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Why Bernie Can Win Print
Saturday, 20 February 2016 09:56

Karp writes: "It's almost surreal to go back and watch Bernie Sanders's presidential campaign announcement today. Last April, with a handful of reporters gathered outside the US Capitol, Sanders strode casually across the grass and unfolded a crinkled sheet of notes. As he spoke - airing his now-familiar grievances with the ever-more-unequal American economy - photographers snapped perfunctory pictures while journalists fiddled with their smartphones. It was all over in about ten minutes."

Bernie Sanders celebrates the results in Iowa. (photo: The Week UK)
Bernie Sanders celebrates the results in Iowa. (photo: The Week UK)


Why Bernie Can Win

By Matt Karp, Jacobin

20 February 16

 

The pundits are wrong. Bernie Sanders is the most electable candidate this November.

t’s almost surreal to go back and watch Bernie Sanders’s presidential campaign announcement today.

Last April, with a handful of reporters gathered outside the US Capitol, Sanders strode casually across the grass and unfolded a crinkled sheet of notes. As he spoke — airing his now-familiar grievances with the ever-more-unequal American economy — photographers snapped perfunctory pictures while journalists fiddled with their smartphones. It was all over in about ten minutes.

If little pomp attended Sanders’s announcement, there appeared to be even less circumstance. An obscure Vermont socialist, polling 3 percent nationally, had joined the race against Hillary Clinton? This was practically the textbook definition of a protest candidate. “It’s more important to you to get these ideas out,” one reporter asked Sanders, “than to contest the Democratic nomination?”

The next day, media analysts sized up Sanders’s candidacy with the same mix of mild amusement and polite condescension. The best possible outcome for a Sanders campaign, agreed the New York Times, NBC News, and Politico, was that his “liberal zeal” might “force Clinton to the left.”

Nine months later, this verdict seems terribly wrong. Not only has Sanders emerged as a serious threat to capture the nomination — his victory in New Hampshire was the largest in primary history — but his impact on the shape of the campaign has been almost the opposite of what experts imagined.

Last fall, Sanders’s early momentum may have pushed an ambivalent Clinton to reject the Keystone Pipeline and the Trans-Pacific Partnership. But after this half-step to the left, Clinton has spent the winter furiously digging an ideological trench between herself and Sanders — opposing his major Wall Street reforms, attacking his proposed tax increases, and declaring that single-payer health care “will never, ever happen.”

While Clinton continues to talk up her personal credentials as a “progressive,” in substantive terms the primary campaign has deepened rather than narrowed the ideological gulf between the two candidates.

Her forthright opposition to the Sanders agenda has won Clinton praise from some liberal elites, unable to disguise their hostility toward even the most basic social-democratic reforms. Yet unfortunately for Clinton, most actual Americans do not inhabit the pundit class, and their professional credentials do not depend on gravely denying the existence of puppies, rainbows, and successful single-payer health programs.

In fact, Sanders’s ideas remain extremely popular with voters. As a result Clinton has been forced to rely more than ever on a dryly pragmatic case for her nomination: only she can defeat the Republicans in November.

The death of Justice Antonin Scalia is likely to heighten this discussion of “electability” in the weeks ahead. “If anyone needed a reminder of how important it is to elect a Democratic president,” Clinton argued last weekend, “look at the Supreme Court.”

Leftists sometimes compare this election-year pitch to a species of blackmail. Vote for us, Democrats tell voters, not because we’ll do anything positive for you, but because if you don’t, the other guys will break your legs and take away your abortion rights.

This may not be an inspiring argument. But like most forms of blackmail, it has undeniable force. And so far, many Democrats seem to agree that Clinton, not Sanders, is the best bet to win in November: in both Iowa and New Hampshire, she claimed over 75 percent of the voters who put a premium on “electability.”

But let’s consider the argument on its own terms. Why should we believe Clinton is more likely to defeat a Republican than Sanders?

The Unfavorable Favorite

Notably, the case that Clinton has the best chance to win in November does not seem to depend much on Clinton herself. This is no coincidence: by a number of measures, she profiles as a comparatively weak general election candidate.

According to national polls, nearly 53 percent of Americans have an unfavorable impression of Clinton, which would make her the most disliked presidential nominee in modern history. Even if incumbents are included, the only candidate with worse numbers was Jimmy Carter in 1980.

Public perception of Clinton has been shaped by the intense sexist and right-wing attacks that she has endured since the 1990s. These polarizing assaults, along with Clinton’s own partisan record, have helped make her very popular with loyal Democrats, but unpopular with everyone else.

The problem is that the loyal Democratic vote is simply not enough to win a general election. In 2012, Democrats made up only 38 percent of the general electorate, while registered independents accounted for 29 percent. On his way to defeating Mitt Romney, Barack Obama won almost half of them.

Clinton’s appeal among these non-Democratic voters is extremely limited. Just 29 percent of independents hold a favorable view of her, according to an average of three YouGov surveys taken since January; over 61 percent view her unfavorably. In the most recent poll, Clinton’s count was 24 to 67, with 50 percent saying they hold a “very unfavorable” opinion. These are numbers that should make even Supreme Court-first liberals feel skittish.

It’s too soon to conclude that Clinton’s historic unfavorability will spell defeat in November. Yet as Nate Silver noted with regard to Mitt Romney’s (less pronounced) unpopularity in April 2012, we should not dismiss these early numbers either. At the very least, they make it plain that Clinton faces an image deficit greater than any challenger in recent memory, including landslide losers like Walter Mondale, Michael Dukakis, Bob Dole, and John McCain.

McGoverns of the Mind

Generally, however, the “electability” argument skips past Clinton and concentrates on Sanders. And here the case against Sanders divides into three general paths — one, guided by historical analogy; another, driven by pundit fears and fantasies; and a third, oriented around voter ideology and demographics. None are persuasive.

The most common way to dismiss Sanders is to lump him in with previous progressives battered by conservatives in general elections — usually Mondale in 1984 or George McGovern in 1972. “The early enthusiasm for Sanders reminds me of the McGovern and Mondale races, where two good men were only able to win one state each in their presidential campaigns,” former Louisiana senator John Breaux told the New York Times in January.

