The American Worker

Friday 21 November 2008

by: Rick Kepler, t r u t h o u t | Perspective

Members of the United Auto Workers at a monthly benefit meeting. (Photo: Getty Images)

I am an American worker, and you are damn right I want the wealth to be shared and spread. I am talking about the wealth my hard work helped to create, but was taken from me by George Bush's base, the very rich, or as I know them, my corporate bosses. For the past eight years I have watched W.'s and McCain's (Country Club First) base grab the largest share of our country's wealth. Where did they take it from? They took it from my family's pocketbook, and my co-workers' families' pocketbooks. They stole the wealth that I was trying to build for me and my family when they stripped my pension plan from me and told me to invest in a 401k. Then they stole most of that 401k and other workers' 401k savings with this economic meltdown. This was a massive transfer of wealth from the workers' pockets into the already stuffed pockets of the rich. My retirement savings and my coworkers' savings all across America have been looted by the corporate bosses, who just got bailed out while we got left out. Again!

The American worker, whether black, brown, white, red, yellow, or rainbow color, has been fleeced over these past eight years. We are the ones who go to work every day. We don't own our places of work, nor do we help manage them. We just go in and do the job. And we must be doing one hell of a good job because we are told that we are the most productive workers in the world. We are working longer and harder, but our paychecks keep shrinking! Where are those productivity gains going then? Not into our pockets. Our standard of living has been going down these past eight years ($2,000 less in family income since W. took office) This is another damn transfer of wealth into the hands of the extremely rich.

Their greed is insatiable. Take our family's health care. They do. They keep passing on their increased costs to us, or they just drop coverage for the worker completely. That means we either join the 50,000,000 who have no health care, or we end up having to buy it privately, thus eating up a huge portion of our family's income. If we manage to hang onto our health care plans, our deductibles, co-pays, and out-of-pay contributions keep skyrocketing. This amounts to another massive transfer of wealth from our pockets into the overflowing pockets of our corporate bosses.

The list goes on for the American worker. We saw overtime pay stripped from millions of workers during this past nightmare eight years. The worker was still working overtime, but due to a new "boss law" passed by W. and McCain's party that assists these thieves, the workers didn't receive overtime pay because they were declared exempt. They also weakened the workers' health and safety standards or just plain didn't enforce the laws already on the books. As a result, the American worker pays the price in lost days due to accidents from unsafe conditions or from lingering, expensive illnesses suffered from unhealthy working conditions. This too is a massive transfer of wealth from our pockets into our corporate bosses' bulging pockets.

To further sweeten their own pots, they took full-time jobs and converted them to part-time with no benefits, or they just made their employees line up and reapply for their exact same jobs at half the pay. Are we beginning to see what a true transfer of wealth looks like? So, do I want to see a spreading of the wealth? You bet your sweet hind-end I do. But all I ask of Obama is to give me and my co-workers the ability to retrieve some of the wealth that has been stolen from us.

Strengthen the laws that give workers the right to organize and bargain for a contract with our bosses. The current laws on the books have been torn to shreds by W. and McCain on behalf of their base. This is just part of their attack on American workers. Under globalization, the bosses seek a much cheaper workforce, which always means non-union, which means "can't fight back." That is why they have gutted the laws that protect workers. The laws that once gave us a level playing field with our bosses have been rendered useless, including our legal right to strike. That law said I had a right to strike, and could.

The American worker doesn't want a handout. Never did. We do want a hand up from our government. We still believe and have hope that this is a government of, by and for the people. We do want to know that our government will finally stand with us against this onslaught, this Robin Hood in reverse, being conducted by the bosses against the workers. The bosses know that W. and McCain have been on their side for the past eight years - and so do we workers. We just want our government to now stand on our side as we stand up against this corporate attempt to create third world working conditions right here in America. Restore our right to fight for a better living for ourselves and our families, and let the power of pissed-off workers, united in struggle, spread corporate America's stolen wealth back into the pockets of those whose pockets got picked these last eight years - the American worker.

Israel says will boycott U.N. forum on racism

Reuters – Israel's Foreign Minister Tzipi Livni speaks to the media after her meeting with President Shimon Peres …

JERUSALEM (Reuters) – Foreign Minister Tzipi Livni said on Wednesday that Israel had made a final decision not to participate in a U.N. forum on racism and urged other countries to boycott what she termed an "anti-Israel tribunal."

The United Nations said it regretted the decision.

The World Conference Against Racism, Racial Discrimination, Xenophobia and Related Intolerance, to be held in Geneva in April, is a follow-up to a 2001 summit in Durban, South Africa on the same issues.

Israel and the United States walked out of the first conference in protest over draft texts branding Israel as a racist and apartheid state -- language that was later dropped.

In a speech to visiting U.S. Jewish leaders, Livni said she announced last February that Israel would not participate in the 2009 meeting unless it was clear it would not be used "as a platform for further anti-Israeli and anti-Semitic" activity.

She said documents prepared for next year's forum showed it was "turning once again into an anti-Israeli tribunal, singling out and delegitimizing the State of Israel."

As a result, she said: "I decided that Israel will not participate and will not legitimize the Durban-2 conference."

"We call upon the international community not to participate in this conference, which seeks to legitimize hatred and extremism under the banner of the fight against racism," Livni added.

In August, officials from 21 African countries held talks ahead of the Geneva conference and adopted a text which recommended it discuss, among other issues, "the plight of the Palestinian people under foreign occupations."

Canada has said it will not take part in the Geneva meeting. The United States, Britain, the Netherlands and France have said they may stay away if Israel's relations with Palestinians stands to eclipse all else.

Some countries are also concerned that some Middle Eastern states will try to use the conference to push a declaration that could stifle free expression by labeling criticism of religions as defamatory.

