USA > History > 2011 > Economy (V)
Dissenting, or Seeking Shelter?
Stake a Claim at Protests
The New York Times
By ADAM NAGOURNEY
— Robert Gaffney, who came here from Oklahoma 10 years ago, settled on a scrap
of burlap the other day on a grassy hill outside City Hall, surveying the tents
and crowd that make up Occupy Los Angeles. For many of his neighbors at City
Hall Park, this is a center of protest and political grievance. For Mr. Gaffney,
it is the latest piece of land that he calls home.
It is, he said, more comfortable than the sidewalk in Hollywood that he has been
living on for the last few months. It is safer and less sketchy than Skid Row,
the homeless colony a few blocks away.
“It’s different here,” said Mr. Gaffney, 31. “I find myself getting sleep.
Interesting conversation.” He held up a pair of dirty socks. “But I haven’t
figured out how to do laundry.”
Mr. Gaffney is hardly an unusual presence in the Occupy demonstrations across
the country these days. From Los Angeles to Wall Street, from Denver to Boston,
homeless men and women have joined the protesters in large numbers, or at least
have settled in beside them for the night. While the economic deprivation they
suffer might symbolize the grievance at the heart of this protest, they have
come less for the cause than for what they almost invariably describe as an
easier existence. There is food, as well as bathrooms, safety, company and lots
of activity to allow them to pass away their days.
“When the tents went up, everybody moved in,” Douglas Marra, a homeless person
in Denver, said. “They knew they could get stuff for free.”
But their presence is posing a mounting quandary for protesters and the
authorities, and divisions have arisen among protesters across the country about
how much, if at all, to embrace the interlopers. The rising number of homeless,
many of them suffering from mental disorders, has made it easier for Occupy’s
opponents to belittle the movement as vagrant and lawless and has raised the
pressure on municipal authorities to crack down.
In Atlanta on Saturday, demonstrators who had been thrown out of Woodruff Park
by the police moved into upper floors of the Peachtree-Pine homeless shelter in
a full-scale embrace of the cause of the 600 residents who live below them. It
gave the demonstration more of a political focus, and not incidentally expanded
“The homeless bring numbers,” said Alex Smith Jr., 50, a former repairman who
lives at the shelter and joined the protests. “They bring a voice.”
But in places like Nashville, New York, Los Angeles and Oakland, Calif.,
protesters talk about feeling unsafe because of the presence of homeless people.
“There are a lot of them here that have mental problems and that need help. They
are in the wrong place,” said Jessica Anderson, 22, who is herself homeless,
sitting with friends on a tarp at the Los Angeles site. “They have been creating
more problems. There was one guy who showed up last night and he would not shut
up: Saying all kinds of crazy stuff all night.”
In Nashville, organizers described the homeless as more of a detriment to the
movement than an asset. “This is keeping people away: It distracts a lot of
energy away from the issues we’re fighting for when we’re just managing life in
the camp,” said Bob Titley 56, one of the participants in Occupy Nashville. “A
lot of women felt unsafe camping out at night. It discourages a lot of people
The influx of homeless has been continuing at a steady pace, even as the overall
populations of some of the demonstrations have faded under the pressures of
dropping temperatures, the passage of time and increasingly aggressive police
tactics. Some organizers estimated that as many as 30 percent of the people
camping out in some cities were chronically homeless, a figure that seems
impossible to verify.
That said, in many encampments, the evidence of a homeless population was
plentiful amid the more high-quality tents: blankets, shopping carts, piles of
clothes, and people sleeping on the grass, a sheet pulled over their heads. Nan
Roman, president of the National Alliance to End Homelessness, said the
demonstrators and the homeless have some shared interests.
“Homeless people, I think, identify with Occupy because it’s about inequities,”
she said. “And it’s another group that is trying to live outside. It’s not
surprising that there’s a confluence here.”
Interviews across the country attest to the complexity of the situation.
At Zuccotti Park in Lower Manhattan, some homeless have integrated themselves
into Occupy Wall Street, protesters said. But others, they said, appeared to be
opportunists looking for free food and clothes, and were often disruptive. Hero
Vincent, 21, said that he was a member of a security team that roamed the park
and has several times broken up disputes involving people who appeared to be
“It’s bad for most of us who came here to build a movement,” he said. “We didn’t
come here to start a recovery institution.”
In Chicago, where there has been a steady influx of homeless people, organizers
said there were just occasional problems, involving drinking alcohol or
provoking violence. “We just ask them to leave,” said Taylor Stekkinger, 18, a
member the group’s organizational committee.
While some homeless people said they were appreciative of the protesters’ cause,
other said they were more grateful for the amenities. Cameron Rose, 26, who
spent the past two months sleeping in restrooms and under highways in Oakland,
called it a welcome respite from a life of worry about food and safety.
“If I need clothes, someone donates clothes,” he said. “If I need to take a
shower, someone helps me find a place to do that. If I need medical help, there
are medics here. Everyone gets fed well, 24/7. I need medical marijuana but I
have no money. Here, people give it to me.”
At a food tent here in Los Angeles, the homeless are often the first in line
when a pot of stew comes out, many of them wandering over from Skid Row.
“If you are hungry and are in need of a meal, we will serve you as long as you
do not disrupt the occupiers,” said Michele Watson, one of the managers of the
food tent, on a soft and sunny day that was a reminder of why so many homeless
people have settled in this city. “We don’t turn anyone away. I don’t care what
your address is.”
contributed by Jess Bidgood from Boston, Robbie Brown from Atlanta, Dan Frosch
from Denver, Ian Lovett from Los Angeles, Colin Moynihan from New York, Malia
Wollan from Oakland, Calif., and Steven Yaccino from Chicago.
Dissenting, or Seeking Shelter? Homeless Stake a Claim at
Protests, NYT, 31.10.2011,
Cities Begin Cracking Down on ‘Occupy’ Protests
The New York Times
By JESSE McKINLEY and ABBY GOODNOUGH
Calif. — After weeks of cautiously accepting the teeming round-the-clock
protests spawned by Occupy Wall Street, several cities have come to the end of
their patience and others appear to be not far behind.
Here in Oakland, in a scene reminiscent of the antiwar protests of the 1960s,
the police filled downtown streets with tear gas late Tuesday to stop throngs of
protesters from re-entering a City Hall plaza that had been cleared of their
encampment earlier in the day. And those protests, which resulted in more than
100 arrests and at least one life-threatening injury, appeared ready to ignite
again on Wednesday night as supporters of the Occupy movement promised to retake
the square. Early Wednesday evening, city officials were trying to defuse the
situation, opening streets around City Hall, though the encampment site was
still fenced off.
But after about an hour of speeches, the crowd removed the fences. The number of
protesters swelled to about 3,000 people, but the demonstration remained
peaceful. Leaders led a series of call-and-response chants. “Now the whole world
is watching Oakland,” was one phrase that was repeated as passing cars honked in
approval. That police had gone, compared with a heavy presence the night before.
The official protest broke up around 10 p.m. local time, peacefully, with
protesters dancing, carrying American flags and generally celebrating what
seemed to be a well-attended demonstration of some 3,000 people.
Shortly after the end of that protest, however, hundreds of demonstrators began
to wander down Broadway, Oakland’s central thoroughfare, in an unplanned march.
The Oakland police, who had been noticeably absent during the protests at City
Hall, began donning protective riot gear as demonstrators upped their rhetoric
and attempted to board San Francisco Bay Area Rapid Transit trains. Several
entrances to the BART system were closed, agitating protesters and adding to an
increasingly tense atmosphere in Oakland, which had exploded in violence a mere
24 hours before.
The impromptu march continued west toward Oakland’s waterfront as it became more
apparent that there was little central organizing structure as the night grew
About 10:25 p.m., a crowd of a thousand protesters arrived at Oakland’s police
headquarters and began milling about in front. Some attempted to put garbage
cans in the street, while others beseeched the crowd to remain peaceful. The
Oakland police manned the front door of their headquarters and maintained a
Across the bay, meanwhile, in the usually liberal environs of San Francisco,
city officials there had also seemingly hit their breaking point, warning
several hundred protesters that they were in violation of the law by camping at
a downtown site after voicing concerns about unhealthy and often squalid
conditions in the camp, including garbage, vermin and human waste.
In Atlanta, Mayor Kasim Reed ordered the police to arrest more than 50
protesters early Wednesday and remove their tents from a downtown park after
deciding that the situation had become unsafe, despite originally issuing
executive orders to let them camp there overnight.
And like many of his mayoral colleagues nationwide, Mr. Reed openly expressed
frustration with the protesters’ methods.
“The attitude I have seen here is not consistent with any civil rights protests
I have seen in Atlanta,” Mr. Reed said in an interview, “and certainly not
consistent with the most respected forms of civil disobedience.”
Similar confrontations could soon come to pass in other cities, including
Providence, R.I., where Mayor Angel Taveras has vowed to seek a court order to
remove protesters from Burnside Park, which they have occupied since Oct. 15.
And while other, bigger cities, including New York, Boston and Philadelphia,
have taken a more tolerant view of the protests — for now — officials are still
grappling with growing concerns about crime, sanitation and homelessness at the
encampments. Even in Los Angeles, where the City Council passed a resolution in
support of the protesters, Mayor Antonio R. Villaraigosa warned Wednesday that
they would not be allowed to remain outside City Hall indefinitely.
Dot Joyce, a spokeswoman for Mayor Thomas M. Menino of Boston, echoed that.
“It’s a daily assessment for us,” she said.
More and more, mayors across the country say they have found themselves walking
a complex and politically delicate line: simultaneously wanting to respect the
right to free speech and assembly, but increasingly concerned that the protests
cannot stay orderly and safe.
“We can do lots of different things to help them on our end,” said Mr. Taveras,
who estimates that roughly 200 people have camped out in Providence despite a
city rule forbidding such behavior. “But we cannot allow an indefinite stay
there, and we can’t allow them to continue to violate the law.”
The protests showed little sign of slacking. In Chicago, for example,
demonstrators gathered Wednesday outside the office of Mayor Rahm Emanuel
requesting 24-hour access to Grant Park and demanding that charges be dropped
against the more than 300 protesters arrested there in the past weeks.
“He’s denying us our constitutional right to not only free speech, but peaceful
continual assembly,” said Andy Manos, 32, one of the protesters.
Even in Democratic Chicago, officials seemed to straining to allow for dissent,
while maintaining order. “We’ve been working hard to strike a balance,” said
Chris Mather, a spokeswoman for Mr. Emanuel. Ms. Mather added that the mayor’s
office had tried to set up meetings with protesters, who themselves said they
were trying to find a permanent home for their demonstrations.
Indeed, some city officials said the tensions surrounding the Occupy protests
have been increased by the fact that many of the groups involved have few
“It’s a significant challenge to deal with their decision-making process,” said
Richard Negrin, the managing director of Philadelphia, where tents form a
protest village outside City Hall.
In Oakland, where one protester — Scott Olsen, an Iraq war veteran — was in
critical condition at a local hospital after being struck in the head with a
projectile during the chaotic street battle on Tuesday, city officials defended
their actions, saying the police used tear gas after being pelted with rocks.
The police are investigating what happened to Mr. Olsen.
As the protests continued, worries about possible violence percolated.
In Atlanta, Mr. Reed said the last straw came Tuesday, when he said a man with
an AK-47 assault rifle joined the protesters in Woodruff Park. On Wednesday,
after all protesters who had been arrested were released on bond, some said the
man with the assault rifle — who was carrying it legally under Georgia law — was
not part of their group and should not have been a factor in shutting them down.
“We don’t even know that guy,” said Candi Cunard, 26.
Protest organizers said many of the troublemakers in Oakland and elsewhere were
not part of the Occupy movement, but rather were anarchists or others with
simply with a taste for mayhem.
“The people throwing things at police and being violent are not part of our ‘99
Percent’ occupation,” said Momo Aleamotua, 19, a student from Oakland. “They’re
not us, and they’re not welcome.”
Still, the scenes of tear gas in the streets and provocative graffiti —
including one spray-painted message reading “Kill Pigs” in Oakland — have been
seized on by some Republicans to try to make the protests a political liability
On Tuesday, for example, the National Republican Senatorial Committee circulated
a report that two people living in the Occupy Boston tent with a young child had
been arrested for selling heroin, and paired it with comments from Elizabeth
Warren, a Democratic contender for Senate from Massachusetts, in which she said
that her work as a consumer advocate had helped inspire the Occupy movement.
“She’s not only standing with those breaking the law and being arrested,” the
committee’s release read, “She’s actually taking credit for them.”
The fear that the group’s political message was being lost also resonated with
Maria Gastelumendi, who runs a sandwich shop in downtown Oakland.
As a small-business owner, Ms. Gastelumendi said she supported the protests —
“There’s been no bailout for us” — but worried that things might end badly. “The
occupiers were very organized and very committed,” she said. “But there’s other
people who are just opportunists.”
reported from Oakland, and Abby Goodnough from Providence, R.I. Reporting was
contributed by Malia Wollan from Oakland, Ian Lovett from Los Angeles, Jess
Bidgood from Boston, Robbie Brown from Atlanta, Kate Zernike from New York, and
Steven Yaccino from Chicago.
Some Cities Begin Cracking Down on ‘Occupy’ Protests, NYT,
Capitalism Comes Home
The New York Times
By NICHOLAS D. KRISTOF
write about Occupy Wall Street, some readers ask me if the protesters really are
half-naked Communists aiming to bring down the American economic system when
they’re not doing drugs or having sex in public.
The answer is no. That alarmist view of the movement is a credit to the
(prurient) imagination of its critics, and voyeurs of Occupy Wall Street will be
disappointed. More important, while alarmists seem to think that the movement is
a “mob” trying to overthrow capitalism, one can make a case that, on the
contrary, it highlights the need to restore basic capitalist principles like
To put it another way, this is a chance to save capitalism from crony
I’m as passionate a believer in capitalism as anyone. My Krzysztofowicz cousins
(who didn’t shorten the family name) lived in Poland, and their experience with
Communism taught me that the way to raise living standards is capitalism.
But, in recent years, some financiers have chosen to live in a government-backed
featherbed. Their platform seems to be socialism for tycoons and capitalism for
the rest of us. They’re not evil at all. But when the system allows you more
than your fair share, it’s human to grab. That’s what explains featherbedding by
both unions and tycoons, and both are impediments to a well-functioning market
When I lived in Asia and covered the financial crisis there in the late 1990s,
American government officials spoke scathingly about “crony capitalism” in the
region. As Lawrence Summers, then a deputy Treasury secretary, put it in a
speech in August 1998: “In Asia, the problems related to ‘crony capitalism’ are
at the heart of this crisis, and that is why structural reforms must be a major
part” of the International Monetary Fund’s solution.
The American critique of the Asian crisis was correct. The countries involved
were nominally capitalist but needed major reforms to create accountability and
Something similar is true today of the United States.
So I’d like to invite the finance ministers of Thailand, South Korea and
Indonesia — whom I and other Americans deemed emblems of crony capitalism in the
1990s — to stand up and denounce American crony capitalism today.
Capitalism is so successful an economic system partly because of an internal
discipline that allows for loss and even bankruptcy. It’s the possibility of
failure that creates the opportunity for triumph. Yet many of America’s major
banks are too big to fail, so they can privatize profits while socializing risk.
The upshot is that financial institutions boost leverage in search of supersize
profits and bonuses. Banks pretend that risk is eliminated because it’s
securitized. Rating agencies accept money to issue an imprimatur that turns out
to be meaningless. The system teeters, and then the taxpayer rushes in to bail
bankers out. Where’s the accountability?
It’s not just rabble-rousers at Occupy Wall Street who are seeking to put
America’s capitalists on a more capitalist footing.
“Structural change is necessary,” Paul Volcker, the former chairman of the
Federal Reserve, said in an important speech last month that discussed many of
these themes. He called for more curbs on big banks, possibly including trimming
their size, and he warned that otherwise we’re on a path of “increasingly
frequent, complex and dangerous financial breakdowns.”
Likewise, Mohamed El-Erian, another pillar of the financial world who is the
chief executive of Pimco, one of the world’s largest money managers, is
sympathetic to aspects of the Occupy movement. He told me that the economic
system needs to move toward “inclusive capitalism” and embrace broad-based job
creation while curbing excessive inequality.
“You cannot be a good house in a rapidly deteriorating neighborhood,” he told
me. “The credibility and the fair functioning of the neighborhood matter a great
deal. Without that, the integrity of the capitalist system will weaken further.”
Lawrence Katz, a Harvard economist, adds that some inequality is necessary to
create incentives in a capitalist economy but that “too much inequality can harm
the efficient operation of the economy.” In particular, he says, excessive
inequality can have two perverse consequences: first, the very wealthy lobby for
favors, contracts and bailouts that distort markets; and, second, growing
inequality undermines the ability of the poorest to invest in their own
“These factors mean that high inequality can generate further high inequality
and eventually poor economic growth,” Professor Katz said.
Does that ring a bell?
So, yes, we face a threat to our capitalist system. But it’s not coming from
half-naked anarchists manning the barricades at Occupy Wall Street protests.
Rather, it comes from pinstriped apologists for a financial system that glides
along without enough of the discipline of failure and that produces soaring
inequality, socialist bank bailouts and unaccountable executives.
It’s time to take the crony out of capitalism, right here at home.
Crony Capitalism Comes Home, NYT, 26.10.2011,
Hardship, Jobless Still Say They Have Hope
The New York Times
By MICHAEL COOPER and ALLISON KOPICKI
nation’s lingering unemployment crisis has forced many people without work to
dip into their savings, borrow from relatives and do without necessities
including health insurance, and most people who receive unemployment benefits
said that the money was not enough to meet their basic needs, according to a New
York Times/CBS News poll of jobless Americans.
Still, despite enduring hardships and being even more pessimistic about the
nation’s economy than the general public, unemployed Americans remained
optimistic about eventually landing jobs. A little more than half of those
polled said they were either very or somewhat confident they would find
long-term employment in the next year, and a majority said they expected that
when they did find permanent work, it would be at a similar or higher salary
than they had received in the past.
But the poll found deep unease about unemployment benefits. At a moment when
several states have decided to pay fewer weeks of benefits to save money, and
President Obama has been urging Republicans in Congress to renew a program — due
to lapse at the end of the year — that pays federal jobless benefits to the
long-term unemployed, 7 in 10 of those receiving unemployment benefits said that
they feared their benefits would run out before they could find new jobs.
While jobless benefits have been criticized as unaffordable by some Republicans,
particularly at the state level, three-quarters of the people receiving them
said that they got “a lot less” than they used to earn at their jobs, and
two-thirds said that the benefits were not enough to pay for basics like housing
“I was earning $50,000 a year, and now I get $200 a week,” said Jan Thomas, 62,
an unemployed marketing executive from Sarasota, Fla., who has been laid off
from two jobs in the last three years. Ms. Thomas said in a follow-up interview
to the poll that she recently dropped her health insurance “just hoping all will
be well” and that she would soon lose her unemployment benefits, leading her to
think about applying early for Social Security. “And I’m giving up my apartment
and moving in with my mom because my unemployment will be running out,” she
The toll that unemployment is taking on families is not just financial,
according to the telephone poll, which surveyed 445 unemployed adults from Oct.
19 to Oct. 25 and has a margin of sampling error of plus or minus five
percentage points. More than half of those polled said that they had experienced
emotional or mental health problems like anxiety or depression because of their
lack of work, and nearly half said that they had felt embarrassed or ashamed not
to have jobs. More than a third said that they had had more conflicts or
arguments with family and friends because of being jobless. The top reason
people cited for not getting work: Too many applicants.
Threats of foreclosure or eviction were reported by a fifth of the unemployed,
and one in eight said that they had moved in with relatives or friends. More
than half said that they lacked health insurance. A fifth said that they had
received food from a nonprofit organization. And in a sign that the nation’s
current economic woes could reverberate for years, nearly two-thirds said they
would probably not have enough money to live comfortably during retirement. More
than half said that they had taken money out of savings or retirement accounts.
But the unemployed continue to believe in the American dream. Two-thirds of
those surveyed said that they still believed it was possible to start out poor
in this country, work hard and become rich — only a little lower than the
three-quarters of all Americans who said that they believed that, according to a
New York Times/CBS News nationwide poll that was conducted at the same time as
the poll of the unemployed adults.
Robert Roberson, 52, a licensed plumber from Corpus Christi, Tex., who has been
out of work for a year, said that he hoped to get work soon when a delayed
project to build a prison breaks ground. “I actually think the job market will
get better because I think the recession will have a break and they’ll go back
to building housing,” he said.
Unemployed people are now less likely to blame former President George W. Bush
for the nation’s high unemployment rate than they were two years ago in the last
Times/CBS News poll of the unemployed. But few blame Mr. Obama. Eight percent of
the unemployed in the new survey said that Mr. Bush was most to blame, down from
26 percent two years ago. Five percent said that Mr. Obama was most to blame,
almost the same as the 3 percent who said so two years ago. Nearly a fifth said
“politicians” were most to blame.
There are currently 14 million Americans unemployed, and more underemployed, and
the unemployment rate remained stubbornly high at 9.1 percent last month. Fierce
debates over how to spur the economy, and how far to go in taking care of
unemployed people, are consuming Washington and state capitals.
One of the most contentious policy questions is how long the government should
continue to pay unemployment benefits. The length and depth of the downturn led
many states to deplete the trust funds they use to pay such benefits, forcing
them to borrow billions of dollars from the federal government and prompting
some states to raise taxes on businesses to continue paying benefits. This year
half a dozen states decided that they would no longer pay the 26 weeks of state
benefits that has long been standard.
The federal government has been picking up the tab to pay extended benefits that
allow some long-term unemployed people to collect checks for up to 99 weeks in
states with the worst unemployment problems. If that program is not renewed at
the end of the year, 1.8 million people could lose benefits in January,
according to the National Employment Law Project, which advocates renewing the
Seven in 10 of the unemployed said that the government should pay benefits for
99 weeks or more. While a slight majority of Americans said that getting
unemployment benefits makes people less motivated to seek work, only 40 percent
of unemployed people said that it did, with half saying that it had no effect.
