Manufacturing data fuel US recession fears | By Chris Bryant in Washington | Published: February 27 2008
US manufacturing orders on Wednesday recorded their biggest decline in five months and new home sales slumped to a 13-year low, compounding fears that the US economy may be sliding into recession.
Orders for big-ticket manufactured items fell 5.3 per cent in January, exceeding economists’ expectations of only a 3.5 per cent decline. The disappointing headline result wiped out a revised 4.4 per cent increase in December, when buoyant aircraft sales had provided a boost to the figures.
...
The durable goods figures followed a dire reading last week on the Philadelphia Federal Reserve manufacturing index, which also deteriorated unexpectedly.
Excluding transportation, durable orders fell a comparatively modest 1.6 per cent this month. However, this was still more than twice the expected decline.
There was mixed news concerning core capital goods orders, a key measure of business spending on machinery and equipment, which fell a modest 1.4 per cent, paring an upwardly revised 5.2 per cent gain in December. Core capital goods shipments rose 0.1 per cent. ...
Friday, February 29, 2008
Friday, February 22, 2008
[From 2005]: Americans make a living selling each other houses, paid for with money borrowed from the Chinese ... not very sustainable ...
August 12, 2005 | Safe as Houses | By PAUL KRUGMAN | NY Times
...
The answer, these days, is that we make a living by selling each other houses. Since December 2000 employment in U.S. manufacturing has fallen 17 percent, but membership in the National Association of Realtors has risen 58 percent.
The housing boom has created jobs in two ways. Many jobs have been created, directly and indirectly, by a surge in housing construction. And rising home values have fueled a simultaneous surge in consumer spending.
Let's start with home building. Between 1980 and 2000, which was before the housing boom, spending on the construction of new homes averaged 4.25 percent of G.D.P. In the most recent quarter, however, the figure was 5.98 percent. That difference is equivalent to about $200 billion a year in additional spending, generating roughly two million extra jobs.
Then there's the jump in house prices. Over the past five years housing prices have grown much faster than the overall cost of living, adding about $5 trillion to the public's wealth. Typical estimates say that each additional dollar of housing wealth adds about 3 cents to annual consumer spending, as families reduce their savings and borrow against their newly valuable homes. So we're talking about an additional $150 billion in spending, and roughly 1.5 million more jobs.
Does anything else in the U.S. economy rival housing as a source of job creation? Well, there's also the military buildup. The Economic Policy Institute estimates that increased military spending over the past four years has created 1.3 million private-sector jobs.
...
Still, the economy is expanding. But because that expansion depends so much on real estate - without the housing boom, the economic picture would look dismal indeed - you have to wonder how much to trust it.
I've written before about the reasons to believe that current house prices in much of the country represent a bubble. When that bubble begins to deflate, so will housing-related employment.
Beyond that, there's the disturbing point that we're paying for the housing boom (and the military buildup and tax cuts) with money borrowed from foreigners.
Now, any economics textbook will tell you that it's fine to borrow from abroad if the money is used to expand the economy's productive capacity. When 19th-century America borrowed from Europe to build railroads, it was also enhancing its ability to repay its debts later. But we aren't borrowing to build productive capacity. As a share of G.D.P., investment other than housing construction is below its average between 1980 and 2000, and way below its level at the end of the 1990's.
In other words, a fuller answer to my former neighbor would be that these days, Americans make a living selling each other houses, paid for with money borrowed from the Chinese. Somehow, that doesn't seem like a sustainable lifestyle. ...
...
The answer, these days, is that we make a living by selling each other houses. Since December 2000 employment in U.S. manufacturing has fallen 17 percent, but membership in the National Association of Realtors has risen 58 percent.
The housing boom has created jobs in two ways. Many jobs have been created, directly and indirectly, by a surge in housing construction. And rising home values have fueled a simultaneous surge in consumer spending.
Let's start with home building. Between 1980 and 2000, which was before the housing boom, spending on the construction of new homes averaged 4.25 percent of G.D.P. In the most recent quarter, however, the figure was 5.98 percent. That difference is equivalent to about $200 billion a year in additional spending, generating roughly two million extra jobs.
