Catherine Rampell, on the New York Times website, wrote about a recent Gallup poll that showed that rich people think the economy is ‘growing’ while poor people believe the economy is in a ‘depression’. These results are not very surprising. We largely have two economies - one in recovery because of bailouts, stock market and commodity prices and another in depression because of unemployment, stagnant wages, foreclosures and high gas and food prices. Two very different economies indeed.

The reason for these two economies or this uneven recovery is largely due to how government policy reacted to the global financial crisis. First, there was the massive bailout of Wall Street that did nothing to help the rest of the economy. Second, the 2009 economic stimulus that weighted more toward tax relief and tax gimmicks than investments in infrastructure or even a direct jobs programs (such as a Job Guarantee). Both political parties were part of these very short-sighted policy decisions.

When it comes to fiscal policy (how government spends/invests and taxes) who benefits really matters. Consider the last ten years - fiscal policy, mostly in the form of huge tax cuts for the rich and huge subsidies to corporations (including big drug companies through Medicare part D), has favored the rich and increased the budget deficit. The deficit soared but job growth wasn’t very impressive even before the Great Recession, income inequality grew, and then of course the global financial crisis. No trickle down effects to be seen.

This is what “trickle up” fiscal policy would look like (very rough outline):

1) Short—term - full payroll tax holiday for workers and extension of unemployment benefits long-term unemployed (99ers);

2) Job guarantee program;

3) Significant investments in infrastructure;

4) Huge reduction in defense spending;

5) Taxes: a) Raise top tax rates; or b) implement a ‘hut tax’ - tax based on cubic feet of home(s) and c) tax cut for middle and lower brackets;

6) Elimination of all corporate subsidies.

You get the idea. If we want to experience a strong recovery for most people then it’s necessary to have fiscal policy that favors those who need and would use the benefits in a way that will help the economy. Yes, that means poor and working class families. We tried (and continue) benefiting the rich and corporations but it’s just doesn’t work. 

Bottom line: when it comes to fiscal policy income distribution and who benefits really matters.

Good luck.

Distractions. I seriously believe that if we heard more about the following items there would be a lot more civil disobedience:

1. 19% of Americans have tapped into retirement savings for urgent financial needs. What is happening to change this? Nothing, unemployment is still high and most economic projections call for continued high unemployment.
2. Unemployment is near 20% for some groups. What is happening to change this? Nothing, unemployment is that 3000 pound gorilla sitting in the corner that politicians want to ignore.
3. 1 in 3 renters in Chicago (and 1 in 4 across rest of U.S.) spend more than half of income on housing expenses. What is happening to change this? Nothing, cost of living is continuing to increase and wage growth is stagnant.
4. Americans depend more on federal aid than ever. What is happening to change this? Nothing, the article says that the trend will continue. But what little discussion outside the mundane in Washington and many states has been how to eliminate or diminish the social safety net.
5. Food prices continue to rise. What is happening to change this? Nothing, we could end the subsidy of ethanol production. Ethanol is having an impact on the demand for corn.
6. Gas prices continue to rise. What is happening to change this? Nothing, Saudia Arabia pretty much controls the price of oil and more domestic drilling isn’t going to change that.

These are very significant economic challenges but that are not being discussed by the plutocracy in Washington. Instead, besides the birth certificate nonsense, we hear more about deficit hysteria.

The political system is bankrupt. We can no longer expect nor rely on our elected officials to address our economic challenges. We must address these challenges and develop solutions ourselves. We can do this.

Good luck.

It should be no surprise that we live in a plutocracy where those with money control the political system. This plutocracy is very much a reflection of our economic system. Our capitalist economic system fosters huge inequalities and provides huge government assistance to those corporations and individuals that control the political system.

In 1951, John K. Galbraith developed the theory of Countervailing Power in his book American Capitalism: The Concept of Countervailing Power. The theory goes like this:

In a properly functioning market (capitalist) economy prices for goods and services are set by free bargaining. However, our current economic system gives massive powers to large corporations who then tip the bargaining process in their favor. To restore a balance in the bargaining process there has to be Countervailing Powers in the form of trade unions, citizens’ organizations and government regulators to offset corporations excessive advantage.

Galbraith’s concept of Countervailing Powers translates well in the political context. Absent these Countervailing Powers big corporations and those who run these big corporations have excessive advantage in the political process. Just consider the Wall Street bailout, the lack of criminal investigations of Wall Street fraudsters and BP/Transocean’s actions (or lack of actions), including influence they had over regulators, before and after the Gulf Oil Spill Disaster.

