Fair Credit Reporting Act (FCRA), federal law, allows Americans to obtain an annual (every 12 months) credit report free of charge.  This is an excellent way to track your credit particularly to check for identity theft.  And did I mention it was FREE.

We have to be careful though. There are a lot of scam websites that offer free credit reports.  They sound attractive but there is always a hook or catch or phishing for your personal information. But there is only ONE legitimate source for this FREE annual credit report:

AnnualCreditReport.com

Believe me there are a lot of sites that have names very close to the above - so be very careful.  If your not certain about the site please check with the Federal Trade Commission website. 

Good luck.

Check out this very disturbing article entitled “The U.S. Middle Class is Being Wiped Out”.  The article lists several facts that indicate the destruction of the middle class. Here are just a few facts listed in the article:

•  83 percent of all U.S. stocks are in the hands of 1 percent of the people. 83 percent of all U.S. stocks are in the hands of 1 percent of the people.

•  61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.

•  Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.

•  As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.

•  Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.

•  The top 10 percent of Americans now earn around 50 percent of our national income.

The article attributes the destruction of middle class to globalization and government regulation.  Multi-national corporations can easily move operations to a lower wage, lower standard of living countries and there’s nothing that American workers can do.  A very depressing picture.

But what about changing economic policies: 1) Re-exam how we negotiate free trade agreements (focus on raising standards of trading partner instead of just opening markets); 2) Provide a stronger social safety net including a Job Guarantee;  3) Changing our tax structure so that it can work more effectively with our Modern Monetary Economy (more on this at a later date); and 4) Control the size and influence of the financial sector.  Despair is not an option but the choice is simple: fight for change or lower our living standard and in the process usher in a possibility of debt servitude for our children and grandchildren.

Good luck. 

Economic Justice pertains the individual person and to society as a whole.  At least one definition says that Economic Justice determines the moral principles that guide us in designing our economic institutions.

These institutions determine how each person earns a living, enters into contracts, exchanges goods and services with others and otherwise produces an independent material foundation for his or her economic sustenance. The ultimate purpose of economic justice is to free each person to engage creatively in the unlimited work beyond economics, that of the mind and the spirit.

Louis O. Kelso and Mortimer J. Adler, who wrote “The Capitalist Manifesto”, spoke in terms of a balance or harmony between inputs, outputs and feedback and if there was an imbalance in this system of Economic Justice it would collapse:

Guess what?  Based on Kelso and Adler’s description of Economic Justice - our system has collapsed. There are way too may imbalances in the system especially the imbalance between wage growth and productivity growth.  It use to be that the harder a person worked the more they could earn.  A worker was rewarded for his or her productivity.  Starting in the the 1970s that all changed - the gap between wage growth and productivity started to grow and the trend has not stopped.  Now, workers are not participating in the gains their increase productivity provides.  Those gains are being captured at the shareholder/executive management level (Capital Owners).

Wage-productivity gap is not the only problem.  There is income inequality which could be related to the wage-productivity gap.  Income gains for very top have dwarfed those in lower and middle income households:

The problems continue.  Stagnate wages and more debt has taken its toll of our retirement savings.  Half of Americans Have Less Than $2,000 banked for retirement.

But the hits keep coming.  Rockefeller Institute released a report [pdf file] this week that said that 1 in 5 Americans has experienced a decline of 25% or more in available household income.  This is a huge hole to dig out of especially with debt loads to boot.  New York Times has a good story on the report.  This line from the story is very disturbing:

The typical American experiencing such a plunge [in income] will require six to eight years just to climb back to previous levels of income.

It was economic and other governmental policies that got us into this mess.  Unfortunately for us it doesn’t look like that will change anytime soon unless we do something about it.  Economic Justice will not be just given nor should it be expected just be voting for a “Change” candidate.  Economic Justice has to be taken or earned and we do that the old fashion way - civil disobedience. 

There is a group of 170 liberal organizations including several major unions called The One Nation Coalition.  They are organizing a march on October 2, 2010 in Washington D.C.  This is a good start but we will have to do more.  More organizing.  More educating and informing.  This will not be easy to change policies that have benefited big money interests.  But it has become a matter of survival for many working class families and this is a challenge that we cannot shy away from. 

Good luck. 

Here is a disturbing conclusion from a recently released study by the Center for Economic Policy and Research:

Many lawmakers, policymakers, and economic commentators do not appear to recognize the depth of the current labor-market recession. If job growth from July 2010 forward proceeds at the same pace as the fastest four years of the 2000s expansion, the economy will not return to the December 2007 employment level until March 2014, well after the next presidential election; and the economy will not catch up to the intervening increase in the labor force until early in the next decade (April 2021). Even at the somewhat faster job creation rates currently projected by the CBO, we will not return to pre-recession employment levels until after the 2012 election (June 2013), and not make up for the expanded labor force until the second half of the next presidential term (August 2015).

We can’t wait that long for normal job growth to return.  Current policy proposals including extension of unemployment compensation or even various business tax credits are not enough to address the enormous jobs hole we are in.  We need much better.

