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Government Debt: Jefferson and Gallatin Were Right

June 30, 2015 in Economics

By Chris Edwards

Chris Edwards

The world economy is getting rattled this week by the consequences of excessive government debt. Greece may be cut off from its international creditors, and Puerto Rico announced that it cannot make full payments on its massive debt. In both cases, years of excessive spending are sadly dealing a crushing blow to the living standards of millions average citizens.

These jurisdictions have fallen into the abyss, but debt has risen to dangerous levels in many places around the world, including in our federal government. The root of the problem is Keynesian economics, which has taught governments since the 1930s that deficit spending is good for the economy. That message has been fiscal catnip for politicians, who have eagerly run deficits year after year, and built up debt to massive levels. To compound the problem, some economists—such as Paul Krugman—have been falsely recommending that we not worry too much about rising debt because it is “money we owe to ourselves.”

The effects of Keynesianism can be seen in federal budget data. From 1791 to 1929, the federal government balanced its budget in 68 percent of the years. But from 1930 to 2015, the government balanced its budget in just 15 percent of the years. The result is that federal debt has risen to levels unprecedented in our peacetime history.

Alexander Hamilton was a brilliant man and an important Founding Father, but he was on the wrong side of the crucial debt issue.”

Economist James M. Buchanan pointed his finger squarely at Keynesianism for the decline in beneficial “Victorian fiscal morality,” which had constrained the political incentive to deficit-spend in our early history. With the rise in Keynesianism, the “modern era of profligacy” was born, he said. Looking ahead, official projections show federal debt soaring in coming decades unless we get the profligacy under control.

Battles over federal government debt go back to the beginning of our nation, as I discuss in recent testimony to the House Budget Committee. On one side in the 1790s were Treasury Secretary Alexander Hamilton and other Federalists, who favored a perpetual federal debt, believing that it would create economic and political benefits.

On the other side were Thomas Jefferson and Albert Gallatin, who were appalled by high debt, and led the opposition to Hamilton’s fiscal policies. They believed that government debt was economically dangerous and politically corruptive. And they argued that debt enriched the financial elite …read more

Source: OP-EDS

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Uber Execs Arrested in France after Luddite Protests

June 30, 2015 in Economics

By Matthew Feeney

Matthew Feeney

Yesterday, the Uber France CEO and Uber Western Europe’s general manager were arrested in Paris. Both are charged with running an illegal taxi business and will go on trial in September. News of the arrests came only a few days after violent anti-Uber protests across France. The arrests and the recent protests are only the latest examples of 21st Century Luddism and lawmakers’ unwillingness to keep up with popular and innovative technological changes.

Taxi drivers in France, who last week set at least one car ablaze, erected barricades, and attacked Uber drivers are not happy about what they see as the unfair competition posed by UberPop, Uber’s European ridesharing service. According to a representative from the FTI taxi union, French taxi drivers have experienced between a 30 percent and 40 percent decline in revenue in the last two years.

If French taxi drivers want to survive in the long term perhaps they should consider developing an app to rival Uber’s or changing their business model.”

French officials are not happy either. Following last Thursday’s protest Interior Minister Bernard Cazeneuve ordered police in Paris to implement an UberPop ban. Two hundred police officers have reportedly been tasked with tracking down drivers using UberPop. A court ruled last December that UberPop could operate in Paris. However, the French Interior Ministry claims that UberPop violates regulations that came into effect at the beginning of this year.

Uber has continued to offer UberPop in France amid the legal challenges and protests. Its behavior may be perceived by some as arrogant, but that hasn’t stopped the San Francisco-based technology company from attracting 400,000 French UberPop users. Whatever one might think about Uber’s strategy in France and elsewhere around the world, it is clear that the company is at least as good at making customers fall in love with its product as it is at frustrating regulators and taxi companies.

It is easy to see why taxi drivers in France are upset about the rise of Uber. UberPop drivers are not complying with the same regulations governing taxis. At first glance it might seem that Uber and taxi companies are basically the same and that Uber is unfairly flouting taxi regulations. But there is an important difference between Uber and taxi companies: UberPop drivers are using their own vehicles on their own time. Uber provides drivers and passengers with a technology that lets them …read more

Source: OP-EDS

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Export-Import Bank Closes: Kill Subsidies to Cut Federal Liabilities, Promote Economic Fairness

June 30, 2015 in Economics

By Doug Bandow

Doug Bandow

The Export-Import Bank dies tonight when its charter expires. After 81 years, what is commonly known as Boeing’s Bank is headed toward Washington’s trash bin.

