The Economic Normalcy Bias

David Sirota is the author of the new book “Back to Our Future: How the 1980s Explain the World We Live In Now.” He hosts the morning show on AM760 in Colorado. E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

© 2011 Creators.com

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Goodbye, Gingrich?

CounterPunch Diary

by ALEXANDER COCKBURN

Sick with disappointment that I missed the Tin-Tin movie showing in Eureka, I had to settle for Obama’s State of the Union and Thursday’s Republican debate in Jacksonville.

Await a presidential State of the Union address with keen anticipation? It’s like saying one looks forward to taking a niece to the Nutcracker. The last time I truly enjoyed one – the speech, not the ballet – was Bill Clinton’s in 1998, and it wasn’t because of anything he said. It was his terrific aplomb, despite the fact that the Lewinsky scandal was breaking over his head. He was rewarded with a bounce of ten points, from 59 to 69 per cent popular approval. The message was clear. We, the people, couldn’t care less about Monica. In fact, we the people thoroughly approve. The following year, the U.S. Senate was trying him for impeachment, after months of  steady servings in the press of Monica’s semen-stained dress, and here was Bill as bouncy as ever, rock solid at 69 per cent.

Normally, the American people don’t set much stock by State of the Union addresses. Half the times Ronald Reagan – the Great Communicator – gave the annual State of the Union address across his two terms in office, he promptly sank in the polls by 3 or 4 points. People turned on the tv set, gasped and said, “He’s the president?”

By all rights, Obama should be a natural at the job. The desired mix is inspirational – his forte – and notionally programmatic, though the history books are knee deep in empty pledges made on such occasions. But somehow the methodical rhythms of Obama’s high-minded eloquence has a narcotic effect on me.

Last year Obama said the American people did “big things,” omitting to qualify this with the fact that mostly they’re big stupid things. This year the menu seemed to be a potpourri of things big and small, of the sort Clinton could gabble about by the hour: retraining schemes, public/corporate partnerships.

Then suddenly, out of nowhere, there was a ringing pledge to prosecute those responsible for the mortgage crisis.  Next day, Glenn Ford gave a useful summary in Black Agenda Report.

“President Obama had hoped to put on a big show – a huge con, really – at his State of the Union address, by announcing a monetary ‘settlement’ of massive banker criminality in housing foreclosures. Obama’s operatives have doggedly pressed for a settlement that would effectively give banks immunity from prosecution. But he was thwarted by a small group of state attorneys general that wanted a real investigation into the crime of the century. So the president was finally forced to set up a federal unit of his own. Since Obama’s own law enforcers have failed to send a single banker to jail, Wall Street immunity is likely to remain the real State of the Union.”

Obama’s announcement was  no doubt also  a defensive reaction to a recent Reuters expose which suggested that the failure of the Department of Justice to launch any foreclosure fraud prosecutions during Obama’s first term might have something to do with the fact that U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a huge Washington law firm, Covington and Burling, that represented big banks at the center of alleged foreclosure fraud.

Then Obama herded us back into “green energy,” though not the vast program for “green jobs” pledged last year; then an abrupt switch to the bad business of teenagers dropping out of high school, a swipe at the oil companies and then, finally, a paean to the core national achievement of 2011 – the killing of bin Laden, which the Presidents rather tastelessly used as his finale on the theme of American unity. It’s no surprise that Presidents  laud the American fighting man in such addresses, but Obama really does go over the top.

The whole 65-minute speech will be forgotten in a week. It would have been far better if Obama had simply read out selected portions of Mitt Romney’s tax returns, perhaps with an aside on one number that jumped from the page. Though they have three large homes in Massachusetts, Boston and California the Romneys  took a deduction of  just above $20,000 in 2010 for domestic help. So who keeps those mansions up and running? Mormon volunteers?