The U.S. Chamber of Commerce (trade group for big multi-national corporations) says businesses are not hiring because of expectation of higher taxes and regulatory uncertainty.  This is utter non-sense.  The reason businesses are not hiring is because the demand for products and services is not there and why is it not there - easy, because of high unemployment and people concerned about their jobs. 

The choice is simple: endure relatively high unemployment for years to come or try to fix it now.  Fixing it now will require higher budget deficit. 

Following are just a few things that can be done:

1) Warren Mosler plan:  a) full payroll tax holiday (for both employer and employee); b) revenue sharing distribution (grant) to states on per capita basis; c) a direct jobs program - Employer of Last Resort Program.

2) Extending and expanding TANF Emergency Fund - due to expire September 30, 2010.

3) Three ideas from Newsweek article “Three Big Ideas for Solving Unemployment”.

I am biased in favor of Warren Mosler’s plan because I believe the economics behind it are solid.  The point is that there are options and our current actions are not rising to meet the economic challenges that we face.  If we want to get out of the jobs hole we are in before 2021 (or even 2015) the budget deficit will have to increase - there is no way to avoid it. 

Good luck. 

First, this Tweaks Bill is better than nothing but it’s far from REFORM.  We did win some battles but unfortunately Wall Street won the most.  Particular after considering it was Wall Street’s greed and/or incompetence when assessing risk that brought our economy to its knees.  Little changes for them. 

The one win:

Consumer Financial Protection Bureau - this was a win but barely.  Many good organizations, such the Center for Responsible Lending and Americans for Fairness in Lending, fought very hard (on our behalf) to create an agency.  In the end, the financial sector when won some big concessions - mainly its not a agency but a ‘bureau’ within the Federal Reserve.  Second, many special interest groups won exemptions from oversight by the new CFPB.  Overall, it was win because at the very least such a regulatory tool that helps consumers was created.  This is truly a step in the right direction.

The rest has potential but we won’t know until 50+ studies are completed and hundreds of regulatory rules are written.  The major weakness of the Tweaks Bill is that it gives an overwhelming amount of discretion to the regulators who already failed in the run-up to the current crisis.  We needed harder and specific rules or laws and we didn’t get them.

One test for me on the strength of the Tweaks Bill was measured by how much protesting, whining and public relations was performed by the financial industry.  If the Tweaks Bill was strong we would have been hearing the public relations campaign in full force.  It didn’t sound like the financial industry was protesting too much. 

Here are some other points of view on the Tweaks Bill:

Fed Up with FinReg: Rooseveltians React

Financial Reform Roundup

Reinventing financial regulation - an interesting graphical representation of the Tweaks Bill

Consider this from the New York Times:

To get all that [Financial Regulatory Tweaks Bill], the bill had to withstand a lobbying juggernaut. Since January 2009, the financial sector has spent nearly $600 million to weaken reform, according to the Center for Responsive Politics. The lobbyists notched some victories, to be sure, mainly in the defeat of reforms that would have broken up large banks and done more to constrain risk-taking throughout the financial system.

But they also lost, especially on consumer protection. The new consumer financial protection bureau established in the bill is a milestone, not only for its intent and power to rectify lending abuses, but because it will institutionalize the insight that the safety and soundness of banks cannot — and should not — be measured by profitability alone, but by the impact that bank practices ultimately may have on consumers.

I think Wall Street got a pretty good return on that $600 million.

Good luck. 

Professor Paul Krugman pointed out yesterday the public messaging in his story: My Obama Problem

John Boehner, republican, minority leader (2009):

It’s time for government to tighten their belts and show the American people that we ‘get’ it.

President Barack Obama two days ago:

“At a time when so many families are tightening their belts, he’s going to make sure that the government continues to tighten its own,” Obama said. “

Both politicians are blatantly wrong.  This notion that federal government should be “tighening its belt” when the private sector (households and businesses) is doing the same is a recipe for a double-dip recession or worse.  It’s particularly shameful that President Obama is mimicking the republicans instead of leading our country. 

However, what is more disturbing is the underlying policy behind both statements.  First, the republicans, they are making their policy position quite clear: to hell with the deficit - they support continuing huge tax cuts for top income earners - screw the unemployed (“Let them eat cake”).  It’s the typical “trickle down economics”/Supply side garbage that has failed over and over again.

Even more disturbing is the Democrats position.  Their position is out of fear - fear of being labeled a “tax and spend” Democrat.  So, in reaction they turn into deficit hawks and ignore all rational economic policies such as supporting the unemployed via unemployment insurance and COBRA subsidies.  Ignoring investments in job creating stuff such as investments in infrastructure, education and green technology.  Ignoring the plight of state and local governments who are a major drag on the economy and a source of job losses (teachers, fireman, policeman, etc.).  Ignoring their history of supporting working class families.  All out of fear. 

Republicans understand the game: the issue is who benefits from the deficit and whose coffers does it fill.  For, us - we basically screwed.

Good luck. 

By Bryce Covert

Why are we forced to engage with a system rigged to keep us in debt?

Good credit is like a golden key to the city. A good credit score gets you access to apartments, mortgages, and sometimes even jobs. A bad credit score will follow you around like a bad stench that you can’t wash off.

