black, Reader Supported News

24 December 12

veryone now agrees that the so-called "fiscal cliff" is a stupid policy that threatens our economy and our people. Everyone agrees why the "fiscal cliff" is stupid -- it inflicts austerity at a time when it is likely to throw the nation into a gratuitous recession. Causing a recession leads to increased unemployment and a larger budget deficit. We have all seen austerity force the Eurozone into a gratuitous recession in which Italy, Spain and Greece have Great Depression levels of unemployment.

Here's the short version of why austerity is a self-destructive response to the Great Recession. A recession occurs when demand to purchase goods and services falls and the economy contracts, causing increased unemployment. This simultaneously causes tax revenues to fall and government expenditures for programs like unemployment compensation to increase. The fall in revenues and increase in expenses causes the federal budget deficit to grow rapidly.

Austerity is a policy of raising taxes and/or cutting governmental spending for the purported purpose of cutting the deficit. If one raises overall taxes in response to the Great Recession the result is a reduction in private sector demand. If one cuts governmental spending the result is a reduction in public sector demand. The result of reducing private and public sector demand in the recovery phase from the Great Recession, where overall demand is already grossly inadequate, is to throw the nation back into recession or even a depression. That causes the budget deficit to grow. A policy of austerity undertaken under the claim that it will reduce the deficit causes a gratuitous recession that leads to a massive loss of wealth, far higher unemployment, and in increased deficit. That is why austerity is a policy that is the self-destructive economic analogy to the medical insanity of bleeding patients.

We have known that austerity is an idiotic response to a severe crisis for 75 years. The U.S. was in the midst of a strong recovery from the Great Depression until FDR's neo-liberal economists convinced him in 1937 that is was essential that the U.S. adopt an austerity program to reduce the federal deficit. Austerity forced our economy back into a Great Depression.

It was only the stimulus of federal spending in World War II that brought the U.S. out of the depression. During World War II and for the remainder of that decade the ratio of debt-to-GDP was at or near historically record levels. The result was the greatest industrial expansion in history, full employment (including a massive influx of women), strong economic growth, and sharply declining deficits and debt-to-GDP ratio because the growth led to large increases in revenue and the low unemployment greatly reduced spending on the unemployed. We also defeated the Axis powers, created Social Security and the GI Bill, and began an extraordinary expansion of our housing stock to house the baby boom.

We learned many lessons from the catastrophic failure of austerity and the extraordinary success of stimulus in this era. The U.S. adopted a fiscal system of "automatic stabilizers." These are counter-cyclical (they push in the opposite direction of the business cycle) fiscal effects that are designed into the system and do not require new legislation once the recession or inflation begins. The result of these automatic stabilizers has been to reduce the severity and duration of recessions. Indeed, studies show that the larger the national governmental role in the economy, the less volatile the economy. This makes sense because the stabilization function should be more effective if the stabilizers are larger relative to the economy.

Unfortunately, these sensible counter-cyclical policies that make theoretical and common sense and have repeatedly worked in the real world were forgotten by many due to a campaign of deficit hysteria funded by Pete Peterson, a Republican billionaire financier who has made it his mission in life to destroy the safety net. His ultimate goal is to privatize social security so that Wall Street can receive hundreds of billions of dollars in fees investing our retirement funds.

I've explained in a prior column how the fiscal cliff was created through an insane bipartisan deal in August 2011. The fiscal cliff was always a terrible job-destroying idea that also began to unravel the safety net by cutting Medicare. Everyone involved in creating the fiscal cliff acted irresponsibly and inhumanely in seeking to inflict austerity, cause a recession, and unravel the safety net.

What is forgotten, however, in discussions of the idiocy of creating the fiscal cliff is that it was part of a broader bipartisan deal intended to inflict even more self-destructive austerity and even greater damage to the safety net. The fiscal cliff was an act of idiocy in pursuit of a policy of depravity called "the Grand Bargain" that was actually the Grand Betrayal.

The bipartisan madness has increased since the August 2011 budget deal. Today, the parties are simultaneously screaming (1) that the fiscal cliff is a disaster because it imposes austerity and will cause a recession and (2) that it is essential that we agree to a Grand Betrayal that will inflict even greater austerity and cause an even more severe recession. Indeed, the Grand Betrayal mandates austerity over a decade so it is likely to cause and/or deepen multiple recessions. The Republican and Democratic variants of the Grand Betrayal are doubly destructive and inhumane because they cut the safety net. President Obama wants to begin to unravel the safety net and cut social programs even though an overwhelming majority of Democrats oppose it and even though doing so will inflict even greater austerity. That will cause a deeper recession and likely make the deficit larger, so it is as nonsensical as it is cruel.

During this this entire financial farce I have been unable to get the dominant media to make the most obvious point. Since we all agree that austerity (the fiscal cliff) is a terrible idea that will cause a recession and likely increase the deficit, we must logically conclude that all variants of the Grand Betrayal are austerity programs that must be defeated in order to prevent a recession that is likely to increase the deficit. We should all be opposing any cuts in the safety net because they would inflict austerity. An overwhelming majority of Democrats and a majority of Republicans also oppose cuts in the safety net as inhumane.

So why don't the Democrats and Republicans stop trying to do a deal that will inflict austerity? Why not simply repeal the Budget Act of August 2011? That would kill the fiscal cliff. Repeal would kill austerity, prevent the recession, save the safety net, increase growth, and shrink the deficit. All versions of the Grand Betrayal (Republican and Democratic) inflict austerity, are likely to cause a recession, begin to unravel the safety net, destroy growth, and increase the deficit.

Under the same logic we should be able to agree on two related actions -- renew the extension of long-term unemployment compensation and renew the moratorium on collecting the payroll tax. These policies are superb counter-cyclical programs and have the added advantage of reducing human misery and inequality. Republicans and Democrats have agreed in the past on the desirability of both actions.

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Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

WITH REGARD TO THE SO-CALLED "FISCAL CLIFF," VIRTUALLY ALL ELECTED REPUBLICANS AND MOST ELECTED DEMOCRATS ARE EITHER TOTALLY IGNORANT OF ECONOMICS OR WILLFULLY DISHONEST IN CLAIMING THAT AUSTERITY IS THE ONLY WAY TO "SAVE" THE ECONOMY. HERE PAUL CRAIG ROBERTS, PERHAPS THE ONLY HONEST REPUBLICAN ECONOMIST OF TRUE STATURE, EXPLAINS IN GREAT DETAIL WHY CUTBACKS IN THE SOCIAL SAFETY NET WOULD BE A SURE-FIRE WAY TO *DEEPEN* THE PRESENT FINANCIAL CRISIS AND WOULD *INCREASE* PUBLIC DEBT. THIS ARTICLE IS WORTH READING AT LEAST TWICE.