Watching Obama proposing economic programs that will never  come to pass, one’s prime thought was It’s all far, far too late, by three years. Obama’s one opening for doing anything substantial about the crashed economy and the banks was the honeymoon period, which last about 48 seconds after taking office.

Thursday’s Jacksonville debate was fun. There have been 19 such debates so far, and this was maybe my fourth, so the engagement had the freshness of relative novelty.  By its end, Romney was glowing with the knowledge that at last he’d put in a robust performance and given Newt Gingrich three sound wallops in the solar plexus. The commentators kept  referring to Romney’s “new debate coach,” who turns out to be the person who honed Michele Bachmann’s modest skills in this department.

There was a turning point which possibly assured Romney’s victory in Florida next Tuesday, maybe the nomination itself, perhaps the White House, conceivably even, as his ultimate reward in the Mormon hereafter, a really nice big planet with lots of beautiful wives awaiting his beck and call. The turning point came early on.

BLITZER (to Gingrich): “Earlier this week, you said Governor Romney, after he released his taxes, you said that you were satisfied with the level of transparency of his personal finances when it comes to this.  And I just want to reiterate and ask you, are you satisfied right now with the level of transparency as far as his personal finances?”

Gingrich saw an opening for the sort of grandstanding against CNN’s John King in the South Carolina debate that won him the evening there.

GINGRICH:  “Wolf, you and I have a great relationship, it goes back a long way.  I’m with him.  This is a nonsense question. 

(APPLAUSE)

… Look, how about if the four of us agree for the rest of the evening, we’ll actually talk about issues that relate to governing America?”  


Blitzer could have taken it on the chin, as King did – but it looks as though he had already decided to take a stand.

BLITZER:  “But, Mr. Speaker, you made an issue of this, this week, when you said that, ‘He lives in a world of Swiss bank and Cayman Island bank accounts.’  I didn’t say that.  You did.” 



GINGRICH:  “I did.  And I’m perfectly happy to say that on an interview on some TV show.  But this is a national debate, where you have a chance to get the four of us to talk about a whole range of issues.”



BLITZER:  “But if you make a serious accusation against Governor Romney like that, you need to explain that.”

At this point Romney jumped in:

ROMNEY: “Wouldn’t it be nice if people didn’t make accusations somewhere else that they weren’t willing to defend here?”

He had the better of the subsequent to-and-fro. Then he  came out ahead on points in a lengthy spat about immigration, beginning with the stern admonition to Gingrich that “The idea that I’m anti-immigrant is repulsive. Don’t use a term like that.” I wouldn’t have expected “repulsive” to be part of Romney’s verbal arsenal. It had shock value, like a pistol shot. Then he whacked Newt in a go-round on personal investments in Fanny Mae. By the end of it Romney was swelling up like Popeye after a mouthful of spinach and Gingrich stayed decidedly subdued for the rest of the night.

Ron Paul played the role of avuncular, anti-imperial libertarian very well, even though the everybody’s-uncle image was dented a few hours later by the declaration in the Washington Post of a former secretary that Paul had closely supervised the editorial production of  those racist newsletters of yesteryear. On Thursday night he certainly did well against Rick Santorum’s ringing call for counter-revolutionary war across Latin America.

Thursday night, assuming it’s cashed with a Romney victory in Florida next Tuesday, must have come as a huge relief to the Republican establishment which had become so desperate after Gingrich’s victory in South Carolina and initial surge in Florida that it was contemplating a draft of Mitch Daniels at the convention next summer. But they’d have to revive Daniels first. In his response to Obama in Tuesday on behalf of the Republicans he gave every appearance of having been dead for at least a week.

It didn’t take long for Bill Clinton to figure out how to deal with Gingrich after the latter became Speaker of the House in ’95. Clinton would constantly invite Gingrich over to the White House, saying that he craved the Speaker’s depth and vision. So Newt would hasten over and blather on about moon colonies and the future. Then he’d return to the Hill where his colleagues in the Republican leadership would discover that in the midst of the palavering about space  Bill had outwitted him in some crucial negotiation about highway funding. In the end they insisted that in any trip to the White House Gingrich had to take along Dick Armey as chaperone.