I don’t own a credit card. At age 25, I’ve made the conscious decision to avoid getting one since I was 17, when I opened a student bank account and began receiving credit card offers in the mail. Every time I’m tempted toward one, a distinct memory comes back to haunt me: my parents sitting at the kitchen table, trying to even up with their credit card bills. I remember how my mother turned to me and warned me about how dangerous they are. She carefully taught me not to spend money I don’t have, and I always figured that with a debit card I’m basically constrained to stick to this program. But with a credit card, I open a Pandora’s box of someone else’s money.

I’m not in a majority. Seventy-eight percent of consumers own a credit card, and the average cardholder has 3.5 credit cards. But credit card usage is falling, particularly in this economic crisis, and card companies are reporting drops in customers. Many consumers are now wary of company practices exposed by the financial meltdown — and are looking to simplify finances by paying off (and staying away from) debt.

Yet ever since I opened my first bank account, I’ve been repeatedly told — by the financially dumb and savvy alike — that I have to get a credit card in order to have good credit. And there is an unmistakable undertone to these admonishments that I’m naïve if I don’t. It doesn’t matter that I’ve never missed a payment on anything in my life. I pay rent on the first; I pay my electric bill when it comes in; I make every payment to my student loans ahead of schedule. But when my credit score is stacked up against someone who has 3.5 credit cards, I look less responsible because there is less proof of my ability to meet financial deadlines.

As our colleague Josh Rosner has pointed out, credit cards should really be called debt cards, since that is what you get when you open an account — debt. Any money spent with a credit card is money you immediately owe to someone else. Credit cards are designed to give a false sense of wealth and then hit you with a load of fees. Rosner notes that it all began in the late 1970’s, when consumers moved from charge cards to revolving debt issuance. This changed the consumption patterns of the whole country. Now, the average credit card debt is about $3,700 per adult, or $7,400 per household.

And opening the account is the easiest part. As New Deal 2.0 contributor Elizabeth Warren has repeatedly noted, most people can’t even understand their contracts, and the fees can easily gobble up your savings. Hence Warren’s fight for a Consumer Financial Protection Agency as an essential part of financial reform — it promises to make contracts actually readable, so that people know what they’re getting themselves into. It will also reign in the wild west of deregulation that credit cards now exist in. Warren has been making this argument since way back in 2007, when she pointed out that credit products fall through regulatory cracks (as opposed to toasters and microwaves that could never put consumers at so much risk). With stricter regulation will come better products and innovation in the consumer’s interest. Credit cards will no longer be subject to a patchwork of state regulations, leading to a race to the bottom, but one uniform rule. Interest rates will be regulated. And rules will have real enforcement behind them. With these changes, credit cards could evolve to work for the consumer, rather than functioning as a financial booby trap.

But what if I want to live without debt cards altogether? Because I’ve made the choice to stay away from these dangerous cards and live within my means, I’m blocked from certain activities. Renting and buying houses or apartments is just one of those. There are a number of much smaller things that I’m excluded from — that add up. For instance, some car rental companies don’t let you pay with debit cards; you can only pay with a credit card. The MTA in New York City won’t let me buy a refillable Metrocard without TWO credit cards on file (it’s hard to get your bank to issue you two debit cards). And God help you if you don’t have a Visa or Mastercard logo on your debit card — at that point it’s practically useless. Society is rigged in favor of owning a credit card, and it takes some real maneuvering (or just plain exclusion) to stay away from them. While grassroots campaigns such as Move Your Money are speaking out against predatory credit card policies, I have yet to see a movement to undo the deep connection between consumers and credit cards. (Although if anyone knows of one, I’d love to join it!)

We’ve constructed a world in which the risky choices have been turned into the reasonable ones. While financial reform will hopefully curtail the risks banks took with their own money and put limits on what credit card companies can do, we could use some restructuring of society to decentivize personal risk taking. We shouldn’t reward — nay, expect — people to sign up for credit cards at age 18. We should reward prudent decisions. That would take some serious change.

Bryce Covert is Assistant Editor at New Deal 2.0.

First, let’s revisit this notion that federal government as fiat currency monopolist over U.S. Dollar is NOT revenue constrained.  Warren Mosler (independent candidate for U.S. Senate - CT) often compares federal government to a score keeper at a sporting event.  A score keeper credits points to either side or multiple participants but score keeper never runs out of points to give.  The same goes for federal government - it will never run out of points or U.S. dollars to give or credit to our or business bank accounts.  This means that when people say the “U.S. is running out of money” - they are wrong!

As for “federal debt” and the misinformation about U.S. going bankrupt over the amount of federal debt, let’s start with a quote from Alan Greenspan (someone who pretty conservative - actually beyond conservative):

When there is confidence in the integrity of government, monetary authorities—the central bank and the finance ministry—can issue unlimited claims denominated in their own currencies and can guarantee or stand ready to guarantee the obligations of private issuers as they see fit. This power has profound implications for both good and ill for our economies.

Central banks can issue currency, a noninterest-bearing claim on the government, effectively without limit. They can discount loans and other assets of banks or other private depository institutions, thereby converting potentially illiquid private assets into riskless claims on the government in the form of deposits at the central bank.