Then there's the jump in house prices. Over the past five years housing prices have grown much faster than the overall cost of living, adding about $5 trillion to the public's wealth. Typical estimates say that each additional dollar of housing wealth adds about 3 cents to annual consumer spending, as families reduce their savings and borrow against their newly valuable homes. So we're talking about an additional $150 billion in spending, and roughly 1.5 million more jobs.
Does anything else in the U.S. economy rival housing as a source of job creation? Well, there's also the military buildup. The Economic Policy Institute estimates that increased military spending over the past four years has created 1.3 million private-sector jobs.
...
Still, the economy is expanding. But because that expansion depends so much on real estate - without the housing boom, the economic picture would look dismal indeed - you have to wonder how much to trust it.
I've written before about the reasons to believe that current house prices in much of the country represent a bubble. When that bubble begins to deflate, so will housing-related employment.
Beyond that, there's the disturbing point that we're paying for the housing boom (and the military buildup and tax cuts) with money borrowed from foreigners.
Now, any economics textbook will tell you that it's fine to borrow from abroad if the money is used to expand the economy's productive capacity. When 19th-century America borrowed from Europe to build railroads, it was also enhancing its ability to repay its debts later. But we aren't borrowing to build productive capacity. As a share of G.D.P., investment other than housing construction is below its average between 1980 and 2000, and way below its level at the end of the 1990's.
In other words, a fuller answer to my former neighbor would be that these days, Americans make a living selling each other houses, paid for with money borrowed from the Chinese. Somehow, that doesn't seem like a sustainable lifestyle. ...
California in a housing depression ... prices drop 16% ... Is a 30-day grace period really the best that Paulson can come up with?
Paulson's Wild Ride on the Hindenburg: "The worst has just begun" | By Mike Whitney | 15/02/08 "ICH"
... [Treasury Secretary] Paulson is currently on a losing-streak ... First, he tried to entice struggling investment banks to put their mortgage-backed bonds in a Super SIV (structured investment vehicle) to see if it would help off-load billions of dollars of down-graded junk onto unsuspecting investors.
That flopped. Then he brokered "Hope Now"” (1-888-995-HOPE) which was designed to help the banks and homeowners work out the details for a rate freeze on mortgage resets. Paulson assured the public that 500,000 homeowners would take advantage of the program, ... So far, the Hope Now hotline has provided counseling to just 36,000 borrowers. Representatives have suggested loan workouts for fewer than 10,000 of them, ...
This week, Paulson announced another new program, "Project Lifeline”, which targets homeowners who are delinquent 90 days or more on their mortgages. ... At the very best, the program just buys a little more time for the homeowner to pick out a nice rental where he and is family can live after the bank repos his home. ... So, why is he wasting time with these bogus public relations gambits when he should be making serious recommendations?
Paulson's so called "mortgage modifications" just don't cut it. They're pointless They just put off foreclosure until a later date. The only real solution to the problem is renegotiating the mortgages with the lenders so that people with negative equity” have an incentive to continue making their monthly payments. Otherwise, the number of "walkaways" will mushroom and wreak havoc on the entire industry.
This week's housing stats from California illustrate how desperate the situation really is. DataQuick Information Systems said Wednesday a total of 9,983 homes were sold in Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties last month, a drop of nearly 50% from January last year.
50%. That is unprecedented. California is in a housing depression. Is a 30-day grace period really the best that Paulson can come up with?
...
For the last four months, housing sales in California have plummeted 40% (year over year) At the same time, prices in Southern California have dipped a whopping 16.7%. The market is freefalling. ...
... [Treasury Secretary] Paulson is currently on a losing-streak ... First, he tried to entice struggling investment banks to put their mortgage-backed bonds in a Super SIV (structured investment vehicle) to see if it would help off-load billions of dollars of down-graded junk onto unsuspecting investors.
That flopped. Then he brokered "Hope Now"” (1-888-995-HOPE) which was designed to help the banks and homeowners work out the details for a rate freeze on mortgage resets. Paulson assured the public that 500,000 homeowners would take advantage of the program, ... So far, the Hope Now hotline has provided counseling to just 36,000 borrowers. Representatives have suggested loan workouts for fewer than 10,000 of them, ...