Three-quarters of the unemployed said that they were qualified, or
overqualified, for the jobs that they were seeking. Four in 10 said that they
would consider moving elsewhere to get jobs, but only 15 percent said that they
had applied for jobs elsewhere. More than a third said that they had taken
classes or trained for new jobs while unemployed.
One was Bobby Austin, 25, from Valdosta, Ga., who lost his job as a truck driver
two years ago and whose benefits will run out soon. “Now I’m back in school to
study nursing,” he said, “and I’m confident I will find a job when I finish next
Facing Hardship, Jobless Still Say They Have Hope, NYT,
Top Earners Doubled Share of Nation’s Income, Study
The New York Times
By ROBERT PEAR
— The top 1 percent of earners more than doubled their share of the nation’s
income over the last three decades, the Congressional Budget Office said
Tuesday, in a new report likely to figure prominently in the escalating
political fight over how to revive the economy, create jobs and lower the
In addition, the report said, government policy has become less redistributive
since the late 1970s, doing less to reduce the concentration of income.
“The equalizing effect of federal taxes was smaller” in 2007 than in 1979, as
“the composition of federal revenues shifted away from progressive income taxes
to less-progressive payroll taxes,” the budget office said.
Also, it said, federal benefit payments are doing less to even out the
distribution of income, as a growing share of benefits, like Social Security,
goes to older Americans, regardless of their income.
The report, requested several years ago, was issued as lawmakers tussle over how
to reduce unemployment, a joint committee of Congress weighs changes in the tax
code and protesters around the country rail against disparities in income
between rich and poor.
In its report, the budget office found that from 1979 to 2007, average
inflation-adjusted after-tax income grew by 275 percent for the 1 percent of the
population with the highest income. For others in the top 20 percent of the
population, average real after-tax household income grew by 65 percent.
By contrast, the budget office said, for the poorest fifth of the population,
average real after-tax household income rose 18 percent.
And for the three-fifths of people in the middle of the income scale, the growth
in such household income was just under 40 percent.
The findings, based on a rigorous analysis of data from the Internal Revenue
Service and the Census Bureau, are generally consistent with studies by some
private researchers and academic economists. But because they carry the
imprimatur of the nonpartisan budget office, they are likely to have a major
impact on the debate in Congress over the fairness of federal tax and spending
Also cited as factors contributing to the rapid growth of income at the top were
the structure of executive compensation; high salaries for some “superstars” in
sports and the arts; the increasing size of the financial services industry; and
the growing role of capital gains, which go disproportionately to higher-income
The report found that higher-income households got a larger share of the pie,
while other households got smaller shares.
Specifically the report made these points:
¶ The share of after-tax household income for the top 1 percent of the
population more than doubled, climbing to 17 percent in 2007 from nearly 8
percent in 1979.
¶ The most affluent fifth of the population received 53 percent of after-tax
household income in 2007, up from 43 percent in 1979. In other words, the
after-tax income of the most affluent fifth exceeded the income of the other
four-fifths of the population.
¶ People in the lowest fifth of the population received about 5 percent of
after-tax household income in 2007, down from 7 percent in 1979.
¶ People in the middle three-fifths of the population saw their shares of
after-tax income decline by 2 to 3 percentage points from 1979 to 2007.
The study was requested by Senators Max Baucus, Democrat of Montana and chairman
of the Finance Committee, and Charles E. Grassley of Iowa, when he was the
senior Republican on the panel.
Representative Sander M. Levin of Michigan, the senior Democrat on the Ways and
Means Committee, said the report was “the latest evidence of the alarming rise
in income inequality.”
House Republicans pushed back Tuesday against President Obama’s complaint that
they were blocking bills to create jobs. Speaker John A. Boehner said he agreed
with Mr. Obama’s new slogan, “we can’t wait,” and he said that 15 House-passed
bills were “sitting over in the Senate, waiting for action.”
On Tuesday, the White House endorsed another bill, which is likely to be passed
by the House this week with bipartisan support. The bill would repeal a
requirement for federal, state and local government agencies to withhold 3
percent of certain payments to suppliers of goods and services and to deposit
the money with the Internal Revenue Service.
This requirement was originally adopted as a tax-compliance measure, and the
Congressional Budget Office said its repeal would reduce federal revenues by $11
billion over 10 years.
House Republicans would offset the cost with a bill that reduces federal
spending on Medicaid under the 2010 health care law. The White House said it
supported the bill, intended to fix an apparent error in the law, under which
hundreds of thousands of middle-income early retirees can get Medicaid coverage
meant for the poor.
The joint Congressional committee on deficit reduction is considering changes in
a wide range of benefit programs.
Representative Steny H. Hoyer of Maryland, the No. 2 House Democrat, said
Tuesday that he was hopeful but not entirely confident that the panel would
succeed in reaching a bipartisan agreement to reduce federal deficits by $1.2
trillion over 10 years.
“Hopeful is not confident,” Mr. Hoyer said.
Top Earners Doubled Share of Nation’s Income, Study Finds,
Names Virginia Rometty as New Chief Executive
The New York Times
By STEVE LOHR
Rometty, a senior vice president at I.B.M., will be the company’s next chief
executive, the directors announced on Tuesday. She will succeed Samuel J.
Palmisano, 60, who will remain as chairman, at the start of next year.
Ms. Rometty, 54, is well known within the technology industry, but not widely
beyond. She has led strategically important divisions of the company as it has
shifted to services and products with high profit margins, like software that
mines vast troves of corporate and online data for sales and cost-saving
The directors’ choice of Ms. Rometty, who managed a crucial merger as well as
sales in fast-growing new markets, ends a competition that has been under way
for years. The leading candidates were always from within the company’s
A leading rival to succeed Mr. Palmisano, analysts say, was Steven A. Mills, the
senior vice president who led I.B.M.’s highly profitable and growing software
division. But his age, analysts note, was probably an obstacle. Mr. Mills has
just turned 60, the traditional retirement age for I.B.M. chief executives.
Mr. Palmisano, in an interview Tuesday, singled out Mr. Mills for praise, saying
“he’s done a phenomenal job.”
The selection of Ms. Rometty for the top job at I.B.M. will make her one of the
most prominent women executives in corporate America, joining a small group of
chiefs that includes Ursula Burns of Xerox, Indra Nooyi of PepsiCo, Ellen J.
Kullman of DuPont and Meg Whitman of Hewlett-Packard. Gender, according to Mr.
Palmisano, did not figure into Ms. Rometty’s selection.
“Ginni got it because she deserved it,” Mr. Palmisano said, using the informal
first name by which she is known to friends and colleagues. “It’s got zero to do
with progressive social policies,” Mr. Palmisano added.
Ms. Rometty has led the growth and development of I.B.M.’s huge services
business for more than a decade. The services strategy, analysts say, is partly
a marketing tactic. But, they add, it also represents a different approach to
the technology business, with less emphasis on selling hardware and software
products. Instead, I.B.M. puts together bundles of technology to help business
streamline operations, find customers and develop new products.
“I.B.M. is selling business solutions, not just products,” said Frank Gens,
chief analyst for the technology market research firm IDC. “Rometty has been at
the forefront of that effort.”
Ms. Rometty, who graduated from Northwestern University with an undergraduate
degree in computer science, joined I.B.M. in 1981 as a systems engineer. She
quickly moved up to a series of management jobs, working with clients in
industries including banking, insurance, telecommunications, manufacturing and
In 2002, Ms. Rometty championed the purchase of the big business consulting
firm, PricewaterhouseCoopers Consulting, for $3.5 billion.
The deal was made shortly after Mr. Palmisano became chief executive and it was
seen as a big risk. The PricewaterhouseCoopers consultants were used to
operating fairly independently, in a very different culture from the more
regimented I.B.M. style of the time. The danger, analysts say, was that the
business consultants would flee in droves, leaving the business a shell.
Ms. Rometty was put in charge of coordinating the work of the acquired firm’s
consultants with I.B.M.’s technologists, to tailor services and software
offering for specific industries. Ms. Rometty, analysts say, worked tirelessly
and effectively to win over the consultants. “She did the deal, and she made it
work,” Mr. Palmisano said.
“Ginni Rometty combines performance and charisma,” said George F. Colony,
chairman of Forrester Research. “She orchestrated a massive charm campaign to
bring the PricewaterhouseCoopers people into the fold. That was the trial by
fire for her.”
In 2009, Ms. Rometty became senior vice president and group executive for sales,
marketing and strategy. Part of the job is leading the I.B.M. drive to sharply
increase its business in overseas growth markets, like China, India, Brazil and
dozens of emerging markets, including several African nations. Such markets now
account for 23 percent of I.B.M.’s revenue, up from 20 percent when she took
over. It should reach 30 percent by 2015, the company projects.
The top marketing job also includes spotting opportunities to use the science
coming out of I.B.M.’s labs in new products and services. In that perch, Ms.
Rometty has pushed to expand the company’s fast-growing analytics unit, which
blends data-mining software with services expertise. “It’s not about capturing
markets, it’s about making new markets,” Ms. Rometty said in a brief interview
after the announcement.
Mr. Palmisano succeeded Louis V. Gerstner Jr., an outsider who became chief
executive in 1993, and led a historic turnaround of I.B.M., an endangered
corporate icon. Mr. Palmisano inherited a company that had returned to health,
but he set about transforming it once again. Under Mr. Palmisano, I.B.M. sold
its personal computer and some other hardware lines, and focused increasingly on
services and software. I.B.M. sells mainly to business and governments, leaving
consumer technology to others.
His strategy for driving the company behind big services projects to use
technology to tackle big business and societal challenges, like energy, traffic
and water management, had a catchy title, “Smarter Planet.” But such grand
themes were initially met with skepticism on Wall Street. “The challenge is that
you have to bring investors with you,” Mr. Palmisano explained.
That led to the development of a “financial roadmap,” setting out five-year
plans for its growth initiatives and profit targets for the company as a whole.
This year, I.B.M. is completing the first five-year roadmap, with the numbers
running ahead of the plan, despite the 2007-2009 recession.
I.B.M.’s profits have increased sharply since Mr. Palmisano took over, and its
stock price climbed. Earlier this year, I.B.M. passed Microsoft to become the
second most valuable technology company, measured by market capitalization,
trailing only Apple, the consumer technology powerhouse.
I.B.M. must steadily evolve, Ms. Rometty said, but she does not anticipate
changing course abruptly. “What you’ll see is an unfolding of the strategy we
have in place,” Ms. Rometty said, noting that she had a hand in creating it.
I.B.M. Names Virginia Rometty as New Chief Executive, NYT, 25.10.2011,
President to Ease Student Loan Burden
The New York Times
By TAMAR LEWIN
Obama will announce new programs Wednesday to lower monthly loan payments for
some students graduating next year and thereafter and to let borrowers who have
a mix of direct federal loans and loans under the old Federal Family Education
Loan Program consolidate them at a slightly lower interest rate.
At a press briefing Tuesday afternoon, Melody Barnes, director of the Domestic
Policy Council, said the president would use his executive authority to expand
the existing income-based repayment program with a “Pay as You Earn” option that
would allow graduates to pay 10 percent of their discretionary income for 20
years and have the rest of their federal student loan debt forgiven. That plan
would start next year.
Most of the 450,000 low-income student-loan borrowers currently enrolled in
income-based payment must pay 15 percent of their discretionary income for 25
years before having their debt forgiven, although terms are easier for those in
The lower caps of the new program were scheduled to go into effect for new
borrowers in 2014, but, Ms. Barnes said, “because we know the frustration of
crushing loan burdens, we have to act now.”
Ms. Barnes noted that over the last month, more than 30,000 people had signed a
petition on the We the People platform at whitehouse.gov, asking for relief on
“It’s a message heard loud and clear,” she said.
The high cost of college and the growing debt burden of student loans have
become increasingly potent political issues in recent years, high on the agenda
of Occupy Wall Street and related protests across the country.
And the annual College Board reports on college prices and student aid, to be
released Wednesday, make it clear that with the weak economy, the college
affordability problem is getting worse.
At public universities and community colleges, costs for the current academic
year increased more than 8 percent, lifted in part by steep tuition increases in
California, according to the “Trends in College Pricing 2011” report.
While California’s whopping increases — 21 percent at the four-year universities
and 37 percent at the community colleges — were extreme, declining state support
for higher education has brought hefty tuition increases at many public
universities nationwide. Arizona and Washington, for example, increased their
in-state tuition and fees by 17 percent and 16 percent.
This is the fifth consecutive year in which the public universities that serve
most students raised their tuition at a faster rate than the far more expensive
private universities. And over the last three decades, the report found, the
average tuition at four-year state universities almost quadrupled.
“It is not surprising, but we do have issues we have to face,” said Sandy Baum,
the economist who is co-author of the report. “Families are struggling because
their incomes are not increasing, but states are struggling too.”
Adjusted for inflation, state appropriations per full-time student are about 23
percent lower than they were a decade ago.
“Families and students are paying more but they’re getting less,” said Jane
Wellman, executive director of the Delta Cost Project, “because what we’re
willing to invest in this generation is less than what we were willing to invest
in my generation.”
At Tuesday’s press briefing, Secretary of Education Arne Duncan estimated that
the debt-consolidation program could help 6 million borrowers who carry both
direct federal loans and loans made under the Federal Family Education Loan
program, which ended last year. Under that program, private lenders received
federal subsidies to make federally guaranteed loans to students; despite
lobbying by the banking industry, the Obama Administration killed the program,
redirecting billions of dollars of subsidies into expanded Pell grants for
Between January and June, Mr. Duncan said, borrowers making payments on both
kinds of loans can consolidate them and get a half-percent interest-rate cut.
The savings to pay for the lower loan rate, he said, would come from the lower
cost of administering the combined loan.
Further information on the new programs will be available at 1-800-4fedaid
(1-800-433-3243) or studentaid.ed.gov.
The Obama administration has taken other steps toward college affordability. The
American Opportunity Tax Credit, introduced in 2009, expanded the tax benefits
for college costs. According to the College Board’s new “Trends in Student Aid
2011,” report, higher education tax credits and deductions grew to $14.7 billion
in 2009, from $6.6 billion in 2008. People with adjusted gross incomes of
$100,000 to $180,000 got 26 percent of those tax savings, compared with 18
percent a year earlier. At the other end of the spectrum, the credits are
available even to those who owe no taxes.
According to the College Board, average in-state tuition at public universities
this year is $8,244, up from $7,613 last year; with room and board, the average
total charge is $17,131, up from $16,162 last year. But the averages mask
enormous variation from state to state: the University of New Hampshire’s
tuition is more than $13,500, compared with $2,600 in Puerto Rico and $4,100 in
At private nonprofit four-year colleges, the average tuition is $28,500 this
year, a 4.5 percent increase on last year’s $27,265. With room and board, the
average total charges are $38,589, up from $36,971 last year. And at community
colleges, the average tuition and fees are $2,963, up 8.7 percent from last
Only about a third of full-time students pay for college without some grant aid,
whether in the form of a federal Pell grant, a state scholarship or aid from the
Net tuition —the amount a student actually pays, after grants and tax savings—
is often sharply lower than the published price. In fact, the College Board
report said, net tuition at community colleges was low enough that, when grants
and tax savings are taken into account, the average student can pay nothing out
of pocket and have $810 left over for books and living expenses.
This year, the report said, full-time students at state universities receive an
average of about $5,750 in grants and tax benefits, while students at private
nonprofit colleges get about $15,530 and those at community colleges about
President to Ease Student Loan Burden for Low-Income
Graduates, NYT, 25.10.2011,
Jobs Predicted for Machines, Not People
The New York Times
By STEVE LOHR
economy explains much of the job shortage in America, but advancing technology
has sharply magnified the effect, more so than is generally understood,
according to two researchers at the Massachusetts Institute of Technology.
The automation of more and more work once done by humans is the central theme of
“Race Against the Machine,” an e-book to be published on Monday.
“Many workers, in short, are losing the race against the machine,” the authors
Erik Brynjolfsson, an economist and director of the M.I.T. Center for Digital
Business, and Andrew P. McAfee, associate director and principal research
scientist at the center, are two of the nation’s leading experts on technology
and productivity. The tone of alarm in their book is a departure for the pair,
whose previous research has focused mainly on the benefits of advancing
Indeed, they were originally going to write a book titled, “The Digital
Frontier,” about the “cornucopia of innovation that is going on,” Mr. McAfee
said. Yet as the employment picture failed to brighten in the last two years,
the two changed course to examine technology’s role in the jobless recovery.
The authors are not the only ones recently to point to the job fallout from
technology. In the current issue of the McKinsey Quarterly, W. Brian Arthur, an
external professor at the Santa Fe Institute, warns that technology is quickly
taking over service jobs, following the waves of automation of farm and factory
work. “This last repository of jobs is shrinking — fewer of us in the future may
have white-collar business process jobs — and we have a problem,” Mr. Arthur
The M.I.T. authors’ claim that automation is accelerating is not shared by some
economists. Prominent among them are Robert J. Gordon of Northwestern and Tyler
Cowen of George Mason University, who contend that productivity improvement
owing to technological innovation rose from 1995 to 2004, but has trailed off
since. Mr. Cowen emphasized that point in an e-book, “The Great Stagnation,”
published this year.
Technology has always displaced some work and jobs. Over the years, many experts
have warned — mistakenly — that machines were gaining the upper hand. In 1930,
the economist John Maynard Keynes warned of a “new disease” that he termed
“technological unemployment,” the inability of the economy to create new jobs
faster than jobs were lost to automation.
But Mr. Brynjolfsson and Mr. McAfee argue that the pace of automation has picked
up in recent years because of a combination of technologies including robotics,
numerically controlled machines, computerized inventory control, voice
recognition and online commerce.
Faster, cheaper computers and increasingly clever software, the authors say, are
giving machines capabilities that were once thought to be distinctively human,
like understanding speech, translating from one language to another and
recognizing patterns. So automation is rapidly moving beyond factories to jobs
in call centers, marketing and sales — parts of the services sector, which
provides most jobs in the economy.
During the last recession, the authors write, one in 12 people in sales lost
their jobs, for example. And the downturn prompted many businesses to look
harder at substituting technology for people, if possible. Since the end of the
recession in June 2009, they note, corporate spending on equipment and software
has increased by 26 percent, while payrolls have been flat.
Corporations are doing fine. The companies in the Standard & Poor’s 500-stock
index are expected to report record profits this year, a total $927 billion,
estimates FactSet Research. And the authors point out that corporate profit as a
share of the economy is at a 50-year high.
Productivity growth in the last decade, at more than 2.5 percent, they observe,
is higher than the 1970s, 1980s and even edges out the 1990s. Still the economy,
they write, did not add to its total job count, the first time that has happened
over a decade since the Depression.
The skills of machines, the authors write, will only improve. In 2004, two
leading economists, Frank Levy and Richard J. Murnane, published “The New
Division of Labor,” which analyzed the capabilities of computers and human
workers. Truck driving was cited as an example of the kind of work computers
could not handle, recognizing and reacting to moving objects in real time.
But last fall, Google announced that its robot-driven cars had logged thousands
of miles on American roads with only an occasional assist from human back-seat
drivers. The Google cars, Mr. Brynjolfsson said, are but one sign of the times.
As others have, he pointed to I.B.M.’s “Jeopardy”-playing computer, Watson,
which in February beat a pair of human “Jeopardy” champions; and Apple’s new
personal assistant software, Siri, which responds to voice commands.
“This technology can do things now that only a few years ago were thought to be
beyond the reach of computers,” Mr. Brynjolfsson said.
Yet computers, the authors say, tend to be narrow and literal-minded, good at
assigned tasks but at a loss when a solution requires intuition and creativity —
human traits. A partnership, they assert, is the path to job creation in the
“In medicine, law, finance, retailing, manufacturing and even scientific
discovery,” they write, “the key to winning the race is not to compete against
machines but to compete with machines.”
More Jobs Predicted for Machines, Not People, NYT,
to Mortgage Refinancing Program
The New York Times
By BINYAMIN APPELBAUM
— The federal government said on Monday that it would overhaul a program that
lets homeowners refinance mortgage loans at lower interest rates to address
problems that have limited participation to less than a million borrowers, far
below the lofty estimates when the program started in 2009.
The White House described the changes as part of a broader plan to boost the
economy through measures that do not require legislative action, reflecting a
pragmatic recognition that Congress is deadlocked on economic issues, and a
political effort to blame Republicans for the standoff.
“We have far too many Americans who have paid their bills and done everything
right on their mortgages and yet they’re still stuck with interest rates of 6 or
7 percent,” said Shaun Donovan, the secretary of Housing and Urban Development.
The existing program, he said, “has not reached the scale that we had hoped and
the scale that it needs to reach.”
The broader refinancing program, which will still take months to implement, will
let people qualify for new loans no matter how far the value of their homes have
declined, and without regard to their financial situations so long as they have
made at least six consecutive monthly mortgage payments. The plan also will
reduce the fees that borrowers must pay, for example by dispensing with the need
for an appraisal in many cases and by automatically transferring mortgage
insurance to the new loan.
The plan also seeks to encourage banks and mortgage companies to participate by
eliminating their legal responsibility for problems with the original loan, a
significant financial benefit in many cases.
But the government maintained the narrow focus of the original program,
significantly limiting the potential impact of the changes. The refinancing
offer only applies to loans in the portfolios of the government-owned mortgage
finance companies Fannie Mae and Freddie Mac. It only applies to loans that they
acquired before May 31, 2009. And it only applies to loans worth more than 80
percent of the value of the home. In other words, it does not matter how deeply
a homeowner is underwater — the loan can be worth twice the value of the home —
but owners with more equity are not eligible.
