“Losing your job affects everything in your life. It is not just the money–it affects your relationships, your happiness, your dignity.” It was Saturday morning and I was sitting in the kitchen of one of our member’s houses, drinking a glass of water, and listening to his story. Though heartbreaking and unimaginable, it was a story that I had heard before, in different members’ kitchens, in coffee shops, over the phone in my office in Center City, Philadelphia.
William had been laid off from three or four jobs in the last decade. The company would move out of Pennsylvania, or simply go bankrupt. Once, he called in to a job to tell them he was taking vacation, and they told him to pick up his tool belt because they would be closed by the time he got back. And these weren’t perfect jobs. He would start at $9 an hour, taking the night shift so that he could be with his two kids during the day while his wife was at work. But he would work hard, and eventually make it up to $17 an hour or so: enough to make ends meet.
Inevitably though, he would be laid off and have to start all over again. “You never expect to lose your job,” he said, and I could feel the truth of his words. “And here I was, stuck again, trying to survive.” During his time unemployed, William would send out about 20 applications each week, applying for jobs that weren’t in his industry, just trying to make it into the door. Trying to make it anywhere.
This is a common story. Last week, I met with a man named Harold who drove trucks, or at least he used to. For 28 years, he crossed the country, delivering goods where they needed to go. Two years ago, he was laid off, and with that pink slip he also lost his health insurance while his wife was undergoing cancer treatments. For two years he has searched for a job. He has sent applications out everywhere. He has stood in line for hours because of a rumor that a warehouse might be hiring, his resume clutched in his hands.
Every day I hear stories from families just trying to get by, to find work, to gather up some of the things that they lost. The unemployment crisis has reached every sector of our community. The faces of the unemployed are all around us. They are standing in line at the grocery store, figuring out if they have enough to pay. They are searching online at the local library to find out if their benefits have been extended yet. They are offering me a glass of water on a Saturday morning.
“Losing your job affects everything in your life.” I shivered when I heard those words because I have learned just how true they are.
Carving out time to read beyond the scope of the day’s headlines isn’t always easy. Neither is going beyond the bounds of the bestseller lists. But one thing that’s been clear from the very start of the Great Recession is that Americans have not been well served by much of what passes for — or is passed off as — economics writing. We suffer from a malaise of relative illiteracy when it comes to economic matters. Fortunately, that’s beginning to change, helped in part by three important recent books.
False Profits – Recovering from the Bubble Economy
by Dean Baker (PoliPointPress, 2010)
Freefall – America, Free Markets and the Sinking of the World Economy
by Joseph E. Stiglitz (W.W. Norton, 2010)
Reckless! How Debt, Deregulation and Dark Money Nearly Bankrupted America
by Senator Byron L. Dorgan (Thomas Dunne Books, 2009)
Each of these books is, on its own, an important contribution to the public’s economic education. They all are focused on the Great Recession, on its causes and consequences. But each is unique in its style and approach, offering as well somewhat different but compatible policy solutions. Together they provide a powerful dose of clarity and lots of in-depth information on what’s been wrong, what went wrong and what can and should be done now.
Rather than offer full-blown reviews here, though, I think it would be more useful to provide a sense of what I think makes each of these books worthwhile and educative reading.
In False Profits it doesn’t take long for Dean Baker, an economist and progressive policy analyst, to clear the air about what was the fundamental cause of the Great Recession. “The basic story of this economic collapse is very simple,” he writes in the introduction’s first paragraph. “The Federal Reserve Board, guided by its revered chairman, Alan Greenspan, allowed an $8 trillion housing bubble to grow unchecked.”
With refreshing lucidity Baker goes on to explain that when the housing bubble inevitably began to burst, all manner of additional factors that contributed to the depth and severity of the economic crisis were spun off — like tornadoes from a giant hurricane.
What makes Baker’s book so compelling is how rightly insistent he is in showing that not only was this crisis foreseeable, but also that its devastation was entirely avoidable. The Great Recession did not have to happen. It was the failure of top regulators and policy makers in the previous Administration that is chiefly to blame. And the author is not bashful about naming names. In 159 pages Baker provides enough detail on the spin-off effects of what went wrong to serve as an essential guide to the real causes of the worst economic crisis since the Great Depression.