That all of these claims on government are readily accepted reflects the fact that a government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit. [emphasis added]

Again, anyone who says that “U.S. is going bankrupt” because of federal debt is WRONG! 

This doesn’t mean that federal government can spend unlimited amounts without consequences or sever limitations.  There are limitations such as real resource constraints and inflation.  The important thing to understand is that our monetary system and fiscal policy can be very effective in addressing many of economic challenges we face to today such huge income inequality and high unemployment and even retirement income.  But neoliberal/conservative ideology prevents us from addressing these problems through our monetary and fiscal systems.

Back to “federal debt”.  Two things:

1) Federal debt as evidenced by Treasury Securities is an asset to you, me, banks, businesses and yes foreign countries like China.  Treasury Securities are nothing more than another form a savings for non-government sector - one that pays interest.  Take away or pay-off Treasury Securities would have a profound negative impact on “net worth” of non-government sector - including our grandparents.

2) Technically (brace yourself), Federal government doesn’t need “federal debt” to spend.  As fiat currency monopolist over USD it doesn’t need it.  Federal government could tomorrow decide to not issue any more debt and still be able to pay its obligations by simply crediting bank accounts across the country either electronically or the old fashion way - via a check.  So why does it issue “federal debt”?  Federal debt does allow Federal Reserve to manage the levels of liquidity in the economy and short-term interest rates.  Eliminating federal debt would make it very difficult for Federal Reserve to manage liquidity and short-term interest rates.

We have bigger problems and challenges to address - the amount of federal debt is NOT one of them. 

Good luck. 

With many Americans loaded with debt (as high as $20,000 to $30,000) these debt settlement companies have flourished with promises of salvation from credit card debt.  A recently released report by the Center for Responsible Lending provides some evidence that debt settlement services may not be very effective.  This report was released just as the Federal Trade Commission prepares to possibly ban huge upfront fees that debt service companies require. 

The CRL report indicates one major flaw with the debt settlement companies’ business model is the requirement of huge upfront fees and monthly fees that often put the consumer in worst position:

facing increased debt, higher risk of (or actual) bankruptcy, ruined creditworthiness, heightened collections efforts and even lawsuits.

Of course the debt settlement trade group is lobbying for legislation that would allow them to collect huge fees regardless if they deliver results. 

As for the effectiveness of debt settlement services the report stated the following:

An industry study (reported in letter to FTC):

• 65.6% of those enrolled had terminated before completion.
 
• 24.6% of consumers had completed the program (defined as at least 70% of debt settled).
 
• 9.8% of consumers were still actively enrolled.
 
• Settlement savings versus fees shows fees were a hefty 51% of savings (not taking into account increased fees/interest on other accounts, and other harms).

Richard A. Briesch “Study” of one debt settlement company (Aug. 6, 2009):

• 60% of those enrolled (~2,700 consumers) cancelled within two years (higher rate 64.5% for those with the most debt).
 
• These consumers alone paid at least $1.3 million in set-up fees.
 
• For the 40% who did not cancel, detail is provided about the size and frequency of offers and settlements only for those consumers who had at least one settlement or offer of settlement (without disclosing the size of this group, or how many consumers had no settlements or offers at all).       o After one to two years of paying fees, even those consumers who had at least one debt settled still owed money on 48% of the enrolled accounts and still owed 46% of the total debt enrolled     (plus whatever amount that debt had grown to during the interim).

Colorado AG Data (Oct. 15, 2009):

• More than 50% of consumers who had signed up in 2006 or 2007 had already terminated as of Dec. 31, 2008.
 
• Only 7.81% of those who had enrolled 2-3 years earlier (in 2006) had completed the program.
 
• Less than 10% of total enrollees had completed the programs.
 
• Enrollees had already paid an average of $1,666.

Judgment (Court Findings) Against Nationwide Asset Services, Inc.:

• 1,981 consumers were defrauded.
 
• Only 1/3 of 1% of enrollees received promised savings (25-40% debt reduction).
 
• 180 consumers who completed the program paid more in fees and settlements than the amounts they saved.

 
FTC Case Against National Consumer Council, Inc. (2004):
   

• Only 1.4% of consumers enrolled in a debt settlement plan obtained the promised results.

Florida Complaint Against Nationwide Asset Services, Inc. and Others:
 

• Alleged that 227 Floridians had enrolled over six years, but only 30 of those consumers completed the program, which is a completion rate of less than 13.5%.

FTC Case Against Debt Solutions, Inc. (2006):
 

• Alleged that Defendants failed to achieve promised interest rate reductions for 99.5% of sample of accounts and failed to achieve any interest rate reductions in 80.4 percent of the accounts.

First, we must understand all of our options before signing up with a debt settlement company.  This does mean seeking legal advice, if possible, or debt counseling advice.  U.S. Department of Housing and Urban Development (HUD) does have a list of approved counseling agencies - some do provide credit card debt counseling.  Second, if our only option is debt settlement - research, research, research - make sure there are no complaints filed against company by checking with state agencies such as state attorney general office or other consumer protection agencies and the Better Business Bureau.  Third, before signing anything, make sure that you read and understand all documents that debt settlement company wants signed - particularly check for fees and any promises offered are included in the documents.  Please do not sign something if you don’t understand it.