The office of U.N. human rights commissioner Navi Pillay said it regretted Israel's decision.

"Given the critical importance of the issues under discussion at the conference, broad participation is essential," U.N. spokeswoman Marie Okabe said in New York, speaking for the Geneva-based office.

"These ... are issues which affect all countries and millions of individuals around the world on a daily basis."

(Writing by Jeffrey Heller; Additional reporting by Patrick Worsnip at the United Nations; editing by David Wiessler)

Ron Paul: Republicans Have Lost All Credibility; But Obama’s Core Policies Mirror Bush

You Tube
Thursday, November 6, 2008

Ron Paul tells CNN this morning that Republican support for endless wars, the Patriot Act and the stripping of civil liberties lost them credibility which will take a long time to regain, but that Obama’s core policies differ little from those of Bush.

Pentagon Fears Transitional Terror Attack

Bill Gertz
Washington Times
Thursday, November 6, 2008

The chairman of the Joint Chiefs of Staff said Wednesday that the United States is vulnerable to attack or other incidents during the presidential transition period and that the military is ready to respond.

“When you go back and look at the number of incidents that have occurred three or four months before an inauguration to about 12 months out, back to the ’50s, it’s pretty staggering the number of major incidents which have occurred in this time frame,” Adm. Michael Mullen said, noting that the danger is compounded by current world conditions.

The Sept. 11 attacks, for example, occurred eight months after President Bush took office, at a time when many key appointments had not been made.

Recent preparations for the transition in the Pentagon were aimed at preventing any attacks, and if an attack or incident does take place, the military is ready to respond, Adm. Mullen told Sara A. Carter, national security reporter for The Washington Times.

(ARTICLE CONTINUES BELOW)

Shifts from old to new administrations are “always a challenging time in our country, always have been,” Adm. Mullen said.

“Transitions are always difficult,” he said. “We’ve put a lot of effort into it, and we’re ready.”

The chairman said he is concerned about the transition because of the global threats and opportunities facing the United States at the present time, namely in Iraq and Afghanistan.

“I consider this a time of vulnerability, and I’ve worked this for months to have a transition team prepare for a new administration, mindful that this new administration, they don’t take charge until the 20th of January,” Adm. Mullen said.

The four-star admiral, who is the designated chief military adviser, stated that the military serves “one commander in chief always” while at the same time he will be going to “great lengths” to respond to the Obama transition team.

Obama Victory Sets Off Jubilation

(Nov. 5) - They danced in the streets, wept,
lifted their voices in prayer and brought
traffic to a standstill. From the nation’s
capital to Los Angeles, Americans celebrated
Barack Obama’s victory and marveled
that they lived to see the day that a black
man was elected president.
“I was born in the civil rights time. To see
this happening is unbelievable. We’ve got
the first black president. A black president!”
said Mike Louis, a 53-year-old black
man who got teary-eyed as he watched the
election results on a giant video board in
Cincinnati’s Fountain Square. “It’s not
cured now, but this is a step to curing this
country of racism. This is a big, giant step
toward getting this country together.”
In Washington, hundreds of residents
spilled into the streets near the White
House, carrying balloons, banging on
drums and chanting, “Bush is gone!” Along
U Street, once known as America’s Black
Broadway for its many thriving blackowned
shops and theaters, men stood on
car roofs, waving American flags and Obama
posters.
Nearby, at historically black Howard University,
hundreds of students erupted in
cheers, broke into song and chanted, “Yes,
we did!”
In Philadelphia, thousands of blacks and
whites converged at City Hall shortly after
Obama was declared the winner. Under a
light rain, they danced to the music blaring
from car radios. Drivers stopped in the
middle of the street, opened their car doors
and broadcast Obama’s acceptance speech.
“Barack is in the house!” shouted Pamela
Williams, 46. “This is very important to me.
Change is about to happen.”
At Sadiki’s restaurant in Philadelphia, the
celebration poured out onto the sidewalk.
“Our parents left this planet thinking that
we would never, ever see this day, when an
African-American could be elected by all
the people to the highest seat in the land,”
said Bernard Smalley Sr. His wife, Jacquelyn,
wept.
The celebrations were both large big and
small, but the sentiment was the same —
pure joy over how far the country has come.
People honked horns, high-fived each other
and embraced. In Harlem, the roar of thousands
of people gathered in a plaza near the
legendary Apollo Theater could be heard
blocks away.
In Cleveland, supporters gathered at a
house party and held champagne flutes
above their heads for a toast. “To the first
African-American president in the history
of the United States!” they shouted.
In Chicago, Obama’s hometown, an estimated
125,000 people gathered on an unusually
warm November night to greet the
senator at a delirious victory rally at Grant
Park.
“It’s fantastic,” said Hulon Johnson, 71, a
retired Chicago public school principal.
“I’ve always told my kids this was possible;
now they’ll have to believe me.”
LaKeisha Williams, a 27-year-old laid-off
school nurse, who watched Obama’s victory
on a TV in a downtown Kansas City concert
hall, said: “People actually have finally
come together and realized that no matter
what his race is, he was the right person for
the job. I think it was destiny for him to
win. But now we still have to come together
to make sure things work.” In Miami’s predominantly
black Liberty City neighborhood,
Otoria Pitts, 30, suggested the significance
of Obama’s victory goes beyond
race.
“His election speaks volumes for a bunch of
people,” she said. “Children of single mothers,
people who put themselves through
college. It says, you can do it, you can do it.”
Joined by her sister, Susan, and niece, Akira,
the three women bought a few rockets
from a fireworks stand and lit up the night
sky with color.
On the other side of the country, others
were thinking how Obama’s election could
change their lives.
“I’m ecstatic,” said Jason Samm, a 33-yearold
business owner who was celebrating in
South Los Angeles. “I have three kids,
which means a lot of doors opening up for
them.” Obama’s victory also brought back
memories of hard-fought battles of generations
past. At Atlanta’s Ebenezer Baptist
Church, where the Rev. Martin Luther King
Jr. preached, Rep. John Lewis, a civil rights
hero, said he was hardly able to believe that
40 years after he was left beaten and bloody
on an Alabama bridge as he marched for
the right for blacks to vote, he had cast a
ballot for Obama.
“This is a great night,” he said. “It is an unbelievable
night. It is a night of thanksgiving.”
As the news of a projected Obama victory
flashed across a TV screen, men in the
nearly all-black crowd pumped their fists
and bowed their heads. Women wept and
embraced their children. Screams of
“Thank you, Lord!” were heard throughout
the sanctuary. Surveying the scene, Mattie
Bridgewater whispered from her seat, “I
just can’t believe it. Not in my lifetime.”
Bridgewater said she went to the same elementary
school as Emmett Till, the boy
from Chicago whose murder in Mississippi
was one of the catalysts of the civil rights
movement. Both she and her 92-year-old
mother voted for Obama.
“I’m sitting here in awe,” she said. “This is a
moment in history that I just thank my God
I was allowed to live long enough to see.
Now, when I tell my students they can be
anything they want to be, that includes
president of the United States.”
EDITOR’S NOTE: Tom Withers in Cleve-
http://news.aol.com/elections/article/obama-victory-sets-off-jubilation/238151
2
land; David Caruso in New York; Kathy
Matheson in Philadelphia; Errin Haines in
Atlanta; Christina Hoag in Los Angeles;
Joe Kay in Cincinnati; Andale Gross in
Kansas City; Ron Powers and Kamala
Lane in Washington; and Tamara Lush in
Miami contributed to this story.