The logic of this analogy turns on the idea that McGovern and Mondale both lost for the simple reason that they were too liberal for American voters. The first rebuttal is almost too obvious to spell out: the 2016 electorate looks nothing like the 1972 or 1984 electorate — quite literally, it is a different set of people.

A healthy majority of voters this year were not eligible to vote in 1984; almost half of them weren’t even alive in 1972. People old enough to have cast ballots against McGovern will probably make up no more than 20 percent of the electorate in 2016. These are very old historical parallels.

Very old, and very lazy. As Daniel Denvir has written, the combination of factors that produced the McGovern disaster bears almost no resemblance to the political situation today. In 1972 the Democratic Party was in a state of flux. McGovern captured the nomination with about 25 percent of the primary vote; over 23 percent went to the Alabama white supremacist George Wallace. Major party leaders like AFL-CIO boss George Meany, meanwhile, refused to support McGovern in the general election against Nixon.

Today both major parties are far more ideologically unified and more polarized. Although the Democratic Party elite has so far shunned Sanders, he is almost as popular as Clinton among the party’s rank and file. If Sanders wins a clean majority of the primary vote, it’s hard to imagine any significant chunk of the Democratic coalition abandoning him in a general election against the Republicans.

But the historical analogies miss the mark for an even more fundamental reason. McGovern and Mondale did not lose because they were too liberal, but above all because they faced Richard Nixon and Ronald Reagan, popular incumbents presiding over economic booms.

The 1972 and 1984 blowout losses conform closely to electoral models that measure vote totals based on underlying economic conditions, without taking any account of candidate identity or ideology. The Democrats were doomed no matter who they nominated.

If the primary race continues to tighten, Clinton supporters will no doubt continue to spook Democrats with the fatal visions of 1972 and 1984. These are but McGoverns of the mind, false creations conjured by elite pundits and party officials. They offer no actual evidence that can be applied to the 2016 general election.

Pundit Horsemen of the Apocalypse

Across the primary season, Sanders himself has rebuffed “electability” arguments by pointing to poll results. In hypothetical matchups against the three leading Republicans (Donald Trump, Ted Cruz, and Marco Rubio) he beats them all soundly, and polls better than Clinton in every case.

We may be skeptical about the predictive power of these findings, nine months before Election Day. But it’s wrong to call them “absolutely worthless,” as one political scientist told Vox last week.

In a comprehensive analysis of elections between 1952 and 2008, Robert Erikson and Christopher Wleizen found that matchup polls as early as April have generally produced results close to the outcome in November.

Even much earlier “trial heats” seem to be far from meaningless. As partisan polarization has increased over the last three decades, there’s some evidence that early polling has become more predictive than ever. In all five elections since 1996, February matchup polls yielded average results within two points of the final outcome.

In other words, if Sanders is the nominee, his nine-point lead over Cruz is probably safe. Even his four-point lead over Rubio likely reflects a meaningful advantage.

Of course, mainstream pundits are quick to dismiss these numbers. Once the Republican attack brigade moves into action, they argue, talk of socialism and taxes and the Iranian Revolution will fill the air like fire and brimstone; poor Bernie will quiver and flop before the vast counterrevolutionary horde.

Occasionally, these liberal concerns seem to resemble pure reactionary giddiness. But that’s not even the real problem. The pundit horsemen of the apocalypse have constructed an argument that has no relationship to actual evidence, either in the current polling or recent history.

Sanders is far from an obscure or unknown figure. Across sixteen national surveys since New Year’s Day, an average of 85 percent of Americans knew enough about Sanders to form an opinion of him.

This is not the profile of a candidate flying under the radar. John Kasich, who fits that description, elicited an opinion from just 53 percent of respondents in the eleven surveys that asked about him. More Americans have a decided view of Sanders than either Rubio (77 percent) or Cruz (81 percent).

That view is strongly positive. Sanders’s favorability ratio of 51 percent positive to 38 percent negative is the best of any candidate in the race, by far. His favorability with independent voters is also much higher than any of his rivals, including Clinton, Trump or Rubio.

There is simply no historical precedent for a major party nominee as popular and well-known as Sanders collapsing in a general election.

Some gleefully apocalyptic liberals have likened Sanders to Michael Dukakis, who held an early polling lead over George H. W. Bush before ultimately losing by a large margin in 1988. Yet the comparison falls apart before it begins.

A stiff technocrat, Dukakis won the Democratic primary not by packing arenas with passionate supporters, but chiefly by having more impulse control than Gary Hart and being whiter than Jesse Jackson. And his early polling strength was clearly a mirage, as contemporaries noted: only 52 percent of voters even had an opinion of him in May 1988. Dukakis was John Kasich, not Bernie Sanders.

None of this means we should expect to see the end of the “wait until the Republicans get him” argument any time soon. It’s a staple of the Clinton primary arsenal.

In February 2008, then-Clinton chief adviser Mark Penn discounted early polls that showed Barack Obama performing well in a general election: “Sen. Obama has never faced a credible Republican opponent or the Republican attack machine, so voters are taking a chance that his current poll numbers will hold up after the Republicans get going.”

Penn was writing about an African-American candidate whose middle name was Hussein, and who had spent much of his childhood in a Muslim country. A month later, a video surfaced showing Obama’s longtime pastor Jeremiah Wright saying, “God damn America!”

Did the vaunted “Republican attack machine” fail to take advantage of what Vox’s David Roberts might have called Obama’s “glaring vulnerabilities”? Of course not: an independent super PAC spent $2.5 million on Wright-themed advertising in swing states. None of it had much impact on Obama’s poll numbers against John McCain, which rose considerably between February and Election Day.

The attacks aimed at Obama may have reinforced his unpopularity with right-wingers, but they did little to dent his appeal among Democrats and independent voters. Why does anybody believe that red-baiting will succeed where racist innuendo failed? When the Berlin Wall came down twenty-seven years ago, today’s median voter was not old enough to drink alcohol.