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Our Collapsing Economy and Currency

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December 1, 2012 | Original Here

Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.

The fiscal cliff is the result of the inability to close the federal budget deficit. The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. The fiscal cliff cannot be closed because of the unfunded liabilities of eleven years of US-initiated wars against a half dozen Muslim countries–wars that have benefitted only the profits of the military/security complex and the territorial ambitions of Israel. The budget deficit cannot be closed, because economic policy is focused only on saving banks that wrongful financial deregulation allowed to speculate, to merge, and to become too big to fail, thus requiring public subsidies that vastly dwarf the totality of US welfare spending.

The hoax is the propaganda that the fiscal cliff can be avoided by reneging on promised Social Security and Medicare benefits that people have paid for with the payroll tax and by cutting back all aspects of the social safety net from food stamps to unemployment benefits to Medicaid, to housing subsidies. The right-wing has been trying to get rid of the social safety net ever since Franklin D. Roosevelt constructed it, out of fear or compassion or both, during the Great Depression.

Washington’s response to the fiscal cliff is austerity: spending cuts and tax increases. The Republicans say they will vote for the Democrats’ tax increases if the Democrats vote for the Republican’s assault on the social safety net. What bipartisan compromise means is a double-barreled dose of austerity.

Ever since John Maynard Keynes, economists have understood that tax increases and spending cuts suppress, not stimulate, economic activity. This is especially the case in an economy such as the American one, which is driven by consumer spending. When spending declines, so does the economy. When the economy declines, the budget deficit rises.

This is especially the case when an economy is weak and already in decline. A declining economy means less sales, less employment, less tax revenues. This works against the effort to close the federal budget deficit with austerity measures. Instead of strengthening the economy, the austerity measures weaken it further. To cut unemployment benefits and food stamps when unemployment is high or rising would be to provoke social and political instability.

Some economists, such as Robert Barro at Harvard University, claim that stimulative measures, the opposite of austerity, don’t work, because consumers anticipate the higher taxes that will be needed to cover the budget deficit and, therefore, reduce their spending and increase their saving in order to be able to pay the anticipated higher taxes.

In other words, the Keynesian effort to stimulate spending causes consumers to reduce their spending. I don’t know of any empirical evidence for this claim.

Regardless, the situation on the ground at the present time is that for the majority of people, incomes are stretched to the limit and beyond. Many cannot pay their bills, their mortgages, their car payments, their student loans. They are drowning in debt, and there is nothing that they can cut back in order to save money with which to pay higher taxes.

Many commentators are complaining that Congress will refuse to face the difficult issues and kick the can down the road, leaving the fiscal cliff looming. This would probably be the best outcome. As the fiscal cliff is a result, not a cause, to focus on the fiscal cliff is to focus on the symptoms rather than the disease.

The US economy has two serious diseases, and neither one is too much welfare spending.
One disease is the offshoring of US middle class jobs, both manufacturing jobs and professional service jobs such as engineering, research, design, and information technology, jobs that formerly were filled by US university graduates, but which today are sent abroad or are filled by foreigners brought in on H-1B work visas at two-thirds of the salary.

The other disease is the deregulation, especially the financial deregulation, that caused the ongoing financial crisis and created banks too big to fail, which has prevented capitalism from working and closing down insolvent corporations.

The Federal Reserve’s policy is focused on saving the banks, not on saving the economy. The Federal Reserve is purchasing not only new Treasury bonds issued to finance the more than one trillion dollar annual federal deficit but also the banks’ underwater financial instruments, taking them off the banks’ books and putting them on the Federal Reserve’s books.

Normally, debt monetization of this amount results in rising inflation, but the money that the Federal Reserve is creating in its attempt to manage the public debt and the banks’ private debt is hung up in the banking system as excess reserves and is not finding its way into the economy. The banks are too busted to lend, and consumers are too indebted to borrow.

However, the debt monetization poses a second threat that is capable of biting the US economy and consumer living standards very hard. Foreign central banks, foreign investors in US stocks and financial instruments, and Americans themselves observing the Federal Reserve’s continuous monetization of US debt cannot avoid concern about the dollar’s value as the supply of ever more dollars continues to pour out of the Federal Reserve.

Already there is evidence of central banks and individuals moving out of dollars into gold and silver bullion and into other currencies of countries that are not hemorrhaging debt and money. According to John Williams of Shadowstats.com, the US dollar as a percentage of global holdings of reserve assets has declined from 36.6% in 2006 to 28.7% in 2012. Gold has increased from 10.5% to 12.8% and other foreign currencies except the euro increased from 38.4% to 44.4%.

Russia, China, Brazil, India, and South Africa intend to conduct trade among themselves in their own currencies without use of the dollar as reserve currency. The EU countries conduct their trade with one another in euros, and although not reported in the US media, Asian countries are discussing a new common currency for trade among themselves.

The world is abandoning the use of the dollar to settle international accounts, and the demand for dollars is falling as the Federal Reserve increases the supply of dollars.
This means that the price of the dollar is threatened.

Concern over the dollar means concern over dollar-denominated financial instruments such as stocks and bonds. The Chinese hold some $2 trillion in US financial instruments. The Japanese hold about $1 trillion in US Treasuries. The Saudis and the oil emirates also hold large quantities of US dollar financial instruments. At some point the move away from the dollar also means a move away from US financial instruments. The dumping of US stocks and bonds would destabilize US financial markets and wipe out the remainder of US wealth.

As I have previously written, the Federal Reserve can create new money with which to purchase the dumped financial instruments, thus maintaining their prices. But the Federal Reserve cannot print gold or foreign currencies with which to buy up the dollars that foreigners are paid for their US stocks and bonds. When the dollars in turn are dumped, the exchange value of the dollar will collapse, and US inflation will explode.

The onset of hyperinflation can be as sudden as the collapse of a currency’s exchange value.

The real crisis facing the US is the impending collapse of the US dollar’s foreign exchange value. The US dollar’s value in relation to silver and gold has already collapsed. In the past ten years, gold’s price in US dollars has increased from $250 per ounce to $1,750 per ounce, an increase of $1,500. Silver’s price has risen from $4 per ounce to $34 per ounce. These price rises are not due to a sudden scarcity of gold and silver, but to a flight from the dollar into the two forms of historical money that cannot be created with the printing press.