Obama's Wins

(CNN) -- Barack Obama told supporters that "change has come to America" as he claimed victory in a historic presidential election.

Sen. Barack Obama addresses a crowd of 125,000 people in Chicago, Illinois.

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"The road ahead will be long. Our climb will be steep. We may not get there in one year or even one term, but America -- I have never been more hopeful than I am tonight that we will get there. I promise you -- we as a people will get there," Obama said in Chicago, Illinois, before an estimated crowd of up to 240,000 people.

With Obama's projected win, he will become the first African-American to win the White House.

Obama had an overwhelming victory over Sen. John McCain, who pledged Tuesday night to help Obama lead. Watch Obama pay tribute to McCain »

"Today, I was a candidate for the highest office in the country I love so much, and tonight, I remain her servant," McCain said.

McCain called Obama to congratulate him, and Obama told the Arizona senator he was eager to sit down and talk about how the two of them can work together.

President Bush also called Obama to offer his congratulations.

Bush told Obama he was about to begin one of the great journeys of his life, and invited him to visit the White House as soon as it could be arranged, according to White House spokeswoman Dana Perino.

Obama will be working with a heavily Democratic Congress. Democrats picked up Senate seats in New Hampshire, New Jersey, North Carolina and Virginia, among others. Read about the Senate races

Don't Miss

• Read Obama's victory speech
• Read McCain's speech
• Democrats pick up Senate seats
• House Republicans lose seats
• Complete video coverage

"While the Democratic Party has won a great victory tonight, we do so with a measure of humility and determination to heal the divides that have held back our progress," Obama said. Watch more on the balance of power »

Flanked by American flags, Obama told the roaring crowd, "This is your victory."

"To those Americans whose support I have yet to earn -- I may not have won your vote, but I hear your voices, I need your help, and I will be your president too," he said. Watch Obama tell voters 'all things are possible' »

Supporters in Chicago cheering, "Yes, we can" were met with cries of "Yes, we did."

More than 1,000 people gathered outside of the White House, chanting "Obama, Obama!"

Sen. Hillary Clinton, Obama's former rival for the Democratic nomination, said in a statement that "we are celebrating an historic victory for the American people." iReport.com: Share your Election Day reaction with CNN

"This was a long and hard fought campaign but the result was well worth the wait. Together, under the leadership of President Barack Obama, Vice President Joe Biden and a Democratic Congress, we will chart a better course to build a new economy and rebuild our leadership in the world."

Sen. Ted Kennedy said Americans "spoke loud and clear" in electing Obama.

"They understood his vision of a fairer and more just America and embraced it. They heard his call for a new generation of Americans to participate in government and were inspired. They believed that change is possible and voted to be part of America's future," the Massachusetts senator said in a statement.

As results came in Tuesday night, Obama picked up early wins in Pennsylvania and Ohio -- states considered must-wins for McCain.

Obama also won Virginia, a state that has not voted for a Democratic president since 1964.

Going into the election, national polls showed Obama with an 8-point lead.

Voters expressed excitement and pride in their country after casting their ballots in the historic election. Poll workers reported high turnout across many parts of the country, and some voters waited hours to cast their ballots. Read about election problems

Tuesday marks the end of the longest presidential campaign season in U.S. history -- 21 months.

Obama, 47, will now begin his transition to the White House. He will be sworn in at the 44th president on January 20, 2009.

Reversal of Fortune

Saturday 01 November 2008

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by: Joseph E. Stiglitz, Vanity Fair

A man waits in a breadline in San Francisco in 1933, the year unemployment hit 24.9 percent. (Photo: Dorothea Lange Collection / Oakland Museum of California)

Describing how ideology, special-interest pressure, populist politics, and sheer incompetence have left the US economy on life support, the author puts forth a clear, commonsense plan to reverse the Bush-era follies and regain America's economic sanity.