When Congress returns it could revive Ex-Im, which primarily subsidizes big business exports. But a proper burial for what Barack Obama once called “corporate welfare” would save Americans money, reduce economic injustice, and promote economic growth.

The Bank was established in 1934 to promote trade with the Soviet Union, ExIm now is one of a score of federal agencies tasked with encouraging exports. The agency exists to borrow at government rates to provide credit at less than market rates for select exporters, mostly corporate behemoths.

ExIm claims to be friendly to small business, but cherchez the money: it goes to Big Business. According to Veronique de Rugy of the Mercatus Center, between 2007 and 2013 the Bank subsidized $66.7 billion in sales by Boeing. ExIm also underwrote $8.3 billion for General Electric, $5.2 billion for Bechtel, $4.9 billion for Caterpillar and its subsidiary Solar Turbine, $3.2 billion for CBI Americas, $3.0 for Exxon Mobil, $2.1 billion for Applied Materials, $2.0 billion for Westinghouse, and $1.4 billion for Noble Drilling. During that period Boeing enjoyed 35 percent, GE 4.4 percent, and Bechtel 2.7 percent of the Bank’s largesse.

In 2012, noted Timothy Carney of the Washington Examiner, the aircraft maker accounted for 83 percent of all loan guarantees. The following year just five firms collected 93 percent of the loan guarantees. Also in 2013 the top ten ExIm beneficiaries accounted for two-thirds of the Bank’s total activities: Boeing, General Electric, Bechtel, Applied Materials, Caterpillar, Space Systems/Loral, Komatsu America, Case New Holland, Ford, and Sikorsky Aircraft. Other frequent beneficiaries include Dow Chemical, John Deere, and Lockheed Martin.

Giants of the financial world, such as Citibank and JP Morgan Chase, also do well by the Bank. Loren Thompson of the Lexington Institute thought he was arguing in favor of ExIm when he observed: “Private lenders often don’t like the risk profile of countries seeking export assistance” and “want the kind of protections available to lenders who finance the exports of other countries.” Of course they do. But the U.S. government’s role is not to protect profit-making private firms from risks at home or abroad.

The Bank denies providing subsidies since it charges fees and interest and claims to make a “profit”—more than $1.6 billion since 2008. But if ExIm operated like a normal commercial bank there …read more

Source: OP-EDS

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Why US Allies Are Happy to Join China's AIIB

June 30, 2015 in Economics

By Swaminathan S. Anklesaria Aiyar

Swaminathan S. Anklesaria Aiyar

On June 29, representatives of 50 countries gathered in Beijing to sign the legal framework agreement to establish the $100 billion Asian Infrastructure Investment Bank (AIIB). Seven more countries are expected to sign, bringing the total number of founding AIIB members to 57. The institution will launch with China having a 30.4 percent share of the AIIB’s equity, followed by India (8.5 percent) and Russia (6.7 percent). The two notable absentees are the United States and Japan. Key NATO allies of the U.S., like Germany, France and the United Kingdom, have opted to join the AIIB. Germany will have the largest non-Asian stake (4.1 percent).

The China-led Asian Infrastructure Investment Bank (AIIB) has swept up U.S. allies.”

Of all its allies, why did only Japan stand with the United States on an issue with strategic implications? The new AIIB will symbolize China’s rise as a financial superpower, guiding the world’s biggest infrastructure financing institution. Whatever their reservations about China’s financial rise, most countries see it as a fact of life that cannot be stalled by staying out of the AIIB. They would rather be inside it, getting a share of the infrastructure orders that the AIIB will finance.

U.S. President Barack Obama says China may steer AIIB loans to meet political or strategic considerations rather than economic. So, the AIIB will have lower lending standards than existing multilateral institutions like the World Bank and Asian Development Bank, and undercut their effectiveness. Japan echoes this sentiment.

Why have other major donors shrugged away this objection? Because their diplomats smile at the notion that the World Bank or ADB have always had the highest lending standards. The U.S. as chief shareholder of the World Bank has always viewed it as a foreign policy tool. Ditto for Japan, chief shareholder of the ADB. Besides, as a development institution, the World Bank measures its success by its top line—lending volume—and not the bottom line. It has financed huge public sector undertakings of dubious quality across developing countries.

When I first worked for the Bank in 1985, one staffer explained to me the pressures to lend. “In the first quarter of the year, we promise to be really tough. By the second quarter, we worry that disbursements are behind schedule. By the last quarter, we are shoveling money as fast as possible. If we don’t meet disbursement targets, we risk losing allocations …read more

Source: OP-EDS

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The New CatoAudio App

June 30, 2015 in Economics

In one simple, innovative app, CatoAudio provides instant access to the expert perspectives, insights, and insider viewpoints offered by the Cato Institute and Libertarianism.org. The app includes favorites such as the Cato Daily Podcast, Libertarianism.org’s Free Thoughts, Cato’s event podcasts, Cato Audio Monthly recordings of event highlights and special roundtable discussions, excursions into libertarian thoughts, and more.