Our systems clearly lack the necessary Countervailing Powers. The lack of Countervailing Powers is a major reason for the emergence of the plutocracy in the U.S. This poses a huge challenge for those who support and believe in democracy but one we can meet.

We have to create new Countervailing Powers because the old ones either don’t exist anymore or have been co-opted by the plutocracy. Yes, this includes unions. We can do this - we have done it before.

The idea “think locally, act globally” is very relevant to creating new Countervailing Powers. Organizing our economic systems at a local level can be a very important first step in creating new Countervailing Powers. Cooperatives can help.

Cooperatives can be a valuable contributor to the creation of new Countervailing Powers. Cooperatives are locally organized, locally owned and democratically managed. They can used in many different contexts. In urban areas, the grocery cooperative is the most common cooperative. In a grocery cooperative, the members own and democratically manage the grocery store. Another very important form of a cooperative is the worker cooperative. A worker cooperative is a business where the workers own and democratically manage it. We can do this.

For additional information on cooperatives check out the following websites: National Cooperative Business Association and U.S. Federation of Worker Cooperatives.

Good luck.

One very promising alternative or solution are worker cooperatives. A worker cooperative is a business model where the workers own the business and democratically govern it - one member one vote. Worker cooperatives can potentially improve the quality of life and standard of living for workers.

“Oh, but that’s socialism or communism.” Ah, NO! It’s a matter of economic survival for millions of working families. Our economic system is not very friendly towards workers particularly low wage workers. Just consider the millions of working poor or the number of workers that don’t have employer sponsored health insurance.

I recently did a case study on Union Cab of Madison Cooperative, Inc. Union cab is a worker cooperative - a cab company owned by its drivers, dispatchers and support staff. Part of Union Cab’s mission is providing a living wage and a safe and democratic workplace for its worker owners. Despite significant business challenges, it does a good job of delivering on its mission. It may be the only cab company in the country that offers health insurance (and pays 60% of the premiums) for worker owners. 

Worker cooperatives are for profit businesses. They have to make money. But profits and shareholder returns, like in traditional businesses, are not the number one priority for worker cooperatives. There’s a deeper commitment on the part of worker cooperatives. A commitment to the worker owners, their families and the communities that they serve.

The following are the cooperative principles that provide guidelines for worker cooperatives and other forms of cooperatives:

1) Voluntary and open membership
2) Democratic member control
3) Member economic participation
4) Autonomy and independence
5) Education, training and education
6) Co-operation among cooperatives
7) Concern for community

For more information please check out the U.S. Federation of Worker Cooperatives’: Democracy at Work Institute. Again, it’s a matter of economic survival. These very significant economic challenges require bold alternatives/solutions and not just more of the same.

Good luck.

Center of Public Integrity’s released a very informative report called Buyer beware. Here are a few excerpts from the report (I strongly encourage people to read the entire report):

The politically powerful industry has also mastered a few high-pressure tactics of its own. Chief among them is the “yo-yo,” where dealers let buyers drive a new car home in hopes of locking them into a deal and later tell them their financing fell through. The tactic can lure buyers to accept a higher interest rate.

And while the financial crisis rendered subprime mortgages extinct, Wall Street is once again buying up bundled subprime auto loans, fueling a market aimed at the most vulnerable consumers and relieving dealers of the risks of making bad loans.

While the consumer thinks the negotiations are over at that point, dealers know that a lot more profit can be made off the financing.

For starters, dealers routinely jack up the interest rate on a loan and split the profit with the lender. So if you qualify for a 4 percent loan, the dealer will say the best he can do is 7 percent. Half of the extra profit goes to the dealer as a “markup.”

Buyers never know they’ve been charged more because the markup usually isn’t disclosed. The Center for Responsible Lending calls these “kickbacks” and calculates that they cost car buyers $20 billion a year.

It should be no surprise that new Consumer Financial Protection Bureau is powerless against these predators. The auto dealers/lenders secured an exemptions from the new consumer protection law. Money speaks volumes in Washington.

Here are the key finding of the Center for Public Integrity’s report.

The best defense is the best offense against predatory lenders. We have to arm ourselves with information and an understanding of what the predatory practices are so that when we experience them we know to just walk away. The Center for Responsible Lending has a wealth of information about auto loans and the predatory practices. Please check them out before making that next auto purchase.