The price of oil has risen from $20 a barrel ten years ago to as high as $120 per barrel earlier this year and currently $90 a barrel. This price rise has come about despite a weak world economy and without any supply restrictions other than those caused by the attempted US occupation of Iraq, the Western assault on Libya, and the self-harming Western sanctions on Iran, impacts most likely offset by the Saudis, still Washington’s faithful puppet, a country that pumps out its precious life fluid in order to save the West from its own mistakes. The moronic neoconservatives wish to overthrow the Saudi Arabian government, but what more faithful servant has Washington ever had than the Saudi royal house?

What can be done? For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US. This can be done, as Ralph Gomory has made clear, by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate. The difference in tax rates can be calculated to offset the benefit of the lower cost of foreign labor.

As all offshored production that is brought to the US to be marketed to Americans counts as imports, relocating the production in the US would decrease the trade deficit, thus strengthening belief in the dollar. The increase in US consumer incomes would raise tax revenues, thus lowering the budget deficit. It is a win-win solution.

The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years as well as future budgets due to the cost of veterans’ hospital care and benefits. According to ABC World News, “In the decade since the Sept. 11, 2001 terrorist attacks on the World Trade Center, 2,333,972 American military personnel have been deployed to Iraq, Afghanistan or both, as of Aug. 30, 2011 [more than a year ago].” These 2.3 million veterans have rights to various unfunded benefits including life-long health care. Already, according to ABC, 711,986 have used Veterans Administration health care between fiscal year 2002 and the third-quarter of fiscal year 2011. http://abcnews.go.com/Politics/us-veterans-numbers/story?id=14928136#1

The Republicans are determined to continue the gratuitous wars and to make the 99 percent pay for the neoconservatives’ Wars of Hegemony while protecting the 1 percent from tax increases.
 
The Democrats are little different.

No one in the White House and no more than one dozen members of the 535 member US Congress represents the American people. This is the reason that despite obvious remedies nothing can be done. America is going to crash big time.

And the rest of the world will be thankful. America along with Israel is the world’s most hated country. Don’t expect any foreign bailouts of the failed “superpower.”

THIRD WAY: A THINK TANK CREATED BY WALL STREET TO FOOL SOME OF THE PEOPLE ALL THE TIME. DON'T BE FOOLED!

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William K. Black                                                                 Original here
Assoc. Professor, Univ. of Missouri, 
Kansas City; Sr. regulator during 
S&L debacle 

Wall Street Uses Third Way to Lead Its Assault on Social Security

Posted: 11/13/2012 8:51 am

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Third Way, lobbyists for and from Wall Street who are leading the effort to enrich Wall Street by privatizing Social Security, was created by Wall Street to fool some of the people all of the time. I have written previously to expose their fictional claims to be a moderate or liberal Democratic group.

Eric Lautner documented Wall Street's effort to become even wealthier by privatizing Social Security in articles and his recent book (The People's Pension: The Struggle to Defend Social Security Since Reagan (AK Press)).

I showed that Third Way makes itself useful by providing a faux "liberal" or "moderate" "Democratic" quote machine that can be used to discredit Democrats and Democratic policies such as the safety net. I gave examples of how Third Way gave aid and comfort to the effort to defeat Elizabeth Warren and the effort to unravel the safety net. Third Way continues to prove that you can fool some of the people all of the time.

The National Journal ran an article on November 8, 2012 entitled "Left Divided over 'Grand Bargain.'"

"Groups concerned with protecting entitlements such as Social Security and Medicare are finding themselves at odds over whether an overarching fiscal deal during Congress's end-of-year session would help or hurt their cause.

The AFL-CIO organized a day of action on Thursday--part of a broader post-election campaign to protect entitlements--with dozens of events scheduled nationwide to urge lawmakers to avoid such a deal.

A 'grand bargain' to prevent the year-end onset of tax hikes and spending cuts 'could cut Social Security, Medicare and Medicaid benefits, all to give tax cuts to the wealthiest Americans,' the labor group argued on its organizing site. But the union campaign is being met with resistance from others on the left.

'We, like you, are ecstatic about the reelection of President Barack Obama and what it means or American growth and prosperity,' wrote Jim Kessler, senior vice president for policy for Third Way, a liberal think tank with a centrist approach, in an open letter to the groups involved with the day of action. 'However, as fellow progressives, we were disappointed to learn that you will be leading an effort against the President to impede a balanced grand bargain.'

In order to protect safety-net programs, such as Social Security and Medicare, the left must embrace reform, Kessler writes."

Let me attempt again to make the basic facts clear. Third Way is not a "liberal think tank." It does not take "a centrist approach." It is not run by "fellow progressives." It is not concerned with "protecting entitlements." It is not even a "think tank." Third Way is a creature of Wall Street. It's version of "protecting" the safety net was made infamous during the Tet offensive in Vietnam when the American officer explained that "it became necessary to destroy the village in order to save it."

Third Way is the Wall Street wing of the Democratic Party, which seeks to defeat Democratic candidates like Elizabeth Warren running against Wall Street sycophants like Senator Scott Brown and seeks to unravel the safety net programs that are the crown jewels of the Democratic Party. Wall Street's "natural" party is certainly the Republican Party, but Wall Street has no permanent party or ideology, only permanent interests. Third Way serves its financial interests and the personal interests of its senior executives. Wall Street has always been the enemy of Social Security and its greatest dream is to privatize Social Security. Wall Street's senior executives live in terror of being held accountable under the criminal laws for their crimes. They became wealthy by leading the "control frauds" that drove the financial crisis and the Great Recession. This is why Wall Street made defeating Warren a top priority.

Third Way is run by a man who Lautner terms an "acolyte" of Pete Peterson. Peterson is a Republican, Wall Street billionaire who has two priorities -- imposing austerity on America and privatizing Social Security. Privatizing Social Security is Wall Street's unholy grail. They would receive hundreds of billions of dollars in fees and ensure that their firms were not only "too big to fail," but "too big to criticize" if they could profit from a privatized retirement system. (We do not know who funds Third Way because it refuses to make its donors public. Given who dominates its Board of Trustees, however, the donors must be overwhelmingly from Wall Street.)

Third Way's self-description has some elements of honesty, admitting that it is "led by a prominent private sector Board of Trustees, drawn from finance, industry, academia, the non-profit sector and government." The order is revealing -- the board is dominated by finance, with a thin veneer provided by industry, and with the barest patina of "academics" and "government."

Here are key excerpts from their web site identifying their board.

