During any budget debate, politicians who want to cut spending on salaries and benefits for the middle classes and on public services never fail to invoke the family budget as a model for how the government should deal with its own finances. We are repeatedly told that just as families have to make hard choices about what to spend their money on in order to stay within their income, so should the government. This comparison invokes the cozy image of thrifty families getting together around the kitchen table and making decisions about what they can afford based on their income, and making painful cuts when necessary.

This is a fantasy, especially in America, a country in which the general public has a notoriously low savings rate and exists on credit card debt and has nowhere near enough money saved to meet their retirement needs. In fact, living beyond their income seems to be the norm in families, not the exception.

Actually there are good reasons for not trying to balance the budget right now. High unemployment is a huge problem right now. The devastating effects it could be ameliorated by government spending a lot of money on projects that put people back to work. While increasing the debt is not good as a permanent policy, there are times when it makes the most sense in the short term and this is one of them. Even families realize that going into debt to purchase a home or paying for college can be a good thing.

So in reality, the federal government’s budgeting process is already like that of the average family. Just not in the way the moralizing speakers intend.

Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), exposes all the myths and lies about Social Security being in crisis and requiring a radical overhaul.

Fortunately, the program is fundamentally solid. While you can sound really smart in Washington by saying that Social Security is going bankrupt, the facts say the opposite. According to the Social Security trustees’ report, if we did absolutely nothing the program could pay every penny of scheduled benefits through the year 2036.

Even if we never did anything, Social Security could always pay near 80 percent of scheduled benefits.
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Social Security is a great program that does exactly what it was supposed to do. It provides a core retirement income as well as insurance against disability and support for survivors. It has extremely low administrative costs and little fraud. The only problem is the politicians who say they want to save it.

… in two minutes, 15 seconds. He does a nice job. His cartooning skills are pretty good, too.

Michael Lewis appeared on Stephen Colbert’s show recently to discuss the financial crisis. I realize that this is a comedy show and that the humor is provided by Colbert using his guests as foils, but on occasion Colbert gets carried away and talks far too much. This was one of those episodes where he kept on interrupting Lewis and became really annoying. Lewis as a guest was interesting and amusing in his own right and Colbert was a nuisance and a distraction.

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Those following business news will have read that many European countries (Greece, Ireland, Portugal, Spain, and Italy) are facing financial crises and are looking for help from external sources. The causes of their predicament are drearily familiar: a banking sector that lent money recklessly on the basis of endless growth in real estate prices and now that that market collapsed, the big banks are demanding that governments must bail them out or that the entire financial system will collapse. It is exactly the kind of extortion that happens in the US. This is why the terms ‘banksters’, which was coined as an amalgam of bankers and gangsters during the time of the Great Depression, is so apropos in describing them.

Currently all eyes are on Greece but in an article for Vanity Fair titled When Irish Eyes Are Crying, Michael Lewis describes the spectacular rise, and even more spectacular fall, of the Irish economy. “What has occurred in Ireland since then is without precedent in economic history. By the start of the new millennium, the Irish poverty rate was under 6 percent and by 2006 Ireland was one of the richest countries in the world.” And yet, within a few years, it had completely tanked.

An Irish economist named Morgan Kelly, whose estimates of Irish bank losses have been the most prescient, made a back-of-the-envelope calculation that puts the losses of all Irish banks at roughly 106 billion euros. (Think $10 trillion.) At the rate money currently flows into the Irish treasury, Irish bank losses alone would absorb every penny of Irish taxes for at least the next three years.
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In late 2006, the unemployment rate stood at a bit more than 4 percent; now it’s 14 percent and climbing toward rates not experienced since the mid-1980s. Just a few years ago, Ireland was able to borrow money more cheaply than Germany; now, if it can borrow at all, it will be charged interest rates nearly 6 percent higher than Germany, another echo of a distant past. The Irish budget deficit—which three years ago was a surplus—is now 32 percent of its G.D.P., the highest by far in the history of the Eurozone. One credit-analysis firm has judged Ireland the third-most-likely country to default. Not quite as risky for the global investor as Venezuela, but riskier than Iraq. Distinctly Third World, in any case.

Ireland managed to collapse its banking sector without all the new fangled gimmickry of Wall Street with its derivatives and Collateralized Debt Obligations (CDOs) and Structured Investment Vehicles (SIVs). They lost money the old-fashioned way, with a classic bubble where they kept buying and selling each other real estate at escalating prices using easily available mortgages on the assumption that prices would continue to rise.

But unlike in the US where a homeowner is only liable for the value of the mortgage and thus can walk away from their home if its market value drops below the mortgage amount (a state known as being ‘underwater’ or ‘upside down’), leaving the bank to get what it can from the foreclosed property, in Ireland you are forced to pay back to the bank what you owe. This means that the average person faces unavoidable large and inescapable debts.

Ireland’s 87 percent rate of home-ownership is among the highest in the world. There’s no such thing as a non-recourse home mortgage in Ireland. The guy who pays too much for his house is not allowed to simply hand the keys to the bank and walk away. He’s on the hook, personally, for whatever he borrowed. Across Ireland, people are unable to extract themselves from their houses or their bank loans. Irish people will tell you that, because of their sad history of dispossession, owning a home is not just a way to avoid paying rent but a mark of freedom. In their rush to freedom, the Irish built their own prisons. And their leaders helped them to do it.

There is one major difference in what happened in Ireland and in the US. As Lewis says, “In America the banks went down, but the big shots in them still got rich; in Ireland the big shots went down with the banks.”