When the American economy enters a downturn, you often hear the experts debating whether it is likely to be V-shaped (short and sharp) or U-shaped (longer but milder). Today, the American economy may be entering a downturn that is best described as L-shaped. It is in a very low place indeed, and likely to remain there for some time to come.

Virtually all the indicators look grim. Inflation is running at an annual rate of nearly 6 percent, its highest level in 17 years. Unemployment stands at 6 percent; there has been no net job growth in the private sector for almost a year. Housing prices have fallen faster than at any time in memory - in Florida and California, by 30 percent or more. Banks are reporting record losses, only months after their executives walked off with record bonuses as their reward. President Bush inherited a $128 billion budget surplus from Bill Clinton; this year the federal government announced the second-largest budget deficit ever reported. During the eight years of the Bush administration, the national debt has increased by more than 65 percent, to nearly $10 trillion (to which the debts of Freddie Mac and Fannie Mae should now be added, according to the Congressional Budget Office). Meanwhile, we are saddled with the cost of two wars. The price tag for the one in Iraq alone will, by my estimate, ultimately exceed $3 trillion.

This tangled knot of problems will be difficult to unravel. Standard prescriptions call for raising interest rates when confronted with inflation, just as standard prescriptions call for lowering interest rates when confronted with an economic downturn. How do you do both at the same time? Not in the way that some politicians have proposed. With gasoline prices at all-time highs, John McCain has called for a rollback of gas taxes. But that would lead to more gas consumption, raise the price of gas further, increase our dependence on foreign oil, and expand our already massive trade deficit. The expanding deficit would in turn force the U.S. to continue borrowing gargantuan sums from abroad, making us even more indebted. At the same time, the higher imports of oil and petroleum-based products would lead to a weaker dollar, fueling inflationary pressures.

Millions of Americans are losing their homes. (Already, some 3.6 million have done so since the subprime-mortgage crisis began.) This social catastrophe has severe economic effects. The banks and other financial institutions that own these mortgages face stunning reverses; a few, such as Bear Stearns, have already gone belly-up. To prevent America's $5.2 trillion home financiers, Fannie Mae and Freddie Mac, from following suit, Congress authorized a blank check to cover their losses, but even that generosity failed to do the trick. Now the administration has taken over the two entities completely, a stunning feat for a supposedly market-oriented regime. These bailouts contribute to growing deficits in the short run, and to perverse incentives in the long run. Market economies work only when there is a system of accountability, but C.E.O.'s, investors, and creditors are walking away with billions, while American taxpayers are being asked to pick up the tab. (Freddie Mac's chairman, Richard Syron, earned $14.5 million in 2007. Fannie Mae's C.E.O., Daniel Mudd, earned $14.2 million that same year.) We're looking at a new form of public-private partnership, one in which the public shoulders all the risk, and the private sector gets all the profit. While the Bush administration preaches responsibility, the words are addressed only to the less well-off. The administration talks about the impact of "moral hazard" on the poor "speculator" who borrowed money and bought a house beyond his ability to pay. But moral hazard somehow isn't an issue when it comes to the high-stakes speculators in corporate boardrooms.

How Did We Get Into This Mess?

A unique combination of ideology, special-interest pressure, populist politics, bad economics, and sheer incompetence has brought us to our present condition.

Ideology proclaimed that markets were always good and government always bad. While George W. Bush has done as much as he can to ensure that government lives up to that reputation - it is the one area where he has overperformed - the fact is that key problems facing our society cannot be addressed without an effective government, whether it's maintaining national security or protecting the environment. Our economy rests on public investments in technology, such as the Internet. While Bush's ideology led him to underestimate the importance of government, it also led him to underestimate the limitations of markets. We learned from the Depression that markets are not self-adjusting - at least, not in a time frame that matters to living people. Today everyone - even the president - accepts the need for macroeconomic policy, for government to try to maintain the economy at near-full employment. But in a sleight of hand, free-market economists promoted the idea that, once the economy was restored to full employment, markets would always allocate resources efficiently. The best regulation, in their view, was no regulation at all, and if that didn't sell, then "self-regulation" was almost as good.

The underlying idea was, on the face of it, absurd: that market failures come only in macro doses, in the form of the recessions and depressions that have periodically plagued capitalist economies for the past several hundred years. Isn't it more reasonable to assume that these failures are just the tip of the iceberg? That beneath the surface lie a myriad of smaller but harder-to-assess inefficiencies? Let me venture an analogy from biology: A patient arrives at a hospital in serious condition. Now, it may be that the patient has simply fallen victim to one of those debilitating ailments that go around from time to time and can be cured by a massive dose of antibiotics. In this case we have a macro problem with a macro solution. But it could instead be that the patient is suffering from a decade of serious abuse - smoking, drinking, overeating, lack of exercise, a fondness for crystal meth - and that it has not only taken a catastrophic toll but also left him open to opportunistic infections of every kind. In other words, a buildup of micro problems has led to a macro problem, and no cure is possible without addressing the underlying issues. The American economy today is a patient of the second kind.

We are in the midst of microeconomic failure on a grand scale. Financial markets receive generous compensation - in the form of more than 30 percent of all corporate profits - presumably for performing two critical tasks: allocating savings and managing risk. But the financial markets have failed laughably at both. Hundreds of billions of dollars were allocated to home loans beyond Americans' ability to pay. And rather than managing risk, the financial markets created more risk. The failure of our financial system to do what it is supposed to do matches in destructive grandeur the macroeconomic failures of the Great Depression.