Another thing: if you don’t know or not sure about something - ask someone before you sign on the line (other than the dealer) - a neighbor, friend or us. We can no longer expect or afford to wait for our government to protect us from predators. We are in this together.

Good luck.

Here are just a few of the fallacies that have been heard in Washington:

• ‘We are running out of money.’
• ‘We are broke.’
• ‘Households and businesses are cutting back so should the federal government.’
• ‘Shared sacrifice’

Items 1, 2 and 3 are part of the biggest fallacy in economics (IMO). The fallacy is that the federal government is the same as a household or business. It’s way different.

Federal government is the monopoly issuer of a currency - U.S. dollar. We can only wish we had this authority. Imagine being able to buy whatever you wanted or give to whatever cause you wanted to give to because you had your own currency and it was accepted almost everywhere.

This means that as the monopoly issuer of currency federal government is not revenue constrained when it comes to running a deficit. It could run deficits for a long time - in fact it has. This also means that the federal government can never run out of the currency.

Households and businesses are USERS of the currency. So we are financially constrained. We can only use the money we have and of course borrow. But unlike the federal government, if we don’t pay that debt back we can go bankrupt. Federal government, as issuer, does not share the risk of bankruptcy or insolvency.

Again, the fact that the federal government is a monopoly issuer of a currency is a big deal. It means it can never go broke, or run out of money. As for the fallacy that it should cut back at the same time as households and businesses, imagine if back in 2009 the federal government decided that it was going to cut back at the same time that households and businesses were. What do you think would’ve happened with the economy? Hint: it would’ve been really ugly. 

This last fallacy would be funny if people were not actually economically impacted by thoughts behind it. This notion of ‘shared sacrifice’ is a complete fallacy - or more like a lie. We hear it constantly from politicians. How is it ‘shared sacrifice’ for someone on fixed income forced to live with less income and pay more in co-pays for medicare while someone making $300,000 per year or more only pays slightly higher taxes or in the case of the republican plan even lower taxes? How is it ‘shared sacrifice’ when one socio-economic group bears the brunt of unemployment and foreclosures and plummeting housing prices while another group receives a bailout and recovers nicely and gets a tax cut to boot?

Good luck.

I recently re-read two columns by Chris Hedges: Power Concedes Nothing Without a Demand and This What Resistance Looks Like. I strongly encourage people to read both articles. Mr. Hedges is absolutely right when he says: “Civil disobedience is the only tool we have left.”

It truly is a matter of economic survival. Check out these three facts (there are a lot more dismal facts):

1) 15.7% unemployment + underemployment rate - 6.3 million people have been out of work and looking for a job for more than six months.
2)  For those lucky enough to find jobs - jobs are paying less.
3) 44.1 million people participating in Supplemental Nutritional Assistance Program (food stamps).

So what’s the problem - it’s our economic system and our political system is only a reflection of that. We have what is called a plutocracy. Those with the money have all the power. Forget about a democracy (even a representative democracy). Just consider these recent events:

1) Wall Street’s MULTI-TRILLION dollar bailout
2) Very weak financial regulatory reform laws passed in response to financial crisis.
3) Lack of prosecutions or real investigations of Wall Street fraud.
4) Spending cuts that impact poor and working class families.
5) More tax cuts for top incomes.

There may have been a time when politicians were responsive to the concerns of those they represented. This definitely not the case now. Both political parties are beholden to the plutocrats. They compete for the same pool of big money donations. Poor and working class families just don’t have the money to buy a politician.

What we do have is our voices and the ability to act together to effect real change. History shows, from protests and civil unrest during the Great Depression, to Civil Rights protests, to Vietnam War protests, that direct action and civil disobedience are more effective than the ballot box at instigating real change. Civil disobedience can take many forms. It could be street protests. It could be boycotts. It could a decision to purchase necessities from consumer coops or locally owned stores. The important thing is that we do it together. Time is running out for the economic security for millions of Americans and civil disobedience is all we have left.

Here is a list of brave Americans that have come together to act and they are organizing across the U.S. Check their websites for actions near you:

US Uncut
MoveOn.org
We Are One

Good luck.

Budget proposals are essentially policy statements. They reflect the priorities of the proposing party.

Republican Proposal

Republicans are calling their budget proposal “The Path to Prosperity” - (here it is PDF). More like the “The Path to Debt Servitude” for poor and working class families. Wow, the policy statement is very clear in this proposal: it’s ‘survival of the fittest’ for poor and working class families while people with top incomes are safe.