The government estimates the revised program will allow perhaps 1 million
homeowners to refinance — less than it once projected would benefit from the
The changes announced Monday address a series of problems that lenders and
outside experts warned from the outset would undermine the original program. In
particular, the high cost of refinancing proved a formidable barrier to many
homeowners struggling to pay their bills. So did the strict income requirements,
which in many cases created the odd situation that a person who had never fallen
behind on their mortgage payments was unable to qualify for a loan with a lower
The terms of the program are set by the Federal Housing Finance Agency, an
independent agency that administers Fannie Mae and Freddie Mac, and that had
resisted calls to broaden the program because it said its primary responsibility
was to staunch the losses at the two companies. The agency said Monday that it
had agreed to make the changes because doing so would contribute to that goal.
“Our goal in pursuing these changes is to create refinancing opportunities for
these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing
a measure of stability to housing markets,” said the agency’s acting director,
Edward J. DeMarco.
Some of the most important changes concern technical issues deep inside the
machinery of the mortgage process. For example, borrowers who took two mortgage
loans, and cannot afford to repay the second loan, cannot refinance the first
loan without the permission of the second lender. The government has now
negotiated a blanket grant of permission from many lenders.
Gene Sperling, director of the president’s National Economic Council, said the
mortgage industry had shown a new willingness to facilitate refinancing, making
the broader program possible.
“What has changed and made this more viable and led the president to push all of
us even harder was that there was a growing awareness among all the
stakeholders” that this problem needed to be addressed, Mr. Sperling said on a
conference call Monday to discuss the announcement from the federal housing
Administration Proposes Changes to Mortgage Refinancing
Program, NYT, 24.10.2011,
Profit Up Despite ‘Volatile’ Economy
The New York Times
By CHRISTINE HAUSER
Electric, the nation’s largest industrial company, on Friday reported net
earnings for the third quarter of $3.2 billion, up 57 percent from the same
period in 2010 despite what the chief executive called a “volatile” economic
The company said it had operating earnings per share of 31 cents, exactly in
line with expectations of analysts surveyed by Thomson Reuters. That excluded
the $0.08 per share impact of its redemption of Berkshire Hathaway shares, which
it subsequently redeemed this month for $3.3 billion. But the company said it
expected that retiring the stock would improve annualized earnings per share by
$0.03 in future quarters.
Revenue for the period from July through September, 2011, was $35.4 billion,
which the company described as flat when compared with the third quarter of
2010. When the impact of the sale of NBC Universal to Comcast was excluded, the
revenue for the quarter was up 12 percent.
Analysts had forecast $34.93 billion in revenue, according to a survey compiled
by Thomson Reuters.
Jeffrey R. Immelt, G.E.’s chief executive, said that the company was pleased
with the results, the sixth consecutive quarter of double digit growth in
operating earnings, in what he called a "volatile macro environment."
"We ended the quarter with a record high order backlog of $191 billion and we
remain confident in our full-year 2011 operating framework," he said in a
The earnings report also provided another glimpse into the company’s progress in
overhauling its business, which has a diverse range of products from jet engines
to medical imaging machines. With its global reach, it also gives a snapshot
into how business is faring not only in the United States but around the world.
The strongest industrial growth for large American manufacturers has recently
come from abroad, accounting for more than half of industrial business in some
cases. The outlook for industrial companies has been gradually improving, but in
the past month the debt crisis in Europe has caused some concern about economic
“Up until September it was improving but now we have hit this bump in the road,”
said Daniel J. Meckstroth, the chief economist for the Manufacturers Alliance
/MAPI, an economics and policy research organization in Arlington, Va. He was
speaking in general about the outlook for the economy, not specific companies.
Other markets could pick up the slack to some extent. Asia was decelerating but
continuing to do well, with Japan rebounding after the devastation of the
earthquake and tsunami, he noted. Companies could also look for more opportunity
in Latin America.
“It is really a mixed outlook in terms of industrial production worldwide,” said
As the reporting season gets under way, other industrial companies are weighing
United Technologies Corp. this week said its earnings per share for the third
quarter were $1.47, up 13 percent compared with the same quarter in 2010. The
company raised its full year earnings per share outlook compared with 2010, to
$5.47 and said it expected its sales to rise nearly 7 percent to $58 billion for
Honeywell International Inc. is also announcing its third quarter earnings on
Friday. Caterpillar Inc. will report on Monday and Goodrich Corp. reports third
quarter results on Thursday.
G.E. has been expecting its business for power generation equipment, which
involves gas, steam and wind turbines, to improve this year. Profits in that
component of its business were down 19 percent in the second quarter.
The company has invested heavily to expand its industrial divisions, including
acquisitions related to oil and gas equipment. Its industrial orders for
equipment and services have grown.
G.E. said that in the third quarter, its industrial segments had $23.4 billion
in revenues, up 19 percent. International revenues were up by 25 percent, driven
by strong growth in Brazil, Russia, China, India, Canada, Mexico and the Middle
But it has been gradually paring back its finance business, called GE Capital,
as part of a long-term strategy to rely more on its core industrial units — even
though GE Capital accounted for much of the profit improvement in the previous
GE Capital has been weathering the wake of the financial turmoil unleashed in
In the third quarter of the year, GE Capital showed a 1 percent rise in revenue
to $12 billion. It had a 1 percent decline in revenue in the second quarter, to
$11.63 billion, when commercial real estate problems showed losses. GE Capital
earned about $1.5 billion, up 79 percent, in the third quarter, the company
After the outbreak of the financial crisis, G.E. cut its dividend in 2009, the
first time it did so since the Great Depression.
Since then, it has raised its dividend three times, to 60 cents a share.
G.E. Profit Up Despite ‘Volatile’ Economy, NYT,
The New York Times
By THOMAS L. FRIEDMAN
After spending last week talking with Hong Kong entrepreneurs about a bill, just
passed by the U.S. Senate, to clear the way for tariffs on Chinese exports to
America if China doesn’t revalue its currency, there are three things I have to
say. One, I really hope the people pushing this bill do not give up. Two, I
really hope the people pushing this bill do not succeed. And, three, I really
hope no one thinks this legislation will make any sustainable dent in our
unemployment problem, which requires much more radical rethinking.
I support this legislation in theory because China needs a wake-up call. I know,
China never responds to in-your-face pressure — not immediately. But it began
revaluing its currency upward in 2005, the last time the Senate brandished a big
stick. The fact is, China’s strategy of using low wages and a cheap currency to
build up an enormous export-led growth engine — while using its huge market to
lure and compel companies to transfer their next-generation technology to China
as well — is now hurting both sides.
China is spending tons of money manipulating its currency downward and, in the
process, creating domestic inflation and a real estate bubble, which is
weakening its competiveness. Meanwhile, it is hair-raising to hear stories in
Hong Kong about the number of American companies feeling the need to transfer
advanced technology to China under pressure from Beijing officials — and being
afraid to complain to Washington about unfair trade practices. Yes, China’s
leaders, fearing unemployment, will revalue their currency at their own pace.
But if pushing this bill even marginally slows the pace of American firms
shifting operations here, and gives others more time to adapt, it will be worth
But, Lord in heaven, do not let the House pass this bill. That would trigger a
trade war in the middle of our Great Recession. We tried that in 1930. It didn’t
end well. Worse, today it would distract us from thinking about the real issue:
How do we adjust our labor market to the simultaneous intensification of
globalization and the I.T. revolution, the biggest thing happening in the world
today? The intensification of globalization means more parts of any product or
service can be produced anywhere, and the intensification of the I.T. revolution
means more parts of any product or service can be created by machines and
I am typing this column on a Dell laptop that says “Made in China” on the
bottom. In fact, it was assembled in China — but the design, memory board,
screen, casing and dozens of other parts were all made in other countries. And
while the machine says “Made in China,” the lion’s share of its value and profit
goes to the firm that conceived the idea and orchestrated that supply chain —
Dell Inc. in Texas.
We are never going to get those labor-intensive assembly jobs back from China —
the wage differentials are far too great, no matter how much China revalues its
currency. We need to focus on multiplying more people at the high-value ideation
and orchestration end of the supply chain, and in the manufacturing processes
where one person can be highly productive, and well paid, by operating multiple
machines. We need to focus on “Imagined in America” and “Orchestrated From
America” and “Made in America by a smart worker using a phalanx of smarter
robots.” In total value terms, America still manufactures almost as much as
China. We just do it with far fewer people, which is why we need more start-ups.
But we also need to stop thinking that a middle class can be sustained only by
factory jobs. Thirty years ago, Hong Kong was a manufacturing center. Now its
economy is 97 percent services. It has adjusted so well that this year the Hong
Kong government is giving a bonus of $775 to each of its residents. One reason
is that Hong Kong has transformed itself into a huge tourist center that last
year received 36 million visitors — 23 million from China. Their hotel stays,
dining and jewelry purchases are driving prosperity here. The U.S. Commerce
Department says 801,000 Mainland Chinese visited the U.S. last year, adding $5
billion to the U.S. economy. More Chinese want to come, but, for security
reasons, visas are hard to obtain. If we let in as many Chinese tourists as Hong
Kong, it would inject more than $115 billion into what is a highly unionized
U.S. hotel, restaurant, gaming and tourism industry.
Another idea officials here offer is that the United States invites Chinese
firms to invest in toll bridges, toll roads, and rail systems across the United
States, in partnership with American companies. They could build them, and
operate them for a set number of years, until their investment pays out, and
then transfer them to full U.S. ownership. It may be the only way we can rebuild
Yes, China manipulates its currency and market access. But the reason we are so
vulnerable is that we have no leverage. We don’t save; we overconsume; we don’t
plan; and we have not invested enough in infrastructure and education. Dealing
with a superpower like China without leverage? Let me know how that works out
Imagined in America, NYT, 18.10.2011,
Lindner Jr., Founder of American Financial, Dies at 92
The New York Times
By THE ASSOCIATED PRESS
Lindner Jr., a billionaire who took over the Cincinnati Reds from Marge Schott,
did junk-bond deals with Michael R. Milken and used his experience running the
family dairy store to build a business empire, died on Monday in Cincinnati. He
His death was announced on the Web site of his company, the American Financial
Mr. Lindner, who never finished high school, was chairman of American Financial,
a Cincinnati-based financial holding company that had more than $17 billion in
assets. In 2009, Forbes magazine estimated his personal wealth at $1.75 billion.
He also made a name for himself by becoming one of Mr. Milken’s earliest
junk-bond players. But he showed his investment savvy by correctly predicting a
decline in the junk-bond market in the late 1980s.
Mr. Lindner ruled over a maze of corporations with nearly 70,000 employees
worldwide. American Financial owned, or held substantial investments in,
Chiquita Brands International, one of the world’s largest food producers; the
Charter Company, marketer of fuel to electric utilities; and the Great American
Mr. Lindner became controlling partner and chief executive of the Cincinnati
Reds in a 1999 deal that ended Ms. Schott’s rocky 15-year rule as owner. In
contrast to her highly public style, Mr. Lindner stayed mostly in the
background, though in 2000 he picked up Ken Griffey Jr. at the airport in his
Rolls-Royce after a blockbuster trade had brought him to the Reds. Mr. Lindner
sold his controlling share in the team in 2005.
Some critics considered him a ruthless takeover artist. He made millions in the
1970s and 1980s by investing in companies and then retreating from them. A
reported attempt by Mr. Lindner to take over the Gannett Company prompted its
former chairman, Al Neuharth, to call him a “shark in sheep’s clothing.”
Though publicity-shy, he held a fund-raiser in his home for the presidential
candidate George H. W. Bush in 1988. He also played host to Mr. Bush, then vice
president, and President François Mitterrand of France at his vacation home in
Ocean Reef, Fla., later that month.
Mr. Lindner paid his staff handsomely and threw lavish annual parties for them.
At his 70th birthday party, Frank Sinatra entertained.
His fortunes began to slide in the late 1980s with the acquisition of Taft
Broadcasting, a Cincinnati television and radio company. The $1.5 billion
takeover left the new company, Great American Communications, mired in debt. It
was forced to sell several major assets, including the cartoon creator
In 1992, Mr. Lindner suffered losses of $560 million at Great American and $284
million at Chiquita, leading to a $77 million loss at American Financial. In
1993, he filed for bankruptcy to restructure Great American’s debts.
Carl Henry Lindner Jr. was born April 22, 1919, in Dayton and spent much of his
youth in Norwood, a blue-collar suburb of Cincinnati.
Along with his brothers Robert and Richard and his sister Dorothy, Mr. Lindner,
without graduating from high school, helped his parents in a succession of dairy
businesses, including what became the United Dairy Farmers convenience-store
During World War II, with his father’s health failing and his brothers in the
military, Mr. Lindner began to direct the chain. By the mid-1960s, when he left
it to his brother Robert’s direction, it had more than 100 stores. The number
has since more than doubled.
Mr. Lindner founded the cornerstone of his financial empire, the American
Financial Corporation (later American Financial Group), in 1959. From 1961 until
the company went private in 1980, American Financial’s portfolio made more than
60 times its original investment as Mr. Lindner diversified into banks,
insurance and assorted industries.
He is survived by his wife, the former Edyth Bailey; his sons, Carl III, Craig
and Keith; 12 grandchildren; and 5 great-grandchildren.
Carl H. Lindner Jr., Founder of American Financial, Dies
at 92, NYT, 18.10.2011,
Opportunity in an Age of Upheaval
The New York Times
By PAUL SULLIVAN
Berggruen is passionate about investing. A compact, handsome billionaire, Mr.
Berggruen is often talked about for his eccentricities — he does not own a home,
preferring to jet around the world and live out of hotels — but his ability to
find, invest in and turn around neglected companies points to a hardened and
And while a series of extreme events in global financial markets this year have
shaken investors’ confidence, he maintains his strategy of investing in
undervalued companies. In fact, the general sense that things are bad and could
get worse seem to have little effect on him.
“I continue to do the same thing,” said Mr. Berggruen, who would not disclose
his net worth beyond saying it was more than the $2.2 billion estimated by
Forbes. “I buy businesses that deserve to exist but have been mismanaged. I feel
there are more opportunities now.”
His focus is retailing, media and real estate. He picks companies in these
areas, he said, that have lost a lot of their value because of macroeconomic
events beyond their control, and he expects them to rebound, eventually.
“I’m not optimistic in the short term,” Mr. Berggruen said. “I just think that
if some businesses are going to survive it’s worth investing now as long as it’s
a real business, and as long as you don’t have to sell the stock to make a
mortgage payment or eat next week.”
Concerns about the ability to cover basic expenses and a fear of losing more
money after the losses in the 2008 crisis are keeping most people on the
sidelines. They have plenty of reasons to be there. Stock markets rise and fall
like a stomach-churning roller coaster ride. European leaders have been slow to
devise a resolution for the debt crisis in Greece, which has rippled through the
European banking system and into other European countries.
While Mr. Berggruen has a front-row seat on the political problems in the United
States through his nonprofit policy foundation, the Nicolas Berggruen Institute,
he doesn’t necessarily like what he sees. So he is looking long term.
In his belief that various assets are undervalued, he represents people who see
opportunities and are moving their money from cash into investments. These
investors are not looking for the hottest new investment but searching for
companies that are strong and have continued to perform, regardless of what
their stock prices say.
“Real big fortunes have been made in times of hardship,” said Karl Wellner,
chief executive of Papamarkou Wellner, an advisory firm that works with wealthy
families and has $3 billion under management. “These people are looking at it
from a different perspective.”
While these investors are contemplating the perils of the market and how to
safeguard and build their wealth, President Obama and others, including the
billionaire investor Warren E. Buffett, have called for increased taxes on the
wealthy. These proposals come in different forms, and how they may apply to the
investors described in this article is not clear — nor are the prospects that
any such proposal will be enacted.
The Senate majority leader, Harry Reid, for example, recently proposed a 5
percent surtax on all income over $1 million, including capital gains and
Many of these investors have enough wealth to buy millions of dollars of some
asset and the time to wait to see what happens. If that investment appreciates
wildly, they have increased their fortune; if it goes to zero their standard of
living will not change.
But even with the luxury of time and wealth, some of them can find ample reasons
not to invest right now.
“Why should I plow money into the market because it has dropped, when it can
drop some more?” said Fred Branovan, the president and chief operating officer
for FFC Capital Management, which is the family office for Milton Fine, who sold
his hotel company to Wyndham Resorts in 1998 for $2.1 billion. “This family is
into wealth preservation. They got rich; now they want to stay rich.”
While Mr. Berggruen is confident about the long term, he acknowledged that the
next few years could be bleak. “I’m scared like everyone else is because the
world is scary,” he said. “I just don’t think the world will disappear.”
The amount of money it takes for even wealthy investors to feel comfortable with
risk is staggering. Todd M. Morgan, senior managing director at Bel Air
Investment Advisors, which manages money for high net-worth investors including
Hollywood celebrities, said he had clients who were worth $25 million to $30
million and remained entirely in bonds.
Those who are worth more than $100 million are comfortable taking some risk but
rarely with more than 20 percent of their assets — and many of them define risky
as being in blue-chip stocks.
“In a perfect world you should be selling some bonds and buying some
high-quality stocks,” Mr. Morgan said. “But the stock market is the only place
in the world where if there’s a big sale no one comes out and buys.”
Those who are investing now fall into three distinct approaches: the bargain
hunters, the natural resource crowd and the bettors.
Bargains are everywhere right now, and those looking for them do not have to go
into the riskiest assets.
Ron Carson, the founder of the Carson Wealth Management Group in Omaha, which
manages $2.6 billion, said his firm focused on an “advance and protect”
strategy, with the emphasis these days on protect. He has investments in
dividend-paying stocks like Johnson & Johnson, Microsoft, Verizon,
ConocoPhillips and Abbott Laboratories.
“We’ve done the research and think they’re cheap,” said Mr. Carson, who has $68
million of his own money invested in this strategy. “They all pay really good
dividends. But if you look at what they could pay versus what they do pay, they
could pay substantially more, so the dividend is safe.”
While this strategy has produced a gain of less than 1 percent this year, Mr.
Carson said he was more concerned with positioning the portfolio for the time a
Others share his view. “You don’t have to be in a particularly esoteric strategy
right now,” Mr. Wellner said. “You can make money in plain vanilla.”
He said several of his clients were putting more money into an equity fund run
by Fayez Sarofim, a billionaire investment adviser in Houston. Clients seem to
appreciate that Mr. Sarofim is invested in blue-chip securities that they can
Mr. Berggruen said he, too, favored simple investments like dividend-paying
stocks as “something I’d recommend to my mother.” He mentioned multinational
corporations with large cash flows and dividends, like Nestlé or Anheuser-Busch
InBev, because they spread their risks around in many different markets, so
currency or economic crises in a few countries will not damage them. “If I had
to put all of my money away and come back in five years, this is what I would
do,” he said.
Natural resources have drawn many wealthy investors because they think that
whatever happens in the global economy, demand for these resources will
How they invest in this area is more intriguing. Some hear the siren song of
alternative energy; others focus on companies that provide traditional sources
Steve Smiley, who made his money in banking and private equity, said he had been
increasing his personal investments in oil and natural gas projects in the
United States. His primary concern in choosing investments, he said, is in
evaluating the management teams of the companies rather than the price of the
commodities or any sentiment surrounding them.
“At some point we’ll start building houses again, and the consumer will go back
to the store and buy what he needs,” Mr. Smiley said. “That’s going to create a
demand for energy.”
Nicholas Butta, whose family’s wealth came from interests in coal mines, said he
had put a substantial portion of the equity allocation of his family’s money
into mining companies. He said he had little interest in what the price of
commodities was today or tomorrow.
“Trying to guess in the short term what will happen to commodity prices is a
mug’s game,” said Mr. Butta, who lives in Australia. “Medium to long term, I can
give a view on commodities. In the short term, it’s futile.”
He said he focused on the costs and production levels of mines, then decided
whether the companies that own them were undervalued. “I’m never buying anything
with the expectation that someone is going to buy something from me at a higher
price,” he said. “I’m looking for strong cash flows.”
That is an advantage of wealthier investors: they can buy and hold indefinitely,
and if the dividends are reasonable, they can be content with a steady,
predictable return for years. When it comes to alternative energy sources,
however, the view needs to be very long indeed.
Michael Steinrueck, 55, who managed money for institutions for 30 years before
retiring, said he had about a third of his money in alternative energy. “I
believe it will be the next mini-industrial revolution,” he said. And China will
drive that with its push to build up its infrastructure.
He would have pushed as high as 40 percent if his adviser hadn’t discouraged the
idea. His adviser, Iain Silverthorne, a partner at Evercore Wealth Management in
San Francisco, said Mr. Steinrueck was one of his few clients whom he has had to
persuade not to invest right now.
Preferring not to choose among wind, solar or other alternative energies, Mr.
Steinrueck has focused on energy storage. “You just don’t know what part of the
sector is going to be the decisive one,” he said. “But energy storage is so
Most investors in the third category are more willing to speculate, but they
also believe that the best future returns may come from nontraditional assets.
Ward McNally, whose wealth derives from the Rand-McNally mapmaking fortune, said
he was plowing his money into his firm, McNally Capital, which advises other
wealthy families on private equity investments.
He said one deal his firm both advised on and invested in was a fund that lent
money to companies that could no longer borrow from banks. The returns on these
loans are 8 to 12 percent, and if the companies were to default, provisions in
the loans would allow the fund to take over.
Recently Mr. McNally said his firm had put together a syndicate of 12 families
with a collective net worth of $30 billion to invest in clean technology
companies,. He said the Cleantech Syndicate, as it is called, includes Dick
DeVos, a son of the founder of Amway, and David Nazarian, a co-founder of
“For some it’s a financial hedge on what they already have,” Mr. McNally said.
“To others, like a family in the real estate business, investing in early-stage
lighting technology could reduce their real estate expenses.”
Mr. Branovan said the Fine family was increasingly invested in farmland, an
asset based as much on stability as demand. “It doesn’t look to have a
tremendous amount of downside, and it has a lot of upside,” he said.