Other useful elements of this book include Baker’s insights into creative remedies. These include a summary proposal for a financial transactions tax to help reduce the size and weight of the financial sector and to provide disincentives for excessive speculative trading practices. There’s also an entire chapter devoted to ideas for progressive programs to help stimulate the economy, including public-funded clinical drug trials, tax incentives and subsidies for public transportation, and a kind of internet-age WPA program to support writers, artists and other creative workers while enhancing their contributions to works in the public domain.
Freefall is the weightiest of the three books, both in length and in depth. The author, Joseph Stiglitz, is a Nobel Prize winning economist, professor at Columbia University, a former World Bank economist and former Chairman of the Council of Economic Advisors for a time under President Bill Clinton. With his extensive academic credentials and incredibly detailed use of footnotes, Stiglitz’s book is perhaps the single most comprehensive survey of the conditions that were allowed to fester for the last few decades leading up to the Great Recession.
Yet it’s also eminently comprehensible. And, speaking of the footnotes, I’d venture to say most readers would learn more just from reading the footnotes than they would from most other entire books. I must say, though, that the book would benefit greatly from an index, which is lacking at least in its first printing.
Stiglitz offers an excellent survey of the push to deregulate the financial sector, especially through legislation that was passed in 1999 and 2000. But what makes his description more substantive is the international historical background he provides. He tells how so-called “free market” finance was a major U.S. export in the 1980s and 90s, and how the new deregulated banking and capital markets in a host of other countries led to a series of financial crises in places like Mexico, Argentina and East Asia — and then to a global financial crisis in 1998.
Remarkably, as Stiglitz documents, those crises never dissuaded most U.S. policy makers from pushing through the deregulation of the U.S. financial sector in 1999-2000. Both Stiglitz and Baker also correctly fault wrong-headed economics, the overwhelming majority of economists and nearly all the so-called economic reporters for these failures and their resulting devastation.
Perhaps the most important element of Freefall is Professor Stiglitz’s devastating critique of the several strands of so-called “free market” economics, from the Chicago School of Milton Friedman to Alan Greenspan, and from the Bush administration’s continuous expansion of deregulation to the Wall Street-influenced strains of “New Keynesian” economics that have compromised too many aspects of the Obama administration’s economic agenda.
In Reckless! Senator Byron Dorgan (D-ND) takes a multifaceted approach to the story of the Great Recession. Originally written to revisit the impact of passing the Financial Services Modernization Act of 1999, also known as Gramm-Leach-Bliley, which dismantled many of the effective Depression-era regulations and reforms, Dorgan’s book underwent a rewrite to expand its scope and bring it up to date with the late 2008 financial crisis and subsequent rapid deepening of the recession that had started in 2007.
Readers here may recall that we recently revisited Senator Dorgan’s opposition to Gramm-Leach-Bliley in an extensive post titled A Remembrance of Things Passed, which included digital video clips from Dorgan’s Senate floor speeches on May 6, 1999.
And in Reckless! Dorgan tells that story once again. But rather than slipping into an “I told you so!” mode, Dorgan expands the scope of his inquiry to include more of the factors that had long worked to undermine the real economy, the middle class and America’s workers in the years and decades leading up to the Great Recession.
In a style at once folksy and humorous, down home and statesmanlike, Dorgan connects his common sense populism to his family’s roots in the Farmers Union movement of the northern Plains. But there’s also plenty of real meat to be found on the bones here. Dorgan explains in detail how the ever-widening gap in income inequality in the U.S. continued, in unrelenting fashion, to undermine the strength of the economy in the last three decades. He documents the increasing income and wealth disparities between average workers and corporate CEOs, between the ultra-rich and the rest of us.
One of the unique contributions to economic awareness and public policy in this book is the discussion of the incredible lengths to which wealthy individuals and corporations have gone to escape their tax responsibilities. And how legislators, lawyers and regulators have aided and abetted this defrauding of the public. If your blood pressure can take it, just read about how billionaire hedge fund managers avoid paying a fair share of income taxes through “carried interest” schemes, or how highly profitable corporations avoid taxes through so-called SILO (Sale In-Lease Out) foreign faux “investments” and the like. It’s enough to make you steam — or scream!
All told, these three books contribute significantly to the serious public discourse on economic policies. Most importantly, at a time when it’s become clear that simply leaving economics to the so-called elites and economics “experts” leads inextricably to disaster, these three books can help us educate ourselves — and perhaps even take back control of U.S. economic policy.