In addition, this year’s polls show little sign of an electorate ready to abandon Sanders at first exposure to right-wing talking points.

Only 35 percent of Virginia independents said they would be less likely to vote for a “Democratic-Socialist” candidate. And when a conservative push-poll asked Nevada Democrats and independents how they felt about Sanders’s plans to spend “$15 trillion dollars” for “a government run health care program,” 53 percent replied that it made them more likely to support him.

Another and even less persuasive claim is that Clinton, unlike Sanders, has already withstood every right-wing attack she can possibly face. Mark Penn also made this point in 2008 — and today Clinton’s unfavorability is even higher than it was then.

Sanders has famously refused to discuss Clinton’s emails. He has denounced her Wall Street speaking fees, but has largely refrained from discussing the much larger hoard of cash connected to the Clinton Foundation — an area that Republicans seem eager to exploit. That same Nevada push-poll showed that 64 percent of Democrats and independents were less likely to back Clinton after learning about “foreign donations” given to the foundation while she was secretary of state.

Republican candidates have already made various scattered attacks on these subjects, but we’ve seen nothing like the tornado of Clinton scandal-mania likely to follow if Hillary is nominated.

Moderates for Socialism

A final line of argument, exemplified by Ruth Marcus in the Washington Post, insists that Sanders’s platform is simply too left-wing for a “moderate” American electorate. Usually this is trotted out amid broad national surveys that find the country divided between ostensibly coherent blocs of “liberal,” “moderate,” and “conservative” voters.

But as political scientists Shawn Treier and D. Sunshine Hillygus have argued, two-dimensional surveys of voter ideology do not provide a useful guide to the American electorate. To the great disappointment of the Post editorial board, many self-identified “moderates” are not sober Beltway centrists but in fact “cross-pressured” by a mix of strong liberal and conservative beliefs.

The unstable and multidimensional identity of the “moderate” voter helps explain why Sanders’s own polling numbers have regularly confounded the prejudices of pundits. In New Hampshire, for instance, where experts repeatedly stressed his strength with “liberals,” Sanders actually did even better with “moderate/conservative” voters.

It might also help explain why Sanders polls well in places like Nevada and Alaska — states not known as liberal bastions, but home to a large number of independent voters.

Who are these independents and “moderates” voting for Sanders? It seems reasonable to believe that they are not confused centrists, but “cross-pressured” voters with a wide range of views, all drawn to Sanders’s left-wing economic message. In fact, Sanders has a long record of winning over these kind of populist “moderates.”

Consider Caledonia County in Vermont’s rugged Northeast Kingdom. Contrary to media cliché, not all of Vermont was a liberal paradise in the 1980s. Caledonia County twice voted heavily for Reagan; in 1988, Bush crushed Dukakis there, 61 to 38 percent.

Yet two years later, when Sanders won his first statewide election for Congress, he defeated the incumbent Republican in Caledonia County by eleven points. Over the next decade, Sanders ran well ahead of the centrist New Democrats Bill Clinton and Al Gore — in 2000, the same year George W. Bush carried the county by seven points, Sanders won it with 66 percent of the vote.

You can chalk some of this up to the quirkiness of rural Vermont. But as the primary campaign has unfolded, Sanders has shown an undeniable ability to connect with the same kind of lower-income and less-well-educated white voters all over the country, from Iowa to West Virginia to Oklahoma.

Democrats have been slowly losing these voters to Republicans since the 1970s; in the last decade, they have almost abandoned them entirely. But non-college-educated whites still represent over 40 percent of the electorate in key swing states like Ohio, Wisconsin, and Indiana.

Many of these poor and struggling voters — however “moderate” according to Gallup — seem very receptive to Sanders’s call for universal health care and a living wage. A Sanders campaign that made deep inroads with working-class whites across the Midwest would be well-prepared to defeat a Republican in November.

It’s difficult to find an equivalent category of voters where Clinton might outperform Sanders in a general election. Women? Clinton’s most recent favorability ratio with all women voters is strongly negative: 41 to 54 percent. Sanders’s mark stands at 44 to 41 percent. In a general election, those numbers might shift — but would it be enough to give Clinton a significant advantage?

Clinton’s strongest support in the primary campaign seems to come from the most loyal Democrats, including African-Americans. But in a bitter campaign against an ethnic nationalist like Trump or a right-wing Republican like Rubio, would loyal party voters refuse to turn out for the Democrats, just because Sanders rather than Clinton was the nominee? It doesn’t seem likely.

None of this is to suggest that Sanders should take loyal non-white Democratic votes for granted. That is exactly what Clinton-style New Democrats did when they pivoted to the center in the 1980s. In a general election campaign, Sanders would have to do the opposite, and build a populist coalition that depended on solidarity between black, Latino, Asian, and white working-class voters.

Unquestionably, it would be difficult work. But the opposition of an ever-more-reactionary Republican Party would surely help. And a successful left-of-center coalition would be well positioned — in both ideological and electoral terms — to mount the much larger, long-term struggle necessary to achieve even Sanders’s social-democratic goals.

Of course, it’s impossible to predict the particular contours of a general election campaign featuring either Sanders or Clinton. Much depends on the Republican nominee, and also, perhaps, on the exact proportion of narcissism and pragmatism in the mind of a certain Manhattan billionaire.

But there’s no question that Bernie Sanders can win in November — and there is good reason to believe he would actually be a stronger Democratic candidate than Hillary Clinton.

Last April in front of the Capitol, when the skeptical reporter asked Sanders if he really intended to contend for the nomination, he replied indignantly: “We’re in this race to win!”

Sanders then continued, insisting that it’s impossible to separate the question of “electability” from the question of democracy. “If you try to put together a movement which says, we have got to stand together as a people,  and say that . . . our country belongs to all of us, and not the billionaire class  — that’s not raising an issue, that is winning elections. That’s where the American people are.”

Far more than the elite media imagined, that’s where the American people have been, all campaign long. They’ll still be there in November.