Economic theory - and historical experience - long ago proved the need for regulation of financial markets. But ever since the Reagan presidency, deregulation has been the prevailing religion. Never mind that the few times "free banking" has been tried - most recently in Pinochet's Chile, under the influence of the doctrinaire free-market theorist Milton Friedman - the experiment has ended in disaster. Chile is still paying back the debts from its misadventure. With massive problems in 1987 (remember Black Friday, when stock markets plunged almost 25 percent), 1989 (the savings-and-loan debacle), 1997 (the East Asia financial crisis), 1998 (the bailout of Long Term Capital Management), and 2001–02 (the collapses of Enron and WorldCom), one might think there would be more skepticism about the wisdom of leaving markets to themselves.

The new populist rhetoric of the right - persuading taxpayers that ordinary people always know how to spend money better than the government does, and promising a new world without budget constraints, where every tax cut generates more revenue - hasn't helped matters. Special interests took advantage of this seductive mixture of populism and free-market ideology. They also bent the rules to suit themselves. Corporations and the wealthy argued that lowering their tax rates would lead to more savings; they got the tax breaks, but America's household savings rate not only didn't rise, it dropped to levels not seen in 75 years. The Bush administration extolled the power of the free market, but it was more than willing to provide generous subsidies to farmers and erect tariffs to protect steelmakers. Lately, as we have seen, it seems willing to write blank checks to bail out its friends on Wall Street. In each of these cases there are clear winners. And in each there are clear losers - including the country as a whole.

What Is to Be Done?

As America attempts to work its way out of the present crisis, the danger is that we will listen to the same people on Wall Street and in the economic establishment who got us into it. For them, our current predicament is another opportunity: if they can shape the government response appropriately, they stand to gain, or at least stand to lose less, and they may be willing to sacrifice the well-being of the economy for their own benefit - just as they did in the past.

There are a number of economic tools at the country's disposal. As noted, they can yield contradictory results. The sad truth is that we have reached the limits of monetary policy. Lowering interest rates will not stimulate the economy much - banks are not going to be willing to lend to strapped consumers, and consumers are not going to be willing to borrow as they see housing prices continue to fall. And raising interest rates, to combat inflation, won't have the desired impact either, because the prices that are the main sources of our inflation - for food and energy - are determined in international markets; the chief consequence will be distress for ordinary people. The quandaries that we face mean that careful balancing is required. There is no quick and easy fix. But if we take decisive action today, we can shorten the length of the downturn and reduce its magnitude. If at the same time we think about what would be good for the economy in the long run, we can build a durable foundation for economic health.

To go back to that patient in the emergency room: we need to address the underlying causes. Most of the treatment options entail painful choices, but there are a few easy ones. On energy: conservation and research into new technologies will make us less dependent on foreign oil, reduce our trade imbalance, and help the environment. Expanding drilling into environmentally fragile areas, as some propose, would have a negligible effect on the price we pay for oil. Moreover, a policy of "drain America first" will make us more dependent on foreigners in the future. It is shortsighted in every dimension.

Our ethanol policy is also bad for the taxpayer, bad for the environment, bad for the world and our relations with other countries, and bad in terms of inflation. It is good only for the ethanol producers and American corn farmers. It should be scrapped. We currently subsidize corn-based ethanol by almost $1 a gallon, while imposing a 54-cent-a-gallon tariff on Brazilian sugar-based ethanol. It would be hard to invent a worse policy. The ethanol industry tries to sell itself as an infant, needing help to get on its feet, but it has been an infant for more than two decades, refusing to grow up. Our misguided biofuel policy is taking land used for food production and diverting it to energy production for cars; it is the single most important factor contributing to higher grain prices.

Our tax policies need to be changed. There is something deeply peculiar about having rich individuals who make their money speculating on real estate or stocks paying lower taxes than middle-class Americans, whose income is derived from wages and salaries; something peculiar and indeed offensive about having those whose income is derived from inherited stocks paying lower taxes than those who put in a 50-hour workweek. Skewing the tax rates in the other direction would provide better incentives where they count and would more effectively stimulate the economy, with more revenues and lower deficits.

We can have a financial system that is more stable - and even more dynamic - with stronger regulation. Self-regulation is an oxymoron. Financial markets produced loans and other products that were so complex and insidious that even their creators did not fully understand them; these products were so irresponsible that analysts called them "toxic." Yet financial markets failed to create products that would enable ordinary households to face the risks they confront and stay in their homes. We need a financial-products safety commission and a financial-systems stability commission. And they can't be run by Wall Street. The Federal Reserve Board shares too much of the mind - set of those it is supposed to regulate. It could and should have known that something was wrong. It had instruments at its disposal to let the air out of the bubble - or at least ensure that the bubble didn't over-expand. But it chose to do nothing.

Throwing the poor out of their homes because they can't pay their mortgages is not only tragic - it is pointless. All that happens is that the property deteriorates and the evicted people move somewhere else. The most coldhearted banker ought to understand the basic economics: banks lose money when they foreclose - the vacant homes typically sell for far less than they would if they were lived in and cared for. If banks won't renegotiate, we should have an expedited special bankruptcy procedure, akin to what we do for corporations in Chapter 11, allowing people to keep their homes and re-structure their finances.

If this sounds too much like coddling the irresponsible, remember that there are two sides to every mortgage - the lender and the borrower. Both enter freely into the deal. One might say that both are, accordingly, equally responsible. But one side - the lender - is supposed to be financially sophisticated. In contrast, the borrowers in the subprime market consist mainly of people who are financially unsophisticated. For many, their home is their only asset, and when they lose it, they lose their life savings. Remember, too, that we already give big homeowner subsidies, through the tax system, to affluent families. With tax deductions, the government is paying in some states almost half of all mortgage interest and real-estate taxes. But many lower-income people, whose deductions are meaningless because their tax bill is too small, get no help. It makes much more sense to convert these tax deductions into cashable tax credits, so that the fraction of housing costs borne by the government for the poor and the rich is the same.