This week, Paulson announced another new program, "Project Lifeline”, which targets homeowners who are delinquent 90 days or more on their mortgages. ... At the very best, the program just buys a little more time for the homeowner to pick out a nice rental where he and is family can live after the bank repos his home. ... So, why is he wasting time with these bogus public relations gambits when he should be making serious recommendations?
Paulson's so called "mortgage modifications" just don't cut it. They're pointless They just put off foreclosure until a later date. The only real solution to the problem is renegotiating the mortgages with the lenders so that people with negative equity” have an incentive to continue making their monthly payments. Otherwise, the number of "walkaways" will mushroom and wreak havoc on the entire industry.
This week's housing stats from California illustrate how desperate the situation really is. DataQuick Information Systems said Wednesday a total of 9,983 homes were sold in Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties last month, a drop of nearly 50% from January last year.
50%. That is unprecedented. California is in a housing depression. Is a 30-day grace period really the best that Paulson can come up with?
...
For the last four months, housing sales in California have plummeted 40% (year over year) At the same time, prices in Southern California have dipped a whopping 16.7%. The market is freefalling. ...
another threatening force is bearing down on the nation: our out-of-control military machine ... $700B+ budget
February 14, 2008 (March 3, 2008 issue) | More Guns, No Butter
Americans are worried about the impending recession and the Wall Street crisis, as well as the exhilarating and unpredictable presidential contest. But another threatening force is bearing down on the nation: our out-of-control military machine. The ever-voracious Pentagon is using this fragile moment as cover for seizing an even greater share of the nation's dwindling resources--trillions more in federal indebtedness to fight a phantom "war on terror." In constant dollars, next year's proposed military budget will be the largest since World War II--around $700 billion.
It reveals not only bureaucratic greed but clever politics. What makes the money grab scary is the silence. Only recently has Barack Obama begun to link the money drained by the disastrous Iraq War to the need for universal healthcare and other domestic proposals. But neither Obama nor Hillary Clinton has been willing to criticize this year's bloated military budget and declare, "Not on my watch. Not if I become President." The military planners think they have Democrats in a box; any candidate who raises questions now can be accused of aiding terrorists. But the obscenely expensive weapons systems (designed to combat a Soviet military long gone) have nothing to do with terrorism. If the generals get away with this, the next presidency will be wretchedly compromised before it starts.
The United States, the world's sole superpower, already spends more on its military than most of the rest of the world combined. And those who assume military spending will subside when we get out of Iraq--if we get out--haven't been paying attention. Defense Secretary Robert Gates and his new Chairman of the Joint Chiefs, Adm. Mike Mullen, have been beating the tom-toms for greater spending after withdrawal. Various "experts," including those at the centrist Brookings Institution, are on board for sustaining the pace of Pentagon spending. Obama and Clinton have both endorsed an increase in the size of the active-duty military by 90,000 troops, while John McCain, their presumed rival this fall, wants to increase it by 150,000 (as he gives the word "quagmire" new meaning with his call to stay in Iraq for as long as 100 years). ...
Americans are worried about the impending recession and the Wall Street crisis, as well as the exhilarating and unpredictable presidential contest. But another threatening force is bearing down on the nation: our out-of-control military machine. The ever-voracious Pentagon is using this fragile moment as cover for seizing an even greater share of the nation's dwindling resources--trillions more in federal indebtedness to fight a phantom "war on terror." In constant dollars, next year's proposed military budget will be the largest since World War II--around $700 billion.
It reveals not only bureaucratic greed but clever politics. What makes the money grab scary is the silence. Only recently has Barack Obama begun to link the money drained by the disastrous Iraq War to the need for universal healthcare and other domestic proposals. But neither Obama nor Hillary Clinton has been willing to criticize this year's bloated military budget and declare, "Not on my watch. Not if I become President." The military planners think they have Democrats in a box; any candidate who raises questions now can be accused of aiding terrorists. But the obscenely expensive weapons systems (designed to combat a Soviet military long gone) have nothing to do with terrorism. If the generals get away with this, the next presidency will be wretchedly compromised before it starts.