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The US Economy Has Not Recovered and Will Not Recover Print
Saturday, 20 February 2016 09:52

Roberts writes: "The US economy died when middle class jobs were offshored and when the financial system was deregulated. Jobs offshoring benefited Wall Street, corporate executives, and shareholders, because lower labor and compliance costs resulted in higher profits."

A pedestrian walks by graffiti on a downtown street in Detroit, Michigan. (photo: The Washington Post)
A pedestrian walks by graffiti on a downtown street in Detroit, Michigan. (photo: The Washington Post)


The US Economy Has Not Recovered and Will Not Recover

By Paul Craig Roberts, CounterPunch

20 February 16

 

he US economy died when middle class jobs were offshored and when the financial system was deregulated.

Jobs offshoring benefitted Wall Street, corporate executives, and shareholders, because lower labor and compliance costs resulted in higher profits. These profits flowed through to shareholders in the form of capital gains and to executives in the form of “performance bonuses.” Wall Street benefitted from the bull market generated by higher profits.

However, jobs offshoring also offshored US GDP and consumer purchasing power. Despite promises of a “New Economy” and better jobs, the replacement jobs have been increasingly part-time, lowly-paid jobs in domestic services, such as retail clerks, waitresses and bartenders.

The offshoring of US manufacturing and professional service jobs to Asia stopped the growth of consumer demand in the US, decimated the middle class, and left insufficient employment for college graduates to be able to service their student loans. The ladders of upward mobility that had made the United States an “opportunity society” were taken down in the interest of higher short-term profits.

Without growth in consumer incomes to drive the economy, the Federal Reserve under Alan Greenspan substituted the growth in consumer debt to take the place of the missing growth in consumer income.  Under the Greenspan regime, Americans’ stagnant and declining incomes were augmented with the ability to spend on credit. One source of this credit was the rise in housing prices that the Federal Reserves low inerest rate policy made possible.  Consumers could refinance their now higher-valued home at lower interest rates and take out the “equity” and spend it.

The debt expansion, tied heavily to housing mortgages, came to a halt when the fraud perpetrated by a deregulated financial system crashed the real estate and stock markets. The bailout of the guilty imposed further costs on the very people that the guilty had victimized.

Under Fed chairman Bernanke the economy was kept going with Quantitative Easing, a massive increase in the money supply in order to bail out the “banks too big to fail.”  Liquidity supplied by the Federal Reserve found its way into stock and bond prices and made those invested in these financial instruments richer. Corporate executives helped to boost the stock market by using the companies’ profits and by taking out loans in order to buy back the companies’ stocks, thus further expanding debt.

Those few benefitting from inflated financial asset prices produced by Quantitative Easing and buy-backs are a much smaller percentage of the population than was affected by the Greenspan consumer credit expansion. A relatively few rich people are an insufficient number to drive the economy.

The Federal Reserve’s zero interest rate policy was designed to support the balance sheets of the mega-banks and denied Americans interest income on their savings.  This policy decreased the incomes of retirees and forced the elderly to reduce their consumption and/or draw down their savings more rapidly, leaving no safety net for heirs.

Using the smoke and mirrors of under-reported inflation and unemployment, the US government kept alive the appearance of economic recovery.  Foreigners fooled by the deception continue to support the US dollar by holding US financial instruments.

The official inflation measures were “reformed” during the Clinton era in order to dramatically understate inflation.  The measures do this in two ways.  One way is to discard from the weighted basket of goods that comprises the inflation index those goods whose price rises.  In their place, inferior lower-priced goods are substituted.

For example, if the price of New York strip steak rises, round steak is substituted in its place.  The former official inflation index measured the cost of a constant standard of living.  The “reformed” index measures the cost of a falling standard of living.

The other way the “reformed” measure of inflation understates the cost of living is to discard price rises as “quality improvements.”  It is true that quality improvements can result in higher prices.  However, it is still a price rise for the consumer as the former product is no longer available.  Moreover, not all price rises are quality improvements; yet many prices rises that are not can be misinterpreted as “quality improvements.”

These two “reforms” resulted in no reported inflation and a halt to cost-of-living adjustments for Social Security recipients.  The fall in Social Security real incomes also negatively impacted aggregate consumer demand.

The rigged understatement of inflation deceived people into believing that the US economy was in recovery. The lower the measure of inflation, the higher is real GDP when nominal GDP is deflated by the inflation measure.  By understating inflation, the US government has overstated GDP growth.

What I have written is easily ascertained and proven; yet the financial press does not question the propaganda that sustains the psychology that the US economy is sound.  This carefully cultivated psychology keeps the rest of the world invested in dollars, thus sustaining the House of Cards.

John Maynard Keynes understood that the Great Depression was the product of an insufficiency of consumer demand to take off the shelves the goods produced by industry.  The post-WW II macroeconomic policy focused on maintaining the adequacy of aggregate demand in order to avoid high unemployment.  The supply-side policy of President Reagan successfully corrected a defect in Keynesian macroeconomic policy and kept the US economy functioning without the “stagflation” from worsening “Philips Curve” trade-offs between inflation and employent.  In the 21st century, jobs offshoring has depleted consumer demand’s ability to maintain US full employment.

The unemployment measure that the presstitute press reports is meaningless as it counts no discouraged workers, and discouraged workers are a huge part of American unemployment.  The reported unemployment rate is about 5%, which is the U-3 measure that does not count as unemployed workers who are too discouraged to continue searching for jobs.

The US government has a second official unemployment measure, U-6, that counts workers discouraged for less than one-year.  This official rate of unemployment is 10%.

When long term (more than one year) discouraged workers are included in the measure of unemployment, as once was done, the US unemployment rate is 23%. (See John Williams, shadowstats.com)

Fiscal and monetary stimulus can pull the unemployed back to work if jobs for them still exist domestically.  But if the jobs have been sent offshore, monetary and fiscal policy cannot work.