- John L. Vogelstein
Mr. Vogelstein is the Chairman of New Providence Asset Management, LLC and Senior Advisor to Warburg Pincus, LLC. [He co-managed that huge private equity firm.]

- Bernard L. Schwartz
Mr. Schwartz is Chairman and CEO of BLS Investments, LLC.

- David Heller
Mr. Heller ... was ... the Global Head of Equity Trading for Goldman Sachs.

- Georgette Bennett
Dr. Bennett--an award-winning sociologist, criminologist, and journalist.... [Yeah criminologists!]

- William D. Budinger
William D. "Bill" Budinger is the founder of Rodel, Inc., where he served for 33 years as its chairman and CEO. [Rodel manufactured semi-conductors.]

- David A. Coulter
Mr. Coulter serves as Managing Director and Senior Advisor at Warburg Pincus, focusing on the firm's financial services practice.
Mr. Coulter retired in September 2005 as vice chairman of J.P. Morgan & Chase Co. He previously served as Executive Chairman of its investment bank, asset and wealth management, and private equity business.

- Jonathan Cowan
Prior to co-founding Third Way, Mr. Cowan founded and ran Americans for Gun Safety.... In 1992, he co-founded Lead...or Leave, which became the nation's leading Generation X advocacy group. [He lobbied to protect "second amendment rights" to bear arms and led a Pete Peterson inspired group urging "Gen X" members to unravel the safety net.]

- Lewis Cullman
Mr. Cullman was the Founder and President of Cullman Ventures, Inc., a diversified corporation that included the At-A-Glance group, which manufactures and markets diaries....

- William M. Daley
William Daley served as President Obama's Chief of Staff from January 2011 until January 2012.
Prior to his Chief of Staff role, he was Vice Chairman ... of ... JPMorgan Chase, from 2004 until 2011.
As Special Counsel to President Clinton in 1993, Daley coordinated the successful campaign to pass the North American Free Trade Agreement (NAFTA).
He was co-chair of the US Chamber of Commerce Center for Capital Markets Competitiveness. [This is code for deregulation of finance.]

- John Dyson
Mr. Dyson is Chairman of Millbrook Capital Management, Inc. (MCM), a private investment firm.

- Robert Dyson
Mr. Dyson ... is Chairman and CEO of the Dyson-Kissner-Moran Corp., a privately owned, diversified investment holding company....

- Andrew Feldstein
Andrew Feldstein is the CEO and Chief Investment Officer of BlueMountain Capital Management....
Prior to co-founding BlueMountain in 2003, Mr. Feldstein spent over a decade at JPMorgan where he was a Managing Director and served as Head of Structured Credit; Head of High Yield Sales, Trading and Research; and Head of Global Credit Portfolio. ["High yield" is a euphemism for junk bonds.]

- Brian Frank
Mr. Frank is a Director and Portfolio Manager at MSD Capital, L.P., the private investment firm founded by Michael Dell.

- Michael B. Goldberg
Mr. Goldberg joined Kelso & Company in 1991 as a Partner and Managing Director. [Private equity.]

- Peter A. Joseph
Mr. Joseph has been in the private equity investment business for over twenty years....

- Derek Kaufman
Derek Kaufman is Head of Global Fixed Income at Citadel LLC. He is a member of Citadel's Portfolio Committee.
Prior to joining Citadel in 2008, Mr. Kaufman was a Managing Director at JPMorgan Chase....

- Derek Kirkland
Mr. Kirkland is a Managing Director and Co-Head of the Global Financial Institutions Group at Morgan Stanley's Financial Institutions Group in Investment Banking.

- Ronald A. Klain
Ronald A. "Ron" Klain is President of Case Holdings, and General Counsel of Revolution LLC. [Case is an investment fund for the holdings of AOL's founder.]

- Thurgood Marshall, Jr.
Mr. Marshall is a partner at Bingham McCutchen LLP, and a Principal of Bingham Consulting Group. Mr. Marshall counsels and devises strategies for advancing clients' interests before Congress, the executive branch and independent regulatory agencies. [He is a lobbyist for a firm best known for representing financial firms.]

- Susan McCue
Ms. McCue is President of Message-Global, LLC, a strategic communications and public affairs firm she founded in January 2008 to advance progressive campaigns, activism and issue advocacy in the U.S. and globally.

- Herbert Miller
Mr. Miller, former CEO and Chairman of The Mills Corporation, one of America's most innovative and successful mall developers and managers, founded Western Development Corporation (WDC) in 1967 and serves as its Chairman, Chief Executive Officer and Principal Stockholder.

- Michael Novogratz
Mr. Novogratz has been President and Director of Fortress Investment Group LLC..... Prior to joining Fortress, Mr. Novogratz spent 11 years at Goldman Sachs....

- Andrew Parmentier
Mr. Parmentier is a Founding and Managing Partner of Height Analytics. He and fellow Managing Partner John Akridge formed the company in January 2009. He has worked in the financial services industry since 1997....

- Kirk Radke
Recognized internationally as one of the top private equity attorneys during his 28 year career at Kirkland & Ellis....
Among professional activities, Mr. Radke is Co-Chair & Organizer of the International Bar Association Private Equity Symposium, Founder of the Private Equity General Counsel Network, Founder of Legal Series and Co-Founder of the Private Equity Law Firm Roundtable.

- Howard Rossman
Dr. Rossman is a President and Founder of Mesirow Advanced Strategies, Inc. and a Vice Chairman of its parent, Mesirow Financial Holdings Inc. He is responsible for all aspects of fund management, including manager due diligence, strategy analysis and asset allocation.

- Tim Sweeney
Mr. Sweeney has been President and CEO of the Denver-based Gill Foundation since October 2007. For more than 30 years, he has worked to advance equality for all people regardless of sexual orientation or gender expression.

- Ted Trimpa
Mr. Trimpa is a partner with the international law firm, Hogan Lovells LLP.

- Barbara Manfrey Vogelstein
She has over 24 years of experience in venture capital and specialized equity investing. [S]he was a Partner of Warburg Pincus, one of the world's largest private equity firms.

- Joseph Zimlich
Mr. Zimlich is the Chief Executive Officer of Bohemian Companies, a group of family-owned real estate and private equity holdings.