The United States, the world's sole superpower, already spends more on its military than most of the rest of the world combined. And those who assume military spending will subside when we get out of Iraq--if we get out--haven't been paying attention. Defense Secretary Robert Gates and his new Chairman of the Joint Chiefs, Adm. Mike Mullen, have been beating the tom-toms for greater spending after withdrawal. Various "experts," including those at the centrist Brookings Institution, are on board for sustaining the pace of Pentagon spending. Obama and Clinton have both endorsed an increase in the size of the active-duty military by 90,000 troops, while John McCain, their presumed rival this fall, wants to increase it by 150,000 (as he gives the word "quagmire" new meaning with his call to stay in Iraq for as long as 100 years). ...
Bloomberg: US "has a balance sheet that's starting to look more and more like a third-world country."
Bloomberg Rips Government Over Failing Economy | Feb 15, 2008 | NYC Mayor: U.S. Resembling A 'Third-World Country'
NEW YORK (CBS/AP) ― Mayor Michael Bloomberg has unleashed another flurry of jabs on Washington, ridiculing the federal government's rebate checks as being "like giving a drink to an alcoholic" on Thursday, and said the presidential candidates are looking for easy solutions to complex economic problems.
The billionaire and potential independent presidential candidate also said the nation "has a balance sheet that's starting to look more and more like a third-world country."
...
The mayor last month said the economic stimulus package was shortsighted, and presented his own views on where the federal government should be focusing its attention. Specifically, he said the government should adopt a capital budget to oversee long-term infrastructure spending, instead of the current year-to-year spending.
It should also offer financial counseling, modified loans, and in some cases, subsidized loans to homeowners who find themselves unable to afford their mortgages. ...
NEW YORK (CBS/AP) ― Mayor Michael Bloomberg has unleashed another flurry of jabs on Washington, ridiculing the federal government's rebate checks as being "like giving a drink to an alcoholic" on Thursday, and said the presidential candidates are looking for easy solutions to complex economic problems.
The billionaire and potential independent presidential candidate also said the nation "has a balance sheet that's starting to look more and more like a third-world country."
...
The mayor last month said the economic stimulus package was shortsighted, and presented his own views on where the federal government should be focusing its attention. Specifically, he said the government should adopt a capital budget to oversee long-term infrastructure spending, instead of the current year-to-year spending.
It should also offer financial counseling, modified loans, and in some cases, subsidized loans to homeowners who find themselves unable to afford their mortgages. ...
Thursday, February 21, 2008
Mass. foreclosures rise 128% in January ... auctions up 78%
Mass. foreclosures rise 128% in January | February 21, 2008 09:09 AM
Nearly 800 foreclosures were recorded in January, the highest number of Bay State homes lost during a single month since August 2007, the Warren Group said today.
The Warren Group of Boston is a provider of local real estate data and the publisher of Banker & Tradesman.
There were 799 foreclosure deeds in January, up 128.3 percent from the 350 deeds in January 2007, the firm said, and January 2008 also marks the highest number of deeds during any month since August 2007, when there were 1,018.
Auction announcements in January reached their highest number since the Warren Group began tracking them in 2005, the firm said, and there were 1,792 announcements in January 2008, up 77.8 percent from the 1,008 in January 2007. ...
Nearly 800 foreclosures were recorded in January, the highest number of Bay State homes lost during a single month since August 2007, the Warren Group said today.
The Warren Group of Boston is a provider of local real estate data and the publisher of Banker & Tradesman.
There were 799 foreclosure deeds in January, up 128.3 percent from the 350 deeds in January 2007, the firm said, and January 2008 also marks the highest number of deeds during any month since August 2007, when there were 1,018.
Auction announcements in January reached their highest number since the Warren Group began tracking them in 2005, the firm said, and there were 1,792 announcements in January 2008, up 77.8 percent from the 1,008 in January 2007. ...
Concerns over Economy Push George W. Bush's Overall Job Approval to New Low - 19% [lower than Nixon's record low]
Concerns over Economy Push George W. Bush's Overall Job Approval to New Low - 19% | Source: American Research Group | February 20, 2008
George W. Bush's overall job approval rating has dropped to a new low in American Research Group polling as 78% of Americans say that the national economy is getting worse according to the latest survey from the American Research Group.