Dennis Jones, who sold his company, Jones Pharma, in 2000 for $3.4 billion, said
he had decided to bet on zero-coupon municipal bonds, which are bought at a
discount and grow to their face value over a set time, usually decades. He sees
them as a good way to leave something to dozens of relatives.
He and his wife recently bought $26,000 of zero-coupon municipals bonds for a
niece that will be worth $156,000 upon maturity in 20 years. “The Napa school
district is going to survive,” he said of the California municipality that
issued the bonds. “Worse comes to worse, you end up owning a building.”
Chasing Opportunity in an Age of Upheaval, NYT,
a New Four-Year Contract With Ford Motor
The New York Times
By BLOOMBERG NEWS
Auto Workers has ratified its proposed contract with the Ford Motor Company
after union members at two assembly plants in Kentucky approved the accord.
Local 600 in Dearborn, Mich., the largest local for the union, disclosed the
development Tuesday on its Facebook page, citing national union officials.
U.A.W. Local 862 in Louisville, Ky., said its members at two plants voted 53.3
percent in favor of the four-year agreement. The Louisville plants build pickups
and sport-utility vehicles and employ 5,397 workers. Ford’s 40,600 American
hourly workers were to conclude voting Tuesday.
Michele Martin, a spokesman for the union, did not immediately answer a voice
message and an e-mail seeking comment.
U.A.W. members at Ford shifted from voting 53 percent against the contract last
Friday to 63.2 percent in favor as of Tuesday morning. Ford is offering 12,000
new jobs, $6.2 billion in factory upgrades and bonus and profit-sharing payments
per worker this year that total as much as $10,000. A lack of a wage increase
was responsible for much of the initial opposition.
“People are saying there is room for improvement, but they’ll vote in favor of
this contract because it means jobs,” said Jerome Williams, president of U.A.W.
Local 2000, which represents 1,880 workers voting today at Ford’s Ohio van
plant. “A few people are saying we gave up monetary concessions and other things
that they’d like to see come back, and rightfully so. But the economic situation
isn’t the best right now.”
The U.A.W. negotiated contracts for 113,000 workers for the first time since
General Motors and Chrysler went bankrupt in 2009. G.M. workers endorsed a new
deal last month and workers at Chrysler begin voting this week. Only workers at
Ford, which avoided Chapter 11, could strike in these contract talks because
G.M. and Chrysler employees agreed not to walk out as part of their
Ford has promised investments totaling $1.26 billion at the two Kentucky
United Auto Workers Approve a New Four-Year Contract With Ford Motor, NYT,
to Lift the Gloom Over Housing
The New York Times
Re “How to Stop the Drop in Home Values,” by Martin S. Feldstein (Op-Ed, Oct.
House prices are falling not primarily because homeowners are defaulting on
their mortgages, as Mr. Feldstein writes, but because homeowners paid too much
for their houses and banks lent too much money to buyers who couldn’t repay. The
housing debt problem lies between those buyers and lenders; they need to
negotiate a solution.
It may be that the continued expectation of more bailout money is keeping buyers
and lenders from seriously dealing with their issue. More bailout money only
supports earlier bad decisions and unsustainable prices.
In essence, why should the rest of us “buy the bubble”?
Islesboro, Me., Oct. 14, 2011
To the Editor:
Martin S. Feldstein is correct that reinvigorating the housing market is crucial
for the economy, but his solution is costly and unfair. Spending up to $350
billion to subsidize homeowners who owe more than their home’s value unfairly
treats taxpayers who avoided mortgages they could not afford.
A far less expensive strategy to boost demand for owner-occupied dwellings and
help the neediest families is to create one to two million homeownership
vouchers patterned after the rent voucher system.
Recipients would pay 30 percent of their income in return for a homeownership
voucher. The voucher’s value would be the carrying costs (mortgage, taxes and
insurance) of homes at the 25th percentile of area home prices. In nearly all
localities, current rent vouchers are worth more than these homeownership costs.
Most of the costs could be offset by phasing out the Low-Income Housing Tax
Credit, an inefficient subsidy to expand housing supply at a time when demand is
ROBERT I. LERMAN
Washington, Oct. 14, 2011
The writer is an institute fellow at the Urban Institute and a professor of
economics at American University.
To the Editor:
Martin S. Feldstein suggests that the decline in home values could be stopped if
the federal government agreed to write down the principal that homeowners owe on
their mortgage. Mr. Feldstein’s suggestion is not without precedent in American
In 1933, the Home Owners’ Loan Corporation solved a similar crisis by
refinancing one million mortgages, about 20 percent of owner-occupied residences
in the United States. The H.O.L.C. also took over the servicing
responsibilities, enabling the agency to cut out the middleman and work with
homeowners to stay in their homes during difficult economic times.
The H.O.L.C. and its refinancing policy stabilized home prices, encouraged
homeowners to stay in their homes and earned the federal government a small
Kent, Ohio, Oct. 13, 2011
The writer is an associate professor at Kent State University and co-author of
the report “Managing a $700 Billion Bailout: Lessons From the Home Owners’ Loan
Corporation and the Resolution Trust Corporation.”
To the Editor:
What part of “moral hazard” does the good professor not understand?
My wife and I did not buy a home at the top of the market during Boston’s huge
and irrational real estate boom. In fact, we have been renting for years.
If the goal is to help those “underwater,” then we have student loan debt that,
given the current job market, we are underwater on. Can we get a check, too?
M. ADRIAN MATTOCKS
Worcester, Mass., Oct. 13, 2011
Trying to Lift the Gloom Over Housing, NYT, 17.10.2011,
Protesters Debate What Demands, if Any, to Make
October 16, 2011
The New York Times
By MEREDITH HOFFMAN
In a quiet corner across the street from Zuccotti Park, a cluster
of 25 solemn-faced protesters struggled one night to give Occupy Wall Street
what critics have found to be most lacking.
“We absolutely need demands,” said Shawn Redden, 35, an earnest history teacher
in the group. “Like Frederick Douglass said, ‘Power concedes nothing without a
The influence and staying power of Occupy Wall Street are undeniable: similar
movements have sprouted around the world, as the original group enters its fifth
week in the financial district. Yet a frequent criticism of the protesters has
been the absence of specific policy demands.
Mr. Redden and other demonstrators formed the Demands Working Group about a week
and a half ago, hoping to identify specific actions they would formally ask
local and federal governments to adopt. But the very nature of Occupy Wall
Street has made that task difficult, in New York and elsewhere.
Although Occupy Seattle has a running tally of votes on its Web site — 395 votes
to “nationalize the Federal Reserve,” 138 for “universal education” and 245 to
“end corporate personhood,” for example — Mike Hines, a member of the group,
said the list would soon be removed because the provisions had not been clearly
explained and because some people were not capable of voting online.
“It feels like we’re all in a similar boat,” Mr. Hines said of other Occupy
movements. “We all want to include as many voices as possible.”
In New York, the demands committee held a two-hour open forum last Monday,
coming up with two major categories: jobs for all and civil rights. The team
will continue to meet twice a week to develop a list of specific proposals,
which it will then discuss with protesters and eventually take to the General
Assembly, a nightly gathering of the hundreds of protesters in the park.
A two-thirds majority would have to approve each proposal, and any passionate
opponent could call for the entire vote to be delayed.
The General Assembly has already adopted a “Declaration of the Occupation of New
York City,” which includes a list of grievances against corporations and a call
for others to join the group in peaceful assembly. To many protesters, that
general statement is enough, and the open democracy of Zuccotti Park is the
point of the movement.
“Demands are disempowering since they require someone else to respond,” said
Gabriel Willow, a protester strolling past a sleeping-bag pod of young adults in
the park last Monday. “It’s not like we couldn’t come up with any, but I don’t
think people would vote for them.”
Although Monday’s open forum was meagerly attended, politically active members
like Cecily McMillan and David Haack, who first proposed formulating demands in
a pre-campout planning meeting in August, said they were ready to take action.
Mr. Haack, who in 2009 tried to run for the White Plains City Council, admitted
feeling disillusioned after the group struck down their proposal in August, but
now he feels inspired by the movement’s “true democratic process,” even if it
means slower progress going forward.
“Let’s give ourselves two weeks,” Ms. McMillan said about presenting provisions
to the General Assembly. Ms. McMillan, 23, a New School graduate student, feels
such dedication to the cause that she has contemplated taking a sabbatical from
her studies — but she has begun to worry that the movement could become “a joke”
without specific goals. Still, with the right demands, she said, more union
members and diverse contingencies could join.
In Austin, Tex., participants agreed on four demands, including an end to
corporate personhood and tax reform. One Austin activist, Lauren Walker, linked
the movement’s goals directly to government officials.
“This is our time because we’re coming up to the 2012 elections,” she said,
suggesting that protesters saw the presidential election as a “deadline” to
draft revolutionary policy suggestions.
Elsewhere, Occupy Boston, Occupy D.C. and Occupy Philadelphia were among the
many groups in the movement slowly formulating demands, though in each city,
opposition has arisen from skeptical demonstrators.
In Boston, Meghann Sheridan wrote on the group’s Facebook page, “The process is
the message.” In Baltimore, Cullen Nawalkowsky, a protester, said by phone that
the point was a “public sphere not moderated by commodities or mainstream
political discourse.” An Occupy Cleveland participant, Harrison Kalodimos, is
even writing a statement about why demands are not the answer.
Joseph Schwartz, a political science professor and an Occupy Philadelphia
participant, said he thought the movement’s “anarchist strain” discouraged a
Whatever it is, New York’s small group of focused activists said they would not
“If we don’t make demands, the political parties will make them for us,” a
longtime protester, Eric Lerner, 64, said from his spot in the cluster last
Monday. “We have to get it right this time.”
Protesters Debate What
Demands, if Any, to Make, NYT, 16.10.2011,
Losing Their Immunity
The New York Times
By PAUL KRUGMAN
Occupy Wall Street movement continues to grow, the response from the movement’s
targets has gradually changed: contemptuous dismissal has been replaced by
whining. (A reader of my blog suggests that we start calling our ruling class
the “kvetchocracy.”) The modern lords of finance look at the protesters and ask,
Don’t they understand what we’ve done for the U.S. economy?
The answer is: yes, many of the protesters do understand what Wall Street and
more generally the nation’s economic elite have done for us. And that’s why
On Saturday The Times reported what people in the financial industry are saying
privately about the protests. My favorite quote came from an unnamed money
manager who declared, “Financial services are one of the last things we do in
this country and do it well. Let’s embrace it.”
This is deeply unfair to American workers, who are good at lots of things, and
could be even better if we made adequate investments in education and
infrastructure. But to the extent that America has lagged in everything except
financial services, shouldn’t the question be why, and whether it’s a trend we
want to continue?
For the financialization of America wasn’t dictated by the invisible hand of the
market. What caused the financial industry to grow much faster than the rest of
the economy starting around 1980 was a series of deliberate policy choices, in
particular a process of deregulation that continued right up to the eve of the
Not coincidentally, the era of an ever-growing financial industry was also an
era of ever-growing inequality of income and wealth. Wall Street made a large
direct contribution to economic polarization, because soaring incomes in finance
accounted for a significant fraction of the rising share of the top 1 percent
(and the top 0.1 percent, which accounts for most of the top 1 percent’s gains)
in the nation’s income. More broadly, the same political forces that promoted
financial deregulation fostered overall inequality in a variety of ways,
undermining organized labor, doing away with the “outrage constraint” that used
to limit executive paychecks, and more.
Oh, and taxes on the wealthy were, of course, sharply reduced.
All of this was supposed to be justified by results: the paychecks of the
wizards of Wall Street were appropriate, we were told, because of the wonderful
things they did. Somehow, however, that wonderfulness failed to trickle down to
the rest of the nation — and that was true even before the crisis. Median family
income, adjusted for inflation, grew only about a fifth as much between 1980 and
2007 as it did in the generation following World War II, even though the postwar
economy was marked both by strict financial regulation and by much higher tax
rates on the wealthy than anything currently under political discussion.
Then came the crisis, which proved that all those claims about how modern
finance had reduced risk and made the system more stable were utter nonsense.
Government bailouts were all that saved us from a financial meltdown as bad as
or worse than the one that caused the Great Depression.
And what about the current situation? Wall Street pay has rebounded even as
ordinary workers continue to suffer from high unemployment and falling real
wages. Yet it’s harder than ever to see what, if anything, financiers are doing
to earn that money.
Why, then, does Wall Street expect anyone to take its whining seriously? That
money manager claiming that finance is the only thing America does well also
complained that New York’s two Democratic senators aren’t on his side, declaring
that “They need to understand who their constituency is.” Actually, they surely
know very well who their constituency is — and even in New York, 16 out of 17
workers are employed by nonfinancial industries.
But he wasn’t really talking about voters, of course. He was talking about the
one thing Wall Street still has plenty of thanks to those bailouts, despite its
total loss of credibility: money.
Money talks in American politics, and what the financial industry’s money has
been saying lately is that it will punish any politician who dares to criticize
that industry’s behavior, no matter how gently — as evidenced by the way Wall
Street money has now abandoned President Obama in favor of Mitt Romney. And this
explains the industry’s shock over recent events.
You see, until a few weeks ago it seemed as if Wall Street had effectively
bribed and bullied our political system into forgetting about that whole drawing
lavish paychecks while destroying the world economy thing. Then, all of a
sudden, some people insisted on bringing the subject up again.
And their outrage has found resonance with millions of Americans. No wonder Wall
Street is whining.
Losing Their Immunity, NYT, 16.10.2011,
The New York Times
first of the major banks to report its earnings each quarter, JPMorgan Chase is
a barometer of conditions in the financial industry. The mercury is falling.
JPMorgan reported on Thursday that its third-quarter revenue had dropped by 11
percent from the second quarter; its profit fell by 4 percent from a year
earlier. And since JPMorgan is arguably one of the nation’s healthier banks,
results for firms like Bank of America, Citigroup, Goldman Sachs and Morgan
Stanley are likely to be considerably worse.
These declines are worrisome in the sense that they reflect the weakness of the
broader economy. Joblessness, damaged credit and falling home values have left
people unable to borrow or to repay debt and businesses reluctant to hire and
invest. But the results also reflect how the banks built profits abusing their
Long overdue federal restrictions on hidden overdraft charges and excessive
debit card fees have begun to take a bite out of bank profits, and that should
be happening. But the banks and their investors tend to see any rules and
regulations that slow revenue growth as undue and overly burdensome, and they
are pushing back. The question is whether lawmakers and regulators will stand up
for the new fee restrictions and other rules as banks resist.
Banks, habituated to gouging their customers, are already trying to recoup lost
revenue with dubious new charges, like Bank of America’s $5 monthly fee for
using a debit card. The move has infuriated customers and led President Obama to
rightly warn against mistreatment of customers in the pursuit of profit. But
Bank of America has yet to relent — a stubbornness that may be from of a belief
that aggrieved customers won’t do better elsewhere. On Thursday, five Democratic
congressmen led by Peter Welch of Vermont asked the Justice Department to
investigate whether the big banks were engaging in “price signaling,” a form of
collusion in the setting of prices.
The big banks are also resisting proposed regulations on capital levels,
derivatives and investing practices. If successfully implemented, the new rules
will help to curb the kind of reckless trading and irresponsible lending that
caused the crash and recession. That will slow revenue growth, but it is the
price of a more stable system.
The banks also have gotten themselves into a legal mess for which they have no
one to blame but themselves. JPMorgan had to set aside another $1 billion last
quarter to prepare for legal claims from investors who want to recoup their loss
from mortgage bonds backed by bad loans.
The banks face legal challenges from federal and state governments over
foreclosure abuses and other mortgage-related issues. In all, analysts say
mortgage problems could cost JPMorgan up to $9 billion. Bank of America, the
most exposed of the big banks to mortgage-related litigation, is potentially on
the hook for far more.
Investors, meanwhile, are pricing banks’ stocks below the banks’ book value — a
sign that they don’t believe the banks are worth what the banks say they are.
The questions generally involve whether banks are properly valuing their loans
and investments and the extent of their exposure to shaky European debt. Banks
could fix this with increased and detailed disclosure. Government officials and
regulators could compel that disclosure. The general failure on this front feeds
the air of skepticism.
One of the lessons from the financial crash is that there is no substitute for
transparency. In the new earnings season, investors are still in the dark.
The Banks Falter, NYT, 13.10.2011,
The New York Times
October 13, 2011
By PAUL KRUGMAN
transcript of Tuesday’s Republican debate on the economy is, for anyone who has
actually been following economic events these past few years, like falling down
a rabbit hole. Suddenly, you find yourself in a fantasy world where nothing
looks or behaves the way it does in real life.
And since economic policy has to deal with the world we live in, not the fantasy
world of the G.O.P.’s imagination, the prospect that one of these people may
well be our next president is, frankly, terrifying.
In the real world, recent events were a devastating refutation of the
free-market orthodoxy that has ruled American politics these past three decades.
Above all, the long crusade against financial regulation, the successful effort
to unravel the prudential rules established after the Great Depression on the
grounds that they were unnecessary, ended up demonstrating — at immense cost to
the nation — that those rules were necessary, after all.
But down the rabbit hole, none of that happened. We didn’t find ourselves in a
crisis because of runaway private lenders like Countrywide Financial. We didn’t
find ourselves in a crisis because Wall Street pretended that slicing, dicing
and rearranging bad loans could somehow create AAA assets — and private rating
agencies played along. We didn’t find ourselves in a crisis because “shadow
banks” like Lehman Brothers exploited gaps in financial regulation to create
bank-type threats to the financial system without being subject to bank-type
limits on risk-taking.
No, in the universe of the Republican Party we found ourselves in a crisis
because Representative Barney Frank forced helpless bankers to lend money to the
O.K., I’m exaggerating a bit — but not much. Mr. Frank’s name did come up
repeatedly as a villain in the crisis, and not just in the context of the
Dodd-Frank financial reform bill, which Republicans want to repeal. You have to
marvel at his alleged influence given the fact that he’s a Democrat and the vast
bulk of the bad loans now afflicting our economy were made while George W. Bush
was president and Republicans controlled the House with an iron grip. But he’s
their preferred villain all the same.
The demonization of Mr. Frank aside, it’s now obviously orthodoxy on the
Republican side that government caused the whole problem. So what you need to
know is that this orthodoxy has hardened even as the supposed evidence for
government as a major villain in the crisis has been discredited. The fact is
that government rules didn’t force banks to make bad loans, and that
government-sponsored lenders, while they behaved badly in many ways, accounted
for few of the truly high-risk loans that fueled the housing bubble.
But that’s history. What do the Republicans want to do now? In particular, what
do they want to do about unemployment?
Well, they want to fire Ben Bernanke, the chairman of the Federal Reserve — not
for doing too little, which is a case one can make, but for doing too much. So
they’re obviously not proposing any job-creation action via monetary policy.
Incidentally, during Tuesday’s debate, Mitt Romney named Harvard’s N. Gregory
Mankiw as one of his advisers. How many Republicans know that Mr. Mankiw at
least used to advocate — correctly, in my view — deliberate inflation by the Fed
to solve our economic woes?
So, no monetary relief. What else? Well, the Cheshire Cat-like Rick Perry — he
seems to be fading out, bit by bit, until only the hair remains — claimed,
implausibly, that he could create 1.2 million jobs in the energy sector. Mr.
Romney, meanwhile, called for permanent tax cuts — basically, let’s replay the
Bush years! And Herman Cain? Oh, never mind.
By the way, has anyone else noticed the disappearance of budget deficits as a
major concern for Republicans once they start talking about tax cuts for
corporations and the wealthy?
It’s all pretty funny. But it’s also, as I said, terrifying.
The Great Recession should have been a huge wake-up call. Nothing like this was
supposed to be possible in the modern world. Everyone, and I mean everyone,
should be engaged in serious soul-searching, asking how much of what he or she
thought was true actually isn’t.
But the G.O.P. has responded to the crisis not by rethinking its dogma but by
adopting an even cruder version of that dogma, becoming a caricature of itself.
During the debate, the hosts played a clip of Ronald Reagan calling for
increased revenue; today, no politician hoping to get anywhere in Reagan’s party
would dare say such a thing.
It’s a terrible thing when an individual loses his or her grip on reality. But
it’s much worse when the same thing happens to a whole political party, one that
already has the power to block anything the president proposes — and which may
soon control the whole government.
Rabbit-Hole Economics, NYT, 13.10.2011,
Stop the Drop in Home Values
The New York Times
By MARTIN S. FELDSTEIN
HOMES are the primary form of wealth for most Americans. Since the housing
bubble burst in 2006, the wealth of American homeowners has fallen by some $9
trillion, or nearly 40 percent. In the 12 months ending in June, house values
fell by more than $1 trillion, or 8 percent. That sharp fall in wealth means
less consumer spending, leading to less business production and fewer jobs.
But for political reasons, both the Obama administration and Republican leaders
in Congress have resisted the only real solution: permanently reducing the
mortgage debt hanging over America. The resistance is understandable. Voters
don’t want their tax dollars used to help some homeowners who could afford to
pay their mortgages but choose not to because they can default instead, and
simply walk away. And voters don’t want to provide any more help to the banks
that made loans that have gone sour.
But failure to act means that further declines in home prices will continue,
preventing the rise in consumer spending needed for recovery. As costly as it
will be to permanently write down mortgages, it will be even costlier to do
nothing and run the risk of another recession.
House prices are falling because millions of homeowners are defaulting on their
mortgages, and the sale of their foreclosed properties is driving down the
prices of all homes. Nearly 15 million homeowners owe more than their homes are
worth; in this group, about half the mortgages exceed the home value by more
than 30 percent.
Most residential mortgages are effectively nonrecourse loans, meaning creditors
can eventually take the house if the homeowner defaults, but cannot take other
assets or earnings. Individuals with substantial excess mortgage debt therefore
have a strong incentive to stop paying; they can often stay in their homes for a
year or more before the property is foreclosed and they are forced to move.