What jobs offshoring does is to give away US GDP to the countries to which US corporations move the jobs.  In other words, with the jobs go American careers,  consumer purchasing power and the tax base of state, local, and federal governments.  There are only a few American winners, and they are the shareholders of the companies that offshored the jobs and the executives of the companies who receive multi-million dollar “performance bonuses” for raising profits by lowering labor costs. And, of course, the economists, who get grants, speaking engagements, and corporate board memberships for shilling for the offshoring policy that worsens the distribution of income and wealth. An economy run for a few only benefits the few, and the few, no matter how large their incomes, cannot consume enough to keep the economy growing.

In the 21st century US economic policy has destroyed the ability of real aggregate demand in the US to increase.  Economists will deny this, because they are shills for globalism and jobs offshoring. They misrepresent jobs offshoring as free trade and, as in their ideology free trade benefits everyone, claim that America is benefitting from jobs offshoring.  Yet, they cannot show any evidence whatsoever of these alleged benefits. (See my book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West.)  

As an economist, it is a mystery to me how any economist can think that a population that does not produce the larger part of the goods that it consumes can afford to purchase the goods that it consumes. Where does the income come from to pay for imports when imports are swollen by the products of offshored production?

We were told that the income would come from better-paid replacement jobs provided by the “New Economy,” but neither the payroll jobs reports nor the US Labor Departments’s projections of future jobs show any sign of this mythical “New Economy.”

There is no “New Economy.”  The “New Economy” is like the neoconservatives promise that the Iraq war would be a six-week “cake walk” paid for by Iraqi oil revenues, not a $3 trillion dollar expense to American taxpayers (according to Joseph Stiglitz and Linda Bilmes) and a war that has lasted the entirely of the 21st century to date, and is getting more dangerous.

The American “New Economy” is the American Third World economy in which the only jobs created are low productivity, low paid nontradable domestic service jobs incapable of producing export earnings with which to pay for the goods and services produced offshore for US consumption.

The massive debt arising from Washington’s endless wars for neoconservative hegemony now threaten Social Security and the entirety of the social safety net. The presstitute media are blaming not the policy that has devasted Americans, but, instead, the Americans who have been devasted by the policy.

Earlier this month I posted readers’ reports on the dismal job situation in Ohio, Southern Illinois, and Texas. In the March issue of Chronicles, Wayne Allensworth describes America’s declining rural towns and once great industrial cities as consequences of “globalizing capitalism.”  A thin layer of very rich people rule over those “who have been left behind”—a shrinking middle class and a growing underclass.  According to a poll last autumn, 53 percent of Americans say that they feel like a stranger in their own country.

Most certainly these Americans have no political representation. As Republicans and Democrats work to raise the retirement age in order to reduce Social Security outlays, Princeton University experts report that the mortality rates for the white working class are rising.  The US government will not be happy until no one lives long enough to collect Social Security.

The United States government has abandoned everyone except the rich.

In the opening sentence of this article, I said that the two murderers of the American economy were jobs offshoring and financial deregulation.  Deregulation greatly enhanced the ability of the large banks to financialize the economy. Financialization is the diversion of income streams into debt service. When debt service absorbs a large amount of the available income, the economy experiences debt deflation.  The service of debt leaves too little income for purchases of goods and services and prices fall.

Michael Hudson, who I recently wrote about, is the expert on finanialization.  His book, Killing the Host, which I recommended to you, tells the complete story.  Briefly, financialization is the process by which creditors capitalize an economy’s economic surplus into interest payments to themselves. Perhaps an example would be a corporation that goes into debt in order to buy back its shares. The corporation achieves a temporary boost in its share prices at the cost of years of interest payments that drain the corporation of profits and deflate its share price.

Michael Hudson stresses the conversion of the rental value of real estate into mortgage payments.  He emphasizes that classical economists wanted to base taxation not on production, but on economic rent.  Economic rent is value due to location or to a monopoly position. For example, beachfront property has a higher price because of location.  The difference in value between beachfront and nonbeachfront property is economic rent, not a produced value.  An unregulated monopoly can charge a price for a service that is higher than the price that would bring that service unto the market.

The proposal to tax economic rent does not mean taxing you on the rent that you pay your landlord or taxing your landlord on the rent that you pay him such that he ceases to provide the housing.  By economic rent Hudson means, for example, the rise in land values due to public infrastructure projects such as roads and subway systems.  The rise in the value of land opened by a new road and in housing and commercial space along a new subway line is not due to any action of the property owners.  This rise in value could be taxed in order to pay for the project instead of taxing the income of the population in general.  Instead, the rise in land values raises appraisals and the amount that creditors are willing to lend on the property.  New purchasers and existing owners can borrow more on the property, and the larger mortgages divert the increased land valuation into interest payments to creditors. Lenders end up as the major beneficiaries of public projects that raise real estate prices.

Similarly, unless the economy is financialized to such an extent that mortgage debt can no longer be serviced, when central banks lower interest rates property values rise, and this rise can be capitalized into a larger mortgage.

Another example would be property tax reductions and legislation such as California’s Proposition 13 that freeze in whole or part the property tax base.  The rise in real estate values that escape taxation are capitalized into larger mortgages.  New buyers do not benefit. The beneficiaries are the lenders who capture the rise in real estate prices in interest payments.

Taxing economic rent would prevent the financial system from capitalizing the rent into debt instruments that pay interest to the financial sector.  Considering the amount of rents available to be taxed, taxing rents would free production from income and sales taxation, thus lowering consumer prices and freeing labor and productive capital from taxation.

With so much of land rent already capitalized into debt instruments shifting the tax burden to economic rent would be challenging.  Nevertheless, Hudson’s analysis shows that financialization, not wage suppression, is the main instrument of exploitation and takes place via the financial system’s conversion of income streams into interest payments on debt.

I remember when mortgage service was restricted to one-quarter of household income. Today mortgage service can eat up half of household income.  This extraordinary growth crowds out the production of goods and services as less of household income is available for other purchases.

Michael Hudson and I bring a total indictment of the neoliberal economics profession, “junk economists” as Hudson calls them.