Among all Americans, 19% approve of the way Bush is handling his job as president and 77% disapprove. When it comes to Bush's handling of the economy, 14% approve and 79% disapprove. ...
George W. Bush's overall job approval rating has dropped to a new low in American Research Group polling as 78% of Americans say that the national economy is getting worse according to the latest survey from the American Research Group.
Among all Americans, 19% approve of the way Bush is handling his job as president and 77% disapprove. When it comes to Bush's handling of the economy, 14% approve and 79% disapprove. ...
Wednesday, February 20, 2008
Bush Dismisses Iraq Recession: The War Has ‘Nothing To Do With The Economy’
Bush Dismisses Iraq Recession: The War Has ‘Nothing To Do With The Economy’
This morning on NBC’s Today Show, President Bush denied that the there’s any link between the faltering U.S. economy and $10 billion a month being spent on the Iraq war. In fact, according to Bush, the war is actually helping the economy:
CURRY: You don’t agree with that? It has nothing do with the economy, the war — spending on the war?
BUSH: I don’t think so. I think actually the spending in the war might help with jobs…because we’re buying equipment, and people are working. I think this economy is down because we built too many houses and the economy’s adjusting. ...
...
Five years after the U.S. invasion of Iraq, however, national unemployment is going up. Between December 2006 and December 2007, the national unemployment rate increased by 13.6 percent in seasonally adjusted terms, from 4.4 to 5.0 percent. Additionally, 68 percent of the American public believes that redeployment from Iraq would help fix the country’s economic woes. ...
Wall Street ... also may have duped borrowers and investors who supplied cash to fuel a housing boom that's turned bust ...
Wall Street Faces Fury Over Subprimes | MARK JEWELL | February 18, 2008 07:35 PM EST
BOSTON — Regulators are trying to punish Wall Street for mortgage finance practices that expanded home ownership and spread risk among a host of new players _ but also may have duped borrowers and investors who supplied cash to fuel a housing boom that's turned bust.
A handful of state securities regulators and a couple foreclosure-blighted cities have fired the opening shots with lawsuits trying to prove that investment banks and big lenders are guilty of more than just bad business decisions and failing to foresee looming mortgage troubles. Some regulators say greed and fraud underlie much of the subprime mortgage mess that has spread across the broader housing market, triggering a spike in foreclosures.
Aside from the civil cases, the FBI is looking at possible criminal action, focusing on what Wall Street firms knew about the risks of mortgage securities backed by subprime loans, and whether they hid risks from investors.
...
Attorneys general in New York and Ohio are targeting alleged systematic inflation of home appraisals by major lenders and appraisal firms. Litigation in Massachusetts and other states seeks to demonstrate that investment banks failed to disclose risks to investors who bought mortgage-related securities and weren't up front about conflicts of interest across their far-flung financial operations, including trading of subprime investments.
...
Criminal action also could be looming. The FBI said last month it was investigating 14 companies for possible accounting fraud, insider trading or other violations that could result in criminal charges. The FBI didn't identify companies but said the probe involves firms across the financial services industry. ...
BOSTON — Regulators are trying to punish Wall Street for mortgage finance practices that expanded home ownership and spread risk among a host of new players _ but also may have duped borrowers and investors who supplied cash to fuel a housing boom that's turned bust.
A handful of state securities regulators and a couple foreclosure-blighted cities have fired the opening shots with lawsuits trying to prove that investment banks and big lenders are guilty of more than just bad business decisions and failing to foresee looming mortgage troubles. Some regulators say greed and fraud underlie much of the subprime mortgage mess that has spread across the broader housing market, triggering a spike in foreclosures.
Aside from the civil cases, the FBI is looking at possible criminal action, focusing on what Wall Street firms knew about the risks of mortgage securities backed by subprime loans, and whether they hid risks from investors.
...