But despite that one slightly positive aspect, the Irish banks are still draining the economy. In March, the Irish government said that they need another 24 billion euros to ‘save’ the banks, whose ratings have been reduced to junk status and the total cost of the bailouts keeps continually rising.

Currently Greece is in the headlines because of fears that it will default on its debts. I do not think this will happen because the banksters will demand that money be loaned to the Greek government so that it can then give it to the banks. Since these banks have global reach, they can exert pressure on the French and German governments to lend the Greek government the money. Of course, those governments will tell their people that this ‘aid’ is in order to save the European Union when it is really driven by the banksters’ extortion.

With all the talk of the deficit and national debt, it is illustrative to see the chart that the Center for Budget and Policy Priorities has published that shows the source of the projected budget deficits.

The main sources are the Bush-Obama wars and the Bush-Obama tax cuts for the rich, not ‘big government’, as is claimed by those who want to use the deficit as an excuse to further reduce government services and, more importantly, reduce government oversight over business.

This should come as no surprise to those who follow the numbers but it is worth periodically reiterating.

The oligarchy has had its greedy eyes on the Social Security trust fund for a long time, seeking to divert all those funds to Wall Street to goose up the stock market and enrich themselves with it. The problem is that people are rightly suspicious of efforts to tamper with their one secure source of retirement funds.

Since the Republicans have traditionally been seen as the servants of the oligarchy, people have quickly reacted when they make any moves to undermine Social Security, as George W. Bush painfully discovered in his second term. The oligarchy knows that they have a better chance when Democrats are in power, which is why we need to be especially vigilant and oppose the current moves by the Obama administration. The reduction in payroll tax contributions by employees that was part of Obama’s budget deal at the end of 2010 was for me a sign that he was seeking to undermine Social Security by reducing its revenue stream, thus artificially creating a crisis where none should exist.

His latest proposal to give employers a similar reduction in their contribution to payroll taxes, thus further exacerbating the problem, is confirmation of the fact that he wants to set in motion the wheels to privatize Social Security.

We need to realize that Obama, although he may make some positive moves on some social issues dear to liberals, is barely distinguishable from the Republicans when it comes to being a servant of the oligarchy.

In this article in the New York Times, one paragraph jumped out at me because it touched a nerve.

“On the one hand the markets want a deal,” said Howard Gleckman, an editor and analyst at the Tax Policy Center, a joint effort of two centrist research organizations, the Urban Institute and the Brookings Institution. “On the other they don’t want a deal that’s going to send the economy back into recession.”

I find it really annoying when people speak so glibly about what ‘the markets’ want and don’t want. How could they possibly know? The stock markets involve millions of people trading billions of shares each day for all manner of reasons. The idea that one can look at the behavior of stock market indices and deduce what is causing it to behave in a particular way is ludicrous except in the case of major events (like the financial collapse) in which case almost anyone can assign cause without being a Wall Street market ‘expert’. And yet these people do it on a daily, or even hourly, basis.

Bob Garfield of the radio show On The Media had a droll piece on this glib single factor analysis. (Note: The audio is wrong and different from the transcript. To hear the seven minutes audio report, click on the link below, and begin at the 24:50 minute mark.)

The way these analysts speak so confidently about something they cannot possibly know reminds me strongly of theologians who also speak confidently about the properties of god and what he wants, even though they have no idea either. The way that politicians try so hard to propitiate ‘the market’ by doing things that will raise the stock indices also reminds me of the way that religious people try to do things to please their inscrutable gods.

I wrote earlier about how European companies now feel free to abuse US workers the way that US companies abuse workers in the less developed world. Now come reports that China has also turned the tables and Chinese companies are abusing European workers, as described in this story about the giant Chinese shipping company Cosco.

Cosco doesn’t allow unions or collective bargaining among its 500-plus Greek workers. The unions report that Cosco workers are largely unskilled and working on a temporary basis, with no benefits. Despite persistent rumors about their labor conditions, until now no Cosco workers have spoken out to the media.

But a former Cosco worker, who had just been sacked, spoke to NPR about work conditions on the Chinese-run pier, on the condition that his name not be used. The worker says he regularly worked eight hours a day with no meal breaks and no toilet breaks.

“I think their actions are breaking the law,” the worker said. “The rights are to have something to eat around 12 o’clock [and] to have our breaks, and not work like a dog straight [through] from morning till afternoon.”

He says workers were told by supervisors to urinate into the sea, rather than taking toilet breaks. Those operating straddle carriers had to take cups up into their cabins to urinate into, and he says they were not given breaks, either, despite the clear dangers of operating at such a height for so long.

The worker says he was paid 600 euros a month — about 50 euros each shift — around half the salary at the neighboring Greek-operated pier, with no extra money for working night shifts or weekends. There was no set schedule; he was kept on 24-hour call for nine months.

The Greek government seems unwilling or unable to protest because it desperately needs Chinese investments. Greece is vulnerable because of its deep economic crisis caused by the same banking interests that caused the debacle in the US.

When you read of the moves to ‘bail out’ Greece by the European Union, keep in mind that what is being advocated is a bail out of the banks, since the bail out money will pass through the Greek government to the banks to make up for their losses.

The bankers rule the world and are driving a race to the bottom for the world’s workers.

Last month I wrote about how the Swedish corporation IKEA became transformed from a model employer in Sweden to an abusive one in the US and that this was because the US does not provide the same level of protections for workers that Sweden does.

Harold Meyerson writes that IKEA is just one example of a trend in which foreign companies see the US as the new home for sweatshops. Deutsche Bank, for example, has been accused of becoming the largest slumlord in Los Angeles, doing things it could never have done in its home country of Germany.
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