…read more

Source: CATO HEADLINES

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The Shocking Numbers that Reveal Just How Burnt Out American Workers Are

June 29, 2015 in Blogs

By Matt Saccaro, Salon

Productivity has exploded in the American workforce in recent years, but at a terrible cost.


The American worker is overworked, underpaid, and suffering from severe burnout.

This sentiment isn’t populist rhetoric, there are numbers to back it up. A new studyfrom Staples Advantage and WorkPlaceTrends — an HR-focused research firm — polled over 2,500 workers and reached troubling results. According to the data, 53 percent of American workers report feeling burned out at work.

With current working conditions, it’s easy to see why. A 2012 study concluded smartphones and tablets enable employers to further colonize a worker’s time to the tune of two extra hours a day since they can be reached at all hours. In 2014, Gallup estimated the typical American workweek was 47 hours, not 40; the American worker was toiling for almost a full extra day. Of the workers this recent study polled, more than half worked a day longer than eight hours.

“This isn’t the workplace of 10 years ago,” Dan Schawbel, founder of WorkPlaceTrends, co-author of the study, and author of the New York Times bestselling book Promote Yourself, told Salon. “There’s a lot of pressure. And it’s competitive in the sense that anyone in the world could take your job for less money, so you have to work harder.”

And work harder Americans have. Some work so hard it kills them, like a Bank of America intern who passed away after working 72 hours straight. Because of this occupational devotion (or occupational desperation), productivity has exploded by over 400 percent since 1950.Yet wages haven’t budged — at least not for most Americans. The richest 1 percent, however, have seen their average income surge by over 240 percent.

Yet, bizarrely, the study reports a vast majority of workers at 86 percent still claim to feel happy and motivated.

“My thought is that workers have accepted the new reality of the workplace,” Schawbel said. “A lot of them are just happy to have a job in general…Many workers are just trying to keep their job, and then excel at their job, …read more

Source: ALTERNET

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Robert Reich: Economic Apartheid in America

June 29, 2015 in Blogs

By Robert Reich, Robert Reich's Blog

Despite social advances, racial segregation exists on a much larger geographic scale than ever before.


Almost lost by the wave of responses to the Supreme Court’s decisions last week upholding the Affordable Care Act and allowing gays and lesbians to marry was the significance of the Court’s third decision – on housing discrimination. 

In a 5-4 ruling, the Court found that the Fair Housing Act of 1968 requires plaintiffs to show only that the effect of a policy is discriminatory, not that defendants intended to discriminate.

The decision is important in the fight against economic apartheid in America – racial segregation on a much larger geographic scale than ever before. 

The decision is likely to affect everything from bank lending practices whose effect is to harm low-income non-white borrowers, to zoning laws that favor higher-income white homebuyers.

First, some background. Americans are segregating ever more by income in terms of where we live. 

Thirty years ago most cities contained a broad spectrum of residents from wealthy to poor. Today, entire cities are mostly rich (San Francisco, San Diego, Seattle) or mostly impoverished (Detroit, Baltimore, Philadelphia).

Because a disproportionate number of the nation’s poor are black or Latino, we’re experiencing far more segregation geographically. 

Which is why, for example, black students are more isolated today than they were 40 years ago. More than 2 million black students now attend schools where 90 percent of the student body is minority.

According to a new study by Stanford researchers, even many middle-income black families remain in poor neighborhoods with low-quality schools, fewer parks and playgrounds, more crime, and inadequate public transportation. Blacks and Hispanics typically need higher incomes than whites in order to live in affluent neighborhoods.

To some extent, this is a matter of choice. Many people prefer to live among others who resemble them racially and ethnically.

But some of this is due to housing discrimination. For example, a 2013 study by the Department of Housing and Urban Development found that realtors often show black families fewer properties than white families possessing about the same income and wealth.

The income gap between poor minority and middle-class white communities continues to …read more

Source: ALTERNET

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Paul Krugman: What Happens When the West Imposes Endless Crippling Austerity on a Country

June 29, 2015 in Blogs

By Janet Allon, AlterNet

Greece's debt trap is inescapable and its exit from the euro will hurt the whole world economy.