Let’s make no mistake: When Republicans obstruct financial reform legislation, preventing it from even being debated openly on the floor of the Senate for everyone to hear, they are protecting Wall Street from being called to account for its irresponsibility and greed and the damage it has done to the economy as a whole and to millions of individual working people.
That’s just what appears likely to happen later this afternoon, when a vote is scheduled to attempt to break a Republican filibuster not of a Wall Street reform bill but of even talking about it. Instead, Republicans would prefer to keep negotiating secretly for a bill that…does or doesn’t do whatever it is they want.
Senate Republicans are working to finalize their own version of legislation to tighten regulation of the nation’s financial system, and aides said their version could be put forward as a rival to the Democrats’ proposal if a bipartisan deal is not reached before an important procedural vote on Monday afternoon.
Republicans, including Senator Richard C. Shelby of Alabama, have said they would use the procedural vote to block the start of debate on the Democrats’ bill unless the Democrats agree to make substantial changes in it. But in a political climate of public impatience and anger at Wall Street, it was not clear how long the Republicans could hold ranks in delaying the bill.
But it’s time to put up or shut up. If you’re concerned the bill doesn’t address something, then write an amendment to address it. If you think the bill is too tough in some respect, then write an amendment to weaken it. There’s no good reason to insist that everything be done in a secret Shelby-Dodd negotiating process.
Exactly. If they won’t allow the issues to be aired publicly on CSPAN where anyone can see, if they won’t negotiate, point to things in an actual, public bill and say out loud what they want changed and why, it’s because they’re not acting in good faith. Which, surprise, they aren’t.
Paul Krugman’s column today — “Don’t Cry for Wall Street” — is truly a must-read. Snippets:
The fact is that Mr. Obama should be trying to do what’s right for the country — full stop. If doing so hurts the bankers, that’s O.K.
More than that, reform actually should hurt the bankers. A growing body of analysis suggests that an oversized financial industry is hurting the broader economy. Shrinking that oversized industry won’t make Wall Street happy, but what’s bad for Wall Street would be good for America.
In the years leading up to the 2008 crisis, the financial industry accounted for a third of total domestic profits — about twice its share two decades earlier.
These profits were justified, we were told, because the industry was doing great things for the economy. It was channeling capital to productive uses; it was spreading risk; it was enhancing financial stability. None of those were true. Capital was channeled not to job-creating innovators, but into an unsustainable housing bubble; risk was concentrated, not spread; and when the housing bubble burst, the supposedly stable financial system imploded, with the worst global slump since the Great Depression as collateral damage.
An intriguing proposal is about to be unveiled from, of all places, the International Monetary Fund. In a leaked paper prepared for a meeting this weekend, the fund calls for a Financial Activity Tax — yes, FAT — levied on financial-industry profits and remuneration.
Such a tax, the fund argues, could “mitigate excessive risk-taking.” It could also “tend to reduce the size of the financial sector,” which the fund presents as a good thing.
The Roosevelt Institute’s Mike Konczal has put together a handy guide (pdf) to the critical elements and possible amendments still in play in the Wall Street reform plan.
Initial claims for state unemployment insurance last week were a seasonally adjusted 456,000 — a decline of 24,000 from the previous week, but still well above 400,000 as they have been every week since early September of 2008.
The House Education and Labor Committee announced the release of detailed estimates of the number of jobs that would be created, restored or saved by the Local Jobs for America Act. The bill, which would support an estimated one million full-time local public service jobs with benefits over two years, now has 151 co-sponsors in the House of Representatives. If you don’t see your House member listed, you can call toll-free 888-254-5087 and urge them to become a co-sponsor of Rep. George Miller’s Local Jobs for America Act (H.R. 4812).
And this coming Thursday, April 29, I plan to be in New York City for a little meet up:
RALLY & MARCH ON WALL STREET with AFL-CIO President Richard Trumka
Thu, Apr 29, 2010
4:00 PM – 6:00 PM
Wall Street tanked America’s economy, killed jobs, took $700 billion in taxpayer bailouts—then went right back to business as usual, choking off credit, handing out $145 billion in 2009 executive pay and bonuses and fighting meaningful financial reform.
We’re 11 million jobs in the hole and it’s time for the financial industry to pay up to create them.