Twenty of the twenty-nine trustees come from finance (counting the lawyer whose specialty is representing private equity firms). Their most common background is Mitt Romney's -- private equity -- and hedge funds. The nine non-finance members include:

• A Pete Peterson acolyte who previously created supposedly centrist front groups for gun rights and an effort to enlist "Gen X" in Wall Street's assault on the safety net
• A developer of giant malls
• A semi-conductor manufacturer
• A manufacturer of diaries
• A criminologist/journalist
• A PR specialist
• A gay rights activist
• A lobbyist at a firm best known for representing finance
• A lawyer

The board includes three representatives of "main street" (malls, semi-conductors, and diaries). They are not heavy hitters compared to the finance representatives. On finance issues, Third Way is Wall Street. It is run by Wall Street for Wall Street. It is liberal only on social issues such as gay rights -- and Wall Street created Third Way to focus on finance.

I have explained in other articles the incoherence and ineptitude of the financial policies that Third Way (including Casey, who temporarily left Third Way's board to serve as President Obama's chief of staff, where he urged Obama to adopt austerity and the Great Betrayal. I have explained how those policies would have thrown the nation back into recession and doomed Obama's chance for re-election. Third Way has learned nothing from their errors -- they continue to push the Great Betrayal and austerity. Their overriding goal is to begin the process of privatizing Social Security. The fact that their policies would cause a gratuitous recession, immense misery, and terrible electoral losses to Democrats does not represent a policy failure to Wall Street. Wall Street would be the grand winner if we began to privatize Social Security as Third Way proposes.

The "left" is not divided on the need to oppose austerity and the Great Betrayal. Third Way is not left or center or even right. It is Wall Street on the Potomac. Opposition to austerity and the Great Betrayal is not a left v. center issue. Wall Street's proposed financial policies are terrible for virtually all Americans.

MOST AMERICANS WITH DECENT-PAYING JOBS AND/OR PENSIONS (i.e., MOST OF MY READERS) MAY NOT REALIZE THAT ABOUT 50% OF THOSE AMERICANS RECENTLY ENTERING THE LABOR FORCE, EVEN THOSE WITH COLLEGE EDUCATIONS AND PERHAPS ADVANCED DEGREES, CAN NOW ONLY FIND JOBS NEAR TO OR BELOW THE POVERTY LEVEL. WORSE STILL, REPUBLICAN AND SOME DEMOCRATIC CANDIDATES FOR HIGH OFFICE PROMISE TO CUT SOCIAL SECURITY, UNEMPLOYMENT BENEFITS, MEDICARE, AND FOOD STAMPS...

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America’s Descent into Poverty ~ Paul Craig Roberts

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August 24, 2012 | Original here

The United States has collapsed economically, socially, politically, legally, constitutionally, and environmentally. The country that exists today is not even a shell of the country into which I was born. In this article I will deal with America’s economic collapse. In subsequent articles, I will deal with other aspects of American collapse.

Economically, America has descended into poverty. As Peter Edelman says, “Low-wage work is pandemic.” Today in “freedom and democracy” America, “the world’s only superpower,” one fourth of the work force is employed in jobs that pay less than $22,000, the poverty line for a family of four. Some of these lowly-paid persons are young college graduates, burdened by education loans, who share housing with three or four others in the same desperate situation. Other of these persons are single parents only one medical problem or lost job away from homelessness.

Others might be Ph.D.s teaching at universities as adjunct professors for $10,000 per year or less. Education is still touted as the way out of poverty, but increasingly is a path into poverty or into enlistments into the military services.

Edelman, who studies these issues, reports that 20.5 million Americans have incomes less than $9,500 per year, which is half of the poverty definition for a family of three.

There are six million Americans whose only income is food stamps. That means that there are six million Americans who live on the streets or under bridges or in the homes of relatives or friends. Hard-hearted Republicans continue to rail at welfare, but Edelman says, “basically welfare is gone.”

In my opinion as an economist, the official poverty line is long out of date. The prospect of three people living on $19,000 per year is farfetched. Considering the prices of rent, electricity, water, bread and fast food, one person cannot live in the US on $6,333.33 per year. In Thailand, perhaps, until the dollar collapses, it might be done, but not in the US.

As Dan Ariely (Duke University) and Mike Norton (Harvard University) have shown empirically, 40% of the US population, the 40% less well off, own 0.3%, that is, three-tenths of one percent, of America’s personal wealth. Who owns the other 99.7%? The top 20% have 84% of the country’s wealth. Those Americans in the third and fourth quintiles–essentially America’s middle class–have only 15.7% of the nation’s wealth. Such an unequal distribution of income is unprecedented in the economically developed world.

In my day, confronted with such disparity in the distribution of income and wealth, a disparity that obviously poses a dramatic problem for economic policy, political stability, and the macro management of the economy, Democrats would have demanded corrections, and Republicans would have reluctantly agreed.

But not today. Both political parties whore for money.

The Republicans believe that the suffering of poor Americans is not helping the rich enough. Paul Ryan and Mitt Romney are committed to abolishing every program that addresses needs of what Republicans deride as “useless eaters.”

The “useless eaters” are the working poor and the former middle class whose jobs were offshored so that corporate executives could receive multi-millions of dollars in performance pay compensation and their shareholders could make millions of dollars on capital gains. While a handful of executives enjoy yachts and Playboy playmates, tens of millions of Americans barely get by.

In political propaganda, the “useless eaters” are not merely a burden on society and the rich. They are leeches who force honest taxpayers to pay for their many hours of comfortable leisure enjoying life, watching sports events, and fishing in trout streams, while they push around their belongings in grocery baskets or sell their bodies for the next MacDonald burger.

The concentration of wealth and power in the US today is far beyond anything my graduate economic professors could image in the 1960s. At four of the world’s best universities that I attended, the opinion was that competition in the free market would prevent great disparities in the distribution of income and wealth. As I was to learn, this belief was based on an ideology, not on reality.

Congress, acting on this erroneous belief in free market perfection, deregulated the US economy in order to create a free market. The immediate consequence was resort to every previous illegal action to monopolize, to commit financial and other fraud, to destroy the productive basis of American consumer incomes, and to redirect income and wealth to the one percent.

The “democratic” Clinton administration, like the Bush and Obama administrations, was suborned by free market ideology. The Clinton sell-outs to Big Money essentially abolished Aid to Families with Dependent Children. But this sell-out of struggling Americans was not enough to satisfy the Republican Party. Mitt Romney and Paul Ryan want to cut or abolish every program that cushions poverty-stricken Americans from starvation and homelessness.

Republicans claim that the only reason Americans are in need is because the government uses taxpayers’ money to subsidize Americans who are unwilling to work. As Republicans see it, while we hard-workers sacrifice our leisure and time with our families, the welfare rabble enjoy the leisure that our tax dollars provide them.