Good luck. 

OMG, “the U.S. is going broke” or “U.S. bankruptcy is imminent”.  This non-sense is usually spewed by politicians, pundits and economists that either don’t understand our modern monetary economy or do understand it but because of ideology chose to misinform the public.  It’s time that we understand our modern monetary economy before we are lead down the path to complete destruction of the working class and further degradation of our democracy. 

Characteristics of Modern Monetary Economy - U.S. Dollar

The U.S. Dollar (USD) is a fiat currency system.  USD is a floating rate currency which means that the Fed and/or Treasury Department don’t have to take special measures to defend USD whether through management of foreign exchange reserves, currency pegs or government currency boards.  USD has no intrinsic value - it isn’t convertible to gold or silver - we dropped the gold standard in early 1970’s.  U.S. government, whether Treasury Department or Federal Reserve Bank, have a monopoly over the issuance of USD.  The viability of or demand for USD is determined entirely by the fact that USD is the only unit that is acceptable for payment of taxes and other financial demands by federal government - eliminate federal taxes (libertarian dream) and viability USD/fiat currency collapses.

Modern Monetary Economy is very powerful

If you don’t think so consider this - how many wars, foreign aid and war machines were funded without any consideration to whether we can afford it or not.  Heck, when Treasury Department and Fed decided to bail out Wall Street affordability was never an issue.  This is powerful stuff. 

Federal government is NOT like businesses and even households.  It has a monopoly over issuance of fiat currency and it is NOT revenue constrained.  If federal government was revenue constrained we would NOT be able to afford two wars and huge bail out of Wall Street. 

It’s all about the sectors or sectoral balances.  Government sector deficits mean non-government sector (mainly private sector) savings.  This a very simple concept that is supported by actual data.  The federal government via spending (deficits) is the only entity that can create what are considered net financial assets that allow the private sector to save and as a result eliminate unemployment.  The economic consensus in Washington and mainstream (neoliberal) economics chooses to ignore this simple concept but at our peril. 

What gives?

Our modern monetary economy is very powerful stuff.  It can redistribute income/wealth very easily.  The status quo for the past 25+ years (with possibly a brief hiatus during Clinton years) has meant a redistribution of income/wealth upward toward top income households and corporations (subsidies and privatization).  The most recent example of this redistribution of income/wealth upward was the $14 trillion bailout of Wall Street - no one in Washington said we couldn’t afford that. 

The issue is not the size of the deficit - the issue is who does the deficit benefit.  Reagan and Bush II both prove that.  Both ran huge budget deficits that largely benefited top income households and corporations. 

So now with the possibility of a Democratic administration and a Democratically controlled congress changing the status quo and our modern monetary economy we hear rumblings from deficit hawks.  Where were they with Reagan or even Bush II? 

There are constraints to federal government/fiscal policy and our modern monetary economy - mainly in the form of resource constraints or inflation.  And government spending can be wasteful.  Responsible modern money economic policy should not be determined by some arbitrary accounting function (deficit), but by how the policy impacts the REAL economy. 

Good luck. 

First the jobs report.  The Bureau of Labor Statistics’ new release is here but here is a little taste: 

Total nonfarm payroll employment declined by 125,000 in June, and the unemployment rate edged down to 9.5 percent, the U.S. Bureau of Labor Statistics reported today. The decline in payroll employment reflected a decrease (-225,000) in the number of temporary employees working on Census 2010. Private-sector payroll employment edged up by 83,000.

So, the 2010 Census was driving much of the job growth over that last several months.  Interesting because this shows how effective a direct jobs program can be in creating jobs.  The private sector did create 83,000 jobs last month but this far from enough to spur economic growth.  Remember, we have lost over 7 million jobs since this Great Recession began - so the Jobs Hole is very very deep. 

As for the unemployment rate, don’t be fooled by the slight decrease.  This slight decrease was due to a number of people dropping out of the work force - giving up looking for a job.  Not good.

Now for WTH are they thinking:

We are hearing many republicans saying that the problem is unemployment insurance and that there are jobs out there people just have to lower their salary expectations.  There are also many Democrats that are thinking the same way but are not going to come out and say that.  One driving force behind this ridiculous rhetoric is politics but another is a flawed ideology. 

The ideology is based on an incredibly flawed notion that the labor market is self-correcting or self-equilibrating.  It should be left alone to correct itself and that unemployment insurance and even minimum wage laws create problems.  This ideology has proven flawed over and over again but it stays alive because it helps justify anti-worker policies.  But let’s assume neoliberals/conservatives are correct about labor market - that would mean we would have to lower our living standard to developing world standards and/or possible enter into some debt servitude/slavery regime.

These people don’t care that over a million people are about to have no source of income to buy things like food or even pay bills but unfortunately for some reason this flawed thinking is getting traction.

Good luck. 

