Three Major Issues The Presidential Candidates Are Ignoring

 

 What if they held an election but didn’t discuss the most important economic issues?

That’s what’s happening here in 2012.

Yes, taxes and the deficit are significant. But there are even more crucial issues that will determine whether the country continues to slide into wider income inequality and destroys what’s left of the middle class.

And these three crucial issues have been barely mentioned during a campaign obsessed with who pays what in taxes and who doesn’t.

Dean Baker, of the Center on Economic Policy Research, neatly summed up several of the left-out issues recently.

On one of the most critical economic issues, the so-called free trade pacts such as NAFTA and the more recent Korean trade agreement, both parties agree: they favor them.

The media cooperates in keeping this issue off the table by repeating the misleading claims of proponents of the agreements while omitting or marginalizing critics.

“Free trade” is really the big lie of our economy and our politics. As the critics point out, these agreements should be accurately labeled “corporate rights agreements” since they are much more concerned with that issue than with trade. Not only do they result in lower wages in the U.S. and devastated small farming in other countries, these agreements allow corporations to challenge environmental and labor protections in special courts in which the public has no voice.

Both parties crank up the rhetoric to promote the notion that the  “free trade” is the road to economic prosperity for everybody. But as Baker points out, the reality of “free trade” is far grimmer for those that work for wages to earn a living because it puts “downward pressure on the wages of manufacturing workers by putting them in direct competition with low-wage workers in the developing world.”

The absence of any discussion of these agreements in the political debate exposes a major fraud on the part of both parties. While the Democrats tout themselves as the party of the little guy, their support for “free trade” shows how closely they hew to the corporate agenda on issues that matter most. For the Republicans, their support for “free trade” agreements which, in the real world, prop up some corporations while punishing others shows they’re less interested in picking economic winners and losers than their free market rhetoric lets on.

And there’s a huge trade deal being secretly negotiated right now, the Trans-Pacific Partnership (TPP), which I previously wrote about here, calling it a Free Trade Frankenstein. Others have called it “NAFTA on steroids.” As with other trade negotiations, the public has been kept out while the corporate lobbyists have full access.

The only TPP issue on which the president and his challenger disagree is who could whip out his pen faster and sign the TPP once the secret negotiations are concluded.

The second major economic issue left out of this election is the deeply unpopular 2008 bailout of the financial sector and corporate America, including the $700 billion Troubled Asset Relief Program and the $16 trillion in cheap or free loans the Federal Reserve provided to corporate America in the wake of the financial collapse.

All this financial assistance was provided with little public debate and without any conditions imposed on the recipients.

The Obama administration dismisses all questions about the bailout by insisting that all the TARP money has been paid back. Case closed, the administration contends.

But could a different kind of bailout, one which imposed specific conditions on banks and corporations, helped more struggling Americans than the one we got, which propped up bank and corporate executives? Why did those portions of TARP that were targeted at ordinary Americans facing foreclosure fail so badly?

And how does this bailout, which picked winners and losers, jibe with the Republicans’ free market rhetoric? What about a belated bailout for the rest of us? Plenty of fodder for tough questions for the president and his challenger, if anybody cared to ask.

The third issue is one that the two parties have disagreed on: increasing the minimum wage.

As a candidate in 2008, President Obama promised to raise the federal minimum wage from $7.25 an hour to $9.50 by 2011 but has taken no action to do so. For his part, Republican challenger Mitt Romney has said he favors tying the minimum wage to inflation, until the right wing of his party objected.

According to a recent paper by the Economic Policy Institute, phasing in the $9.80 minimum wage would raise the wages for 28 million workers, who would earn an additional $40 billion during the phase-in, while gross domestic product would increase by $25 billion and 100,000 new jobs would be created.

We need a robust debate on these issues in the remaining weeks of the presidential campaign that challenges the president and Mr. Romney on where they stand and what actions they’ll take, not just a stale rehash of the same old arguments on taxes. But we won’t get that debate unless we demand it.

 

Federal Reserve / Income inequality / Martin Column / Mitt Romney / TARP / TPP - 09/25/2012

Purchasing power, One-Percent style

There’s been a good deal of talk about how the Occupy movement “changed the debate in this country” to focus on income inequality.