This cock-eyed belief, on top of corporate CEOs maximizing their incomes by offshoring the middle class jobs of millions of Americans, has left Americans in poverty and cities, counties, states, and the federal government without a tax base, resulting in bankruptcies at the state and local level and massive budget deficits at the federal level that threaten the value of the dollar and its role as reserve currency.

The economic destruction of America benefitted the mega-rich with multi-billions of dollars with which to enjoy life and its high-priced accompaniments wherever the mega-rich wish. Meanwhile, away from the French Rivera, Homeland Security is collecting sufficient ammunition to keep dispossessed Americans under control.

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AUSTERITY POLICIES ARE DRIVING US TOWARDS A DOUBLE-DIP RECESSION WARNS NOBEL-PRIZE-WINNING ECONOMIST JOSEPH STIGLITZ

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AUSTERITY, AND A NEW RECESSION?

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"Politics Is at the Root of the Problem"

by Joseph Stiglitz — 23.04.2012

Austerity policies are driving us towards a double-dip recession, warns US economist Joseph Stiglitz. He sat down with Martin Eiermann to discuss new economic thinking and the influence of money in politics.

The European: Four years after the beginning of the financial crisis, are you encouraged by the ways in which economists have tried to make sense of it, and by the ways in which those insights have been taken up by policy makers?
Stiglitz: Let me break this down in a slightly different way. Academic economists played a big role in causing the crisis. Their models were overly simplified, distorted, and left out the most important aspects. Those faulty models then encouraged policy-makers to believe that the markets would solve all the problems. Before the crisis, if I had been a narrow-minded economist, I would have been very pleased to see that academics had a big impact on policy. But unfortunately that was bad for the world. After the crisis, you would have hoped that the academic profession had changed and that policy-making had changed with it and would become more skeptical and cautious. You would have expected that after all the wrong predictions of the past, politics would have demanded from academics a rethinking of their theories. I am broadly disappointed on all accounts.

The European: Economists have seen the flaws of their models but have not worked to discard or improve them?
Stiglitz: Within academia, those who believed in free markets before the crisis still do so today. A few people have shifted, and I want to give credit to them for saying: “We were wrong. We underestimated this or that aspect of our models.” But for the most part, the response was different. Believers in the free market have not revised their beliefs.

The European: So let’s take a longer view. Do you think that the crisis will have an effect on future generations of economists and policy-makers, for example by changing the way that economic basics are taught?
Stiglitz: I think that change is really occurring with the young people. My young students overwhelmingly don’t understand how people could have believed in the old models. That is good. But on the other hand, many of them say that if you want to be an economist, you still have to deal with all the old guys who believe in their wrong theories, who teach those theories, and expect you to believe in them as well. So they choose not to go into those branches of economics. But where I have been even more disappointed is American policy-making. Ben Bernanke gives a speech and says something like, there was nothing wrong with economic theory, the problems were a few details in implementation. In fact, there was a lot wrong with economic theory and with the basic policy framework that was derived from theory. If your mindset is that nothing was wrong, you will not demand new models. That’s a big disappointment.

The European: There seemed to have been quite a bit of disagreement among Obama’s economic advisers about the right course of action. And in Europe, fundamental economic principles like the absolute focus on GDP growth have finally come under attack.
Stiglitz: Some American policy-makers have recognized the danger of “too big to fail,” but they are a minority. In Europe, things are a bit better on the rhetorical side. Influential economists like Derek Turner and Mervyn King have recognized that something is wrong. The Vickers Commission has thoughtfully re-examined economic policy. We have nothing like that in the United States. In Germany and France, the financial transactions tax and limits to executive compensation are on the table. Sarkozy says that capitalism hasn’t worked, Merkel says that we were saved by the European social model – and they are both conservative politicians! The bankers still don’t understand this, which explains why we still see the head of the European Central Bank, Mario Draghi, arguing that we have to give up the welfare system at a time when Merkel says the exact opposite: That the social model kept us going when the central banks failed to do their regulatory job and used politics to change the nature of our societies.

The European: How have your own convictions been affected by the crisis?
Stiglitz: I don’t think that there has been a fundamental change in my thinking. The crisis has reinforced certain things I said before and shown me how important they are. In 2003, I wrote about the risk of interdependence, where the collapse of one bank can bring about the collapse of other banks and increase the fragility of the banking system. I thought it was important, but the idea wasn’t picked up at the time. The same year we looked at agency problems in finance. Now we recognize just how important those issues are. I argued that the real issue in monetary economics is about credit, not money supply. Now everybody recognizes that the collapse of the credit system brought down the banks. So the crisis really validated and reinforced several strands of theory that I had explored before. One topic that I now consider much more important than I did previously is the question of adjustment and the role of exchange rate systems like the Euro in preventing economic adjustment. A related issues is the linkage between structural adjustment and macroeconomic activity. The events of the crisis have really induced me to think more about them.

The European: The financial transaction tax seems to have died a political death in Europe. Now, economic policy in Europe seems largely dominated by the logic of austerity, and by forcing other European countries to become more like Germany.

Stiglitz: Austerity itself will almost surely be disastrous. It is leading to a double-dip recession that could be quite serious. It will probably make the Euro crisis worse. The short-term consequences are going to be very bad for Europe. But the broader issue is about the “German model.” There are many aspects to it – among them the social model – that allow Germany to weather a very big dip in GDP by offering high levels of social protection. The German model of vocational training is also very successful. But there are other characteristics that are not so good. Germany is an export economy, but that cannot be true for all countries. If some countries have export surpluses, they are forcing other countries to have export deficits. Germany has taken a policy that other countries cannot imitate and tried to apply it to Europe in a way that contributes to Europe’s problems. The fact that some aspects of the German model are good does not mean that all aspects can be applied across Europe.

The European: And it does not mean that economic growth satisfied the criteria of social fairness.
Stiglitz: Yes, so there is one other thing we have to take into account: What is happening to most citizens in a country? When you look at America, you have to concede that we have failed. Most Americans today are worse off than they were fifteen years ago. A full-time worker in the US is worse off today than he or she was 44 years ago. That is astounding – half a century of stagnation. The economic system is not delivering. It does not matter whether a few people at the top benefitted tremendously – when the majority of citizens are not better off, the economic system is not working. We also have to ask of the German system whether it has been delivering. I haven’t studied all the data, but my impression is no.