The overhang of mortgage debt prevents homeowners from moving to areas where
there are better job prospects and from using home equity to finance small
business start-ups and expansions. And because their current mortgages exceed
the value of their homes, they cannot free up cash by refinancing at low
The Obama administration has tried a variety of programs to reduce monthly
interest payments. Those programs failed because they didn’t address the real
problem: the size of the mortgage exceeds the value of the home.
To halt the fall in house prices, the government should reduce mortgage
principal when it exceeds 110 percent of the home value. About 11 million of the
nearly 15 million homes that are “underwater” are in this category. If everyone
eligible participated, the one-time cost would be under $350 billion. Here’s how
such a policy might work:
If the bank or other mortgage holder agrees, the value of the mortgage would be
reduced to 110 percent of the home value, with the government absorbing half of
the cost of the reduction and the bank absorbing the other half. For the
millions of underwater mortgages that are held by Fannie Mae and Freddie Mac,
the government would just be paying itself. And in exchange for this reduction
in principal, the borrower would have to accept that the new mortgage had full
recourse — in other words, the government could go after the borrower’s other
assets if he defaulted on the home. This would all be voluntary.
This plan is fair because both borrowers and creditors would make sacrifices.
The bank would accept the cost of the principal write-down because the resulting
loan — with its lower loan-to-value ratio and its full recourse feature — would
be much less likely to result in default. The borrowers would accept full
recourse to get the mortgage reduction.
Without a program to stop mortgage defaults, there is no way to know how much
further house prices might fall. Although house prices in some areas are already
very low, potential buyers continue to wait because they anticipate even lower
prices in the future.
Before the housing bubble burst in 2006, the level of house prices had risen
nearly 60 percent above the long-term price path. So there is no knowing how far
prices may fall below the long-term path before they begin to recover.
I cannot agree with those who say we should just let house prices continue to
fall until they stop by themselves. Although some forest fires are allowed to
burn out naturally, no one lets those fires continue to burn when they threaten
residential neighborhoods. The fall in house prices is not just a decline in
wealth but a decline that depresses consumer spending, making the economy weaker
and the loss of jobs much greater. We all have a stake in preventing that.
Feldstein, a professor of economics at Harvard, was the chairman of the Council
of Economic Advisers from 1982 to 1984 under President Ronald Reagan.
How to Stop the Drop in Home Values, NYT, 12.10.2011,
Is Last to Reach Deal With Union
The New York Times
By NICK BUNKLEY
Chrysler and the United Automobile Workers union reached a tentative agreement
early Wednesday on a new four-year labor contract that calls for 2,100
additional jobs in the United States, the union said.
The union said Chrysler, which went through bankruptcy protection in 2009, also
committed to investing $4.5 billion to retool plants for new models. It planned
to lay out more details of the proposed contract, which covers 26,000 workers,
at a news conference later Wednesday.
“This agreement is the latest in a remarkable turnaround for Chrysler,” General
Holiefield, the U.A.W. vice president in charge of negotiations with Chrysler,
said in a statement. “Chrysler has turned the corner and with this agreement
will continue to move forward. It’s a new day at Chrysler.”
Chrysler, the smallest of the three Detroit automakers, was the last to reach a
deal with the U.A.W. Negotiations there were the most difficult, as Chrysler
executives took a hard line against any increase in labor costs.
The union last month ratified a new contract with General Motors that creates or
retains 6,400 jobs. Workers at the Ford Motor Company began voting this week on
a tentative agreement, reached Oct. 4, that adds 12,000 jobs. Both deals follow
the same basic framework, giving workers signing bonuses of at least $5,000,
raising entry-level wages and moving work from other countries, including
Mexico, to American plants.
“Together with the jobs created in suppliers and other businesses supported by
auto manufacturing, a total of 180,000 jobs will be added to the country’s
battered economy” if the Ford and Chrysler agreements are approved, U.A.W.
President Bob King said in the statement. The 180,000 includes the new G.M.
G.M. has said its new contract increases labor costs by just 1 percent annually,
an amount that prompted Standard & Poor’s to upgrade G.M.’s credit rating. Ford
and Chrysler were waiting until their deals are ratified before discussing them
in more detail.
Chrysler’s chief executive, Sergio Marchionne, last week described the G.M. and
Ford deals as “overly generous.” Chrysler was the only one of the Detroit
companies to lose money in 2010 — $652 million — but it has since repaid $7.5
billion in high-interest government loans that were its largest hindrance to
Ford workers were scheduled to finish voting on their contract next week. The
first big plant to vote, a compact-car assembly plant in suburban Detroit,
narrowly rejected the deal Tuesday. Some Ford workers have complained that they
deserved larger bonuses or a pay raise, which they have not received since 2003.
“I have no doubt in my mind that the agreement will pass,” Jimmy Settles, the
U.A.W. vice president in charge of negotiations with Ford, said in an interview
Chrysler Is Last to Reach Deal With Union, NYT,
Messages of the Wall St. Demonstration
The New York Times
In “The Milquetoast Radicals” (column, Oct. 11), David Brooks suggests that by
focusing on the 1 percent of wealthiest Americans, Occupy Wall Street fails to
credibly address our key challenges. In doing so, he ignores a central thesis of
the demonstrators: Our political system is neither responsive to the middle
class nor capable of rational action because it serves — almost exclusively —
the interests of those who finance political campaigns.
This influence, by the so-called 1 percent, is not only unjust, but also
distorts our free market and rewards those with access to power rather than
those who create jobs and wealth. The near collapse of our banking system is
only the most visible example of how such influence threatens our economic
security and our democracy.
Occupy Wall Street’s first purpose, then, must be to ensure that our government
can hear our voices and promote our interests. That would be sufficiently
Brookline, Mass., Oct. 11, 2011
David Brooks’s get-off-my-lawn dismissal of Occupy Wall Street misses the point.
Wall Street tycoons made a civilization-jeopardizing mess requiring extensive
government bailouts and were never brought to justice. Incredibly, most did not
miss a bonus payment, while millions of middle-class folks face stagnating wages
at best and unemployment at worst.
This travesty follows decades of ill-conceived policies and court decisions
concentrating wealth and power in the hands of the few at the expense of the
many. If Mr. Brooks cannot hear these sentiments from Occupy Wall Street, he’s
Locust Valley, N.Y., Oct. 11, 2011
In the angry worldview of the Occupy Wall Street protesters, there are no gray
areas, no such thing as multiple causes for difficult conditions or any
possibility that actions may be well intended and then fail. It is the
uncomplicated view of a child. There is one category of bad guy and everything
is his fault.
Donors to their cause should send them a selection of the excellent books
written on the subject of the 2008 collapse so they can read up on the perfect
storm that left us where we find ourselves today.
Policy makers, legislators, civil servants, bankers, consumers — all these
groups shared responsibility for how things have turned out. The vast majority
were going about their business and intended no harm.
But that story won’t keep the anger alive, and the message doesn’t fit on a
sign. The truth rarely does.
Greenwich, Conn., Oct. 11, 2011
I think that David Brooks misunderstands the message being sent by the Occupy
Wall Street protesters. It is not that the top 1 percent are villainous while
the bottom 99 percent are virtuous. Rather, their message is that the system
that creates and sustains our extraordinary degree of income inequality is
damaging to the country as a whole and must be dramatically reformed.
Katonah, N.Y., Oct. 11, 2011
Re “Confronting the Malefactors” (column, Oct. 7):
Paul Krugman says of Occupy Wall Street, “A better critique of the protests is
the absence of specific policy demands.” Though initially the absence of
specific demands caused many to write off this movement, the vagueness of their
goals has actually helped the protesters.
Occupy Wall Street has absorbed the causes of hippies, unions and frustrated
Americans alike. The bigger the tent, the greater the number of people who can
Ossining, N.Y., Oct. 7, 2011
Messages of the Wall St. Demonstration, NYT, 11.10.2011,
Flat by Layaway
The New York Times
By LOUIS HYMAN
IN another sign that the national economy is suffering through a rerun of the
1970s, Wal-Mart recently announced that it was bringing back its Christmas
layaway program. Beginning on Oct. 17, shoppers who buy at least $50 worth of
goods, put 10 percent down and pay a $5 fee will be able to pay for their
purchases slowly over the next two months, all for the ostensible purpose of
Wal-Mart’s press releases suggest that the restoration of the layaway program,
which was discontinued in 2006, is meant to help its customers “budget” so that
Christmas can be “worry-free.” The company is partly playing on the economic
insecurity of its customers, and partly on the national nostalgia for the days
before credit-card debt. But the truth is, the program is a bad deal for
everyone — except Wal-Mart.
Wal-Mart is not alone in the return to layaway; Sears and Toys “R” Us also have
revived their programs. The plans first became common in the 1930s. Stores that
catered to the well-to-do, like department stores, offered no-interest credit to
be paid off at the end of the month. But store owners feared extending such
offers to lower-income shoppers, believing they were likely to be slow to repay,
or even default on their debt, which would tie up the store’s working capital.
Stores didn’t want to turn away lower-income customers, though — hence layaway.
It allowed them to impulse shop and take advantage of sales, but it also
protected the store’s capital. And if shoppers couldn’t pay the layaway, the
store could resell the goods.
But layaway fell out of favor during the last decade as lower-income Americans
gained access to credit. It was better for stores, too, since credit cards are
easier to administer — most of the work is handled by the card company, not the
store. Most stores, except for a few holdouts like Kmart, eliminated their
At first glance, the return of layaway makes sense. Fewer lower-income shoppers
have access to the sort of credit they once did, and many can’t afford big
purchases outright. And there is a moral appeal as well: customers paying
layaway are effectively saving toward something, a reward they will receive only
if they meet their goal, rather than paying off the debt on a purchase they have
Nevertheless, as a financing option, layaway is decidedly worse than most credit
cards. Imagine a mother going to Wal-Mart on Oct. 17 and buying $100 worth of
Christmas toys. She makes a down payment of $10 and pays a $5 service fee. Over
the next two months she pays off the rest. In effect, she is paying $5 in
interest for a $90 loan for two months: the equivalent of a credit card with a
44 percent annual percentage rate, a level most of us would consider predatory.
In comparison, even a card with an 18 percent A.P.R. would charge only half as
much interest — and she could take those presents home the same day.
Then consider what would happen if she couldn’t finish all the payments.
Wal-Mart would give her the money back, less $10. If she borrowed that $90 and
paid $15 in interest for two months, she would have the equivalent of a
jaw-dropping interest rate of 131 percent.
These numbers assume she borrowed for the maximum amount of time, two months,
and put double the minimum required amount on layaway. But if that period were
shortened or the shopper put the minimum amount on layaway, those rates would go
With rates like that, why would anyone participate in layaway? Retailers talk
about the plans as a way to give consumers more choice, but in fact it’s the
result of the opposite: the desperation arising from many Americans’ inability
to borrow, save and, most important, earn.
Credit, after all, is a great deal, giving us the use of something today that we
pay for tomorrow. One could also put the money that would go to layaway into a
savings account, where it would earn some interest. But non-predatory credit is
hard to come by these days, even for middle-class shoppers, and, according to
the 2007 Survey of Consumer Finance, even before the crisis 25 percent of
lower-income Americans had no bank account at all.
Indeed, rather than reminding us of the morally upright, pre-credit days we left
behind, the return of layaway should remind us that in many ways we’re still
stuck in that decade: since the early 1970s, the median male wage has declined.
Any rise in household earnings has come from more women entering the
marketplace, not from higher wages.
It didn’t feel that way, of course, because the expansion of credit to moderate-
and lower-income Americans made us all believe we were getting richer. And, not
surprisingly, as better options emerged, people dumped layaway plans. The
programs’ return, then, isn’t a signal that consumers have more choice. It’s a
signal that in today’s cruel economy, there’s no choice left.
Louis Hyman is
an assistant professor of history at Cornell
and the author
of “Debtor Nation: A History of America in Red Ink.”
Laid Flat by Layaway, NYT, 11.10.2011,
The New York Times
By DAVID BROOKS
economy is probably going to stink for a few more years. It is beset by
short-term problems (low consumer demand, uncertain housing prices, too much
debt) and long-term problems (wage stagnation, rising health care costs, eroding
Realistically, not much is going to be done to address the short-term problems,
but we can at least use this winter of recuperation to address the country’s
underlying structural ones. Do tax reform, fiscal reform, education reform and
political reform so that when the economy finally does recover the prosperity is
deep, broad and strong.
Unfortunately, the country has been wasting this winter of recuperation. Nothing
of consequence has been achieved over the past two years. Instead, there have
been a series of trivial sideshows. It’s as if people can’t keep their minds
focused on the big things. They get diverted by scuffles that are small,
contentious and symbolic.
Take the Occupy Wall Street movement. This uprising was sparked by the magazine
Adbusters, previously best known for the 2004 essay, “Why Won’t Anyone Say They
Are Jewish?” — an investigative report that identified some of the most
influential Jews in America and their nefarious grip on policy.
If there is a core theme to the Occupy Wall Street movement, it is that the
virtuous 99 percent of society is being cheated by the richest and greediest 1
This is a theme that allows the people in the 99 percent to think very highly of
themselves. All their problems are caused by the nefarious elite.
Unfortunately, almost no problem can be productively conceived in this way. A
group that divides the world between the pure 99 percent and the evil 1 percent
will have nothing to say about education reform, Medicare reform, tax reform,
wage stagnation or polarization. They will have nothing to say about the way
Americans have overconsumed and overborrowed. These are problems that implicate
a much broader swath of society than the top 1 percent.
They will have no realistic proposal to reduce the debt or sustain the welfare
state. Even if you tax away 50 percent of the income of those making between $1
million and $10 million, you only reduce the national debt by 1 percent,
according to the Tax Foundation. If you confiscate all the income of those
making more than $10 million, you reduce the debt by 2 percent. You would still
be nibbling only meekly around the edges.
The 99-versus-1 frame is also extremely self-limiting. If you think all problems
flow from a small sliver of American society, then all your solutions are going
to be small, too. The policy proposals that have been floating around the Occupy
Wall Street movement — a financial transfer tax, forgiveness for student loans —
The Occupy Wall Street movement may look radical, but its members’ ideas are
less radical than those you might hear at your average Rotary Club. Its members
may hate capitalism. A third believe the U.S. is no better than Al Qaeda,
according to a New York magazine survey, but since the left no longer believes
in the nationalization of industry, these “radicals” really have no systemic
reforms to fall back on.
They are not the only small thinkers. President Obama promises not to raise
taxes on the bottom 98 percent. The Occupy-types celebrate the bottom 99
percent. Republicans promise not to raise taxes on the bottom 100 percent.
Through these and other pledges, leaders of all three movements are hedging
themselves in. They are severely limiting the scope of their proposed solutions.
The thing about the current moment is that the moderates in suits are much more
radical than the pierced anarchists camping out on Wall Street or the Tea
Look, for example, at a piece Matt Miller wrote for The Washington Post called
“The Third Party Stump Speech We Need.” Miller is a former McKinsey consultant
and Clinton staffer. But his ideas are much bigger than anything you hear from
the protesters: slash corporate taxes and raise energy taxes, aggressively use
market forces and public provisions to bring down health care costs; raise
capital requirements for banks; require national service; balance the budget by
Other economists, for example, have revived the USA Tax, first introduced in
1995 by Senators Sam Nunn and Pete Domenici. This would replace the personal
income and business tax regime with a code that allows unlimited deduction for
personal savings and business investment. It’s a consumption tax through the
back door, which would clean out loopholes and weaken lobbyists.
Don’t be fooled by the clichés of protest movements past. The most radical
people today are the ones that look the most boring. It’s not about declaring
war on some nefarious elite. It’s about changing behavior from top to bottom.
Let’s occupy ourselves.
The Milquetoast Radicals, NYT, 10.10.2011,
Protests Offer Help, and Risk, for Democrats
October 10, 2011
The New York Times
By ERIC LICHTBLAU
WASHINGTON — Leading Democratic figures, including party fund-raisers and a
top ally of President Obama, are embracing the spread of the anti-Wall Street
protests in a clear sign that members of the Democratic establishment see the
movement as a way to align disenchanted Americans with their party.
The Democratic Congressional Campaign Committee, the party’s powerful House
fund-raising arm, is circulating a petition seeking 100,000 party supporters to
declare that “I stand with the Occupy Wall Street protests.”
The Center for American Progress, a liberal organization run by John D. Podesta,
who helped lead Mr. Obama’s 2008 transition, credits the protests with tapping
into pent-up anger over a political system that it says rewards the rich over
the working class — a populist theme now being emphasized by the White House and
the party. The center has encouraged and sought to help coordinate protests in
Judd Legum, a spokesman for the center, said that its direct contacts with the
protests have been limited, but that “we’ve definitely been publicizing it and
He said Democrats are already looking for ways to mobilize protesters in
get-out-the-vote drives for 2012. “What attracts an organization like CAP to
this movement is the idea that our country’s economic policies have been focused
on the very top and not on the bulk of America,” Mr. Legum added. “That’s a
message we certainly agree with.”
But while some Democrats see the movement as providing a political boost, the
party’s alignment with the eclectic mix of protesters makes others nervous. They
see the prospect of the protesters’ pushing the party dangerously to the left —
just as the Tea Party has often pushed Republicans farther to the right and made
for intraparty run-ins.
Mr. Obama has spoken sympathetically of the Wall Street protests, saying they
reflect “the frustration” that many struggling Americans are feeling. Vice
President Joseph R. Biden Jr. and Representative Nancy Pelosi, the House
Democratic leader, have sounded similar themes.
The role of groups like the Democratic campaign committee and Mr. Podesta’s
group, sometimes working in recent weeks with labor unions, moves support from
talking points to the realm of organizational guidance.
It is not at all clear whether the leaders of the amorphous movement actually
want the support of the Democratic establishment, given that some of the
protesters’ complaints are directed at the Obama administration. Among their
grievances, the protesters say they want to see steps taken to ensure that the
rich pay a fairer share of their income in taxes, that banks are held
accountable for reckless practices and that more attention is paid to finding
jobs for the unemployed.
The movement has chosen not to have a spokesman and did not offer official
comment on the Democrats’ attentions. But whether sought or not, the blessing of
senior Democrats holds the potential to give the movement added heft in the same
way that the role of senior Republicans like the former House leader Dick Armey
did for the Tea Party as it grew from an offshoot movement to a much more
organized and potent force.
The protests also provide yet another bright dividing line between Democrats and
Republicans in Washington — one that seems likely to help shape the competing
themes of the 2012 presidential election.
Democrats and Republicans were already largely divided over the Dodd-Frank
legislation, which set out hundreds of new restrictions governing the way
financial institutions operate and are regulated. But while the regulations were
dense and difficult for many Americans to understand, much less seen as a
rallying point, the widespread images of the sprawling protests have offered
both parties a colorful and powerful symbol around which to frame their
Leading Republicans have grown increasingly critical of the protests. Eric
Cantor, the House majority leader, called the protesters “a growing mob,” and
Herman Cain, a Republican presidential candidate, said the protests are the work
of “jealous” anti-capitalists.
The Republican National Committee is also eager to use the protests against Mr.
“The protests began with anger aimed at Wall Street, but the anger is also
directed at the failure of leadership in Washington and that starts with the
president,” Kristen Kukowski, a spokeswoman for the committee, said Monday.
The protesters “realize that if they want change, the one person most
responsible for the status quo and for making change is President Obama,” she
While many Democrats have praised the protesters, some officials in the party
remain wary of their potential impact — especially if the protests were to turn
more disruptive or even violent.
“That’s the danger with something like this — that you go from peaceful protests
to throwing trash cans,” said a senior House Democratic official, who spoke on
condition of anonymity.
“Sure, there’s been some crazy anarchy stuff, but over all, the Democrats like
their message about Wall Street and accountability,” the official said. “It
overlaps with our own message.”
Matt Bennett, vice president for Third Way, a Democratic policy institute in
Washington that favors a more centrist approach, said he believes the angry and
sometimes radical tone of the protests may turn off moderate swing voters who
will be critical in the 2012 elections, just as many moderates are put off by
the rhetoric of the Tea Party on the right.
Embracing the protests may prove a mistake for Democrats, Mr. Bennett said.
“There’s not much upside,” he said, “and there’s a lot of downside.”
Robert Reich, the former labor secretary under President Bill Clinton, wrote in
a blog posting Friday that the protesters’ demands on taxes dovetail with
Democrats’ themes, but he said the protests should still make the party wary —
in part because Democrats rely on Wall Street for significant campaign
“If Occupy Wall Street coalesces into something like a real movement, the
Democratic Party may have more difficulty digesting it than the G.O.P. has had
with the Tea Party,” Mr. Reich wrote.
Some Tea Party leaders are already using the headlines generated by the Wall
Street protesters to try to appeal for financial help for a national advertising
campaign of their own.
In an e-mail sent over the weekend, Todd Cefaratti, representing TeaParty.net,
explained the goal of the first television advertisement would be to introduce
the face of the Tea Party movement as a “diverse group of everyday Americans who
are only special in that they are patriots who want to put our country back on
the right track!” He included a link to the ad that is posted on YouTube and
already had more than 37,000 views by Monday night.
Mr. Cefaratti dismissed comparisons that some people have been making about the
Tea Party movement and the Occupy Wall Street group.
Jennifer Preston contributed reporting from New York.
Protests Offer Help, and
Risk, for Democrats, NYT, 10.10.2011,
Economists Share Nobel Prize
The New York Times
By CATHERINE RAMPELL
in economic science was awarded Monday to Thomas J. Sargent at New York
University and Christopher A. Sims at Princeton University for their research on
the cause and effect of government policies on the broader economy, a major
concern of countries still struggling to address the aftermath of the recent
Back in the 1970s, Dr. Sargent and Dr. Sims were interested in figuring out how
a new policy, like a tax cut or an interest rate hike, might affect the economy.
But economists cannot run controlled experiments in real life to see what
happens when a policy is executed and compare the results to when it is not.
Instead, they have to study whatever history is available to them, with all the
complicated conditions that happened to coincide with the policy change.