But while members of Occupy Wall Street skirmished  with police over a patch of ground in lower Manhattan, the members of the country’s top 1 percent bypassed the political debate and have gone back to work wielding their influence in the corridors of power.

It’s been a particularly wrenching patch for the 99 percent, who are excluded from those corridors.

First, Congress this week, with President Obama’s blessing, passed something Republicans misleadingly labeled a JOBS Act, which basically gives a green light for fraud by removing important investor protections under the guise of promoting startups.

Second, Congress has been pushing financial regulators to weaken even further a mild piece of sensible financial regulation that would prevent banks from making risky gambles with their own accounts – the ones guaranteed by you and me as taxpayers. It’s the final coup de grace marginalizing the views of one-time Federal Reserve chair Paul Volcker, for whom the rule is named. Volcker has been a lonely voice among the president’s financial advisers, advocating stronger action to rein in the behavior of the too big to fail banks. Largely ignored by the president, Volcker’s views are getting stomped by Congress and financial regulators.

There is no mystery why we have suffered these setbacks: our political system has been overwhelmed by the power of money. The bankers lobby has swarmed the Capitol to drown any opposition to its views. The bankers have also come with their checkbooks in an election year, and they’re looking to buy whoever is for sale, of whatever party. According to a new report by Public Citizen, politicians who advocated for a weaker Volcker rule got an average of $388,010 in contributions from the financial sector – more than four times as much as politicians advocating to strengthen the rule, who still managed to haul in an average of $96,897 apiece.

Our politicians, insulated by a celebrity-obsessed media and swaddled in Super PAC cash, could care less about the consent of the governed. Republicans have only to wave around their magic wand that makes all problems the fault of government regulation in order to hypnotize their followers, while the Democrats only have to remind their followers how scary the Republicans are to keep them in line.

Meanwhile, the Occupy movement, which started with such promise in galvanizing public support against corporate domination of our politics, has splintered into a thousand pieces, wasting precious energy and time in confrontations with police rather than building a broad-shouldered coalition working on many different social and political fronts.

The challenge for Occupy remains the same: building a force that actually includes the members of the 99 percent who have not yet gotten active, who may be still stuck in apathy, cynicism or hopelessness or who may simply not have a perspective that includes social and political action.

The next opportunity is a series of protests planned nationwide for May 1, which has traditionally been a time of action around the immigration rights issue. This year occupiers, labor allies and a variety of community organizations are planning to join their issues. Can we forge a message strong enough and the numbers large enough to rock the corridors of power?

Congress / Martin Column / Occupy / Paul Volcker - 03/28/2012

All the President's Millionaires

While there’s some shuffling of desks close to President Obama, the most important factor isn’t changing ¬– the 1 percent is retaining a tight grip on the administration.

Exit Bill Daley (income from J.P. Morgan in 2010 = $8.7 million). Enter Jacob Lew (income from Citigroup in 2010 = $1.1 million). Lew was CEO of the Citigroup division that invested in credit default swaps, among other risky investments that sank the economy. But the bank, which survived only thanks to taxpayer generosity, paid Lew a $900,000 bonus.
Were they really paying him for overseeing the investments that nearly sank the bank – or were they compensating him for the work he did for the bank while he served in the Clinton administration, betting that Lew would serve again?
And who can forget Daley’s predecessor, Rahm Emanuel, who got paid $16.2 million during a 2 1/2/ year as an investment banker, and remained a hedge fund favorite?
Meanwhile, still firmly in place near President Obama’s ear as his closest outside adviser on creating jobs is Jeffrey Immelt, CEO of General Electric. The Center for Public Integrity’s i-watch news is out with a devastating investigation into how GE under Immelt lost more than $1 billion getting into the subprime loan business, ignoring its own whistleblowers who were trying to tell their bosses how the irresponsible pursuit of profits led to widespread fraud.
This is more than just inside baseball – with these people in charge of the Democrats and the Republicans as well, there’s little hope that the administration will come to grips with the foreclosure crisis – or hold bankers accountable for looting and tanking the economy. Only a huge public outcry, much larger than the Occupy has mustered so far, can hope to change that.

Martin Column / Occupy / Outrage / President Barack Obama - 01/09/2012

Occupy the Supercommittee

Well they can’t ignore income inequality anymore.