Gingrich’s affair with the woman who later became his third wife, Callista Bisek became public in 1998. But it was certainly no secret in the House Agriculture Committee where Callista worked from 1995. According to one witness her phone rang frequently. If she was away from her desk one of her colleagues would pick it up, and call across the room, “The speaker.”

Joke: Q.  How did Newt get Sheldon Adelson to give him $18 million?

A.  He promised his next wife would be Jewish.

Veteran journalist and political critic ALEX COCKBURN coedits the iconoclastic Counterpunch.

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America’s Great Divide Between Rich and Poor

by Stephen Lendman

In 1962, Michael Harrington‘s “The Other America” exposed the nation’s dark side, saying:

“In morality and in justice, every citizen should be committed to abolishing the other America, for it is intolerable that the richest nation in human history should allow such needless suffering.” 

“But more than that, if we solve the problem of the other America we will have learned how to solve the problems of all of America.”  

Jack Kennedy was concerned enough to ask Walter Heller, his Council of Economic Advisor chairman, to examine the problem. 

In his January 8, 1964 State of the Union address, poverty levels also got Lyndon Johnson to say his administration “today, here and now, declares unconditional war on poverty in America.” 

In fact, he barely scratched it. However, he got Congress to enact measures helping America’s poor. 

Inequality then was severe. Today, it’s unprecedented and growing. Wealthy elites are richer than ever. Census data show around half of US households impoverished or bordering on it.

In fact, government data consistently over-estimate good news and understate the bad. As a result, unprecedented numbers of US households are impoverished under protracted Main Street Depression conditions.

Political Washington’s austerity harshness causes greater harm. Shocking bipartisan indifference to human need and suffering is criminal.

In the world’s richest ever country, poverty is highest among industrialized nations. Homelessness and hunger levels are unprecedented. Over 20% of US families haven’t enough money to buy food and need help. 

Over half of US children need food stamps to eat. Tens of millions have no health insurance. Those with it pay double the cost in other developed nations. Policies enacted under Obama assure tougher times ahead.

Unemployment approaches record highs. Manipulated government data hide it. Those employed work longer for less. Home foreclosures and bankruptcies affect millions. Adjusted for inflation, median income’s no higher than in the 1970s.

In their book titled, “Winner-Take-All Politics: How Washington Made the Rich Richer,” Jacob Hacker and Paul Pierson explained how unprecedented wealth transfers to America’s rich destroyed middle class households. It also deepened poverty and created a permanent underclass.

Last September, Forbes magazine’s annual report on America’s richest 400 showed net worth soaring to over $1.5 trillion, up 12% from 2010. At the same time, poverty and human need spiral higher.

Studies Show Shocking US Inequality 

Last November, The New York Times headlined, “Middle-Class Areas Shrink as Income Gap Grows, New Report Shows,” saying:

A Stanford University study titled, “Growth in the Residential Segregation of Families by Income, 1970 – 2009,” said households living in middle income areas declined sharply since 1970. Rising income inequality left once better off ones mostly low-income or poor. 

In fact, data through 2007 were examined before today’s economic crisis began. Conditions now are much worse. Study author Sean Reardon said income shifts have far-reaching implications for future generations if present trends continue. Children are especially disadvantaged without access to good schools, preschool, child care, and support networks. 

Former solid middle class areas are now low-income or poor. Income differences have profound effects. One example shows up on standardized test scores. The differential between rich and poor children is 40% greater than in 1970. 

Moreover, the gap between rich and poor college completion (a key predictor of future success) is 50% greater than the 1990s. Over half of children from higher income families finish college compared to less than 10% of those in lower income households.