Dr. Sargent and Dr. Sims developed statistical methods to organize historical
data and disentangle these many variables.
Their new methodologies are used to figure out whether a policy change that
happened in the past affected the economy or whether it was made in anticipation
of events that policymakers thought would happen later. The methods also help
decipher how regular people’s expectations for government policies can affect
“For both Sims and Sargent, their research is fundamental,” said Mark Watson, an
economics professor at Princeton. “They figured out what it is you need to know
to answer this cause and effect question, and then they developed methods for
actually measuring the effects of causes.”
Dr. Sims said that his research was relevant for helping countries decide how to
respond to the economic stagnation and decimated budgets left by the financial
“The methods that I’ve used and that Tom has developed are central for finding
our way out of this mess,” he said. But asked for specific policy conclusions of
his research, he responded, “If I had a simple answer, I would have been
spreading it around the world.”
Dr. Sims, 68, who is president-elect of the American Economic Association, has
primarily looked at temporary policy changes, such as a surprise in government
finances or a change in interest rates. For example, his methods have been used
to determine whether a central bank’s decision to raise rates affected
inflation, or whether bank officials raised the interest rate precisely because
they expected that inflation change later on.
His research that was honored on Monday developed a systematic method for
distinguishing between unexpected shocks to the economy, such as a change in oil
prices or government finances, and expected changes, the prize committee of the
Royal Swedish Academy of Sciences said in a statement.
His methodology, developed in the 1970s, has been influential in subsequent
decades among all flavors of economists. Research using his methodology, for
example, has helped lend credence to New Keynesianism, the theory that says that
an economy can go into recession because there is not enough demand.
“The idea that there could be an aggregate demand failure is a very old idea,
but it had been completely banished in the ‘70s, ‘80s and ‘90s,” said Lawrence
Christiano, a professor at Northwestern University. “Really the center of
gravity of macro was very much in places like Chicago and Minneapolis. That was
bumped away in part by results of applying this new methodology, and Sims is the
one who originated that.”
Dr. Sims’s work has also been the basis of important papers by Ben S. Bernanke,
the Federal Reserve chairman, and Olivier Blanchard, the chief economist at the
International Monetary Fund.
Dr. Sargent, on the other hand, focused on longer-run structural changes in the
economy, such as setting a new inflation target. His research has analyzed
historical data to better understand how these types of policy changes affect
the economy over time. He has also conducted experiments in a sort of laboratory
setting to examine how new policies might affect the economy.
Dr. Sargent’s body of work is somewhat eclectic. For example, he spent the early
part of his career building up the “rational expectations theory” — the idea
that people make choices based on what they rationally expect to happen, and so
expectations can affect outcomes — and then spent subsequent decades critiquing
“He’s an amazing character in that sense,” said Dr. Christiano, who wrote his
dissertation under Dr. Sargent. “He contributed a revolution, and then tried to
develop a revolution against that one.”
While the prize committee chiefly cited Dr. Sargent’s contributions to modeling
and methodology, he has also done a number of influential empirical studies. He
has studied historical episodes of hyperinflation, for example, and helped show
how expectations for monetary policy can affect price changes.
“He looked at countries that were having inflation of hundreds of percent for
months, like the European countries after world wars,” said Robert Lucas, a
Nobel laureate and economics professor at the University of Chicago. “He wanted
to know how you get out of inflation like that without causing a big recession.
It’s a mix of economics and historical analysis.”
A more controversial line of Dr. Sargent’s research has examined how the
generous welfare state in many European countries might be causing higher
The two economists were awarded for work that they did independently of each
other but that the prize committee said was complementary. They did collaborate
once, in 1977, when they were colleagues at the University of Minnesota.
Their academic pedigrees have other similarities: Both received their Ph.D.s
from Harvard University in 1968, and both spent time studying at the University
of California at Berkeley before receiving their doctorates. Dr. Sargent
received his bachelor’s from Berkeley, and Dr. Sims did post-graduate work at
Berkeley after receiving a bachelor’s from Harvard College.
Coincidentally, the two winners are jointly teaching a graduate course in
macroeconomics at Princeton this semester.
The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel is not
one of the original Nobel prizes. It was created in 1968 and is awarded annually
“according to the same principles as for the Nobel Prizes,” first begun in 1901.
American Economists Share Nobel Prize, NYT, 10.10.2011,
The New York Times
By PAUL KRUGMAN
to be seen whether the Occupy Wall Street protests will change America’s
direction. Yet the protests have already elicited a remarkably hysterical
reaction from Wall Street, the super-rich in general, and politicians and
pundits who reliably serve the interests of the wealthiest hundredth of a
And this reaction tells you something important — namely, that the extremists
threatening American values are what F.D.R. called “economic royalists,” not the
people camping in Zuccotti Park.
Consider first how Republican politicians have portrayed the modest-sized if
growing demonstrations, which have involved some confrontations with the police
— confrontations that seem to have involved a lot of police overreaction — but
nothing one could call a riot. And there has in fact been nothing so far to
match the behavior of Tea Party crowds in the summer of 2009.
Nonetheless, Eric Cantor, the House majority leader, has denounced “mobs” and
“the pitting of Americans against Americans.” The G.O.P. presidential candidates
have weighed in, with Mitt Romney accusing the protesters of waging “class
warfare,” while Herman Cain calls them “anti-American.” My favorite, however, is
Senator Rand Paul, who for some reason worries that the protesters will start
seizing iPads, because they believe rich people don’t deserve to have them.
Michael Bloomberg, New York’s mayor and a financial-industry titan in his own
right, was a bit more moderate, but still accused the protesters of trying to
“take the jobs away from people working in this city,” a statement that bears no
resemblance to the movement’s actual goals.
And if you were listening to talking heads on CNBC, you learned that the
protesters “let their freak flags fly,” and are “aligned with Lenin.”
The way to understand all of this is to realize that it’s part of a broader
syndrome, in which wealthy Americans who benefit hugely from a system rigged in
their favor react with hysteria to anyone who points out just how rigged the
Last year, you may recall, a number of financial-industry barons went wild over
very mild criticism from President Obama. They denounced Mr. Obama as being
almost a socialist for endorsing the so-called Volcker rule, which would simply
prohibit banks backed by federal guarantees from engaging in risky speculation.
And as for their reaction to proposals to close a loophole that lets some of
them pay remarkably low taxes — well, Stephen Schwarzman, chairman of the
Blackstone Group, compared it to Hitler’s invasion of Poland.
And then there’s the campaign of character assassination against Elizabeth
Warren, the financial reformer now running for the Senate in Massachusetts. Not
long ago a YouTube video of Ms. Warren making an eloquent, down-to-earth case
for taxes on the rich went viral. Nothing about what she said was radical — it
was no more than a modern riff on Oliver Wendell Holmes’s famous dictum that
“Taxes are what we pay for civilized society.”
But listening to the reliable defenders of the wealthy, you’d think that Ms.
Warren was the second coming of Leon Trotsky. George Will declared that she has
a “collectivist agenda,” that she believes that “individualism is a chimera.”
And Rush Limbaugh called her “a parasite who hates her host. Willing to destroy
the host while she sucks the life out of it.”
What’s going on here? The answer, surely, is that Wall Street’s Masters of the
Universe realize, deep down, how morally indefensible their position is. They’re
not John Galt; they’re not even Steve Jobs. They’re people who got rich by
peddling complex financial schemes that, far from delivering clear benefits to
the American people, helped push us into a crisis whose aftereffects continue to
blight the lives of tens of millions of their fellow citizens.
Yet they have paid no price. Their institutions were bailed out by taxpayers,
with few strings attached. They continue to benefit from explicit and implicit
federal guarantees — basically, they’re still in a game of heads they win, tails
taxpayers lose. And they benefit from tax loopholes that in many cases have
people with multimillion-dollar incomes paying lower rates than middle-class
This special treatment can’t bear close scrutiny — and therefore, as they see
it, there must be no close scrutiny. Anyone who points out the obvious, no
matter how calmly and moderately, must be demonized and driven from the stage.
In fact, the more reasonable and moderate a critic sounds, the more urgently he
or she must be demonized, hence the frantic sliming of Elizabeth Warren.
So who’s really being un-American here? Not the protesters, who are simply
trying to get their voices heard. No, the real extremists here are America’s
oligarchs, who want to suppress any criticism of the sources of their wealth.
Panic of the Plutocrats, NYT, 9.10.2011,
Recession Officially Over, U.S. Incomes Kept Falling
The New York Times
By ROBERT PEAR
— In a grim sign of the enduring nature of the economic slump, household income
declined more in the two years after the recession ended than it did during the
recession itself, new research has found.
Between June 2009, when the recession officially ended, and June 2011,
inflation-adjusted median household income fell 6.7 percent, to $49,909,
according to a study by two former Census Bureau officials. During the recession
— from December 2007 to June 2009 — household income fell 3.2 percent.
The finding helps explain why Americans’ attitudes toward the economy, the
country’s direction and its political leaders have continued to sour even as the
economy has been growing. Unhappiness and anger have come to dominate the
political scene, including the early stages of the 2012 presidential campaign.
President Obama recently called the economic situation “an emergency,” and over
the weekend he assailed Congressional Republicans for opposing his jobs bill,
which includes tax cuts that would raise take-home pay. Republicans blame Mr.
Obama for the slump, saying he has issued a blizzard of regulations and promised
future tax increases that have hurt business and consumer confidence.
Those arguments may be heard repeatedly this week, as the Senate begins debating
the jobs bill. The full bill — a mix of tax cuts, public works, unemployment
benefits and other items, costing $447 billion — is unlikely to pass, but
individual parts seem to have a significant chance.
The full 9.8 percent drop in income from the start of the recession to this June
— the most recent month in the study — appears to be the largest in several
decades, according to other Census Bureau data. Gordon W. Green Jr., who wrote
the report with John F. Coder, called the decline “a significant reduction in
the American standard of living.”
That reduction occurred even though the unemployment rate fell slightly, to 9.2
percent in June compared with 9.5 percent two years earlier. Two main forces
appear to have held down pay: the number of people outside the labor force —
neither working nor looking for work — has risen; and the hourly pay of employed
people has failed to keep pace with inflation, as the prices of oil products and
many foods have jumped.
During the recession itself, by contrast, wage gains outpaced inflation.
One reason pay has stagnated is that many people who lost their jobs in the
recession — and remained out of work for months — have taken pay cuts in order
to be hired again. In a separate study, Henry S. Farber, an economics professor
at Princeton, found that people who lost jobs in the recession and later found
work again made an average of 17.5 percent less than they had in their old jobs.
“As a labor economist, I do not think the recession has ended,” Mr. Farber said.
“Job losers are having more trouble than ever before finding full-time jobs.”
Mr. Farber added that this downturn was “fundamentally different” from most
previous ones. Historically, other economists say, financial crises and
debt-caused bubbles have led to deeper, more protracted downturns.
Mr. Green and Mr. Coder said the persistently high rate of unemployment and the
long duration of unemployment helped explain the decline in income during the
In the recession, the average length of time a person who lost a job was
unemployed increased to 24.1 weeks in June 2009, from 16.6 weeks in December
2007, according to the federal Bureau of Labor Statistics. Since the end of the
recession, that figure has continued to increase, reaching 40.5 weeks in
September, the longest in more than 60 years.
The new study by Mr. Green and Mr. Coder is based on monthly census surveys,
rather than the annual data that appeared in last month’s census report on
income. The monthly figures allow researchers to measure income changes more
precisely during a recession or a recovery and provide more current information.
The annual report is based on surveys conducted early in the following year, and
people sometimes confuse how much money they are making at the time of the
survey with how much they made the previous year. Additionally, recessions
usually do not line up with a calendar year.
A committee of academic economists at the National Bureau of Economic Research,
a private group widely considered the arbiter of the business cycle, judged that
the most recent recession began in December 2007. The bureau defines a recession
as a significant, broad-based decline in economic activity.
The economists said the recession ended in June 2009. In every quarter since
then, the economy has grown.
Some economists see signs that the United States may be in or about to enter
another recession, though the evidence is mixed.
In their new study, Mr. Green and Mr. Coder found that income dropped more, in
percentage terms, for some groups already making less, a factor that they say
may have contributed to rising income inequality.
From June 2007 to June of this year, they said, median annual household income
declined by 7.8 percent for non-Hispanic whites, to $56,320, and by 6.8 percent
for Hispanics, to $39,901. For blacks, household income declined 9.2 percent, to
Mr. Green and Mr. Coder, who both worked at the Census Bureau for more than 25
years, found other income changes over the four-year period examined.
For example, income, after adjustment for inflation, declined fairly
substantially for households headed by people under age 62, but it rose 4.7
percent for those headed by people 65 to 74, many of whom are not in the labor
force. The change was negligible for those 62 to 64.
The type of employment also made a difference. Real median annual income
declined to a similar degree for households headed by private-sector wage
workers (4.3 percent) and government-sector workers (3.9 percent), but fell much
more for the self-employed (12.3 percent).
Family households generally had larger declines in real income than other
households. Men living alone showed a bigger decline than women living alone.
Education levels were also a factor. Median annual income declined most for
households headed by someone with an associate’s degree, dropping 14 percent, to
$53,195, in the four-year period that ended in June 2011, the report said.
For households headed by people who had not completed high school, median income
declined by 7.9 percent, to $25,157. For those with a bachelor’s degree or more,
income declined by 6.8 percent, to $82,846.
Recession Officially Over, U.S. Incomes Kept Falling, NYT,
Protesters Against Wall Street
The New York Times
Occupy Wall Street protests spread from Lower Manhattan to Washington and other
cities, the chattering classes keep complaining that the marchers lack a clear
message and specific policy prescriptions. The message — and the solutions —
should be obvious to anyone who has been paying attention since the economy went
into a recession that continues to sock the middle class while the rich have
recovered and prospered. The problem is that no one in Washington has been
At this point, protest is the message: income inequality is grinding down that
middle class, increasing the ranks of the poor, and threatening to create a
permanent underclass of able, willing but jobless people. On one level, the
protesters, most of them young, are giving voice to a generation of lost
The jobless rate for college graduates under age 25 has averaged 9.6 percent
over the past year; for young high school graduates, the average is 21.6
percent. Those figures do not reflect graduates who are working but in
low-paying jobs that do not even require diplomas. Such poor prospects in the
early years of a career portend a lifetime of diminished prospects and lower
earnings — the very definition of downward mobility.
The protests, though, are more than a youth uprising. The protesters’ own
problems are only one illustration of the ways in which the economy is not
working for most Americans. They are exactly right when they say that the
financial sector, with regulators and elected officials in collusion, inflated
and profited from a credit bubble that burst, costing millions of Americans
their jobs, incomes, savings and home equity. As the bad times have endured,
Americans have also lost their belief in redress and recovery.
The initial outrage has been compounded by bailouts and by elected officials’
hunger for campaign cash from Wall Street, a toxic combination that has
reaffirmed the economic and political power of banks and bankers, while ordinary
Extreme inequality is the hallmark of a dysfunctional economy, dominated by a
financial sector that is driven as much by speculation, gouging and government
backing as by productive investment.
When the protesters say they represent 99 percent of Americans, they are
referring to the concentration of income in today’s deeply unequal society.
Before the recession, the share of income held by those in the top 1 percent of
households was 23.5 percent, the highest since 1928 and more than double the 10
percent level of the late 1970s.
That share declined slightly as financial markets tanked in 2008, and updated
data is not yet available, but inequality has almost certainly resurged. In the
last few years, for instance, corporate profits (which flow largely to the
wealthy) have reached their highest level as a share of the economy since 1950,
while worker pay as a share of the economy is at its lowest point since the
Income gains at the top would not be as worrisome as they are if the middle
class and the poor were also gaining. But working-age households saw their real
income decline in the first decade of this century. The recession and its
aftermath have only accelerated the decline.
Research shows that such extreme inequality correlates to a host of ills,
including lower levels of educational attainment, poorer health and less public
investment. It also skews political power, because policy almost invariably
reflects the views of upper-income Americans versus those of lower-income
No wonder then that Occupy Wall Street has become a magnet for discontent. There
are plenty of policy goals to address the grievances of the protesters —
including lasting foreclosure relief, a financial transactions tax, greater
legal protection for workers’ rights, and more progressive taxation. The country
needs a shift in the emphasis of public policy from protecting the banks to
fostering full employment, including public spending for job creation and
development of a strong, long-term strategy to increase domestic manufacturing.
It is not the job of the protesters to draft legislation. That’s the job of the
nation’s leaders, and if they had been doing it all along there might not be a
need for these marches and rallies. Because they have not, the public airing of
grievances is a legitimate and important end in itself. It is also the first
line of defense against a return to the Wall Street ways that plunged the nation
into an economic crisis from which it has yet to emerge.
Protesters Against Wall Street, NYT, 8.10.2011,
Redefining the Meaning of No. 1
The New York Times
By DAVID J. ROTHKOPF
Rothkopf is the author of the forthcoming “Power, Inc.: The Epic Rivalry Between
Big Business and Government — and the Reckoning that Lies Ahead.”
HERE in America, we seem to be more interested in finishing first than we are in
figuring out what race we ought to be in.
The refrain is insistent, from President Obama on down. He, like others in both
parties, urges us on — to build or educate or invest or cut the deficit — so
that “America can be No. 1 again.”
We want to be No. 1 — but why, and at what?
The size of our economy is one measure of success, but it’s not the only
Isn’t the important question not how we remain No. 1 but rather, what we want to
be best at — and even, whether we want to lead at all?
But we are Americans and we seem to think the rest of the world looks best when
framed in our rear-view mirror.
We outstrip the world by many measures but lag, sometimes shockingly, in many
others. The metrics by which we choose to measure our success determine our
priorities. Yet, some of the metrics we rate as most important, like G.D.P.,
stock indices or trade data, are so deeply flawed as to be irrelevant or worse,
dangerous distractions. And at the same time, countries that could hardly hope
to outperform the world in any category are far ahead of us when it comes to
things that matter more to people. Choosing metrics to measure our society is
not a value-free process. As a country we have consistently relied on indicators
that keep us focused on the interests of business, financial institutions or the
defense industry whereas equity, quality of life and even social mobility
metrics are played down.
Calculating national income is a relatively new concept. Previously, countries
measured their economic well-being by tallying land holdings or counting
railroad boxcars. But in the midst of the Great Depression, Congress, showing a
great deal more intellectual curiosity than it does today, commissioned a group
of economists led by a future Nobel Prize winner named Simon Kuznets to better
measure economic activity.
Although Kuznets and his team fulfilled their mission, they released their
results with considerable unease. Not only were they aware that the statistic
they devised ignored many types of economic activity — from the work of
housewives to illegal enterprises — they also knew their number did not assess
the social benefits of what they were tracking.
Kuznets warned of this: “The welfare of a nation can, therefore, scarcely be
inferred from a measurement of national income” like the one they created. That
hasn’t stopped us from making this misleading number perhaps the most
influential statistic in the world.
Americans use G.D.P. in discussions about how well we are doing. It’s at the
heart of discussions of whether we are in a recession or not, ahead or falling
Yet, when China “passes” us, it will remain for the most part a very poor
country racked with social problems. And as we have seen, though the past decade
was marked mostly by United States “growth,” recent Census data shows that since
1999, median American incomes have fallen more than 7 percent while the top 1
percent showed gains. Almost one in four American children live in poverty. We
have a high level of unemployment compared to many of our peers.
THE G.D.P. number is not the only culprit, of course. Listening to the news, you
might be forgiven if you thought that stock market performance was linked to
reality. But markets are oceans of teeming emotions that make the average
hormone-infused high school look calmly rational, and much of the “data” that
moves markets is just bunk. Trade deficit numbers may be scary but they are also
frighteningly flawed, doing a terrible job of accounting for trade in services,
trade via the Internet, and inter-company trade, to pick just three among many
Worse than the shortcomings of these statistics are the consequences of our
over-dependence on them as measures of the success of our society. A country,
for example, that overemphasizes G.D.P. growth and market performance is likely
to focus policies on the big drivers of those — corporations and financial
institutions — even when, as during the recent past, there has been little
correlation between the performance of big businesses or elites and that of most
Furthermore, of course, the purpose of a society is not merely the creation of
wealth, especially if most of it goes to the few. Even John Locke, who famously
enumerated our fundamental rights as being to life, liberty and property,
qualified this by asserting that people should appropriate only what they could
use, leaving “enough and as good” for others. Thomas Jefferson later consciously
replaced the right to property with a right to “the pursuit of happiness.” And
happiness has become the watchword for those seeking different measures that
might better guide governments.
According to the economist Carol Graham, the author of a recent book called “The
Pursuit of Happiness: An Economy of Well-Being,” “happiness is, in the end, a
much more complicated concept than income. Yet it is also a laudable and much
more ambitious policy objective.” While she notes distinctions between
approaches to happiness — with some societies more focused on goals like
contentment and others on the creation of equal opportunities — she joins a
growing chorus of leading thinkers who suggest the time has come to rethink how
we measure our performance and how we set our goals.
This diverse group has included thinkers and public figures like President
Nicolas Sarkozy of France, who established a commission in 2008 to address the
issue that was co-led by the Nobel Prize-winning economist Joseph E. Stiglitz;
the Columbia economist Jeffrey D. Sachs; the British prime minister, David
Cameron; and the trail-blazing people of Bhutan, who since 1972 have set a goal
of raising their gross national happiness.
Dr. Graham admits that it’s a challenge to set criteria for measuring happiness.
However, in a conversation, she told me she did not see it as an insurmountable
one: “It doesn’t have to be perfect; after all, it took us decades to agree upon
what to include in G.D.P. and it is still far from a perfect metric.”