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Students Testify on Capitol Hill Against Predatory For-Profit Colleges Print
Saturday, 20 February 2016 09:51

Dewan writes: "Students reeling from debt incurred while attending for-profit colleges traveled to Capitol Hill Thursday to voice their struggles to the Senate Health Education Labor and Pensions committee, seeking to pursue blanket discharges for debt taken on by attending expensive programs that, in reality, had little value."

Students protest for-profit education in the US. (photo: David McNew/Getty Images)
Students protest for-profit education in the US. (photo: David McNew/Getty Images)


Students Testify on Capitol Hill Against Predatory For-Profit Colleges

By Bryan Dewan, ThinkProgress

20 February 16

 

tudents reeling from debt incurred while attending for-profit colleges traveled to Capitol Hill Thursday to voice their struggles to the Senate Health Education Labor and Pensions committee, seeking to pursue blanket discharges for debt taken on by attending expensive programs that, in reality, had little value.

The stories told to the Senate panel were emotional. According to the Huffington Post, Alicia Stevens, who enrolled at the Florida Metropolitan University in 2005, graduated with $33,000 and little hope for a job, given the poor quality of education she received. She lives on Social Security payments, and is likely to be forced to live out of her car due to her financial situation. Another student, Alyse Zachary, was told she would be kicked out of ITT Technical Institute if she did not sign up for a high-interest private loan. She graduated $30,000 in debt.

One of the most heartbreaking stories was that of Pam Hunt, a former Corinthian student who studied criminal justice and owes $172,000. She is without a job and is currently homeless, along with her five children, one of whom is disabled.

Despite the increasing amount of evidence suggesting that many for-profit colleges function as little more than scams, the federal government will likely not apply blanket debt forgiveness to students affected by predatory, dishonest programs. Students will instead have to work through their options individually, which can often be a lengthy and fruitless endeavor. The activists who met with government officials on Thursday were disappointed when Education Department Special Master Joseph Smith told them that it was unlikely that the government would act to help groups of students in similar situations. The federal government will likely opt for the individualized process, as opposed to group-focused action, instead. The Department of Education, while mindful of the dangers of for-profit colleges, has been very slow to provide relief to students in need.

For-profit colleges have a poor reputation when it comes to loan default rates. As ThinkProgress has previously reported, nearly half of students who attend for-profit colleges default on their loans within five years. Students have been catching on, and have been choosing to take their money to better educational programs, causing upheaval in the for-profit college market. Students who feel that they have been scammed by a for-profit college may have some options open to them, but should be wary of debt-forgiveness scams and other predatory practices.

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The New South American Political Map Print
Saturday, 20 February 2016 09:50

Zibechi writes: "The election results in Venezuela and Argentina, the Brazilian crisis, and the erosion of the 'citizens' revolution' in Ecuador are part of a change in political climate that puts the transformative processes underway on the defensive in South America."

A demonstrator holds a placard as she stands in front of national guards in Caracas, Venezuela. (photo: Jorge Silva/Reuters)
A demonstrator holds a placard as she stands in front of national guards in Caracas, Venezuela. (photo: Jorge Silva/Reuters)


The New South American Political Map

By Raul Zibechi, Upside Down World

20 February 16

 

he election results in Venezuela and Argentina, the Brazilian crisis, and the erosion of the “citizens’ revolution” in Ecuador are part of a change in political climate that puts the transformative processes underway on the defensive.

In the past weeks four progressive governments in the region show unmistakable signs of weakness. Rafael Correa will not compete for re-election, in the context of an uncertain economic outlook for his country. Dilma Rousseff may face impeachment by parliament. Nicolás Maduro suffered the first Bolivarian electoral defeat, leaving his government at the mercy of parliament, and Cristina Fernandez’s candidate was defeated by the right-wing Mauricio Macri.

The explanations that have been given range from the consequences of the fall in international commodity prices, to offensives from the right and mass media, considered allies of United States policy. These are undoubtedly true, but they are not enough to explain the deterioration of the progressive governments. Few analysts mention rampant corruption in Venezuela and Brazil, and tend to blame almost everything on the “enemies” of these governments.

It’s true there is an undeniable economic crisis in Argentina, Brazil, and Venezuela, with significant drops in GDP and rising unemployment and poverty chipping away at some of the greatest achievements of these governments. However, we must not generalize too much. Although there are common causes, the particularities have weight. The Brazilian crisis is closely linked to the de-legitimization of the political class, while in Venezuela the economic crisis is the key to the government’s defeat in parliamentary elections.

“How did we get to such a scenario of near ruin?” journalist Eric Nepomuceno asks, in trying to explain the Brazilian situation (La Jornada, December 20, 2015). His answer is “coalition presidentialism”, since it imposes purely pragmatic alliances on the administration that run counter to its convictions. But the Maduro, Correa and Fernandez governments with parliamentary majorities are also experiencing serious difficulties. Although these examples do not invalidate the analysis of the Brazilian case, they do require us to look to common problems. The fall of commodity prices, persistent inequality, and increasing distance from sectors that previously backed the governments seem to be the principal factors that apply to all these progressive governments.

The end of an unforgettable cycle

When the price of a barrel of oil rose above $120, and mineral and soy prices were high, no one thought that they could someday fall, or rather, return to their “normal” levels. These were years of euphoria and promises that never left the paper. Hugo Chávez took office in 1999 with a barrel valued at just over ten dollars. The price saw a steady climb in the following years, with an abrupt interruption after the crisis of 2008 when it fell from $140 to $52, returning to more than $100 in a few months. But oil prices have gone downhill for more than a year, without indication of a recovery anytime soon. Ecuador exports at $28/barrel; extraction is estimated to no longer be profitable under $20/barrel.

The problem is that governments did their budgets with oil prices above $100/barrel, and now cannot find a way to plug the hole. The story of soy is similar: at the beginning of the 2000s, the price fluctuated around $200/ton, rose to above $600 in 2013, and fell to $350 in 2014. Similar patterns appear in the historical prices of every major commodity. Gold hovered above $1800/ troy ounce, to settle out at around $1,100 today. A longterm look at prices shows this to be a matter of a speculative bubble. Although they are not returning to their average values of the preceding decades now (between 1970 and 2005, gold averaged was $345/troy ounce), it’s unlikely we´ll see a return to those extraordinary prices.