By Benjamin I. Page and Lawrence R. Jacobs

Deficit-hawk and investment banker Pete Peterson has devoted a substantial part of his $2.8 billion fortune to pushing for cuts in entitlements like Social Security, in the name of deficit reduction. His Foundation lavishly funded the AmericaSpeaks “town hall” forums held on Saturday, the results of which will be presented to the national Deficit Commission this week — purporting to tell what the American public thinks about various deficit-reduction options.

The AmericaSpeaks forums suffered from serious defects as measures of public opinion. Yet the results, perhaps to Peterson’s surprise, correctly indicated that Americans are strongly committed to Social Security. Large majorities oppose cutting Social Security benefits, even for the sake of deficit reduction.

The AmericaSpeaks town halls failed to convene a representative sample of Americans: they opened their doors to self-selected political activists with extreme views, possibly hoping to draw Tea Party backers. Their intense emphasis on reducing budget deficits “primed” participants to focus on deficits rather than on the needs of retirees when evaluating Social Security policy. The information provided to participants was one-sided, speculative, and in some cases quite misleading: it overstated the “crisis” in Social Security funding, understated the current burden of payroll taxes on ordinary workers, and failed to convey the extent to which millions of retirees count on stable, dependable Social Security benefits. The policy options that were discussed tilted rightwards.

These town halls — like deliberative forums in general — should not be taken as accurate measures of “true” or “deliberative” public opinion. Carefully designed and carefully interpreted opinion surveys, based on representative samples from the whole country and carried out in natural settings rather than the artificial and manipulable “fish bowl” of town hall meetings, can do a much better job of revealing what the American public thinks.

Remarkably, however, AmericaSpeaks got lucky (or perhaps, from Peterson’s point of view, unlucky.) Despite all the biases, on several issues town hall participants came up with opinions not very different from those that have been expressed by majorities of Americans in dozens of well-designed national surveys. Participants opposed cuts in Social Security benefits, insisting that benefits must be preserved when balancing the budget. They wanted to strengthen the economy, favoring the current stimulus bill (stalled in the Senate) by a margin of 51% to 38%. In order to reduce budget deficits, most favored cutting defense spending and enacting progressive tax measures: raising the payroll tax “cap” so that incomes over $106,800 are subject to the tax (85% in favor); raising high-end corporate and personal income taxes; and imposing new taxes on carbon and on securities transactions. Only on the Social Security retirement age did the results conspicuously stray from actual public opinion.

We have carefully reviewed the best available survey-based evidence concerning public opinion on budget deficits and Social Security. It is this evidence, which provides a fuller, more representative, and more accurate picture of Americans’ thinking, that the Deficit Commission and others should pay attention to.

For decades, for example, highly respected studies by the General Social Survey and the Chicago Council on Global Affairs have found large majorities of Americans wanting to expand rather than cut back spending on Social Security. In the most recent CCGA survey, for example, 69% said the program should be “expanded,” and only 10% said “cut back.”

Support for Social Security is found in virtually all segments of the American population. The opinion that “too little” is being spent on Social Security is shared by majorities of Republicans, Democrats, and Independents; by majorities of men as well as women; by whites as well as African Americans or Latinos; by people with a lot of formal education as well as people with little. Most important, support is very strong among young (age 18-29) Americans, fully 63% of whom told the most recent GSS that we are spending “too little” on Social Security. The supposed generation gap on Social Security is mostly a myth. There is no intergenerational war between “greedy geezers” and the young.

Even when survey questions prime respondents to focus on budget deficits, large majorities of Americans oppose the idea of cutting Social Security benefits for the sake of deficit reduction. Early this year a survey by National Review/ McLaughlin (certainly not prone to a left-wing bias) found that only 11% of Americans approved “cutting future benefits of Social Security” to reduce government spending: fully 86% opposed. Similar results have been found within the last year or so by Democracy Corps/ Greenberg Quinlan; Bloomberg; Quinnipiac; EBRI/ Greenwald, and others.

When survey questions are asked in a reasonably unbiased fashion, majorities of Americans also express opposition to virtually any sort of specific cut or postponement of benefits. This includes reducing COLAs (only a bare majority would even “consider” this possibility, according to Bloomberg), or increasing the retirement age. Earlier this year, Democracy Corps/ Greenberg Quinlan found a solid 63% of Americans opposed to “allowing the Social Security retirement age for receiving full benefits to rise slowly to age 70 by the year 2020″; only 35% favored this, even when it was posed as a proposal “to help close the federal budget deficit.” To be sure, EBRI/ Greenwald found a bare, 51% to 47% majority in favor of “raising the age at which people can begin receiving full Social Security retirement benefits by one year,” but the question did not specify from what level the age would be raised: perhaps just from age 65, which the 1983 law is already doing.

Thus the sole non-progressive policy option that the AmericaSpeaks forums seemed to support - raising the Social Security retirement age to 69, apparently favored by a bare majority (52%) of forum participants - may not actually be favored by a majority of Americans. On this and other questions, careful scrutiny of AmericaSpeaks’ methods is called for, including the unrepresentativeness of their participants and the biases in information presented and options discussed.

