Newspaper logo  
 
 
Local Stories, Events

Ref. : Civic Events

Ref. : Arts & Education Events

Ref. : Public Service Notices

Books, Films, Arts & Education
Letters

Ref. : Letters to the editor

Health Care & Environment

09.23 Nasa launches satellite to precisely track how Earth's ice is melting

09.23 Climate study ‘pulls punches’ to keep polluters on board

09.21 Greed is killing Alaska's salmon habitat – but we can still save it

09.21 Trump administration poses new threat to birds in allowing ‘incidental’ killings

09.20 Al Gore Is Still Optimistic [24:06 video; rather than future Frankenstein governments, how can we better ensure having brilliantly efficient & competent governments?]

09.20 The $11 trillion question Chris Cillizza can't answer

09.20 Florence sparks pollution fears after excrement-filled 'hog lagoons' overflow

09.20 EU must end new petrol and diesel car sales by 2030 to meet climate targets – report

News Media Matters

09.22 Progressives to DNC: It Would Be 'Insane' Not to Hand Over Twitter Account to Ocasio-Cortez

09.20 Morning Edition’s Think Tank Sources Lean to the Right

09.19 Taibbi: Bernie Sanders’ Anti-Amazon Bill Is an Indictment of the Media, Too

Daily: FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

09.23 MARYLAND GOVERNOR REBUFFS CALL FOR CRIMINAL INVESTIGATION INTO BRETT KAVANAUGH ATTEMPTED RAPE ALLEGATIONS [Republicans above the law...]

09.23 Trump Is Strangling the U.S. Refugee Program to Death

09.23 Michael Moore's "Fahrenheit 11/9" Aims Not at Trump But at Those Who Created the Conditions That Led to His Rise

09.23 The Trump Administration's Latest Tax Scam for the Rich [video]

09.23 One Tiny Tax Reform, Billions for America

09.22 As Right-Wingers Push Trump to Fire Rosenstein, Here's What to Do If He Does

09.21 400,000 Americans in 900 Cities Ready to Take to Streets If President Trump Fires Rosenstein After NYT Bombshell

Justice Matters

09.22 Making Tariffs Corrupt Again

09.22 Why isn't Mark Judge testifying about Kavanaugh? He is an alleged witness

High Crimes?

09.20 Trump Should Be More Worried About the Brennan Dossier

09.19 'Killing a generation': one million more children at risk from famine in Yemen [Does America's government have empathy? Does it understand the concept of morality? The Saudi Air Force would be ineffective without U.S. military assistance...]

09.19 ‘Tied to trees and raped’: UN report details Rohingya horrors

09.16 Merchants of Death Profit from the Bombing of Children as a US-Backed War Goes Largely Ignored

Economics, Crony Capitalism

09.23 The Spider’s Web: Britain’s Second Empire [1:18:01 documentary video]

09.23 Why We Have To Break Up Amazon

International & Futurism

09.23 For This Year’s International Day of Peace, Korea Takes the Lead

09.22 Which nation is 'most generous' to refugees? Certainly not the US

09.18 Racist rioting in Chemnitz has reopened Germany’s east-west split [After 10,000 generations, we are all mixed-race. So let's become friends with our cousins instead!]

We are a non-profit Internet-only newspaper publication founded in 1973. Your donation is essential to our survival.

You can also mail a check to:
Baltimore News Network, Inc.
P.O. Box 42581
Baltimore, MD 21284-2581
Google
This site Web
  Only Rats Get Fat as Misdirected Bailout and Stimulus Funds go Down the Rat Hole
Newspaper logo

OPINION FOR A BETTER ECONOMIC STIMULUS PLAN:

Only Rats Get Fat as Misdirected Bailout and Stimulus Funds go Down the Rat Hole

by Dave Lindorff
Wednesday, 14 January 2009
We are facing a grave economic crisis, but the boneheads in the Bush and Obama economic teams are either clueless or are too busy protecting their friends on Wall Street to either know or care.
Congress should do now what it should have done back in the fall: kill the Wall Street bailout program.

After wasting $350 billion on a program that was misrepresented from the outset, and investing hundreds of billions of dollars in failing financial institutions that it could have bought outright for less than it was investing in them (AIG was worth only a few billion dollars in total at the time that the government bailed the company out with an initial investment of $85 billion and Citicorp today is worth less than the $45 billion the government has invested in that failing firm), the Treasury Department, now acting at the direction not of the Bush administration and outgoing Treasurer Hank Paulson, but the Obama administration, is asking for the other half of the Troubled Assets Relief Fund (TARP).

Aside from the corrupt aspect of this $700-billion boondoggle—the handing over of borrowed taxpayer money to the very bankers and investors who created the mess we’re in today—the whole TARP program is premised on a false assumption: namely that the US economy’s problem is a freeze in bank lending.

This is simply untrue.

Three economists at the Minneapolis Fed, in an article published on the Minneapolis Federal Reserve’s website, show using the Fed’s own data that at the very point in September that Paulson and Fed Chairman Ben Bernanke were warning Congressional leaders in a secret session that the bank lending had entirely seized up and that US was “days away” from a meltdown that would lead to riots in the streets and the possible need to impose martial law, in fact interbank lending was at record levels, and that commercial lending was also flowing normally. True, long-term bond interest rates were unusually (though not unprecedentedly) high, but then, that’s what you would expect when the treasury is borrowing enormous sums and lowering interest rates, and thus raising inflation expectations long term.