The European: What do you say to someone who argues thus: Demographic change and the end of the industrial age have made the welfare state financially unsustainable. We cannot expect to cut down on our debt without fundamentally reducing welfare costs in the long run.
Stiglitz: That is absurd. The question of social protection does not have to do with the structure of production. It has to do with social cohesion or solidarity. That is why I am also very critical of Draghi’s argument at the European Central Bank that social protection has to be undone. There are no grounds upon which to base that argument. The countries that are doing very well in Europe are the Scandinavian countries. Denmark is different from Sweden, Sweden is different from Norway – but they all have strong social protection and they are all growing. The argument that the response to the current crisis has to be a lessening of social protection is really an argument by the 1% to say: “We have to grab a bigger share of the pie.” But if the majority of people don’t benefit from the economic pie, the system is a failure. I don’t want to talk about GDP anymore, I want to talk about what is happening to most citizens.

The European: Has the political Left been able to articulate that criticism?
Stiglitz: Paul Krugman has been very strong on articulating criticism of the austerity arguments. The broader attack has been made, but I am not sure whether it has been fully heard. The critical question right now is how we grade economic systems. It hasn’t been fully articulated yet but I think we will win this one. Even the Right is beginning to agree that GDP is not a good measure of economic progress. The notion of the welfare of most citizens is almost a no-brainer.

The European: It seems to me that much of the discussion is still about statistical measurements – if we’re not measuring GDP, we’re measuring something else, like happiness or income differences. But is there an element to these discussions that cannot be put in numerical terms – something about the values we implicitly bake into our economic system?
Stiglitz: In the long run, we ought to have those ethical discussions. But I am beginning from a much narrower base. We know that income doesn’t reflect many things we care about. But even with an imperfect indicator such as income, we should care about what happens to most citizens. It’s nice that Bill Gates is doing well. But if all the money went to Bill Gates, the system could not be graded as successful.

The European: If the political Left hasn’t been able to fully articulate that idea, has civil society been able to fill the gap?
Stiglitz: Yes, the Occupy movement has been very successful in bringing those ideas to the forefront of political discussion. I wrote an article for Vanity Fair in 2011 – “Of the 1%, by the 1%, for the 1%” – that really resonated with a lot of people because it spoke to our worries. Protests like the ones at Occupy Wall Street are only successful when they pick up on these shared concerns. There was one newspaper article that described the rough police tactics in Oakland. They interviewed many people, including police officers, who said: “I agree with the protesters.” If you ask about the message, the overwhelming response has been supportive, and the big concern has been that the Occupy movement hasn’t been effective enough in getting that message across.

The European: How do we move from talking about economic inequality to tangible change? As you said earlier, the theoretical recognition of economic problems has often not been translated into policy.
Stiglitz: If my forecast about the consequences of austerity is correct, you will see a new round of protest movements. We had a crisis in 2008. We are now in the fifth year of crisis, and we haven’t solved it. There’s not even a light at the end of the tunnel. When we come to that conclusion, the discourse will change.

The European: The situation needs to be really bad before it will get better?
Stiglitz: Yes, I fear.

The European: You recently wrote about the “irreversible decay” of the American Midwest. Is this crisis a sign that the US has begun an irreversible economic decline, even while we still regard the country as a potent political player?
Stiglitz: We are facing a very difficult transition from manufacturing to a service economy. We have failed to manage that transition smoothly. If we don’t correct that mistake, we will pay a very high price. Already, the average American is suffering from the failed transition. My concern is that we have set in motion an adverse economics and an adverse politics. A lot of American inequality is caused by rent-seeking: Monopolies, military spending, procurement, extractive industries, drugs. We have some economic sectors that are very good, but we also have a lot of parasites. The hopeful view is that the economy can grow if we rid ourselves of the parasites and focus on the productive sectors. But in any disease there is always the risk that the parasites will devour the healthy body parts. The jury is still out on that.

The European: Have we at least understood the disease well enough to prescribe the correct therapy? Especially with regard to policy-making and the Euro crisis, there seems to be a lot of shooting into the dark.
Stiglitz: I think the problem is not a lack of understanding by dispassionate social scientists. We know the basic dilemma, and we know the effect of campaign contributions on policy-makers. So we are facing a vicious circle: Because money matters in politics, that leads to outcomes in which money matters in society, which increases the role of money in politics. You have more gerrymandering and more disillusionment with parliamentary politics.

The European: Has politics become too focused on outcomes, and is it not sensitive enough to the processes that lead to those outcomes? The bedrock of democracy seems to hinge on the avenues for participation, not on the effectiveness of particular policies.
Stiglitz: Let me put it this way: Some people criticize by saying that we have become too focused on inequality and are not concerned enough about opportunity. But in the United States, we are also the country with the biggest inequality of opportunity. Most Americans understand that fraud political processes play in fraud outcomes. But we don’t know how to break into that system. Our Supreme Court was appointed by moneyed interests and – not surprisingly – concluded that moneyed interests had unrestricted influence on politics. In the short run, we are exacerbating the influence of money, with negative consequences for the economy and for society.

The European: Where is change rooted? In parliament? In academia? In the streets?
Stiglitz: You look in the streets and a little bit in academia as well. When I say that the major thrust of the economics profession has disappointed me, I need to qualify that statement. There have been groups that push new economic thinking and challenge the old models.

The European: You have written that the challenge is to respond to bad ideas not with rejection but with better ideas. Where is the longest and strongest lever to bring new economic thinking into the realm of policy?
Stiglitz: The diagnosis is that politics is at the root of the problem: That is where the rules of the game are made, that is where we decide on policies that favor the rich and that have allowed the financial sector to amass vast economic and political power. The first step has to be political reform: Change campaign finance laws. Make it easier for people to vote – in Australia, they even have compulsory voting. Address the problem of gerrymandering. Gerrymandering makes it so that your vote doesn’t count. If it does not count, you are leaving it to moneyed interests to push their own agenda. Change the filibuster, which turned from a barely used congressional tactic into a regular feature of politics. It disempowers Americans. Even if you have a majority vote, you cannot win.

The European: We’re looking at six months of presidential campaigning. The role of money has been embraced by both parties. Campaign finance reform seems rather unlikely.
Stiglitz: Even the Republicans have become more aware of the power of money by seeing how it influenced and distorted the primaries. The outcomes are not what the Republican party establishment had hoped for. The disaster is becoming clear – but that will not lead to immediate remedies. Those who become elected depend on that money. It will require a strong third party or civil society to do something about this.

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About the Author 

Joseph Stiglitz won the Nobel Prize in economics in 2001 for his work on information asymmetry in financial markets. Stiglitz served as senior economist at the World Bank and, from 1993 until 1997, as economic adviser to President Clinton. In 2009, he co-founded the Institute for New Economic Thinking (INET). He teaches at Columbia University.