Thank you Occupy Wall Street.

But despite the faux populist tone and understanding emanating from the White House, I’m not convinced President Obama or the rest of our politicians are getting the message.

If they were getting it, they wouldn’t be continuing to pursue policies that place the costs of our continuing economic crisis squarely on the backs of the 99 percent, while the 1 percent uses their political clout to avoid any inconvenience.

For example, the Obama administration has allowed California to cut hundreds of millions of dollars to Medi-Cal, which provides health care to the state’s poorest residents.

If the president’s party was getting it, the Democrats on the so-called Super Committee wouldn’t be pursuing a host of draconian cuts including $3 trillion in cuts to federal health care programs as part of a so-called “grand bargain,” along with some modest tax increases for the country’s wealthiest, you know “job creators,” who are just chomping at the bit to stop outsourcing jobs as soon as they cut yet another tax cut.

As for the Republicans, they’re maintaining the position that their corporate and Wall Street benefactors should have to pay fewer taxes, while the rest of us should get along with less.

I don’t know who these politicians think this bargaining is so grand for, certainly not the 99 percent.

They talk gamely about having “skin in the game” as though they’d be doing the suffering as a result of their proposed cuts. Meanwhile, the House members of the supercommittee did exceptionally well in their service during the third quarter, raking in nearly $372,000 in fundraising from the nation’s financial sector.

This disreputable bunch have turned what is supposed to be a serious democratic process into a demonstration of what our legislature has become – an auction where the government is for sale to the highest bidder, behind closed doors.

As the weather gets frostier in the nation’s capital, the Occupy movement might want to consider the supercommittee’s digs as someplace to get in out from out of the cold.

Martin Column / Occupy / Supercommittee - 10/31/2011

The Credit Wolves Stalk South-Central

Before they fell into a costly cycle of subprime refinancing, Harold and Patricia King could afford to live in their modest two-bedroom home in south-central Los Angeles. They had paid $17,500 for it in 1968 with the help of a low-interest G.I loan.They raised two children and two grandchildren there. Harold retired in 1994 after 30 years on General Motors’ assembly line. His wife retired a few years later from her clerical job with the school district. They had a monthly fixed income of $2,900 and a fixed monthly mortgage payment of less than $1,000. They could handle it.

Unlike some who were able to take advantage of the cash they squeezed from the value of their homes, the Kings have little more than financial devastation to show for it. They refinanced 10 times — eight times between 2000 and 2006 — through various financial institutions. They wound up with more than a half million dollars in debt and payments more than their monthly income. Earlier this year they joined the more than 1 million other homeowners across the country that face foreclosure.

While we’ve seen and heard lots of stories of families suffering through losing homes they could never actually afford, the King’s saga puts into sharp focus one of the overlooked aspects of the on-going foreclosure crisis –many homeowners who had traditional– and affordable – mortgage loans were sold into subprime hell via refinancing deals.

In its 2006 study, “Losing Ground,” the Center for Responsible Lending found that between 1998 and 2006, “the majority of subprime loans have been refinances rather than purchase mortgages to buy homes,” and that homeowners who repeatedly refinance face a higher likelihood of facing foreclosure.

In February, the Kings packed their belongings in boxes, preparing for the loss of their long-time home. But they decided to fight for the home they’ve lived in for more than 40 years.  With the help of their lawyer, they’ve been able to stave off foreclosure, at least through the rest of the year. They’ve gone on the offense, suing their most recent lenders earlier this year for fraud and elder abuse.

Tracking the complex cast of characters and institutions with key roles on the business side of the Kings’ plight also offers a stark reminder that the explosive growth in subprime created vast wealth that never trickled down to hard-hit communities like south-central Los Angeles, a once-vibrant largely African-American and Latino neighborhood increasingly blighted by the lasting marks of the severe recession – high unemployment and high rates of foreclosure.

Take for example Deutsch Bank, which bought the MortgageIT firm that provided one of their Kings’ refinancings. In 2009, the banking giant increased its compensation to its executive board nine-fold over the previous year, led by the bank’s president, who was paid $13 million. Deutsch Bank’s path through the rocky financial crisis was helped along by its share of more than $50 billion it got in funds from the taxpayer bailout–funds the federal government paid to insurance giant AIG, which were then passed on to AIG’s clients – what has been labeled the “back-door bailout.”