According to Harvard sociologist William Julius Wilson:

“Rising inequality” produces a “two-tiered society….in which the more affluent citizens live lives fundamentally different from middle and lower-income groups. This divide decreases a sense of community.”

In October 2011, the Congressional Budget Office (CBO) published after-tax income data from 1979 – 2007, saying it grew:

Data were adjusted for household size differentials. However, inflation adjusted measures weren’t provided. They show far greater differences between rich and poor. According to Professor Paul Buchheit, America’s top 1% tripled their after-tax income from 1980 – 2006, while the bottom 90% saw theirs drop over 20%. 

“(O)ur economy,” he said, “allows a tiny percentage of us to take an inordinate amount of money from society, at an increasing rate.”

According to economists Emmanuel Saez and Thomas Piketty, America’s income inequality was the highest in recorded history in 2007 before the current crisis began, and Census data way understate it.

One Dollar for Life/economics public school teacher Robert Freeman said “(b)etween 2002 and 2006, (an) astounding three-quarters of the economy’s growth was captured by the top 1%.” 

In his January 2010 Common Dreams article, he said it had “70% of all financial assets,” a record high. Moreover, the bottom 40% own nothing and have a combined zero net worth. 

In December 2011, the Congressional Research Service (CRS) reported on income differentials from 1996 – 2006, saying inflation adjusted it grew 25%. However, averages obscure variations. America’s poorest 20% saw income levels fall 6%, and if measured since 1979, it would have been much greater. 

In contrast, top 1% earners saw incomes double from 1996 – 2006. Middle income ones experienced a 10% increase. In addition, income inequality as measured by the Gini coefficient increased 9% before taxes and 11% after-tax.

Capital gains and dividends most advantage richer Americans. Overall taxes in 2006 were less progressive than in 1996. Today, extremes are greater.

A 2011 Michael Norton/Dan Ariely study titled, “Building a Better America – One Wealth Quintile at a Time,” showed most Americans vastly underestimate today’s wealth disparities.

They believe the richest 20% control about 59% of the nation’s wealth. It’s about 84%, say the study authors. It fact, it’s over 90%, perhaps well over.

A January 2012 Indiana University/School of Public and Environmental Affairs study titled, “At Risk: America’s Poor During and After the Great Recession” discussed enormous growing problems facing the nation’s least advantaged.

Protracted economic weakness “inflicted long-lasting damage to individuals, families, and communities,” it said. It created a “near poor” and “new poor” underclass.

Long-term unemployment contributes greatly. Over four million Americans say they’ve been out of work over a year, the largest number since data collection began in 1948.

From 2006 – 2010, impoverished households increased 27% and keep rising. Young people and minorities between 18 and 34 have been hardest hit. Safety net protections are inadequate and eroding. Hard times getting harder affect greater numbers of people. 

A Final Comment

Wrongheaded policies assure growing misery while America’s rich never had it so good. 

That’s the dilemma voters face in an election year when neither party offers solutions. Instead, they assure growing wealth disparity, greater poverty, and human misery. 

Only grassroots activism can change things. OWS protests show promise. Nothing will happen easily or quickly. 

The mother of all social justice struggles continues. It better because growing inequality and human need are too intolerable to accept. 

Organized people power works. Using it can beat organized money. If that’s not incentive enough, what is?

Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. 

Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour/.                                  

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US government shuts down file-sharing site MegaUpload

By Patrick Zimmerman, SEP


Although MegaUpload is based in Hong Kong and none of those arrested are American citizens, federal authorities claimed jurisdiction because of servers the company leases in the United States. The indictment claims that site has cost the recording industry more than $500 million.

MegaUpload is an online “file locker” used for hosting files too large to be sent through email. The site, created in 2005, reports 50 million visitors a day and was at one time the 13th most frequently visited site on the Internet. Many users store personal files on the site, and this content is now unavailable and has been seized by the US government.