The real point of the damning report by the Minneapolis Fed’s plucky trio of economists, is that banks aren’t lending not because they don’t have enough capital, but because for the first time in a decade, bankers are being prudent the way banks are supposed to be. They are looking at companies seeking loans and saying, “show me your balance sheet and your order book.” Companies that are in trouble financially, or that are seeing their sales plummet are being rightly turned away, but companies with solid balance sheets and sales are able to borrow what they need.

The other point is that contrary to the claims being made by both Bush and Obama economic teams about the allegedly urgent importance of the keeping credit flowing so that, as Paulson put it, companies will be able to meet payroll and so that they won’t start laying off employees, what is needed is not looser or cheaper credit but programs to protect the incomes of millions of workers who are losing their jobs. (Unemployment, officially now at 7.2 percent, would actually be closer to 17 percent using the more honest methodology in use prior to 1980, before the Reagan administration altered it to hide the impact of the recession of the early '80s.)

The record shows that even as the government has blown $350 billion on a Wall Street bailout, unemployment has soared, housing price declines have accelerated, and retail sales have continued on a six-month death march into the ground. While administration touts are claiming that if there had been no bailout, things would be worse, there is no evidence to support this claim. Things are terrible as it is—in fact the economic collapse is being called the worst since the onset of the Great Depression of the 1930s. How the hell much worse could it have been?

Which brings us back to the current Obama administration demand for the other $350 billion in TARP funds.

Being laid off in America is an unmitigated disaster: no health care, no income, and a nightmare struggle even to obtain food stamps.

It seems clear that what the country is facing is not a unique credit freeze, but rather a classic recession (or depression), in which spiraling industry layoffs of workers is leading to a collapse in spending, which in turn leads to a further slowdown in business and more layoffs. Because the social safety net in America has been systematically shredded, with unemployment benefits only covering a minority of laid-off workers, and then only for a short period and at only a small fraction of their prior wages, the rise in unemployment is crippling the economy. Being laid off in America is an unmitigated disaster: no health care, no income, and a nightmare struggle even to obtain food stamps. (People with homes and savings can be screwed out of assistance because they have too many assets, for example.)

In the case of tax cuts, studies have repeatedly shown that business tax cuts do nothing to stimulate business activity but rather just enrich managers and shareholders, while tax cuts to consumers do not even return a dollar-for-dollar stimulus.

Nor is the other Obama rescue measure—the proposed $800-billion so-called “stimulus” package--adequately addressing the problem. Focusing on tax breaks (especially tax breaks for business) and on large infrastructure projects, is once again wasting precious stimulus resources. In the case of tax cuts, studies have repeatedly shown that business tax cuts do nothing to stimulate business activity but rather just enrich managers and shareholders, while tax cuts to consumers do not even return a dollar-for-dollar stimulus. Meanwhile, investing in infrastructure projects only provides incomes to relatively skilled heavy equipment operators these days, not to the broad masses of people who need help. Moreover, because the pool of workers trained to work on such projects is limited, all boosting that spending does is push up wages in that sector. (Besides, the last thing America needs is more and better roads; it needs a wholly revitalized and expanded mass transit system, inter- and intra-city, and that’s getting short shrift in this proposal.)

A stimulus package that works would expand welfare and food stamp benefits for the chronically unemployed, would boost funding for education—K through college--would provide grants to states and local governments to compensate for declining tax bases, with stipulations that the money be used to hire more teachers, more teachers’ aides, more librarians, more trash collectors, etc., not just lower taxes. It would expand unemployment insurance coverage to all workers and extend those payments for the duration of the recession while raising the payments to provide a real subsistence wage. It would fund government run programs to hire the unemployed, creating jobs that meet the skill-set of the unemployed. The excellent CETA program, part of the grotesquely maligned War on Poverty of the late 1960s, would be a good model for this.

The truth is, the US military budget could be cut in half or even more, without anyone really noticing.

Meanwhile, of course, since we’re talking about big bucks here, the new administration should be looking to the future and figuring out how to get the budget deficit back in check. And there, a first target has to be the military, now chewing through well over $1 trillion a year, most of it wasted and wrongheaded. For starters, the war in Iraq should be ended. Period. Ditto for Afghanistan—a doomed venture. Then too, the 800 overseas military bases should be closed down, along with the nation’s nuclear missile and bomb program (okay, as long as China, Russia, France, the UK, Israel, India, Pakistan and a few other countries have the bomb, we could keep a few nukes for negotiating purposes, pending a global nuclear disarmament agreement, which should be a top priority). The truth is, the US military budget could be cut in half or even more, without anyone really noticing. The US would be the stronger for it, not weaker or more vulnerable. Even at half strength, no potential enemy would want to threaten the US. (In fact, arguably, a US that had pulled back from its current global stance would be far more formidable an opponent if directly threatened.)

We are facing a grave economic crisis, but the boneheads in the Bush and Obama economic teams are either clueless, or are too busy protecting their friends on Wall Street (or in New York Fed Chief and Treasury Secretary nominee Timothy Geithner's case, too busy figuring out ways to cheat on his taxes), to either know or care.

Only mass public action will set this right. Hopefully, the public is getting scared enough now to pry their eyes away from the tube and start demanding that it be done, before another trillion dollars is thrown down a rat hole.


Dave Lindorff in Washington

About the author: Philadelphia journalist Dave Lindorff is a 34-year veteran, an award-winning journalist, a former New York Times contributor, a graduate of the Columbia University Graduate School of Journalism, a two-time Journalism Fulbright Scholar, and the co-author, with Barbara Olshansky, of a well-regarded book on impeachment, The Case for Impeachment. His work is available at www.thiscantbehappening.net.



Copyright © 2009 The Baltimore News Network. All rights reserved.

Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.

Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.

This story was published on January 14, 2009.
 



Public Service Ads:
Verifiable Voting in Maryland