The Federal Reserve also began to raise interest rates, which were near zero for seven years, to revive the US economy after the 2008 crisis. Rates are expected to rise gradually throughout 2016, putting an end to the era of cheap money, and aggravating the situation of countries and families in debt.

The commodity bubble increased dependency on easy money, as if income earned were a hard drug. More than 95% of Venezuelan export is oil. Production in Brazil and Argentina reverted to raw materials. Immense export surpluses were not used to diversify production, but to boost consumption.

In the absence of realistic planning, bafflement ensued. Arguments to explain the drop in oil prices were more ideological than economic or political. Some said it was a ploy by the United States to punish Russia, Iran and Venezuela, its principal enemies. Others claimed that Saudi Arabia was behind low prices to discourage the huge increase in US production by fracking.

The truth is that oil production is higher than demand today, partly because China’s growth has fallen from 9-10 to 7% percent annually. But above all because of a shift toward growth based on new technologies and lower consumption of non-renewable energy, areas in which China is at the forefront. Asia will not continue to grow based on raw materials and cheap labor, which shakes up the world.

Inequality and debt

For South America, the combination of low export prices and the rising price of money is a ticking time bomb. A recent report by the Friedrich Ebert Foundation in Brazil notes that almost half of family income (46.5%) is dedicated to the payment of debts, compared to only 19.3% in 2005. “This makes it impossible to stimulate the economy,” said economist Ladislau Dowbor.

Companies are also affected by abusive fees charged by banks, which fluctuate around 50%, compared to only 2% charged in Europe. With demand hampered by debt, industry hindered by the high cost of money, and the impossibility of government investment because of the fiscal crisis, the situation is explosive. Dowbor argues, “The resources that should be invested in the development of the economy are syphoned off by financial speculation.”

Brazil is the regional norm. There are 900 million credit cards and the number of bank accounts has grown 179% since 1999. So-called “financial inclusion” mostly benefitted the banks, which became more and more concentrated. At the close of the virtuous cycle of commodities, families are more dependent on the financial system since they spent much of the social benefits on household consumption. At the same time, health and education did not undergo substantial changes.

Some recent studies belie progressive discourse on the fall in inequality, particularly in Uruguay and Brazil. While poverty diminished significantly from the peak of the crisis, there are more continuities than shifts in inequality. The work of economists at the Uruguayan Institute of Economics and the Brazilian Institute of Applied Economic Research on the 1% percent highest earners reach the same conclusion: inequality remains largely unaffected and even has tended to increase slightly in the current crisis.

The picture that emerges from these studies shows poverty falling notably in the early years of the new century. This coincided with economic growth and the implementation of social policies.

But in the second half of the decade, the decline in poverty slowed. This seems reasonable since it the second half faced the hard nuclei of poor, and not just those sectors impoverished during the last crisis. But inequality almost didn’t move.

As the current crisis expands, much of the so-called “conquests” are being eroded by inflation, as has happened in Argentina since 2013. In Brazil and other countries in the region, unemployment is growing while wages tend to stagnate.

In short, the end of the cycle has brought much uncertainty and a sense of lost time, since there were no major structural changes or diversification in production models.

Dissenting movements

The social movements that played a prominent role in the de-legitimization of neoliberalism in the 1990s have weakened. Many became recipients of state funding and have dulled their militant profile. Others have joined electoral politics, and not just a few have disappeared. The Argentine piquetero movement that shook the country in the early 2000s no longer exists, fragmented between these three pathways.

But new movements are born, and others re-activated. In the indigenous and workers’ uprising in Ecuador this August, the Confederation of Indigenous Nationalities of Ecuador (CONAIE) confronted the Correa government. In a rare occurrence, the CONAIE organized the biggest protests in years against governmental authoritarianism.

In Brazil, a new breed of movements was born in the heat of the June mobilizations of 2013. Hundreds of small groups in middle-class neighborhoods and poor favelas hit the streets. The recent wave of student occupations of more than 200 high schools in Sao Paulo stands out as a sign of new times.

Most of the countries are seeing a new activism, quite different from that which was forged in the 1990s and found its point of reference in the social forums since 2000. This new wave is less ideological and more concrete in its demands, but no less forceful, as demonstrated by the Sao Paulo students who drove the government to shelve a plan to restructure the education system that would have closed 90 schools on the periphery and concentrate youth in large, overcrowded schools.

It looks like a new consciousness is being born, largely a product of the social policies of progressive governments. In Rio’s favelas, for example, college students abound, whereas twenty years ago you could count them on your fingers. With them, actions linked to NGOs have multiplied, but also grassroots theater, black culture, women’s groups, and micro-economic enterprise groups. New organizational skills have been developed out of the demonstrations of 2013 that is reflected in the occupations. And there’s also a sense of dignity that will get people talking in the future.

Throughout the region, the voice is clearer and clearer. The pages of Aporrea, a publication traditionally sympathetic to Hugo Chavez’s political current, show a very different picture of Venezuela in recent months: corruption, inefficiency, and poor government management are cited openly. Writer Luis Brito García, always faithful to the Bolivarian process, just published a controversial article in which he concludes: “Revolution without ideology is a piñata, where all kneel until the candies are gone” (Aporrea, December 20, 2015).

If it is true that the candies are running out, hard times may cause desertion or reflections that go beyond the pat on the back. Because the numbers tell the story: chavismo lost two million votes while the opposition gained only 400,000. A punishment vote as hard as it was necessary.

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Hillary Clinton, With Little Notice, Vows to Embrace an Extremist Agenda on Israel Print
Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=29455"><span class="small">Glenn Greenwald, The Intercept</span></a>   
Friday, 19 February 2016 15:35

Greenwald writes: "Is it even physically possible to 'strengthen the U.S.-Israel alliance' beyond what it already entails: billions of dollars in American taxpayer money transferred every year, sophisticated weapons fed to Israel as it bombs its defenseless neighbors, blindly loyal diplomatic support and protection for everything it does?"