This republican proposal claims to cut $4 Trillion over 10 years from the federal budget. But who is bearing the burden of this cuts? According to Center on Budget and Policy Priorities, the republican proposal gets two thirds of its $4 trillion cuts from programs that help lower income Americans. These cuts are huge - we are talking the elimination of medicaid (health insurance program for poor families particularly children) and privatization of medicare which will result in seniors paying much more for a lot less coverage.

But there’s more. While the cuts are targeting poor and working class families, the tax benefits totally favor top income people. It calls for making the Bush tax cuts that favored top incomes permanent and under the guise of “tax reform” it consolidates the income tax brackets (currently six) and cuts even more the top income bracket from 35% to 25%. Talk about going ‘all in’ for trickle down economics.

Oh, yeah. As if it wasn’t enough to completely try to decimate two socio-economic classes and totally favor another with spending and tax cuts - how about eliminating the (already weak) rules of the game. For no other reason other than to help the financial oligarchy on Wall Street, the republican proposal calls for the complete repeal of financial regulatory reform that was passed last year. That’s right let’s go back to way it was for Wall Street - even weaker rules that lead to the global financial crisis.

The republican budget proposal reminds of a quote from Albert Einstein:

Insanity is doing the same thing over and over again and expecting different results

Democratic Proposal

Remember, the republican proposal is a response to the budget proposal offered by the White House in February. President’s proposal claims to reduce the deficit by $1.1 trillion over the next decade. At best, the president’s proposal can be described as the “goldilocks proposal” - not too warm or not too cold. But the onus of deficit reduction is still on spending cuts (and a lack of tax cuts/benefits) that affect poor and working class families.

Big Problems

We are still dealing with high unemployment/underemployment - last report U6 (unemployment + underemployment) was 15.7%. And unemployment projections by various agencies and economists expect relatively high unemployment/underemployment for several years - heck, even the White House is projecting unemployment rate to be 7.5% in 2013. But yet all we hear about is deficit reduction.

But this budget debate will get worse for poor and working class families. With the republicans on the offensive and Democrats typically scared of their own shadow - the question or issue will be how much to cut - cut - cut from programs that affect poor and working class families. And forget about any programs/investments that would address high unemployment. Hints of this are already in the air. From Ezra Klein (Will Ryan’s budget revive Simpson-Bowles?):

I wouldn’t be surprised if, a year from now, it’s broadly agreed that the main thing Paul Ryan’s budget did was persuade Democrats — and perhaps some Republicans — to adopt something pretty close to the Fiscal Commission’s recommendations (which are currently being turned into legislation by a bipartisan group of senators).

There are real similarities between the two plans. Perhaps most importantly, the Ryan budget and the Fiscal Commission rely on similar mechanisms to reduce the deficit: They both cap stuff. But the Fiscal Commission’s caps are more flexible and fair than those in the Ryan budget; the Fiscal Commission makes revenues part of the solution, where the Ryan budget includes a deficit-busting tax cut; and the Fiscal Commission doesn’t try to sneak an ideological wish list into law under the cover of deficit reduction.

This what they call a trial ballon in Washington DC-speak. Funny how Klein says that the Catfood [Fiscal] Commission’s proposal “doesn’t try to sneak an ideological wish list into law under the cover of deficit reduction.” Yeah, right - like Simpson and Bowles (co-chairs of the Catfood Commision) were not ideologically driven. Both are deficit hawks and their plan accomplishes the same thing - stick it to poor and working class families but save top incomes from pain.

Republican proposal will move the ‘goal posts’ in Washington. The budget debate will not be between a blatant attack (republican proposal) on poor and working families and a backhanded slap (White House proposal) at poor and working families. Instead, we’ll get a debate about how soon to economically subjugate poor and working class families - republican proposal vs. catfood commission.

We have a situation where those who didn’t cause this Great Recession but who have paid a heavy price in the form of joblessness, foreclosures and the related heavy (often ignored) social costs are being forced by both legacy political parties to pay/sacrifice even more. Welcome to the Class War. We have no allies in Washington.

It doesn’t have to be this way. What the republicans understand very well and it shows in their budget proposal is that issue is not the size of the deficit but who benefits from it. It’s a matter of priorities. Most democrats don’t understand this and others quietly agree with republican’s trickle down economics.  Maybe it’s time to shut it down and start over.

Good luck.