Attorneys general in New York and Ohio are targeting alleged systematic inflation of home appraisals by major lenders and appraisal firms. Litigation in Massachusetts and other states seeks to demonstrate that investment banks failed to disclose risks to investors who bought mortgage-related securities and weren't up front about conflicts of interest across their far-flung financial operations, including trading of subprime investments.
...
Criminal action also could be looming. The FBI said last month it was investigating 14 companies for possible accounting fraud, insider trading or other violations that could result in criminal charges. The FBI didn't identify companies but said the probe involves firms across the financial services industry. ...
Tuesday, February 12, 2008
[Republicans] not only starved the [government] through tax cuts for the rich and increased defense spending; they've just about dismembered it.
Financing the Common Good | Robert B. Reich | February 1, 2008
After three decades of government starvation of necessary resources, the next president needs to champion progressive taxation with the proceeds invested in social outlays that make for a more productive economy.
...
A new Democratic president will face many of the same challenges Bill Clinton faced at the start of his administration -- but all made worse by George W. Bush. Clinton, recall, inherited a fiscal straightjacket. At the start of 1993, the federal budget deficit was running $300 billion a year as far as the eye could see. Prior Republican administrations had sought to "starve the beast," going deep into the red by spending heavily on defense while at the same time cutting taxes.
A new Democratic president coming into office in 2009 will face a national debt much larger than it was in 1993. Despite the $5 trillion 10-year budget surplus that ended the Clinton years, the federal debt at the end of the Bush years will be almost $4 trillion larger than it was then. It will have grown about 70 percent during Bush's reign. If you assume 5 percent interest, the Bush debt burden will require the government to pay its creditors -- prominent among them, the Japanese and Chinese -- $200 billion a year, forever. That will use up a lot of tax revenue even before any of the nation's problems are addressed. In this way, George W. and company have done Reagan one better. They've not only starved the beast through tax cuts for the rich and increased defense spending; they've just about dismembered it.
Meanwhile, the fiscal demands facing a new Democratic president in 2009 are far greater than when Bill Clinton took office in 1993. Clinton's investment agenda in schools, job-training, health care, and infrastructure was badly needed then. Today, it's urgent. Inequality of income and wealth is wider and upward mobility has slowed. Our schools are worse than they were when Clinton became president, classrooms more overcrowded, and school buildings, falling apart. Job-training is almost nonexistent. At least 10 million more Americans lack health insurance than they did in 1993. Among the 13 wealthiest nations, America now ranks last or nearly last in infant mortality, low birth weight, and life expectancy. Some 5.3 million more Americans are living in poverty than when Bush became president. America's infrastructure is older and even more prone to breakage. From New Orleans levees to Minneapolis bridges to New York City's water lines, the nation is literally falling apart.
Add to all of this the pending retirements of baby boomers and the looming fiscal crisis of Medicare, which includes a giant subsidy to the pharmaceutical industry disguised as a Medicare drug benefit for the elderly. And the Alternative Minimum Tax about to hit the middle class unless a trillion dollars can be found somewhere. There is also the newly obvious need to support basic research in non–fossil based fuels. Finally, and tragically, the war in Iraq will cost the nation billions more. Even if we were to withdraw tomorrow, the future costs of disability and health care for tens of thousands of wounded veterans, many with spinal and brain injuries, will be staggering. ...
After three decades of government starvation of necessary resources, the next president needs to champion progressive taxation with the proceeds invested in social outlays that make for a more productive economy.
...
A new Democratic president will face many of the same challenges Bill Clinton faced at the start of his administration -- but all made worse by George W. Bush. Clinton, recall, inherited a fiscal straightjacket. At the start of 1993, the federal budget deficit was running $300 billion a year as far as the eye could see. Prior Republican administrations had sought to "starve the beast," going deep into the red by spending heavily on defense while at the same time cutting taxes.
A new Democratic president coming into office in 2009 will face a national debt much larger than it was in 1993. Despite the $5 trillion 10-year budget surplus that ended the Clinton years, the federal debt at the end of the Bush years will be almost $4 trillion larger than it was then. It will have grown about 70 percent during Bush's reign. If you assume 5 percent interest, the Bush debt burden will require the government to pay its creditors -- prominent among them, the Japanese and Chinese -- $200 billion a year, forever. That will use up a lot of tax revenue even before any of the nation's problems are addressed. In this way, George W. and company have done Reagan one better. They've not only starved the beast through tax cuts for the rich and increased defense spending; they've just about dismembered it.