But for Americans, beyond choosing the right goals, there remains the issue of
being No. 1. Many of us have lived our lives in a country that has thought
itself the world’s most powerful and successful. But with the United States
economy in a frustrating stall as China rises, it seems that period is coming to
an end. We are suffering a national identity crisis, and politicians are
competing with one another to win favor by assuring a return to old familiar
This approach, too, is problematic. We, as a developed nation, are unlikely to
grow at the rapid pace of emerging powers (the United States is currently ranked
127th in real G.D.P. growth rate). Europe and Japan, too, are grappling with the
realities of being maturing societies.
But maturing societies can offer many benefits to their citizens that are
unavailable to most in the rapidly growing world — the products of rich
educational and cultural resources, capable institutions, stability and
AS a consequence, countries that at different times in history were among the
world’s great powers, such as Sweden, the Netherlands, France, Britain and
Germany, have gradually shifted their sights, either in the wake of defeat or
after protracted periods of grappling with decline, from winning the great power
sweepstakes to topping lists of nations offering the best quality of life.
When Newsweek ranked the “world’s best countries” based on measures of health,
education and politics, the United States ranked 11th. In the 2011 Quality of
Life Index by Nation Ranking, the United States was 31st. Similarly, in recent
rankings of the world’s most livable cities, the Economist Intelligence Unit has
the top American entry at No. 29, Mercer’s Quality of Living Survey has the
first United States entry at No. 31 and Monocle magazine showed only 3 United
States cities in the top 25.
On each of these lists, the top performers were heavily concentrated in Northern
Europe, Australia and Canada with strong showings in East Asian countries from
Japan to Singapore. It is no accident that there is a heavy overlap between the
top performing countries and those that also outperform the United States in
terms of educational performance — acknowledging, of course, the mistake it
would be to overemphasize any one factor in contributing to something as complex
as overall quality of life. Nearly all the world’s quality-of-life leaders are
also countries that spend more on infrastructure than the United States does. In
addition, almost all are more environmentally conscious and offer more
comprehensive social safety nets and national health care to their citizens.
That virtually all of the top performers place a much greater emphasis on
government’s role in ensuring social well-being is also undeniable. But the
politics of such distinctions aside, the focus of those governments on social
outcomes — on policies that enhance contentment and security as well as
enriching both human capabilities and opportunities — may be seen as yet another
sign of maturity.
It is also worth noting that providing the basics to ensure a high quality of
life is not a formula for excess or the kind of economic calamities befalling
parts of Europe today. For example, many of the countries that top
quality-of-life lists, like Sweden, Luxembourg, Denmark, the Netherlands and
Norway, all rank high in lists of fiscally responsible nations — well ahead of
the United States, which ranks 28th on the Sovereign Fiscal Responsibility
What these societies have in common is that rather than striving to be the
biggest they instead aspire to be constantly better. Which, in the end, offers
an important antidote to both the rhetoric of decline and mindless boosterism:
the recognition that whether we are falling behind or achieving new heights is
greatly determined both by what goals we set and how we measure our performance.
Redefining the Meaning of No. 1, NYT, 8.11.2011,
Depression: If Only Things Were That Good
The New York Times
By DAVID LEONHARDT
Leonhardt is The New York Times Washington bureau chief.
UNDERNEATH the misery of the Great Depression, the United States economy was
quietly making enormous strides during the 1930s. Television and nylon stockings
were invented. Refrigerators and washing machines turned into mass-market
products. Railroads became faster and roads smoother and wider. As the economic
historian Alexander J. Field has said, the 1930s constituted “the most
technologically progressive decade of the century.”
Economists often distinguish between cyclical trends and secular trends — which
is to say, between short-term fluctuations and long-term changes in the basic
structure of the economy. No decade points to the difference quite like the
1930s: cyclically, the worst decade of the 20th century, and yet, secularly, one
of the best.
It would clearly be nice if we could take some comfort from this bit of history.
If anything, though, the lesson of the 1930s may be the opposite one. The most
worrisome aspect about our current slump is that it combines obvious short-term
problems — from the financial crisis — with less obvious long-term problems.
Those long-term problems include a decade-long slowdown in new-business
formation, the stagnation of educational gains and the rapid growth of
industries with mixed blessings, including finance and health care.
Together, these problems raise the possibility that the United States is not
merely suffering through a normal, if severe, downturn. Instead, it may have
entered a phase in which high unemployment is the norm.
On Friday, the Labor Department reported that job growth was mediocre in
September and that unemployment remained at 9.1 percent. In a recent survey by
the Federal Reserve Bank of Philadelphia, forecasters said the rate was not
likely to fall below 7 percent until at least 2015. After that, they predicted,
it would rarely fall below 6 percent, even in good times.
Not so long ago, 6 percent was considered a disappointingly high unemployment
rate. From 1995 to 2007, the jobless rate exceeded 6 percent for only a single
five-month period in 2003 — and it never topped 7 percent.
“We’ve got a double-whammy effect,” says John C. Haltiwanger, an economics
professor at the University of Maryland. The cyclical crisis has come on top of
the secular one, and the two are now feeding off each other.
In the most likely case, the United States has fallen into a period somewhat
similar to the one that Europe has endured for parts of the last generation; it
is rich but struggling. A high unemployment rate will feed fears of national
decline. The political scene may be tumultuous, as it already is. Many people
will find themselves shut out of the work force.
Almost 6.5 million people have been officially unemployed for at least six
months, and another few million have dropped out of the labor force — that is,
they are no longer looking for work — since 2008. These hard-core unemployed
highlight the nexus between long-term and short-term economic problems. Most
lost their jobs because of the recession. But many will remain without work long
after the economy begins growing again.
Indeed, they will themselves become a force weighing on the economy. Fairly or
not, employers will be reluctant to hire them. Many with borderline health
problems will end up in the federal disability program, which has become a
shadow welfare program that most beneficiaries never leave.
For now, the main cause of the economic funk remains the financial crisis. The
bursting of a generation-long, debt-enabled consumer bubble has left households
rebuilding their balance sheets and businesses wary of hiring until they are
confident that consumer spending will pick up. Even now, sales of many
big-ticket items — houses, cars, appliances, many services — remain far below
their pre-crisis peaks.
Although the details of every financial crisis differ, the broad patterns are
similar. The typical crisis leads to almost a decade of elevated unemployment,
according to oft-cited academic research by Carmen M. Reinhart and Kenneth S.
Rogoff. Ms. Reinhart and Mr. Rogoff date the recent crisis from the summer of
2007, which would mean our economy was not even halfway through its decade of
Of course, making dark forecasts about the American economy, especially after a
recession, can be dangerous. In just the last 50 years, doomsayers claimed that
the United States was falling behind the Soviet Union, Japan and Germany, only
to be proved wrong each time.
This country continues to have advantages that no other country, including
China, does: the world’s best venture-capital network, a well-established rule
of law, a culture that celebrates risk taking, an unmatched appeal to
immigrants. These strengths often give rise to the next great industry, even
when the strengths are less salient than the country’s problems.
THAT’S part of what happened in the 1930s. It’s also happened in the 1990s, when
many people were worrying about a jobless recovery and economic decline. At a
1992 conference Bill Clinton convened shortly after his election to talk about
the economy, participants recall, no one mentioned the Internet.
Still, the reasons for concern today are serious. Even before the financial
crisis began, the American economy was not healthy. Job growth was so weak
during the economic expansion from 2001 to 2007 that employment failed to keep
pace with the growing population, and the share of working adults declined. For
the average person with a job, income growth barely exceeded inflation.
The closest thing to a unified explanation for these problems is a mirror image
of what made the 1930s so important. Then, the United States was vastly
increasing its productive capacity, as Mr. Field argued in his recent book, “A
Great Leap Forward.” Partly because the Depression was eliminating
inefficiencies but mostly because of the emergence of new technologies, the
economy was adding muscle and shedding fat. Those changes, combined with the
vast industrialization for World War II, made possible the postwar boom.
In recent years, on the other hand, the economy has not done an especially good
job of building its productive capacity. Yes, innovations like the iPad and
Twitter have altered daily life. And, yes, companies have figured out how to
produce just as many goods and services with fewer workers. But the country has
not developed any major new industries that employ large and growing numbers of
There is no contemporary version of the 1870s railroads, the 1920s auto industry
or even the 1990s Internet sector. Total economic output over the last decade,
as measured by the gross domestic product, has grown more slowly than in any
10-year period during the 1950s, ’60s, ’70s, ’80s or ’90s.
Perhaps the most important reason, beyond the financial crisis, is the overall
skill level of the work force. The United States is the only rich country in the
world that has not substantially increased the share of young adults with the
equivalent of a bachelor’s degree over the past three decades. Some less
technical measures of human capital, like the percentage of children living with
two parents, have deteriorated. The country has also chosen not to welcome many
scientists and entrepreneurs who would like to move here.
The relationship between skills and economic success is not an exact one, yet it
is certainly strong enough to notice, and not just in the reams of peer-reviewed
studies on the subject. Australia, New Zealand, Canada and much of Northern
Europe have made considerable educational progress since the 1980s, for
instance. Their unemployment rates, which were once higher than ours, are now
lower. Within this country, the 50 most educated metropolitan areas have an
average jobless rate of 7.3 percent, according to Moody’s Analytics; in the 50
least educated, the average rate is 11.4 percent.
Despite the media’s focus on those college graduates who are struggling, it’s
not much of an exaggeration to say that people with a four-year degree — who
have an unemployment rate of just 4.3 percent — are barely experiencing an
Economic downturns do often send people streaming back to school, and this one
is no exception. So there is a chance that it will lead to a surge in skill
formation. Yet it seems unlikely to do nearly as much on that score as the Great
Depression, which helped make high school universal. High school, of course, is
free. Today’s educational frontier, college, is not. In fact, it has become more
expensive lately, as state cutbacks have led to tuition increases.
Beyond education, the American economy seems to be suffering from a
misallocation of resources. Some of this is beyond our control. China’s
artificially low currency has nudged us toward consuming too much and producing
too little. But much of the misallocation is homegrown.
In particular, three giant industries — finance, health care and housing — now
include large amounts of unproductive capacity. Housing may have shrunk, but it
is still a bigger, more subsidized sector in this country than in many others.
Health care is far larger, with the United States spending at least 50 percent
more per person on medical care than any other country, without getting vastly
better results. (Some aspects of our care, like certain cancer treatments, are
better, while others, like medical error rates, are worse.) The contrast
suggests that a significant portion of medical spending is wasted, be it on
approaches that do not make people healthier or on insurance-company
In finance, trading volumes have boomed in recent decades, yet it is unclear how
much all the activity has lifted living standards. Paul A. Volcker, the former
Fed chairman, has mischievously said that the only useful recent financial
innovation was the automated teller machine. Critics like Mr. Volcker argue that
much of modern finance amounts to arbitrage, in which technology and
globalization have allowed traders to profit from being the first to notice
small price differences.
IN the process, Wall Street has captured a growing share of the world’s economic
pie — thereby increasing inequality — without doing much to expand the pie. It
may even have shrunk the pie, given that a new International Monetary Fund
analysis found that higher inequality leads to slower economic growth.
The common question with these industries is whether they are using resources
that could do more economic good elsewhere. “The health care problem is very
similar to the finance problem,” says Lawrence F. Katz, a Harvard economist, “in
that incredibly talented people are wasting their talent on something that is
essentially a zero-sum game.”
In the short term, finance, health care and housing provide jobs, as their
lobbyists are quick to point out. But it is hard to see how the jobs of the
future will spring from unnecessary back surgery and garden-variety arbitrage.
They differ from the growth engines of the past, which delivered fundamental
value — faster transportation or new knowledge — and let other industries then
build off those advances.
The United States has long overcome its less dynamic industries by replacing
them with more dynamic ones. The decline of the horse and buggy, difficult as it
may have been for people in the business, created no macroeconomic problems. The
trouble today is that those new industries don’t seem to be arriving very
The rate at which new companies are created has been falling for most of the
last decade. So has the pace at which existing companies add positions. “The
current problem is not that we have tons of layoffs,” Mr. Katz says. “It’s that
we don’t have much hiring.”
If history repeats itself, this situation will eventually turn around. Maybe
some American scientist in a laboratory somewhere is about to make a
breakthrough. Maybe an entrepreneur is on the verge of creating a great new
product. Maybe the recent health care and financial-regulation laws will squeeze
For now, the evidence for such optimism remains scant. And the economy remains
millions of jobs away from being even moderately healthy.
The Depression: If Only Things Were That Good, NYT,
Down on High-Speed Stock Trades
The New York Times
By GRAHAM BOWLEY
in the United States and overseas are cracking down on computerized high-speed
trading that crowds today’s stock exchanges, worried that as it spreads around
the globe it is making market swings worse.
The cost of these high-frequency traders, critics say, is the confidence of
ordinary investors in the markets, and ultimately their belief in the fairness
of the financial system.
“There is something unholy about them,” said Guy P. Wyser-Pratte, a prominent
longtime Wall Street trader and investor. “That is what caused this tremendous
volatility. They make a fortune whereas the public gets so whipsawed by this
Regulators are playing catch-up. In the United States and Europe, they have
recently fined traders for using computers to gain advantage over slower
investors by illegally manipulating prices, and they suspect other market abuse
could be going on. Regulators are also weighing new rules for high-speed
trading, with an international regulatory body to make recommendations in coming
In addition, officials in Europe, Canada and the United States are considering
imposing fees aimed at limiting trading volume or paying for the cost of greater
Perhaps regulators’ biggest worry is over the unknown dynamics of the
computerized stock market world that the firms are part of — and the risk that
at any moment it could spin out of control. Some regulators fear that the sudden
market dive on May 6, 2010, when prices dropped by 700 points in minutes and
recovered just as abruptly, was a warning of the potential problems to come.
Just last week, the broader market fell throughout Tuesday’s session before
shooting up 4 percent in the last hour, raising questions on what was really
“The flash crash was a wake-up call for the market,” said Andrew Haldane,
executive director of the Bank of England responsible for financial stability.
“There are many questions begging.”
The industry and others say that the vast majority of trading is legitimate and
that its presence means many extra buyers and sellers in the markets,
drastically reducing trading costs for ordinary investors.
James Overdahl, an adviser to the firms’ trade group, said that they favor
policing the market to stamp out manipulation and that they support efforts to
improve market stability. The traders, he said, “are as much interested in
improving the quality of markets as anyone else.”
Some academic studies show that high-frequency trading tends to reduce price
volatility on normal trading days.
And while a recent analysis by The New York Times of price changes in the
Standard & Poor’s 500-stock index over the past five decades showed that big
price swings are more common than they used to be, analysts ascribe this to a
variety of causes — including high-speed electronic trading but also high
anxiety about the European crisis and the United States economy.
“We are just beginning to catch up to the reality of, ‘Hey, we are in an
electronic market, what does that mean?’ ” said Adam Sussman, director of
research at the Tabb Group, a markets specialist.
High-frequency trading took off in the middle of the last decade when regulatory
reforms encouraged exchanges to switch from floor-based trading to electronic.
As computers took over, daily turnover of stocks rose to 8 billion shares in the
United States from about 6 billion in 2007, according to BATS Global Markets.
The trading, done by independent firms or on special desks inside big Wall
Street banks, now accounts for two of every three stock market trades in
Such trading has expanded into other markets, including futures markets in the
United States. It has also spread to stock markets around the world where
for-profit exchanges are taking steps to attract their business.
When British regulators noticed strange price movements in a range of shares on
the London Stock Exchange, they tracked them to a Canadian firm issuing
thousands of computerized orders allegedly designed to mislead other investors.
In August, regulators fined the firm, Swift Trade, £8 million, or $13.1 million,
for a technique called layering, which involves issuing and then canceling
orders they never meant to carry out. The action was challenged by Swift Trade,
which was dissolved last year.
Susanne Bergsträsser, a German regulator leading a review of high-speed trading
for the International Organization of Securities Commissions, said authorities
have to be alert for “market abuse that may arise as a result of technological
The organization will present its recommendations to G-20 finance ministers this
In the United States, the Financial Industry Regulatory Authority last year
fined Trillium Brokerage Services, a New York firm, and some of its employees
$2.3 million for layering.
Even the traders’ authorized activities are coming under fire, especially their
tendency to shoot off thousands of orders a second and suddenly cancel many.
Long-term investors like pension funds complain that the practice makes their
Global regulators are considering penalizing traders if they issue but then
cancel a high degree of orders, or even making them keep open their orders for a
minimum time before they can cancel. Long-term investors worry that some traders
may be using their superior technology to detect when others are buying and
selling and rush in ahead of them to take advantage of price moves. This is
driving some investors who buy and sell in large blocks to move to new so-called
dark pools — venues away from public exchanges. As more trading takes place in
these venues, prices on exchanges have less meaning, critics say.
In the United States, the Securities and Exchange Commission has been looking
into the new market structure for almost two years. In July, it approved a
“large trader” rule, requiring firms that do a lot of business, including
high-speed traders, to offer more information about their activities in case
regulators need to trace their trades.
After the flash crash, exchanges introduced circuit breakers to halt trading
after violent moves. Bart Chilton, a commissioner at the Commodity Futures
Trading Commission, called for regulators to go further. He wants compulsory
registration of high-frequency firms and pre-trade testing of their algorithms.
One of the most controversial actions has been the European Commission’s recent
proposal for a financial transaction tax on speculators, which would hit
high-frequency firms and curtail volumes. The proposed tax would apply to all
trades in stocks, bonds and derivatives, and may face stiff opposition from
European governments. Many such firms are based in Britain or the Netherlands,
and authorities fear a loss of business.
In Canada, a top regulator is proposing higher fees on the biggest players. Last
year, the country put in place a monitoring system to track the 200 million to
250 million orders its exchanges receive daily — up from 70 million a year and a
And the S.E.C. last year proposed what would be an even more high-powered
monitoring system called a consolidated audit trail that would gather data on
trades in real time from all United States exchanges, and be a powerful tool in
helping regulators piece together events in case of another flash crash.
The monitoring “will provide regulators a critical new tool to surveil the
securities markets and pursue wrongdoers, in a much more efficient and effective
way than we can today,” said David Shillman, associate director of the S.E.C.’s
trading and markets unit.
Clamping Down on High-Speed Stock Trades, NYT, 8.10.2011,
Confronting the Malefactors
The New York Times
By PAUL KRUGMAN
something happening here. What it is ain’t exactly clear, but we may, at long
last, be seeing the rise of a popular movement that, unlike the Tea Party, is
angry at the right people.
When the Occupy Wall Street protests began three weeks ago, most news
organizations were derisive if they deigned to mention the events at all. For
example, nine days into the protests, National Public Radio had provided no
It is, therefore, a testament to the passion of those involved that the protests
not only continued but grew, eventually becoming too big to ignore. With unions
and a growing number of Democrats now expressing at least qualified support for
the protesters, Occupy Wall Street is starting to look like an important event
that might even eventually be seen as a turning point.
What can we say about the protests? First things first: The protesters’
indictment of Wall Street as a destructive force, economically and politically,
is completely right.
A weary cynicism, a belief that justice will never get served, has taken over
much of our political debate — and, yes, I myself have sometimes succumbed. In
the process, it has been easy to forget just how outrageous the story of our
economic woes really is. So, in case you’ve forgotten, it was a play in three
In the first act, bankers took advantage of deregulation to run wild (and pay
themselves princely sums), inflating huge bubbles through reckless lending. In
the second act, the bubbles burst — but bankers were bailed out by taxpayers,
with remarkably few strings attached, even as ordinary workers continued to
suffer the consequences of the bankers’ sins. And, in the third act, bankers
showed their gratitude by turning on the people who had saved them, throwing
their support — and the wealth they still possessed thanks to the bailouts —
behind politicians who promised to keep their taxes low and dismantle the mild
regulations erected in the aftermath of the crisis.
Given this history, how can you not applaud the protesters for finally taking a
Now, it’s true that some of the protesters are oddly dressed or have
silly-sounding slogans, which is inevitable given the open character of the
events. But so what? I, at least, am a lot more offended by the sight of
exquisitely tailored plutocrats, who owe their continued wealth to government
guarantees, whining that President Obama has said mean things about them than I
am by the sight of ragtag young people denouncing consumerism.
Bear in mind, too, that experience has made it painfully clear that men in suits
not only don’t have any monopoly on wisdom, they have very little wisdom to
offer. When talking heads on, say, CNBC mock the protesters as unserious,
remember how many serious people assured us that there was no housing bubble,
that Alan Greenspan was an oracle and that budget deficits would send interest
A better critique of the protests is the absence of specific policy demands. It
would probably be helpful if protesters could agree on at least a few main
policy changes they would like to see enacted. But we shouldn’t make too much of
the lack of specifics. It’s clear what kinds of things the Occupy Wall Street
demonstrators want, and it’s really the job of policy intellectuals and
politicians to fill in the details.
Rich Yeselson, a veteran organizer and historian of social movements, has
suggested that debt relief for working Americans become a central plank of the
protests. I’ll second that, because such relief, in addition to serving economic
justice, could do a lot to help the economy recover. I’d suggest that protesters
also demand infrastructure investment — not more tax cuts — to help create jobs.
Neither proposal is going to become law in the current political climate, but
the whole point of the protests is to change that political climate.
And there are real political opportunities here. Not, of course, for today’s
Republicans, who instinctively side with those Theodore Roosevelt-dubbed
“malefactors of great wealth.” Mitt Romney, for example — who, by the way,
probably pays less of his income in taxes than many middle-class Americans — was
quick to condemn the protests as “class warfare.”
But Democrats are being given what amounts to a second chance. The Obama
administration squandered a lot of potential good will early on by adopting
banker-friendly policies that failed to deliver economic recovery even as
bankers repaid the favor by turning on the president. Now, however, Mr. Obama’s
party has a chance for a do-over. All it has to do is take these protests as
seriously as they deserve to be taken.
And if the protests goad some politicians into doing what they should have been
doing all along, Occupy Wall Street will have been a smashing success.
Confronting the Malefactors, NYT, 6.10.2011,
the Jobs Bill?
The New York Times
Cantor, the House Republican leader, predictably said that President Obama’s
jobs bill was dead on arrival in his chamber, and would not even be debated, the
president — in a break from his usual forbearance — lashed right back at him.