Glenn Greenwald. (photo: Reuters)
Glenn Greenwald. (photo: Reuters)


Hillary Clinton, With Little Notice, Vows to Embrace an Extremist Agenda on Israel

By Glenn Greenwald, The Intercept

19 February 16

 

ormer President Bill Clinton on Monday met in secret (no press allowed) with roughly 100 leaders of South Florida’s Jewish community, and, as the Times of Israel reports, “He vowed that, if elected, Hillary Clinton would make it one of her top priorities to strengthen the U.S.-Israel alliance.” He also “stressed the close bond that he and his wife have with the State of Israel.”

It may be tempting to dismiss this as standard, vapid Clintonian politicking: adeptly telling everyone what they want to hear and making them believe it. After all, is it even physically possible to “strengthen the U.S.-Israel alliance” beyond what it already entails: billions of dollars in American taxpayer money transferred every year, sophisticated weapons fed to Israel as it bombs its defenseless neighbors, blindly loyal diplomatic support and protection for everything it does?

But Bill Clinton’s vow of even greater support for Israel is completely consistent with what Hillary Clinton herself has been telling American Jewish audiences for months. In November, she published an op-ed in The Forward in which she vowed to strengthen relations not only with Israel, but also with its extremist prime minister, Benjamin Netanyahu.

“I have stood with Israel my entire career,” she proclaimed. Indeed, “as secretary of state, [she] requested more assistance for Israel every year.” Moreover, she added, “I defended Israel from isolation and attacks at the United Nations and other international settings, including opposing the biased Goldstone report [which documented widespread Israeli war crimes in Gaza].”

Clinton media operatives such as Jonathan Alter have tried to undermine the Sanders campaign by claiming that only Sanders, but not Clinton, has committed the sin of criticizing Obama: “Hillary stopped criticizing Obama in 2008, when [Obama] was nominee; Sanders stopped in 2015, so he could run as Dem.” Aside from being creepy — it’s actually healthy to criticize a president and pathological to refuse to do so — this framework is also blatantly false. Clinton, in her book and in interviews, has often criticized Obama for being insufficiently hawkish: making clear that she wanted to be more militaristic than the Democratic president who has literally bombed seven predominantly Muslim countries (thus far).

Headline from The Week. (photo: The Intercept)
Headline from The Week. (photo: The Intercept)

Her comments on Israel have similarly contained implicit criticisms of Obama’s foreign policy: namely, that he has created or at least allowed too much animosity with Netanyahu. In her Forward op-ed, she wrote that the Israeli prime minister’s “upcoming visit to Washington is an opportunity to reaffirm the unbreakable bonds of friendship and unity between the people and governments of the United States and Israel.” She pointedly added: “The alliance between our two nations transcends politics. It is and should always be a commitment that unites us, not a wedge that divides us.” And in case her message is unclear, she added this campaign promise: “I would also invite the Israeli prime minister to the White House in my first month in office.”

Last month, Clinton wrote an even more extreme op-ed in the Jewish Journal, one that made even clearer that she intends to change Obama’s policy to make it even more “pro-Israel.” It begins: “In this time of terrorism and turmoil, the alliance between the United States and Israel is more important than ever. To meet the many challenges we face, we have to take our relationship to the next level.”

Headline from the Jewish Journal. (photo: The Intercept)
Headline from the Jewish Journal. (photo: The Intercept)

“With every passing year, we must tie the bonds tighter,” she wrote. Tie those bonds tighter. Thus:

As part of this effort, we need to ensure that Israel continues to maintain its qualitative military edge. The United States should further bolster Israeli air defenses and help develop better tunnel detection technology to prevent arms smuggling and kidnapping. We should also expand high-level U.S.-Israel strategic consultations.

As always, there is not a word about the oppression and brutality imposed on Palestinians as part of Israel’s decadeslong occupation. She does not even acknowledge, let alone express opposition to, Israel’s repeated, civilian-slaughtering bombing of the open-air prison in Gaza. That’s because for Clinton — like the progressive establishment that supports her — the suffering and violence imposed on Palestinians literally do not exist. None of this is mentioned, even in passing, in the endless parade of pro-Clinton articles pouring forth from progressive media outlets.

Beyond progressive indifference, Clinton has been able to spout such extremist rhetoric with little notice because Bernie Sanders’ views on Israel/Palestine (like his foreign policy views generally) are, at best, unclear. Like many American Jews, particularly of his generation, he has long viewed Israel favorably, as a crucial protective refuge after the Holocaust. But while he is far from radical on these matters, he at least has been more willing than the standard Democrat, and certainly more willing than Clinton, to express criticisms of Israel. Still, his demonstrated preference for focusing on domestic issues at the expense of foreign policy has unfortunately enabled Clinton to get away with all sorts of extremism and pandering in this area.

Clinton partisans — being Clinton partisans — would, if they ever did deign to address Israel/Palestine, undoubtedly justify Clinton’s hawkishness on the ground of political necessity: that she could never win if she did not demonstrate steadfast devotion to the Israeli government. But for all his foreign policy excesses, including on Israel, Obama has proven that a national politician can be at least mildly more adversarial to Israeli leaders and still retain support. And notably, there is at least one politician who rejects the view that one must cling to standard pro-Israel orthodoxy in order to win; just yesterday, Donald Trump vowed “neutrality” on Israel/Palestine.

As I noted a couple of weeks ago, Clinton advocates are understandably desperate to manufacture the most trivial controversies because the alternative is to defend her candidacy based on her prior actions and current beliefs (that tactic was actually pioneered by then-Clinton operative Dick Morris, who had his client turn the 1996 election into a discussion of profound topics such as school uniforms). If you were a pro-Clinton progressive, would you want to defend her continuous vows to “strengthen” U.S. support for the Netanyahu government and ensure that every year “we must tie the bonds tighter”?

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