About these matters there should be no debate - but there will be. Already, those on Wall Street are arguing that we have to be careful not to "over-react." Over-reaction, we are told, might stifle "innovation." Well, some innovations ought to be stifled. Those toxic mortgages were certainly innovative. Other innovations were simply devices to circumvent regulations - regulations intended to prevent the kinds of problems from which our economy now suffers. Some of the innovations were designed to tart up the bottom line, moving liabilities off the balance sheet - charades designed to blur the information available to investors and regulators. They succeeded: the full extent of the exposure was not clear, and still isn't. But there is a reason we need reliable accounting. Without good information it is hard to make good economic decisions. In short, some innovations come with very high price tags. Some can actually cause instability.

The free-market fundamentalists - who believe in the miracles of markets - have not been averse to accepting government bailouts. Indeed, they have demanded them, warning that unless they get what they want the whole system may crash. What politician wants to be blamed for the next Great Depression, simply because he stood on principle? I have been critical of weak anti-trust policies that allowed certain institutions to become so dominant that they are "too big to fail." The harsh reality is that, given how far we've come, we will see more bailouts in the days ahead. Now that Fannie Mae and Freddie Mac are in federal receivership, we must insist: not a dime of taxpayer money should be put at risk while shareholders and creditors, who failed to oversee management, are permitted to walk away with anything they please. To do otherwise would invite a recurrence. Moreover, while these institutions may be too big to fail, they're not too big to be reorganized. And we need to remember why we're bailing them out: in order to maintain a flow of money into mortgage markets. It's outrageous that these institutions are responding to their near-monopoly position by raising fees and increasing the costs of mortgages, which will only worsen the housing crisis. They, and the financial markets, have shown little interest in measures that could help millions of existing and potential homeowners out of the bind they're in.

The hardest puzzles will be in monetary policy (balancing the risks of inflation and the risk of a deeper downturn) and fiscal policy (balancing the risk of a deeper downturn and the risk of an exploding deficit). The standard analysis coming from financial markets these days is that inflation is the greatest threat, and therefore we need to raise interest rates and cut deficits, which will restore confidence and thereby restore the economy. This is the same bad economics that didn't work in East Asia in 1997 and didn't work in Russia and Brazil in 1998. Indeed, it is the same recipe prescribed by Herbert Hoover in 1929.

It is a recipe, moreover, that would be particularly hard on working people and the poor. Higher interest rates dampen inflation by cutting back so sharply on aggregate demand that the unemployment rate grows and wages fall. Eventually, prices fall, too. As noted, the cause of our inflation today is largely imported - it comes from global food and energy prices, which are hard to control. To curb inflation therefore means that the price of everything else needs to fall drastically to compensate, which means that unemployment would also have to rise drastically.

In addition, this is not the time to turn to the old-time fiscal religion. Confidence in the economy won't be restored as long as growth is low, and growth will be low if investment is anemic, consumption weak, and public spending on the wane. Under these circumstances, to mindlessly cut taxes or reduce government expenditures would be folly.

But there are ways of thoughtfully shaping policy that can walk a fine line and help us get out of our current predicament. Spending money on needed investments - infrastructure, education, technology - will yield double dividends. It will increase incomes today while laying the foundations for future employment and economic growth. Investments in energy efficiency will pay triple dividends - yielding environmental benefits in addition to the short- and long-run economic benefits.

The federal government needs to give a hand to states and localities - their tax revenues are plummeting, and without help they will face costly cutbacks in investment and in basic human services. The poor will suffer today, and growth will suffer tomorrow. The big advantage of a program to make up for the shortfall in the revenues of states and localities is that it would provide money in the amounts needed: if the economy recovers quickly, the shortfall will be small; if the downturn is long, as I fear will be the case, the shortfall will be large.

These measures are the opposite of what the administration - along with the Republican presidential nominee, John McCain - has been urging. It has always believed that tax cuts, especially for the rich, are the solution to the economy's ills. In fact, the tax cuts in 2001 and 2003 set the stage for the current crisis. They did virtually nothing to stimulate the economy, and they left the burden of keeping the economy on life support to monetary policy alone. America's problem today is not that households consume too little; on the contrary, with a savings rate barely above zero, it is clear we consume too much. But the administration hopes to encourage our spendthrift ways.

What has happened to the American economy was avoidable. It was not just that those who were entrusted to maintain the economy's safety and soundness failed to do their job. There were also many who benefited handsomely by ensuring that what needed to be done did not get done. Now we face a choice: whether to let our response to the nation's woes be shaped by those who got us here, or to seize the opportunity for fundamental reforms, striking a new balance between the market and government.

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Joseph E. Stiglitz, a Nobel Prize–winning economist, is a professor at Columbia University.

McCain and the Hidden Keating Five!!!

McCain First, Second, and Always

Saturday 01 November 2008

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by: Sahil Mahtani, The New Republic

In this November 20, 1990 file photo, Senator John McCain, R-Arizona (left) sits with his attorney during a Senate Ethics Committee hearing on the Keating Five Savings and Loan Scandal. Carefully timed leaks during the investigation successfully deflected the blame from McCain to his other Senate colleagues. Evidence continues to surface that points to John McCain as the possible source of those leaks. (Photo: John Duricka / AP)

Should he have been expelled from the Senate? Exclusive evidence reveals the Keating Five story you've never heard.

One day in early March 1986, John McCain, an Arizona congressman, sat down to write a letter. McCain had heard that a long-time friend and donor, Charles Keating, was upset for being listed as a member of McCain's campaign finance committee when a more prominent position would seem more appropriate. So McCain apologized. Needlessly it turned out, for "Charlie," as he signed his letter, would reply a few days later: "John, don't be silly. You can call me anything...I'm yours until death do us part."