The indictment claims that the business model used by the company was designed specifically to promote the sharing of copyrighted works. However, hours before being shutdown a post on MegaUpload claimed the allegations against it were “grotesquely overblown.”

Also seized in the actions yesterday were 18 domain names as well $50 million worth of assets, including servers located in Virginia and Washington D.C. According to a joint statement released by the Department of Justice and the FBI the actions are “among the largest criminal copyright cases ever brought by the United States.”

An attorney for MegaUpload, Ira Rothken, said he had only heard of the actions in a press release yesterday morning and had not had the chance to read the entire indictment. He commented, “Our initial impression is that the allegations are without merit and MegaUpload is going to vigorously contest them. We have deep concerns over due process and assets being taken without the opportunity for a hearing.”

MegaUpload has long been a target of powerful media companies, including the Universal Media Group (UMG) and the movie industry trade association, the Motion Picture Association of America (MPAA). In October of last year, the MPAA included MegaUpload, along with the Pirate Bay and other torrent sites, in its list of “notorious websites” submitted to the Obama administration.

In December, MegaUpload released a video featuring a number of prominent musicians, including Alicia Keys and Kanye West, endorsing the site. UMG succeeded in getting YouTube to temporarily remove the video even though it did not feature any material with a UMG copyright.

The timing of the government action appears deliberately provocative, a demonstration of its determination to take action against web sites in the face of widespread opposition to the attack on the freedom of the Internet.

SOPA and PIPA would provide greater powers to the government, including the ability of the US attorney general to obtain a court order forcing search engines and other websites from linking or providing services to a targeted domain. While the immediate targets are sites that supposedly violate copyright laws, the implications are far broader.

Part of the protests on Wednesday involved a “black out” of the Internet, during which many websites, including Wikipedia and Reddit, restricted access to their website while collecting signatures for petitions opposing SOPA and PIPA.

There were also numerous demonstrations throughout the country, the largest taking place in New York and San Francisco. Over 1,000 people turned out in New York, protesting at the Manhattan offices of Senators Chuck Schumer (D-NY) and Kirsten Gillibrand (D-NY) due to the Senators support for PIPA.

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Free Enterprise on Trial

LEFT: One of many posters singing the praises of mythical capitalism. 

Mitt Romney is casting the 2012 campaign as “free enterprise on trial” – defining free enterprise as achieving success through “hard work and risking-taking.”  Tea-Party favorite Senator Jim DeMint of South Carolina says he’s supporting Romney because “we really need someone who understands how risk, taking risk … is the way we create jobs, create choices, expand freedom.” Chamber of Commerce President Tom Donahue, defending Romney, explains “this economy is about risk. If you don’t take risk, you can’t have success.”

Wait a minute. Who do they think are bearing the risks? Their blather about free enterprise risk-taking has it upside down. The higher you go in the economy, the easier it is to make money without taking any personal financial risk at all. The lower you go, the bigger the risks.

Wall Street has become the center of riskless free enterprise. Bankers risk other people’s money. If deals turn bad, they collect their fees in any event. The entire hedge-fund industry is designed to hedge bets so big investors can make money whether the price of assets they bet on rises or falls. And if the worst happens, the biggest bankers and investors now know they’ll be bailed out by taxpayers because they’re too big to fail.

But the worst examples of riskless free enteprise are the CEOs who rake in millions after they screw up royally.

Near the end of 2007, Charles Prince resigned as CEO of Citgroup after announcing the bank would need an additional $8 billion to $11 billion in write-downs related to sub-prime mortgages gone bad. Prince left with a princely $30 million in pension, stock awards, and stock options, along with an office, car, and a driver for five years.

Stanley O’Neal’s five-year tenure as CEO of Merrill Lynch ended about the same time, when it became clear Merrill would have to take tens of billions in write-downs on bad sub-prime mortgages and be bought up at a fire-sale price by Bank of America. O’Neal got a payout worth $162 million.