Meanwhile, the fiscal demands facing a new Democratic president in 2009 are far greater than when Bill Clinton took office in 1993. Clinton's investment agenda in schools, job-training, health care, and infrastructure was badly needed then. Today, it's urgent. Inequality of income and wealth is wider and upward mobility has slowed. Our schools are worse than they were when Clinton became president, classrooms more overcrowded, and school buildings, falling apart. Job-training is almost nonexistent. At least 10 million more Americans lack health insurance than they did in 1993. Among the 13 wealthiest nations, America now ranks last or nearly last in infant mortality, low birth weight, and life expectancy. Some 5.3 million more Americans are living in poverty than when Bush became president. America's infrastructure is older and even more prone to breakage. From New Orleans levees to Minneapolis bridges to New York City's water lines, the nation is literally falling apart.
Add to all of this the pending retirements of baby boomers and the looming fiscal crisis of Medicare, which includes a giant subsidy to the pharmaceutical industry disguised as a Medicare drug benefit for the elderly. And the Alternative Minimum Tax about to hit the middle class unless a trillion dollars can be found somewhere. There is also the newly obvious need to support basic research in non–fossil based fuels. Finally, and tragically, the war in Iraq will cost the nation billions more. Even if we were to withdraw tomorrow, the future costs of disability and health care for tens of thousands of wounded veterans, many with spinal and brain injuries, will be staggering. ...
families have exhausted the coping mechanisms they have used for more than three decades to get by on median wages that are barely higher than 1970
America’s middle classes are no longer coping | By Robert Reich | Published: January 29 2008 19:10 | Last updated: January 29 2008 19:10
...
The fact is, middle-class families have exhausted the coping mechanisms they have used for more than three decades to get by on median wages that are barely higher than they were in 1970, adjusted for inflation. Male wages today are in fact lower than they were then: the income of a young man in his 30s is now 12 per cent below that of a man his age three decades ago. Yet for years now, America’s middle class has lived beyond its pay cheque. Middle-class lifestyles have flourished even though median wages have barely budged. That is ending and Americans are beginning to feel the consequences.
The first coping mechanism was moving more women into paid work. ... But we reached the limit to how many mothers could maintain paying jobs.
...
... When families could not paddle any harder, they started paddling longer. The typical American now works two weeks more each year than 30 years ago. Compared with any other advanced nation we are veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese. ... But there is also a limit to how long we can work. ...
... We began to borrow, big time. With housing prices rising briskly through the 1990s and even faster between 2002 and 2006, we turned our homes into piggy banks through home equity loans. Americans got nearly $250bn worth of home equity every quarter in second mortgages and refinancings. That is nearly 10 per cent of disposable income.
... The era of easy money is over. With the bursting of the housing bubble, home equity is drying up. As Moody’s reported recently, defaults on home equity loans have surged to the highest level this decade. Car and credit card debt is next. Personal bankruptcies rose 48 per cent in first half of 2007, probably even more in the second half, which means a wave of defaults on consumer loans. Meanwhile, as foreigners begin shifting out of dollars, we will no longer have access to cheap foreign goods and services.
In short, the anxiety gripping the middle class is not simply a product of the current economic slowdown. The underlying problem began around 1970. Any presidential candidate seeking to address it will have to think bigger than bailing out lenders and borrowers, or stimulating the economy with tax cuts and spending increases. ...
...
The fact is, middle-class families have exhausted the coping mechanisms they have used for more than three decades to get by on median wages that are barely higher than they were in 1970, adjusted for inflation. Male wages today are in fact lower than they were then: the income of a young man in his 30s is now 12 per cent below that of a man his age three decades ago. Yet for years now, America’s middle class has lived beyond its pay cheque. Middle-class lifestyles have flourished even though median wages have barely budged. That is ending and Americans are beginning to feel the consequences.
The first coping mechanism was moving more women into paid work. ... But we reached the limit to how many mothers could maintain paying jobs.