Three years later, McCain and four other senators would be called to the carpet for this loyalty, which was accompanied by a total of $1.3 million in contributions from Keating. Senators Alan Cranston, Dennis DeConcini, John Glenn, John McCain, and Donald Riegle were being investigated by the Senate Ethics Committee for helping Keating's company, Lincoln Savings and Loan, resist regulators. That lack of regulation precipitated Lincoln's collapse that year - part of the larger savings-and-loan collapse - at a cost of about $3 billion to the federal government.

This episode has been invoked in the current campaign first as a parable against Reagan-era financial deregulation, which McCain supported and which was a significant factor in the collapse of savings and loans institutions; and second, as a reminder that McCain himself was rebuked by the Senate Ethics Committee for "poor judgment" after a 14-month investigation.

Yet the Ethics Committee's was not the only investigation into the scandal. There were two other probes at the time that got barely any public attention - both of which largely focused on McCain himself. These were probes into illicit leaks about the proceedings of the Ethics Committee - leaks that repeatedly benefited McCain and hurt his Keating Five colleagues. One of those senators described the leaks at the time as a "violation of ethical behavior at least as serious as anything of which we senators have been accused."

The leaks, if they were coming from a senator, were also illegal. All five senators - including McCain - had testified under oath and under the U.S. penal code that the leaks did not come from their camps. The leaks were also prohibited by rules of the Senate Ethics Committee; according to the rules of the Senate, anyone caught leaking such information could face expulsion from the body. These, then, were not the usual Washington disclosures: Discovered, they could have stopped the career of any Washington politician in his tracks.

The two investigations into the leaks suggested McCain's involvement but were officially inconclusive. New evidence, obtained in recent weeks, again points back to the McCain camp. The investigator of those leaks now says that he does not doubt that they came from McCain or his team. A reporter who possessed evidence in the Keating case now says he believes that McCain was the source and got away with it. Finally, a senator who has emerged as a key backer of McCain's presidential campaign turns out to have authored a letter stating flatly that McCain was the source of the damning leaks. Put together, a large record of evidence now points in the direction of Senator McCain. Far from McCain's reputation of putting "country first," these leaks depict a formidable politician willing to go through great lengths to maintain his standing. More than McCain's relationship with Keating, it is the story of the Keating investigation leaks that voters should know.

The Senate Ethics investigation into the Keating Five scandal would last over a year, between 1989 and 1991. But before the actual hearings even began, carefully timed leaks featuring information from Committee deliberations - which were secret - began to appear. Committee members were privy to the information that was ending up in the leaks, but so were the five senators and their staffs, who received Committee documents in order to safeguard their due process rights.

The leaks had instant impact. One source close to the case described them as "backfires lit in the beltway press and in the states where the five senators were from." There were nine in all, some correct, some incorrect. Almost all of them - eight to be precise - either exonerated McCain or implicated the other senators.

Essentially, the leaks deflected public attention away from McCain and toward his colleagues. One leak, the week of DeConcini and Riegle's appearances before the Committee in October, 1990, described the probe against them as having "broadened," and accused Riegle, then Banking Committee chairman, of improper regulatory intervention. Neither part was true, yet the leak ricocheted in the press instantly. One headline from the Washington Post blared, "Panel Reveals Riegle-Keating Meetings; Senator Said to Have Maintained Contact After Start of S&L Probe," and another from the Los Angeles Times read, "Panel Action is Seen as Prelude to a Full-Scale Investigation of Sens. Cranston, DeConcini and Riegle." Meanwhile, approval ratings for Riegle and DeConcini began to tank in their home states. Later on, the leaks investigation would conclude that the leak "[could] only be described" as an attempt to "influence the deliberations on DeConcini and Riegle."

Just five days after that October leak, McCain appeared on the Senate floor urging the Committee to recuse him from the rest of the hearings. It was an impassioned speech, laced with references to his Vietnam service. "I do not deserve ... to be strung out for week after week, month after month," he said. The Ethics Committee rejected that argument as undue political pressure, for the first time suggesting that there was an "organized campaign of leaks to gain some advantage for some cause or person to which the leakers are partisan."

There were other leaks. One occurred after McCain appeared before the Committee. Five days later, an article appeared in the Arizona Republic with the favorable headline, "Source: Nothing New Found Against McCain." Also leaked was a letter from Keating's son-in-law thanking DeConcini while expressing disappointment over McCain. In the Keating affair, there existed all manner of documents, some that hurt each senator, and others that helped. The leaked documents reoriented the entire direction of public scrutiny to McCain's benefit.

This reorientation was significant because McCain was in many ways a natural suspect in the entire affair. McCain and Keating had been friends as early as 1981. He was the only senator who took personal gifts from Keating, including nine trips to Cat Cay, Keating's island in the Bahamas. Cindy McCain and her father were also involved with Keating in an Arizona real estate development called the Fountain Square Project. "I always thought McCain had by far the worst case facts," said one senior government official. None of the other Keating Five senators had a close personal relationship with Keating.

Nonetheless, the leaks created "a presumption of guilt" among the others, said one government official. As DeConcini said at the time, "Those leaks were very damaging to me, and yet I did not respond in kind." Cranston, Riegle, and DeConcini retired from political life soon after.

To investigate those leaks, two investigations were convened: one private, by the Senate Ethics Committee and conducted by Clark "Bud" Hall; the other public, by the Senate's Temporary Special Independent Counsel, New York lawyer Peter Fleming. Howell Heflin, the Democratic Senator from Alabama who chaired the six-person Ethics Committee, consisting of three Democrats and three Republicans, took the matter very seriously. A former Chief Justice on the Alabama Supreme Court, he was respected enough to have been on Reagan's Supreme Court shortlist. After the leaks, Heflin was "madder than hell," according to Democratic Senator David Pryor of Arkansas, who was one of the other six senators on the Committee.