Finally, abundant evidence from surveys over the years by Bloomberg, NASI, the present authors, Pew, Quinnipiace, and CBS/NYT have all found that majorities of Americans favor raising or eliminating the payroll tax “cap” on high incomes. Most recently, Bloomberg found 78% of Americans saying that removing the cap entirely should be “considered.” Last summer, NASI found that fully 83% of Americans supported “lift[ing]” the cap “so that workers earning more than [the cap] would pay Social Security tax on their entire salary just like everyone else.” This one policy change, by itself, would erase most of the projected future deficit in the Social Security trust fund.

We believe that public opinion should be taken seriously by policy makers. Indeed, elected officials ignore the public’s wishes at their peril. In assessing public opinion on deficits and Social Security, we urge that the Deficit Commission and others to take the AmericaSpeaks forums with a large grain of salt, even if they happened to come close to the truth on several points. To get a full and accurate picture of what Americans want, it is important to consult a wide range of survey-based evidence and expertise.

*This post was based on the Roosevelt Institute Working Paper, “Understanding Public Opinion on Deficits and Social Security.” Full text available here.

Benjamin I. Page is Gordon Scott Fulcher Professor of Decision Making at Northwestern University and coauthor (with Robert Y. Shapiro) of “The Rational Public: Fifty Years of Trends in Americans’ Policy Preferences.”

Lawrence R. Jacobs is the Walter F. and Joan Mondale Chair for Political Studies and Director of the Center for the Study of Politics and Governance in the Hubert H. Humphrey Institute at the University of Minnesota. He has written numerous books and articles on public opinion and other aspects of American politics.

Remember when we were told that the Wall Street bailout was necessary in order to free up lending to small businesses and us.  Well, that certainly didn’t happen.  Instead, financial conglomerates and Wall Street firms used the trillions of dollars to keep it internally to trade and continue to profit and give out huge bonuses.  What about the rest of us - well, you know the story:

1)  9.3% unemployment - even higher if we consider the amount of underemployed people.

2)  A record 40 million people on food stamps.

3)  Over 1 million people losing an important form of income assistance - ie. unemployment insurance runs out.

4)  Over 14% mortgage delinquency and foreclosure rate (as of 1st quarter of 2010).

It didn’t have to be this way.  Policy makers in Washington from both political parties were replaying the old “Trickle Down” game that has proven to be a failure already.  Sadly, nothing is changing.  No one in Washington is talking about policies that will support the people who matter the most to a strong prosperous economy - working class people. 

Consider this: with the trillions of dollars pumped into financial sector and financial conglomerates, Treasury Department through Fannie and Freddie Mac could have bought every struggling or troubled mortgage in the market.  It could have truly modified/restructured the mortgages so that it would’ve benefited homeowners - lower payments and eliminate or ameliorate negative equity.  But this would have been a defeat to status quo of redistributing income upwards. 

Consider this too: In theory or at least as stated publicly, Washington bailed out Wall Street so that it can load us up with even more debt that we don’t want or need.  When will the insanity stop?

Good luck. 

By Yung-Ping Chen

Solvency is not the issue on Social Security. Reforming the rules for the most vulnerable is.

The Fiscal Commission, created to reduce deficits, is likely to concentrate on ensuring Social Security’s long-term solvency. But updating the program’s rules on family benefits should be the first priority. Without this, Social Security, despite solvency, will continue to leave many vulnerable people unprotected. We need a more effective safety net for the needy, most of whom are women, minorities, and children. Fortunately, updating family benefit rules does not necessarily imply more funding.

Social Security pays benefits to the dependents and survivors of retired and disabled beneficiaries. Nothing better symbolizes this valuable protection than the benefit checks sent to eligible survivors of September 11 only three weeks after the attacks. Eligibility depends on benefit rules. Over the past 40 years, statistics show that among each year’s new beneficiaries, the proportion of dependents and survivors to the total has steadily declined: 54.7% (1970); 52.3% (1980); 42.6% (1990); 39.8% (2000); and 38.5% (2008). It is estimated at 32% in 2018.

This decline partly stems from the fact that the benefit rules designed 70 years ago were meant to protect the then-dominant family structure: a wage-earning father and a stay-at-home mother with children. During the past 40 years, however, more and more women work for pay. Fewer people marry, they marry later, they divorce more often and sooner, and some never remarry. Increasingly, many people are not marrying, and unmarried couples have multiplied. While social norms have changed dramatically, benefit rules remain largely stationary.

Consequently, fewer dependents and survivors are getting benefits. For example, divorced people without at least ten years of marriage or people not legally married are ineligible as spouses, ex-spouses, or survivors. Even among the legally married, some widowed spouses, mostly women, may only get two-thirds or less of the benefits received while a couple. The lowered benefits may help explain why the poverty rates among widowed and divorced older women are about four times the rate for older married women.

Children’s benefits may also be lower than they could be. Owing mainly to births to unmarried mothers and high divorce rates, nearly one in four children now lives with a single mother. Since women generally earn less than men, children’s benefits will be lower when based on mothers’ earnings.