Paul Krugman has long been sounding the alarm about the relentless imposition of economy-hobbling austerity measures on Greece. Now, the worst-case scenario he has warned about seems to be coming to pass, with Greek banks closing and panic spreading. Will anyone learn the right lesson? Doubtful.

He opens his Monday column with this strong statement: “It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.”

But worse than not creating a centralized currency is when a country has to exit it. And that is the decision that is facing beleaguered Greek voters. ”Next week the country will hold a referendum on whether to accept the demands of the 'troika',” Krugman writes, “the institutions representing creditor interests — for yet more austerity.”

He takes the stance that Greece should vote 'no' and leave the euro. Because they have no choice. Further austerity will ruin them.

Yes, Krugman allows, the Greeks did need to cut back their overspending in the 2000s, but they have done that repeatedly and dutifully raised taxes. The problem is they cut so much spending that their economy simply collapsed. Revenues plummeted. Krugman then connects this with the euro, and why it is unworkable.

And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it’s what happened in Iceland more recently. But Greece, without its own currency, didn’t have that option.

So have …read more

Source: ALTERNET

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Landslide at the Supreme Court: Right Wingers Lose a Trifecta of Partisan Cases

June 29, 2015 in Blogs

By Steven Rosenfeld, AlterNet

The latest ruling reverses an effort in TX to eliminate abortion access.


The Republican’s losing streak at the U.S. Supreme Court continued Monday, on the last day of the term as the Court made three rulings thwarting right-wing crusades.

In two rulings, the Court stopped the GOP from gaming different aspects of the electoral process that help keep their party in political office. In the third ruling, the Court voted 5-4 to keep abortion clinics open in Texas while a lawsuit proceeds that challenges a state law seeking to shut down all but nine of them.

The Court also ruled against the Obama administration’s latest environmental regulations that sought to limit power plant emissions and said that a three-drug mix used to execute prisoners on Oklahoma was not unconstitutional. Late last week, the Court said there was a constitutional right to same-sex marriage, and upheld federal subsidies for Obamacare—two historic victories for progressives and Democrats. 

Voter Suppression, Uncompetitive Elections

In the first election case, the Court decided not hear an appeal brought by the nation’s most partisan Secretary of State, Kansas Republican Chris Kobach, who has been trying for years to require new voters to produce documented proof of citizenship—as opposed to taking an oath when registering to vote.

Kobach, who has been associated with anti-immigrant organizations throughout his career, wanted to add the requirement to protect the “integrity” of the vote, but civil rights groups have seen it as the latest GOP effort to unnecessarily police the process and keep inexperienced voters from voting. The latest twist in this fight came when Kobach sued the U.S. Election Assistance Commission because he wanted separate voter registration forms for state and federal elections—to limit who was eligible to vote locally. A lower appeals court rejected that approach and the U.S. Supreme Court denied Kobach’s petition for a new trial. 

In the second election case, the Court sided with a citizen redistricting commission in Arizona—where Republicans in the Legislature didn’t like the results because it awarded them fewer “safe seats” in the U.S. House—where boundaries ensured a Republican would win. Because Arizona voters created this independent …read more

Source: ALTERNET

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John Oliver Rips CNN For Confusing Pride Flag with ISIS Flag

June 29, 2015 in Blogs

By Colin Gorenstein, Salon.com

Oliver: “You work at CNN — and you don’t know what a dildo looks like?”


CNN’s royal “f-up” this weekend is sure to go down in history — some type of special history — right alongside SCOTUS’ historic same-sex ruling.

In a live segment following Saturday’s gay pride parade in London, CNN reporter Lucy Pawle claimed that she’d seen an ISIS flag when, in fact, the flag was actuallydecorated with dildos and butt-plugs. 

“I seem to be the only person that’s spotted this, and nobody seems to be raising any questions or pointing it!” she was heard saying in the seven-minute segment which featured a prominent banner reading “ISIS FLAG SPOTTED AT GAY PRIDE PARADE.” 

CNN quickly washed their hands clean of the egregious error and took down the video from the Internet. But thankfully, because people like “Last Week Tonight’s” John Oliver exist, it lives on forever.

The host took a minute of his program Sunday to revisit the weekend highlight, leading into the segment: “The award for greatest moment in global Pride celebrations actually had nothing to do with gay marriage, and everything to do with the idiocy of CNN.”

Oliver, who jumped on the story a full 24 hours later, was shocked to learn that CNN hadn’t issued any sort of apology or retraction for the blunder. 

“Probably because it would be too embarrassing to have a professional journalist say, ‘I’m sorry. Despite working at CNN, it seems I don’t know what a dildo looks like,’” he concluded. 

Watch the clip courtesy of HBO below:

 

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Source: ALTERNET