...
... When families could not paddle any harder, they started paddling longer. The typical American now works two weeks more each year than 30 years ago. Compared with any other advanced nation we are veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese. ... But there is also a limit to how long we can work. ...
... We began to borrow, big time. With housing prices rising briskly through the 1990s and even faster between 2002 and 2006, we turned our homes into piggy banks through home equity loans. Americans got nearly $250bn worth of home equity every quarter in second mortgages and refinancings. That is nearly 10 per cent of disposable income.
... The era of easy money is over. With the bursting of the housing bubble, home equity is drying up. As Moody’s reported recently, defaults on home equity loans have surged to the highest level this decade. Car and credit card debt is next. Personal bankruptcies rose 48 per cent in first half of 2007, probably even more in the second half, which means a wave of defaults on consumer loans. Meanwhile, as foreigners begin shifting out of dollars, we will no longer have access to cheap foreign goods and services.
In short, the anxiety gripping the middle class is not simply a product of the current economic slowdown. The underlying problem began around 1970. Any presidential candidate seeking to address it will have to think bigger than bailing out lenders and borrowers, or stimulating the economy with tax cuts and spending increases. ...
Friday, February 8, 2008
While us peons were distracted, our masters have brought back Debt Bondage
While us peons were distracted, our masters have brought back Debt Bondage | Edited on Tue Feb-05-08 05:43 PM by arendt
Historical peonage
Peonage is a system where laborers are bound in servitude until their debts are paid in full. Those bound by such a system are known, in the US, as peons. Employers may extend credit to laborers to buy from employer-owned stores at inflated prices. This method is a variation of the company store system, in which workers are exploited by agreeing to work for an insufficient amount of goods and/or services. In these circumstances, peonage is a form of unfree labor. Such systems have existed in many places at many times throughout history.
Modern views
According to Anti-Slavery International, "A person enters debt bondage when their labor is demanded as a means of repayment of a loan, or of money given in advance. Usually, people are tricked or trapped into working for no pay or very little pay (in return for such a loan), in conditions which violate their human rights. Invariably, the value of the work done by a bonded laborer is greater that the original sum of money borrowed or advanced."
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The sub-prime mortgage mess piles on top of usurious credit card rates and fees to create a perfect storm of peonage, not only for poor Americans, but also for the increasingly large percentage of the formerly middle class Americans who effectively have no assets.
The new Bankruptcy Laws (thanks Joe Biden, Senator - MBNA) are the chains and padlocks that will keep the new peons from fleeing - as if there were any jobs in America to which they might flee.
Welcome to debt peonage America, where children are locked into big box stores overnight to do shelf stocking, where single mothers get on buses to be bussed fifty miles away to work for chump change - as a condition of receiving welfare.
Historical peonage
Peonage is a system where laborers are bound in servitude until their debts are paid in full. Those bound by such a system are known, in the US, as peons. Employers may extend credit to laborers to buy from employer-owned stores at inflated prices. This method is a variation of the company store system, in which workers are exploited by agreeing to work for an insufficient amount of goods and/or services. In these circumstances, peonage is a form of unfree labor. Such systems have existed in many places at many times throughout history.
Modern views
According to Anti-Slavery International, "A person enters debt bondage when their labor is demanded as a means of repayment of a loan, or of money given in advance. Usually, people are tricked or trapped into working for no pay or very little pay (in return for such a loan), in conditions which violate their human rights. Invariably, the value of the work done by a bonded laborer is greater that the original sum of money borrowed or advanced."
...................
The sub-prime mortgage mess piles on top of usurious credit card rates and fees to create a perfect storm of peonage, not only for poor Americans, but also for the increasingly large percentage of the formerly middle class Americans who effectively have no assets.
The new Bankruptcy Laws (thanks Joe Biden, Senator - MBNA) are the chains and padlocks that will keep the new peons from fleeing - as if there were any jobs in America to which they might flee.
Welcome to debt peonage America, where children are locked into big box stores overnight to do shelf stocking, where single mothers get on buses to be bussed fifty miles away to work for chump change - as a condition of receiving welfare.
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