Original here
BillMoyers.com / By Lauren Feeney

America's ‘Inexcusable’ Indifference to Extreme Poverty -- Frances Fox Piven Speaks

An interview with Frances Fox Piven, a political scientist and activist whose writings on poverty, welfare rights, and protest movements have infuriated the Right.

Photo Credit: Luna Vandoorne/ Shutterstock

March 15, 2012 |  Frances Fox Piven is a political scientist and activist who has been writing about poverty, welfare rights and protest movements for nearly half a century. The Nation, where Piven has been a long-time contributor, calls her “legendary.” Recently, Piven has become well known to another audience. Since Glenn Beck placed her at the root of one of his famous chalkboard graphs, accusing her of plotting to “intentionally collapse our economic system,” Piven has been covered throughout the conservative blogosphere. We talked to Piven about rising inequality, poverty, and the condition of the safety net, as well as her sudden and un-intentioned notoriety.

Lauren Feeney: There’s been a lot of talk recently about growing inequality — how the richest of the rich just keep getting richer. But what’s going on with the poorest of the poor?

Frances Fox Piven: Poverty has been increasing pretty rapidly, at least since 2000, and then there was another big spike with the financial crisis. The official poverty rate is about 15 percent [but] I think the most reasonable estimate is that one out of three Americans are now poor. The official poverty line in the United States is set much lower than it is in other rich countries. That’s because it’s based on the cost of a market basket of basic foods multiplied by three to cover all other costs, and those other costs have inflated much more rapidly than food costs. I want to count people who in other prosperous countries would also be called poor.

We have another measure which we call extreme poverty — people who are living at half of the official poverty line — and the numbers in extreme poverty are increasing rapidly too. It’s a big problem, an inexcusable problem. Profits are increasing; the aggregate amount of wealth in this country does not in anyway justify having such a large pool of poor people and near poor people. We’re wiping out whatever progress has been made in the last half century in decreasing poverty.

Feeney: Mitt Romney recently said in an interview with Soledad O’Brien that he’s not worried about the very poor because they have a safety net. What’s the state of that safety net?

Piven: Dismal. It’s torn in many places.

There was something like a safety net put in place gradually between the 1930s and the 1960s — that included the program we call welfare, the food stamp program, Medicaid, WIC (a nutritional program for pregnant women and infants), unemployment benefits. By the end of the 1960s, these programs had expanded to the point that they provided at least minimal assistance to the majority of the poor. It was a ragged safety net, but there was a safety net. After the protests of the 1960s subsided, there were steady cutbacks in the main program that is welfare, Aid to Families with Dependent Children we called it then. The cutbacks took mainly the form of failing to raise the benefit levels to take account of inflation, so in real terms the benefits sank.

This was accompanied by an enormous outpouring of rhetoric blaming poor people — and black people and Hispanic people — for their own poverty. The culmination of all this occurred in 1996 when Congress passed and Bill Clinton signed the Personal Responsibility Act, which essentially eliminated the old Aid to Families with Dependent Children program and replaced it with another program know as TANF. Under TANF, the states have been given much more license to refuse people, and the consequence has been that far, far fewer people get any assistance from TANF than they did from Aid to Families with Dependent Children. And this is of course called a success.

Feeney: My understanding is that, under TANF, there are work requirements, time limits, restrictions for immigrants, talk of drug testing ….

Piven: Finger printing, all sorts of things. They have criminalized the act of applying for or receiving government benefits. And people shrink from that, people shrink from the humiliation.

Feeney: If you pass the 60-month time limit on TANF benefits, is there any safety net for you?

Piven: Food stamps. You can still get food stamps. The truth is, we don’t even know how these people are surviving.

Feeney: By lumping everyone — or almost everyone — together, does the meme of “the 99 percent” overlook the problems of the extremely poor?

Piven: Well, not as much as the rest of us do. The encampments that the Occupy movement established did welcome the homeless, feed the homeless at their food kitchens; I think they behaved in a very ethical and inclusive way.

Something else is beginning to happen now. There are organizations of the poor, some of them who trace their origins back to the 1960s, and these organizations are very supportive of Occupy. This is not just a movement of college kids whose futures have been destroyed. This isn’t just a movement of workers who find their wages reduced. This should be a movement of all of the people who suffer the burdens of extreme inequality, especially the poor.

Poor and minority people in the United States have been singled out, basically since about 1980, as the targets for right wing and Republican rhetoric — tremendous amounts of castigation of the poor, as if it were poor people’s fault that things are going wrong in America. The argument has been that the big moral problem of the United States is that “those people” don’t get up and work hard, “those people” have babies out of wedlock, “those people” hang out on the stoop and drink beer…. It’s relentless. This kind of propaganda is mainly designed for the great mass of working people in the U.S. to quell whatever sympathies they might have for the poor, but also to instill fear in them of the risk of falling into poverty, the risk of having to depend on a government program or a handout. But the poor are also an audience for this kind of castigating propaganda. It has an effect — it makes people shrink into themselves, and that’s a very bad thing, because then they can’t be citizens, they can’t be political, they can’t protest the conditions under which they live.

If they — when they — link up with the larger protests, this will be an enormous boost to their sense of themselves, of their rights, and of their capacities to fight back against the policies that have brought them this low.

Feeney: Glenn Beck talks about you as though “Frances Fox Piven” were a household name. What’s he saying about you?

Piven: Richard Cloward and I wrote an article published in The Nation in 1966 called “A Strategy to End Poverty” which proposed a big mobilization by community organizers, social workers and poor people to get full benefits under the welfare system, because we had done research showing that the welfare system operated by denying people their legal benefits.

They got hold of this article and labeled it a blueprint for bringing down American capitalism.

I didn’t know that Glenn Beck was featuring me on his television program until my students at the City University of New York put a Glenn Beck chalkboard up on the door of my office which showed that Richard and I were at the trunk of what Glenn Beck called the “tree of revolution,” and the branches went off to include SDS, the financial crisis, Barack Obama — I mean, it was amazing. Then I began to pay attention and Googled myself from time to time, and realized something about the nature of propaganda in contemporary America — things are so confusing, you can tell people anything. The Tea Party believes this. I have gotten many, many hundreds of death threats. They put my address on the Internet. Then I decided, they are drawing on a tradition that goes back to the Inquisition — they must think I’m a witch, because how else could I be responsible for so much?

Lauren Feeney is an award-winning documentary filmmaker and multimedia journalist.