Philip Purcell, who left Morgan Stanley in 2005 after a shareholder revolt against him, took away $43.9 million plus $250,000 a year for life.

Pay-for-failure extends far beyond Wall Street. In a study released last week, GMI, a well-regarded research firm that monitors executive pay, analyzed the largest severance packages received by ex-CEOs since 2000.

On the list: Thomas E. Freston, who lasted just nine months as CEO of Viacom before being terminated, and left with a walk-away package of $101 million.

Also William D. McGuire, who in 2006 was forced to resign as CEO of UnitedHealth over a stock-options scandal, and for his troubles got pay package worth $286 million.

And Hank A. McKinnell, Jr.’s, whose five-year tenure as CEO of Pfizer was marked by a $140 billion drop in Pfizer’s stock market value. Notwithstanding, McKinnell walked away with a payout of nearly $200 million, free lifetime medical coverage, and an annual pension of $6.5 million. (At Pfizer’s 2006 annual meeting a plane flew overhead towing a banner reading “Give it back, Hank!”)

Not to forget Douglas Ivester of Coca Cola, who stepped down as CEO in 2000 after a period of stagnant growth and declining earnings, with an exit package worth $120 million.

If anything, pay for failure is on the rise. Last September, Leo Apotheker was shown the door at Hewlett-Packard, with an exit package worth $13 million. Stephen Hilbert left Conseco with an estimated $72 million even though value of Conseco’s stock during his tenure sank from $57 to $5 a share on its way to bankruptcy.

But as economic risk-taking has declined at the top, it’s been increasing at the middle and below. More than 20 percent of the American workforce is now “contingent” – temporary workers, contractors, independent consultants – with no security at all.

Even full-time workers who have put in decades with a company can now find themselves without a job overnight – with no parachute, no help finding another job, and no health insurance.

Meanwhile the proportion of large and medium-sized companies (200 or more workers) offering full health care coverage continues to drop – from 74 percent in 1980 to under 10 percent today. Twenty-five years ago, two-thirds of large and medium-sized employers also provided health insurance to their retirees. Now, fewer than 15 percent do.

The risk of getting old with no pension is also rising. In 1980, more than 80 percent of large and medium-sized firms gave their workers “defined-benefit” pensions that guaranteed a fixed amount of money every month after they retired. Now it’s down to under 10 percent. Instead, they offer “defined contribution” plans where the risk is on the workers. When the stock market tanks, as it did in 2008, the 401(k) plan tanks along with it. Today, a third of all workers with defined-benefit plans contribute nothing, which means their employers don’t either.

And the risk of losing earnings continues to grow. Even before the crash of 2008, the Panel Study of Income Dynamics at University of Michigan found that over any given two-year stretch about half of all families experienced some decline in income. And the downturns were becoming progressively larger. In the 1970s, the typical drop was about 25 percent. By late 1990s, it was 40 percent. By the mid-2000s, family incomes rose and fell twice as much as they did in the mid-1970s, on average.

What Romney and the cheerleaders of risk-taking free enterprise don’t want you to know is the risks of the economy have been shifting steadily away from CEOs and Wall Street – and on to average working people. It’s not just income and wealth that are surging to the top. Economic security is moving there as well, leaving the rest of us stranded.

To the extent free enterprise is on trial, the real question is whether the system is rigged in favor of those at the top who get rewarded no matter how badly they screw up, while the rest of us get screwed no matter how hard we work.

The jury will report back Election Day. In the meantime, Obama and the Democrats shouldn’t allow Romney and the Republicans to act as defenders of risk-taking free enterprise. Americans need to know the truth. The only way the economy can thrive is if we have more risk-taking at the top, and more economic security below.

ABOUT THE AUTHOR

Robert Reich—[WARNING: A LEFT-LIBERAL and still loyal Democrat] is Chancellor’s Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including The Work of Nations, Locked in the Cabinet, Supercapitalism, and his most recent book, Aftershock. 

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