Join AFL-CIO President Richard Trumka and thousands of union and community activists from across the country marching down Broadway in the heart of the financial district on April 29 to MAKE WALL STREET PAY.
See you there. For information contact the New York City Central Labor Council at 212-604-9552 or www.nycclc.org.
This is what health insurance giant Wellpoint has been doing to women diagnosed with breast cancer:
None of the women knew about the others. But besides their similar narratives, they had something else in common: Their health insurance carriers were subsidiaries of WellPoint, which has 33.7 million policyholders — more than any other health insurance company in the United States.
The women all paid their premiums on time. Before they fell ill, none had any problems with their insurance. Initially, they believed their policies had been canceled by mistake.
They had no idea that WellPoint was using a computer algorithm that automatically targeted them and every other policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators.
Once the women were singled out, they say, the insurer then canceled their policies based on either erroneous or flimsy information.
Murray Waas’ investigation of this outrageous practice focuses on three women. One of them had to wait five months for the double mastectomy required by her aggressive cancer. In that five months, the size of her tumor had more than tripled. Another woman received coverage through her mastectomy and reconstructive surgery, but then was dropped by her insurer as she struggled to recover from a life-threatening staph infection. She was unable to get needed reconstructive surgery for the after-effects of that infection and can no longer work. She had been well-to-do and now lives on food stamps and spends her time looking for charities that will help her with her medical and other bills.
Those are horrific stories, and more horrific because they are not isolated:
The investigation last year by the House Energy and Commerce Committee determined that WellPoint and two of the nation’s other largest insurance companies — UnitedHealth Group Inc and Assurant Health, part of Assurant Inc — made at least $300 million by improperly rescinding more than 19,000 policyholders over one five-year period.
WellPoint itself profited by more than $128 million from the practice, and the committee suggested that the figure might be largely understated because the company refused to provide information about cancellations by several subsidiaries.
This is a massive story—in importance and in detail. Read the whole thing, if you can stand to.
Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid, a USA TODAY/American University review found.
When the Bush administration’s Treasury Secretary Henry Paulson first demanded the TARP funds from Congress in late 2008, he said they would be used to buy the “troubled assets” on bank balance sheets. But that idea was rather fleeting, replaced quickly with the scheme of simply giving the funds principally to the biggest banks to shore up their capital needs.
Throwing money at the banks with no strings attached — virtually no compensation provisions and no requirements to generate lending — allowed Wall Street to survive, prosper and go right back to business as usual.
Without a robust revival of lending, especially to small- and mid-sized businesses, private sector job growth will continue to be inadequate by any measure. Meanwhile, the biggest Wall Street firms, having benefited from the Bush administration’s bailouts, are again generating mega-profits and mega-bonuses trading all manner of higher-risk instruments.
While the outlines of the Wall Street reform plan taking shape in the Senate are generally strong and sound, whether they will be enough to force a real change in the way the financial sector either helps or hinders Main Street remains to be seen.
That’s why it will be important to watch how the plan might be strengthened. Look in particular for possible amendments from Senators such as Sherrod Brown of Ohio and Ted Kaufman of Delaware that could limit the size and scope of banks. It is possible that Senator Byron Dorgan of North Dakota, who was the Senate’s most outspoken critic of the deregulation of Wall Street in 1999, may offer his own amendments to strengthen the regulatory system. Senator Maria Cantwell of Washington is also said to be considering a revived Glass-Steagall provision to once again separate commercial banks from securities trading and investment banking.
Those are just some of the things that will need to be done to make Wall Street reform potent enough to force at least a greater portion of the financial sector toward doing the job of aiding, instead of undermining, jobs and the economy.
Consumer educator and personal finance expert Gerri Detweiler participated in Working America’s recent series of tele-town halls, answering questions from our members about how to manage debt, keep their homes, and generally keep their heads above water in this tough economy. She came out of that with an important point:
In college, I interned in a Senator’s office on Capitol Hill, and one of my first assignments was to help constituents who were experiencing problems with everything from Social Security benefits to disputes with their banks. I was immediately impressed with how easy it was to get a response from both government agencies and private companies simply because I was calling from the Senator’s office.
-snip-
At a minimum, their elected officials need to know the kinds of challenges their constituents are experiencing. But they may also be able to help these homeowners get a faster answer on their modifications than they can get on their own.