“Does he not believe in rebuilding America’s roads and bridges?” Mr. Obama asked
on Tuesday. Does Mr. Cantor oppose rehiring teachers or construction workers, he
continued, or giving tax breaks to businesses that hire?
It was the kind of strong, personal rejoinder to Republican obstructionism that
Mr. Obama needs to make. Unfortunately, he has not been as forceful in pressing
the other lawmakers holding up his bill: Senate Democrats.
Nearly a month after the president proposed his jobs bill, it has not yet been
taken up in the chamber controlled by his party. “We’ll get to that,” Senator
Harry Reid, the majority leader, said last month, after taking up a misguided
bill to punish China for currency manipulation. The truth is that Mr. Reid has
not had enough Democratic votes to even claim a Senate majority. That is because
so many members of his caucus do not have the political courage to stand up for
aggressive government action to revive the economy, or to admit that both higher
taxes on the wealthy and an end to corporate tax breaks are necessary to pay for
it and to start wrestling down the deficit.
The Republicans have used that cowardice to embarrass Mr. Reid, his party and
Mr. Obama. On Tuesday, when the Senate Republican leader, Mitch McConnell,
prankishly offered to bring up the jobs bill, Mr. Reid was forced to object,
leading to all sorts of merry, if hollow, taunts from the Republican side.
The Republicans’ willingness to play political games while millions are out of
work is inexcusable, but the eagerness of some Democratic senators to protect
big business and big contributors is no less frustrating.
Oil state Democrats, like Mark Begich of Alaska and Mary Landrieu of Louisiana,
are resisting ending tax breaks for energy conglomerates. Ben Nelson of Nebraska
and Bill Nelson of Florida have objected to broad tax revenue increases. Even
Charles Schumer of New York objected to increases on families making more than
$250,000, claiming— no more convincingly than Republicans do — that many are
struggling small businesses.
To reassemble his coalition, Mr. Reid on Wednesday proposed scrapping the
president’s plan to pay for his bill, and substituting a new 5 percent surtax on
incomes of more than $1 million. That would increase the progressivity of the
tax code, and White House officials said they could accept it. But their
original idea was much better.
Ultimately, families making $250,000, and even those making less, will have to
give back some of the tax benefits they got from the Bush administration if the
budget is to return to long-term health. Beginning that tax-reform process now
makes more sense than confining the new tax to millionaires, whatever its
In the end, it may be a political exercise anyway, since Mr. McConnell’s
Republicans will filibuster any jobs bill, and Mr. Cantor’s will reject most of
it. But the sharp contrast with the Republican plan to do nothing can only be
made if Democrats are clearly united behind a plan to invigorate the economy.
Mr. Reid insists the millionaire’s tax will unite Democrats and produce a vote
on the jobs plan in the next few days. It cannot come soon enough.
Where’s the Jobs Bill?, NYT, 5.10.2011,
Energy, Unions Join Protest Against Wall Street
The New York Times
By STEVEN GREENHOUSE and CARA BUCKLEY
Appelbaum, an influential union leader in New York City, was in Tunisia last
month, advising the fledgling labor movement there, when he received a flurry of
phone calls and e-mails alerting him to the rumblings of something back home.
Protesters united under a provocative name, Occupy Wall Street, were gathering
in a Lower Manhattan park and raising issues long dear to organized labor.
And gaining attention for it.
Mr. Appelbaum recalled asking a colleague over the phone to find out who was
behind Occupy Wall Street — a bunch of hippies or perhaps troublemakers? — and
whether the movement might quickly fade.
So far, at least, it has not, and on Wednesday, several prominent unions,
struggling to gain traction on their own, made their first effort to join forces
with Occupy Wall Street. Thousands of union members marched with the protesters
from Foley Square to their encampment in nearby Zuccotti Park.
“The labor movement needs to tap into the energy and learn from them,” Mr.
Appelbaum, president of the Retail, Wholesale and Department Store Union, said.
“They are reaching a lot of people and exciting a lot of people that the labor
movement has been struggling to reach for years.”
In fact, the unexpected success of Occupy Wall Street in leveling criticism of
corporate America has stirred some soul-searching among labor leaders. They have
noted with envy that the new movement has done a far better job, not only of
capturing interest, but also of attracting young people. Protests have spread to
dozens of cities, including Boston, Chicago and Los Angeles.
Several union leaders complained that their own protests over the past two years
had received little attention, though they had put far more people on the
streets than Occupy Wall Street has. A labor rally in Washington last October
drew more than 100,000 people, with little news media coverage.
Behind the scenes in recent days, union leaders have debated how to respond to
Occupy Wall Street. In internal discussions, some voiced worries that if labor
were perceived as trying to co-opt the movement, it might alienate the
protesters and touch off a backlash.
Others said they were wary of being embarrassed by the far-left activists in the
group who have repeatedly denounced the United States government.
Those concerns may be renewed after a disturbance about 8 p.m. Wednesday as the
march was breaking up. The police said they arrested eight protesters around the
intersection of Broadway and Wall Street, after people rushed barriers and began
spilling into the street. While a couple of witnesses said that officers used
pepper spray to clear the streets, Paul J. Browne, the Police Department’s chief
spokesman, said that one officer “possibly” used it. Several protesters were
also arrested at State and Bridge Streets at 9:30 p.m.; the police said one
protester was charged with assault after an officer was knocked off his scooter.
Despite questions about the protesters’ hostility to the authorities, many union
leaders have decided to embrace Occupy Wall Street. On Wednesday, for example,
members of the A.F.L.-C.I.O.’s executive council had a conference call in which
they expressed unanimous support for the protest. One A.F.L.-C.I.O. official
said leaders had heard from local union members wondering why organized labor
The two movements may be markedly different, but union leaders maintain that
they can help each other — the weakened labor movement can tap into Occupy Wall
Street’s vitality, while the protesters can benefit from labor’s money, its
millions of members and its stature.
The labor leaders said they hoped Occupy Wall Street would serve as a
counterweight to the Tea Party and help pressure President Obama and Congress to
focus on job creation and other concerns important to unions.
“This is very much a crystallizing moment,” said Denise Mitchell, the
A.F.L.-C.I.O.’s communications director. “We have to look for sparks wherever
they are. It could be an opportunity to talk about what’s wrong with the system
and how to make it better.”
Still, it may not be easy for organized labor to mesh with this new movement.
Labor unions generally represent older workers, while the Occupy Wall Street
protesters are younger. Unions are hierarchical, while the Occupy Wall Street
protesters are more loosely knit and like to see themselves as highly
Unions invariably have a long and specific list of demands, while Occupy Wall
Street has not articulated formal ones. Union leaders often like the limelight,
while Occupy Wall Street is largely leaderless.
“Labor’s needed a way to excite younger people with their message,” Michael
Kazin, a historian at Georgetown University, said. “And to the extent that
Occupy Wall Street’s ‘99 percent versus 1 percent’ theme goes along with what
labor has been saying for a while, it’s a natural fit.”
“But obviously,” said Professor Kazin, who has written several books on populist
and progressive movements, “demographically, there may be some problems here.
The protests haven’t gotten much institutional presence, and if labor can help
give them institutional presence, that can really help them.”
Several major labor groups — including the Transport Workers Union, the Service
Employees International Union, the United Federation of Teachers and the United
Auto Workers — took part in the march on Wednesday. Some more traditionally
conservative ones, like those in the construction trades, stayed away.
George White, 60, a retired union member who lives in Marine Park, Brooklyn,
said it was up to the young protesters to champion bread-and-butter issues in
the future. “Unions are on the way out,” he said. “These are the children of
mothers and fathers who have worked hard all their lives and now can’t put food
on the tables. These are the children who can’t pay off their loans, who have
nowhere to go and no opportunities.”
Julie Fry, 32, a lawyer who is a member of the union at the Legal Aid Society,
said labor’s backing of the protest was momentous, and born out of frustration.
“We’re so fed up and getting nowhere through the old political structures that
there needs to be old-fashioned rage in the streets,” she said.
Before the march, protesters at the Occupy Wall Street encampment’s welcome
table said that while the unions were welcome, they would be only one more base
“The idea that the unions will take over the crowd, that’s not going to happen,”
said Jeff Smith, 41, a freelancer in advertising who has been on the welcome
committee since the protests began. “We are not a group looking for a leader.”
Others expressed frustration with the unions. Chris Cicala, 26, from Staten
Island, said his father, a union painter, had been laid off, leaving his family
without health insurance. “I don’t get where the unions have been for the past
10 years,” Mr. Cicala said.
contributed by Al Baker, Joseph Goldstein, Rob Harris
Seeking Energy, Unions Join Protest Against Wall Street, NYT, 5.10.2011,
Wrong Way to Deal With China
The New York Times
undeniably manipulating its currency. Countries around the world, including the
United States, are losing jobs because their manufacturing industries cannot
compete with artificially cheap Chinese goods. For the good of the world
economy, and its own long-term economic development, China should stop.
Still, a Senate bill, with strong bipartisan support, to punish countries that
manipulate their currencies is a bad idea. It could do even more damage to the
American economy if — as is all too likely — China decides to retaliate.
Senator Charles Schumer, a Democrat of New York, declared that the legislation
“is a clear, unwavering message from both parties to China’s leaders — the jig
is up; it’s time to stop gaming the system or face severe consequences.” Talk of
payback is playing well with his colleagues. On Monday, 79 senators — 47
Democrats, 31 Republicans and 1 independent — voted to initiate debate.
Growing trade with China over the past two decades has been one of the leading
causes of the decline of manufacturing employment. The United States would
likely add jobs over time if the renminbi was allowed to rise more
significantly. Some high-technology industries, like the nascent American
solar-panel business, would be a lot more competitive against their Chinese
rivals. But many of the low-wage businesses lost to Chinese competition — like
toys and textiles — will never come back.
Stiff retaliatory tariffs or other punishments are also very unlikely to
persuade Beijing to swiftly abandon a policy that has been at the core of its
economic strategy for two decades. Instead, it could add an explosive new
conflict to an already heavy list of bilateral frictions.
The Senate bill is intended to limit the executive branch’s discretion. It would
require the Treasury Department to identify countries whose currencies were
grossly misaligned — with China everyone’s favorite culprit. If Beijing
persisted, Washington would be required — with a delimited presidential waiver —
to stop spending federal dollars on Chinese goods, and consider the renminbi’s
undervaluation in antidumping cases against Chinese imports. The Treasury
Department would also be required to ask the Federal Reserve to consider acting
in currency markets to counteract the undervaluation of China’s currency. And
the bill would increase the pressure on the Commerce Department to impose
tariffs on undervalued Chinese products.
Given Beijing’s history of meeting fire with fire, many experts fear that China
would retaliate on other fronts, like dragging its feet on customs inspections
of American imports, opening new antidumping investigations against American
goods or slowing its promised efforts to halt the stealing of American
intellectual property. Beijing might even slow the renminbi’s current rise
against the dollar, which translates into an appreciation rate of some 10
percent per year, after taking Chinese inflation into account.
The Obama administration has been pressing Beijing on the broad range of
economic relations. It has won some important cases at the World Trade
Organization. But it could do more to challenge other illegal policies, like
China’s ban on the export of rare earth materials used in high-tech industries.
It could more explicitly link China’s bid for a bilateral investment agreement
with the United States and a designation as a “market economy” at the W.T.O. to
improvements in Chinese policies. It should press the European Union, Brazil and
others to increase the rhetorical heat. China’s undervalued currency hurts them,
Beijing is not immune to pressure. But the Senate bill is too blunt an
The Wrong Way to Deal With China, NYT, 4.10.2011,
Chief Raises Doubts on Recovery
The New York Times
By BINYAMIN APPELBAUM
— The Federal Reserve chairman, Ben S. Bernanke, offered a grim assessment of
the nation’s economic health Tuesday, telling a Congressional committee that
“the recovery is close to faltering.”
Mr. Bernanke said that the Federal Reserve has acted forcefully to support
growth and that it stood ready to do more. But he emphasized that the rest of
the government also needs to act on problems including the federal debt,
unemployment, housing, trade, taxation and regulation.
“Monetary policy can be a powerful tool, but it is not a panacea for the
problems currently faced by the U.S. economy,” Mr. Bernanke said. “Fostering
healthy growth and job creation is a shared responsibility of all economic
Mr. Bernanke began his testimony Tuesday by repeating his basic assessment that
the economy has grown more slowly than expected, because of unexpected setbacks
like the Japanese earthquake and the European debt crisis and because of
domestic problems like the ongoing housing crisis.
“The recovery from the crisis has been much less robust than we hoped,” he said,
although he also reiterated that the Fed expects faster growth going forward.
The Fed’s primary policy focus is on the pace of price increases, or inflation,
which it seeks to maintain at a steady annual rate of about 2 percent. Prices
have increased more quickly over the last year, but the Fed has predicted that
the increases will abate, and Mr. Bernanke reiterated that forecast Monday.
But Mr. Bernanke’s description of the economic outlook sounded slightly more
worried. He has previously said that the economy would recover so long as the
government did nothing to interfere, for example through severe short-term
spending cuts. On Tuesday, he seemed to suggest that the government needed to
act to preserve the recovery.
“We need to make sure that the recovery continues and doesn’t drop back,” Mr.
Bernanke told the Joint Economic Committee.
Mr. Bernanke said that the Fed has not exhausted its options.
The central bank, he said, “is prepared to take further action as appropriate to
promote a stronger economic recovery in the context of price stability.”
But his emphasis once again was on the need for the rest of the government to
He said that the government should keep four goals in mind: reducing debts to a
level that was sustainable in the long term; avoiding short-term reductions that
could impede recovery; adjusting spending and tax policies to support growth;
and improving the government’s decision-making process.
“There is evident need to improve the process for making long-term budget
decisions, to create greater predictability and clarity, while avoiding
disruptions to the financial markets and the economy,” Mr. Bernanke said.
Fed Chief Raises Doubts on Recovery, NYT, 4.9.2011,
Mae Knew Early of Abuses, Report Says
The New York Times
By GRETCHEN MORGENSON
the mortgage finance giant, learned as early as 2003 of extensive foreclosure
abuses among the law firms it had hired to remove troubled borrowers from their
homes. But the company did little to correct the firms’ practices, according to
a report issued Tuesday.
Only after news reports in mid-2010 began to describe the dubious practices,
like the routine filing of false pleadings in bankruptcy courts, did Fannie
Mae’s overseer start to scrutinize the conduct. The report was critical of that
overseer, the Federal Housing Finance Agency, and was prepared by the agency’s
In one notable lapse, even after the agency reported problems to Fannie Mae in
late 2010 about some of the approved law firms, it did not request a response
from the company, the report said.
“American homeowners have been struggling with the effects of the housing
finance crisis for several years, and they shouldn’t have to worry whether they
will be victims of foreclosure abuse,” said Steve Linick, inspector general of
the finance agency. “Increased oversight by F.H.F.A. could help to prevent these
The report is the second in two weeks in which the inspector general has
outlined lapses at both the Federal Housing Finance Agency and the companies it
oversees — Fannie Mae and Freddie Mac. The agency has acted as conservator for
the companies since they were taken over by the government in 2008. Its duty is
to ensure that their operations do not pose additional risk to the taxpayers who
now own them. The companies have tapped the taxpayers to cover mortgage losses
totaling about $160 billion.
Elijah E. Cummings, the Maryland Democrat who is the ranking member of the House
Committee on Oversight and Government Reform and who requested the inspector
general’s report, said in a statement, “As a member of Congress and an attorney,
I find the systemic failures by F.H.F.A. and Fannie Mae to adequately oversee
these foreclosure law firms to be a breach of the public trust and an assault on
the integrity of our justice system.”
The new report from the inspector general tracks Fannie Mae’s dealings with the
law firms handling its foreclosures from 1997, when the company created its
so-called retained attorney network. At the time, Fannie Mae was a highly
profitable and powerful institution, and it devised the legal network to ensure
that borrower defaults would be resolved with efficiency and speed.
The law firms in the network agreed to a flat-rate fee structure and pricing
model based on the volume of foreclosures they completed. The companies that
serviced the loans for Fannie Mae, were supposed to monitor the law firms’
performance and practices, the report noted
After receiving information from a shareholder in 2003 about foreclosure abuses
by its law firms, Fannie Mae assigned its outside counsel to investigate,
according to the report. That law firm concluded in a 2006 analysis that
“foreclosure attorneys in Florida are routinely filing false pleadings and
affidavits,” and that the practice could be occurring elsewhere. “It is
axiomatic that the practice is improper and should be stopped,” the law firm
The inspector general’s report said that it could not be determined whether
Fannie Mae had alerted its regulator, then the Office of Federal Housing
Enterprise Oversight, to the legal improprieties identified by its internal
Amy Bonitatibus, a Fannie Mae spokeswoman, declined to comment on the inspector
general’s report, but said that the 2006 legal analysis identified a specific
issue with the practice of filing lost-note affidavits, which the company
The inspector general said that both Fannie Mae and its regulator appear to have
ignored other signs of problems in their foreclosure operations. For example,
the Federal Housing Finance Agency did not respond to borrower complaints about
improper actions taken by law firms in foreclosures received as early as August
2009, even though foreclosure abuse poses operational and financial risks to
The report cited a media report from early 2008 detailing foreclosure abuses by
law firms doing work for Fannie Mae.
Nevertheless, a few months later and just before its takeover by the government,
Fannie Mae began requiring the banks that serviced its loans to use only those
law firms that were in its network. By then, 140 law firms in 31 jurisdictions
were in the group. Among the largest firms in the network was the David J. Stern
firm in Plantation, Fla., which was handling more than 75,000 foreclosure
actions a year before Fannie Mae terminated it because of vast problems with its
Finally last fall, after an outcry over apparently forged foreclosure documents
and other improprieties, the Federal Housing Finance Agency began investigating
the company’s process. In a report issued early this year, it determined that
Fannie Mae’s management of its network of lawyers did not meet safety and
soundness standards. Among the reasons: the company’s controls to prevent or
detect foreclosure abuses were inadequate, as was the company’s monitoring of
the law firms. “If a law firm self-reported no issues as it processed cases,”
the inspector general said, “then Fannie Mae presumed the firm was doing a good
The agency is still deciding how to handle the lawyer network, the inspector
Mr. Cummings has asked the federal housing agency to consider terminating the
Officials at the housing agency agreed, however, with the recommendations in the
inspector general’s report. Corinne Russell, a spokeswoman for F.H.F.A. said the
agency was concluding its supervisory work in this area and would direct Fannie
Mae to take necessary action when the work was completed.
In a response, the agency said that by Sept. 29, 2012, it would review its
existing supervisory practices and act to resolve “deficiencies in the
management of risks associated with default-related legal services vendors.”
Fannie Mae Knew Early of Abuses, Report Says, NYT,
Supercommittee’s Stark Choice
The New York Times
Congressional Republicans tried to box in Democrats and the White House by
demanding huge deficit cuts in exchange for preventing a government default.
Then they joined in the creation of a “supercommittee” on deficit reduction that
they hoped would take taxes off the table and focus entirely on cuts in
But that supposed victory has forced many Republicans into an equally tight
corner. They are starting to realize that if they remain adamant, the resulting
across-the-board cuts will disproportionately affect programs they support,
starting with military spending.
The joint committee created by the debt-ceiling agreement is desperately groping
behind closed doors for ways to cut at least $1.2 trillion from the federal
deficit. Republican leaders want it all to come from spending cuts; Democratic
leaders want a mix of cuts and revenue increases. If the two sides cannot agree,
there will be automatic cuts, which largely spare social-welfare programs but
would severely reduce military and security spending.
Senator Jon Kyl of Arizona, who is happy to cut virtually anything else, says
military cuts could lead to job losses. Representative Howard McKeon of
California, the Armed Services Committee chairman, is so rattled by the law that
he used an old scare tactic, saying the cuts could produce a new military draft.
“It is my suspicion that the White House and Congressional Democrats insisted on
that defense number for one purpose: to force Republicans to choose between
raising taxes or gutting defense,” Mr. McKeon said.
That is exactly the choice, and Republicans brought it on themselves by turning
the routine debt-ceiling vote into a life-or-death struggle over the unrelated
issue of taxes and spending. They have a way out, however. President Obama has
given the supercommittee a clear blueprint for $3.6 trillion in deficit
reduction through a mix of spending cuts and tax increases on the rich. If the
committee followed even half of that program, it could exceed its original
mandate, wrap up its work quickly and accomplish a great deal.
Mr. McKeon is a rare Republican who says he would prefer the tax increases to
military spending cuts. But the White House proposal, like virtually every good
idea that has come up, has been removed from the table by Republican leaders,
who have resisted even Democratic demands to allow the panel to add job creation
to its mandate.
The committee has only one option, Speaker John Boehner said a few days ago:
cutting domestic spending and social-insurance programs, including Medicare and
Social Security. Representative Jeb Hensarling of Texas, the co-chairman of the
committee, said the president’s plan was “undermining the work” of the group.
The opposite is true. Mr. Obama identified $570 billion in detailed cuts to
mandatory spending programs over 10 years. If committee members actually looked
at the plan, instead of dismissing it, they would find scores of useful
proposals for savings: $31 billion in agriculture subsidies; $18.6 billion in
Postal Service reform, including ending Saturday delivery; $27.5 billion in
increased fees charged to lenders by Fannie Mae and Freddie Mac; $42.5 billion
in higher health premiums and pension contributions for federal and military
workers; $135 billion in less generous Medicare payments to drug makers.
Most important, Mr. Obama would cut the deficit by $1.57 trillion with new tax
revenue. It is a good bet the Republican side of the panel will reject it.
Republicans want to preserve the programs they care about, at the expense of
programs for the elderly, the middle class and the poor. But the president’s
strong defense of his plan should at least stiffen the spines of the six
Democrats on the panel to refuse any plan that relies entirely on cuts.
The Supercommittee’s Stark Choice, NYT, 1.10.2011,