The Kings also crossed paths with a lesser-known firm called Green Tree, which at one time was hired to act as the servicer on their loan – collecting the Kings’ mortgage payments every month. Founded by Lawrence Coss, a former car salesman, the firm had made a fortune in the 1990s by loaning money to people to buy mobile homes. Around the time Harold King was retiring from GM, Coss was drawing attention as the country’s highest-paid executive, winning a $69 million bonus ­– the largest bonus of all time when it was awarded in 1996. The following year he did even better, with a $102 million bonus. However, the fat profits that got Coss the bonus later turned out to be a mirage, built from bundles of risky loans and shaky accounting. Coss had to give some of his bonus back but managed to hang onto his ranches and philanthropic foundation. If anybody had been paying attention back in 2001, the unraveling of Green Tree’s business could have provided an early warning signal of the problems to come.

But in places like south-central Los Angeles, the country’s financial institutions were on a lending spree.  The Kings originally borrowed some money against their equity to supplement their retirement income. But then a series of lenders decided that the retired couple on a fixed income were good candidates for much larger refinancing.  What they offered the Kings were adjustable-interest rate loans with low teaser rates and exorbitant closing costs, fees and prepayment penalties. The Kings readily acknowledge now that they are financially unsophisticated and didn’t understand what they were getting themselves into. The deeper they went into debt the worse they felt.

“I felt guilty; I didn’t want to discuss it,” Patricia King says now. “I knew that something was deeply wrong. You hope for the best. But nothing good ever happened.”

Eventually lenders told the Kings that they needed to find somebody with better credit if they wanted to refinance their home. They brought in their 35-year-old grandson Antonio, who at the time worked at the Coca-Cola bottling plant.

According to the Kings’ lawsuit, Antonio King informed lenders that his monthly income was $3,700 a month, but when the broker or lender prepared the application, it showed his monthly income as $10,200 a month. The application, submitted on Antonio King’s behalf, also exaggerated the value of the home, from $154,000 to $540,000.  The Kings’ lawyer, Philip Koebel said of their grandson: “He threw himself to the credit wolves.”

Koebel said Antionio King found an ad for what sounded like an attractive new loan with a monthly payment of about $1,000 a month.

The Kings didn’t understand that they were getting into a negative amortization loan. The Kings were told that they would save $1,000.00 per month in comparison to a conventional mortgage if they made the minimum payment. They were not told that the minimum payment didn't even cover the interest. They were not told that the difference would be added to the principal of their mortgage and that they would be charged additional interest on the ever increasing balance of their mortgage.

With the money they got, the Kings paid off the previous loan. But they couldn’t keep up with the new payments. Antonio tried to work out a loan modification but Green Tree, which was servicing the loan,  “was not interested in making the loan affordable to the Kings,” according to their lawsuit.  Eventually Antonio filed bankruptcy in an effort to save his grandparents’ house. His 80-year old grandfather mows lawns in the neighborhood to bring in a couple of hundred dollars a month.

The lenders have fought to have the Kings lawsuit thrown out, so far unsuccessfully. In court papers their defense lawyers characterize the lawsuit as nothing more than “vague allegations and broad generalizations.” The Kings, they say, were “reaping the rewards of the strong housing market at the time and taking cash-out payment after cash-out payment each time they refinanced the loans.”

The Kings “were clearly very familiar with the loan refinancing process,” the lenders’ lawyers contend.

Like many others, the Kings didn’t see that the world had fundamentally changed, Koebel said. “Once a mortgage loan had been a relatively simple matter; a talk with a banker and a fixed payment for life. They’re not supposed to put your home at risk.”

Foreclosures / Martin Column - 08/09/2010

Administration still won't rein in lavish pay schemes

Imagine if you could report the value of your work on your tax return, rather than your actual income. At the end of the year, you’d issue yourself a W2 or a 1099 based on a comparison of how other people who did the same kind of work valued their efforts. The lower the worth you put on your work, the lower your taxes. Let’s just say the IRS wouldn’t be too happy with a system that encouraged low-balling.

Wall Street bankers were able to arrange an equally self-serving compensation system for themselves - and they got away with it.

Executive Pay / Harvey Column - 09/20/2009