As a taxpayer, you pay for these constituent services. So if you need this help, don’t be afraid to ask for it. To locate your Senators’ contact information., visit senate.gov, and for your Representative, visit house.gov.
When we suggest you call your senators or representatives, it’s usually to urge them to vote for a bill—on jobs or unemployment insurance or the like—but, as Gerri says, this is another important reason you might want to call them. You don’t necessarily need to struggle by yourself, and when it’s a bank or a bureaucracy you’re struggling against, having your representatives actively on your side can make a big difference.
Some help available for those on the edge of eviction. From the NY Times:
He could no longer pay even the rent on his cramped studio apartment — not on his $10-an-hour part-time job as a fry cook at a fast food restaurant.
Faced with eviction, he was staring last month at the imminent prospect of joining the teeming ranks of the homeless. His last hope was a new $1.5 billion federal program aimed at preventing that fate.
and
Much like the Great Depression, when millions of previously working people came to rely on a new social safety net for their sustenance, a swelling group of formerly middle-class Americans like Mr. Moore, 30, is seeking government aid for the first time. Without help, say economists, many are at risk of slipping permanently into poverty, even as economic conditions improve.
The question is whether the modern-day safety net has enough money and the right initiatives to aid those who need it most. The answer could shape whether a considerable slice of the American population will recover from the trauma of recent years, and how long that will take.
more
“Nationally, homelessness has now reached crisis proportions not seen since the Great Depression,” says Maria Foscarinis, executive director of the National Law Center on Homelessness and Poverty.
The severity of the situation prompted the Obama administration to create the Homelessness Prevention and Rapid Re-Housing program within the $787 billion economic stimulus package. The program rests on the assumption that intervention is the best course because once people become homeless, the odds and costs of regaining their lives escalate sharply.
One of the goals of this program is to help prevent even more people from losing their housing. The US has a higher level of homelessness right now than we had during the Great Depression. The funds are administered federally through the HUD program, but each state seems to have a different system for distributing funds. Every state has a housing authority, and their websites are the best way to find out how the program works in your state.
A big round of teacher layoffs is coming. From the NY Times:
School districts around the country, forced to resort to drastic money-saving measures, are warning hundreds of thousands of teachers that their jobs may be eliminated in June.
The districts have no choice, they say, because their usual sources of revenue — state money and local property taxes — have been hit hard by the recession. In addition, federal stimulus money earmarked for education has been mostly used up this year.
As a result, the 2010-11 school term is shaping up as one of the most austere in the last half century. In addition to teacher layoffs, districts are planning to close schools, cut programs, enlarge classes and shorten the school day, week or year to save money.
Tolleson Union High School District is laying off 207 employees, including 34 classroom teachers, to balance a budget hit by state funding cuts, climbing expenses and the March failure of a crucial budget override election.
That’s nearly 19 percent of the district’s workforce.
The cash-strapped Flint school district will lay off 261 teachers at the end of the year.
The Flint Community Schools Board of Education approved the layoffs Wednesday night.
These cuts are also affecting state colleges and universities. In New Jersey:
Facing record deficits, Gov. Chris Christie has proposed cutting $173 million in state aid to universities, a nearly 8 percent reduction. New budget language released last week also included a surprise cap on tuition proposals, further squeezing the bottom lines at state colleges and universities.
The first battle will take place Wednesday afternoon in Trenton, during an Assembly budget hearing on the governor’s proposals. The stakes are high for the universities, which have endured cuts in state aid for seven of the past 10 years, according to union officials.
“Immediate effects include larger class sizes, fewer faculty hires, fewer class offerings, cutbacks in services and hours, and cutbacks in technology purchases and facilities renovations,” the New Jersey Association of State Colleges and Universities said.
As universities across the nation face budget shortcuts, Georgia is trying to meet the demands of a $385 million budget cut from the state’s higher education budget.
Chancellor Erroll B. Davis, responsible for the 35 public colleges and universities in Georgia, says that in order to meet this budget cut, the colleges and universities would have to increase tuition by 77 percent. Chancellor Davis, along with other university presidents in the state of Georgia, is attempting to discuss specific budget cuts, rather than have the state House-Senate joint budget committee make budget cuts wherever they choose.
A survey of community college presidents finds that as unemployment rises, so does the enrollment at community colleges. At the same time, these schools are facing significant budget cuts.