In October 1990, Heflin called in the General Accounting Office's Office of Special Investigations, which was staffed by some of the FBI's most accomplished agents. The investigative unit sent in Bud Hall, who had a distinguished career in the Bureau as a Supervisory Special Agent in the Organized Crime section and not long before had come off a stint as the lead House investigator in the Iran-Contra scandal.

Hall arrived with a colleague to McCain's office, sometime between 1990 and 1991, armed with a letter signed by Heflin and fellow Senator Warren Rudman - which he "carried like a pistol in [his] holster," according to Hall - urging cooperation with the investigation. By the time he reached McCain, Hall had spent three months on the investigation and had already interviewed approximately 60 people, including Senators Bob Dole, Rudman, and DeConcini. "In an investigation, when you have a target that looks good, so to speak ... you wait 'til the very end 'til you interview him because you want all the information you can get. Second, you want him to be a little nervous," said Hall.

Hall and McCain had never met, yet soon as Hall entered, he knew McCain was not glad to see him. "He looked at me hard, right in the eyes," said Hall. He believes McCain "felt like he was being forced. ... He was there because his attorney told him he had to [be there]." McCain would not respond to any of Hall's questions about the leaks, but every so often would say, "you're crazy," "you're crazy, man, you're crazy." This went on for about 15 minutes by Hall's estimation.

"It was one of the strangest things I've seen," says Hall. "And as a professional investigator, I've interviewed a lot of weird people. ... I am a professional investigator and he treated me like some guy off the street. I just came away with a very bad impression." Eventually Hall addressed McCain's lawyer and told him that because his client was not being responsive to the inquiry, the meeting was over.

The report Hall wrote after his investigation is privileged Ethics Committee information and is under permanent restrictions - Hall himself said he did not have a copy of it, having turned all notes and documents to the Committee, including his interview transcripts, which, according to one source, feature dozens of interviews with McCain associates, family members, and in some cases intimate friends. His final report was formally inconclusive but argued for a strong trail of circumstantial evidence that pointed in McCain's direction. In our interview, he was emphatic on this point. "There is absolutely no doubt in my mind that McCain made those leaks."

Hall was barred by Committee rules from discussing the evidence he had, but other evidence appeared during of the private investigation by Peter Fleming that also pointed to McCain. First, Washington Times reporter Jerry Seper told a congressional staffer that he heard a taped conversation between McCain and Paul Rodriguez, his colleague at the Times who wrote many of the stories containing the leaks, and that he had also received independent information confirming McCain as the source of the leaks. This would have been important evidence, except that Seper declined to testify under a subpoena, asserting first amendment privileges. However, Seper, now the chief investigative reporter at The Washington Times, recently told The New Republic about the leaks that McCain "got a walk on that." Seper said, "[H]e did what they said he did, no doubt."

A second episode in the Fleming report that pointed to McCain happened when the senator held his much-publicized "mea culpa" news conference in October 1989 to acknowledge his mistakes during the Keating affair. Even in this moment of contrition, McCain was simultaneously on the attack, releasing - according to the Fleming report - a heavy-handed memo that DeConcini's office sent to regulators. The next day, the Arizona Republic had two headlines that both benefited McCain: "McCain Meets the Press" and "DeConcini Staffer's Memo Bared." In his report, Fleming wrote that he had discovered the leaked memo had "come to press from Senator McCain's office, and the juxtaposition of the two articles is disturbing."

Finally, Fleming concluded in his report that partisanship was the motive for the leaks and that they were designed to hurt DeConcini, Riegle, and Cranston. A Republican spokesman, quoted in the Fleming report, explained the politics: If enough people pressured the Committee into releasing McCain - the only Republican - and Glenn, who still had a heroic aura around him from his astronaut days, from the investigation, then the Keating Five would become the "Keating Three," and the GOP could then use the whole affair against the Democrats. Fleming also concluded that while Glenn "presumably stood to benefit by disclosure[s] ... there is simply a total absence of evidence implicating Glenn."

Ultimately there was no smoking gun: from a legal point of view, that would have meant either an admission from the person who leaked, an admission from the reporter who received the leak, or a statement from someone who was told about the leak by the leaker directly. This is why neither the Hall nor Fleming reports were "conclusive," in the legal and technical sense.

Nonetheless, evidence continues to surface. A letter from Rudman to Heflin (now in Heflin's archives) that states unambiguously that McCain was involved with at least some of the leaks, according to Steve Raby, who was Heflin's chief of staff at the time and recently reread the later. (Raby is a close friend of the family and spoke to TNR from Alabama, where he lives and where Heflin's records are located.) This letter would square with what Rudman wrote in his 1996 autobiography, that McCain and his staff were among those responsible for the leaks. (When prodded by the Boston Globe in 2000, Rudman - who has been a strong backer and participant of McCain's 2000 and 2008 campaigns - denied this, saying, "When you're writing a book, sometimes you're not that careful.")

Finally, there are Hall's reflections on the leaks today: "When you look at these stories, you interview the people - I must have interviewed 50-60 people, and I didn't have one single person defend McCain. If and when they pointed, they pointed in his direction."

Had either of the leaks probes found McCain guilty, in all likelihood he would have been recommended for censure by the Ethics Committee, but also possibly faced expulsion by the Senate or charged with perjury for having lied under oath. As it was, the worst that happened is that those observing McCain reevaluated the senator. Said one source close to the leaks investigation, "It pricked the balloon I had that McCain might have had integrity."

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Sahil Mahtani is a reporter-researcher at The New Republic.