Ineligibility and lower benefits also hit minorities harder. Compared to whites, a much smaller proportion of African Americans and Latinos is legally married; a much greater percentage of them is never married; a much larger share of them is poor; and a much larger portion of their children lives with single mothers–African American (52%), Latino (27%), and white (16%).
Moreover, among African Americans, in each year’s new beneficiaries, the proportion of dependents and survivors to the total has steadily declined in the past three decades: 62% (1980); 52% (1990); 44% (2000); and 37% (2008).

Beyond coverage and benefit levels, there’s also the issue of equity. For dual earners whose earnings are close, the widowed spouse receives only his or her own benefits and feels short-changed compared to the one-earner family. Spouses who are better off with spousal (or survivor) benefits feel unfairly treated by not getting any additional benefit for the payroll taxes they paid. And single workers, who pay the same taxes on the same earnings, do not receive such benefits.

Some are talking about raising the survivor benefit and lowering the spousal benefit, lowering the required length of marriage, or instituting a special minimum benefit for low-earners. But these are only partial answers. Another idea, “earnings sharing.” appears to offer a broader solution.

Under earnings sharing, total earnings of a couple are evenly divided between them while married and each half would be portable upon divorce, regardless of the length of marriage. When one spouse dies, the survivor would inherit all or most of the earnings credits of the deceased.

Earnings sharing could solve the problem for some widowed spouses and ex-spouses. While in general, married women in two-earner families would be better off under earnings sharing than those in one-earner families, there are potential problems. An important forthcoming simulation study reports that benefits for some of the most economically vulnerable subgroups of women, such as low-income widows, would be reduced, some sharply. Moreover, earnings sharing will not help the never-married. Nor will it alleviate poverty among older people generally.

What we need is fundamental reform. This Fiscal Commission has a historic opportunity to remake Social Security into a program with two tiers of benefits that incorporates earnings sharing. The first tier Social Security would pay a flat-rate benefit to eligible persons based solely on age or disability. It would be funded by the revenues currently paying for the share of program costs for older people under Supplemental Security Income, food stamps, subsidized rents, and the like, as well as through part of the payroll tax. The second tier Social Security benefit, funded by payroll taxes, would be based on earnings — an individual’s earnings when single plus half the couple’s combined earnings while married. Such a restructured Social Security system can deal with the issues of coverage, benefit level, and equity in a comprehensive manner.

But there will be individuals who would get less benefit under the new system, most notably attributable to the change to earnings sharing. For this reason, no legislation has adopted earnings sharing despite its logic and common sense. Plainly, policymaking has been held hostage by the loss in benefit for some people.

The hostage must be freed or there will be little chance for sensible policy changes. For example, there has been resistance to postponing the normal retirement age and early retirement age because some people would lose benefits due to their inability to continue working. If we cannot resolve this “loser” issue, all reform efforts will be futile.

There might be a way to break the logjam. Social Security could establish a “Benefits Compensation Fund” to pay those who would lose by the change to earnings sharing. This fund would be transitional in nature, since its size would diminish over time as the number of beneficiaries who lose benefits declines.

Doubtless, there are other methods. But any reform must enable Social Security to protect more potentially at-risk individuals, not fewer.

Yung-Ping Chen is professor emeritus of gerontology and a fellow in the Gerontology Institute at the University of Massachusetts Boston. A founding member of the National Academy of Social Insurance, he has served in a number of White House conferences and panels on the issue.

Professor Chen recently received the Kleemeier Award for 2010 from the Gerontological Society of America, the Society’s highest award for research.

The Business Roundtable (nice reference to “Knights of the Roundtable”) is a group of CEOs from the top multi-national corporations based in U.S.  Of course, the chairman of the Roundtable and who was quoted in the above article, is Ivan Seidenberg, CEO of Verizon.  Verizon and other internet service providers are trying to convince the Federal Communications Commission (FCC) to give them more control over the internet which would help their businesses at our expense (in terms of fees and freedom).  Anyway.

According to the article the Roundtable had been working with the Obama Administration on various issues including Health Care Reform.  But they noticed more and more threats to unchecked and irresponsible behavior.  They say the last straw was two pieces of legislation currently pending:

1)  In the financial regulatory reform bills currently being discussed in congress there is a provision to would make it easier for shareholders to nominate corporate board members.

LMAO, the CEOs don’t want accountability.  Hell, no they don’t want to make it easier for shareholders to nominate board members that would upset the cushy game they got now.  A pure example of self-interest and self-preservation.

2)  The other would raise taxes on multinational corporations.

Please! 

Of course, Business Rountable floats this old threat that Obama’s economic policies threaten investment and job creation.  Wait. Hold on one minute.  These multi-national corporations have had the lowest tax rates in decades and most favorable regulatory (practically non-existent) environment and they still did NOT generate jobs.  In fact, at the end of Bush’s reign of PRO-multi-national corporation terror we had a NET LOSS of jobs. 

Feel free to read the Roundtable’s letter to the Obama Administration - it’s here.  It reads like a request for more of the same de-regulation and corporate welfare.  They would like us to forget that it was some of their own members that caused the crisis we are in today.

Screw them!  Maybe, it’s time to tax corporations retained earnings especially since they seem more interested in accumulating more cash and not investing it in jobs. 

Good luck.