Economist's View: Reblog: Wow! Cash for Clunkers Worked!!

Economist's View: Reblog: Wow! Cash for Clunkers Worked!!

Reblogging Brad DeLong:

That surprises me. But Christy Romer and Chris Carroll have a graph: Did 'Cash-for-Clunkers' work as intended?:

via delong.typepad.com ...

The ‘mind-blowing’ surge of wealth inequality in America - Sahil Kapur - AntiPartisan - True/Slant

The ‘mind-blowing’ surge of wealth inequality in America - Sahil Kapur - AntiPartisan - True/Slant By SAHIL KAPUR

One of the most understated issues in American political discourse is the surging inequality of income and wealth. The Nation has a chart that sheds light on what’s going on.

Notice that the level of inequality was higher by 2006 than even just before the Great Depression. You can bet that figure has risen after the ‘08 bailouts, which (necessary as it may have been to prevent a catastrophic financial plunge) essentially funneled money from poor and working people into the pockets of wealthy financial institutions that participated in the economy’s decline. Heads they win, tails we lose.

FDR’s Fed chairman Marriner S. Eccles explained in kitchen-table discourse why this matter is so damaging to the national economy: “As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped,” he said.

Business Insider has an excellent slide show that adds depth and breadth to this phenomenon. Here’s one graphic (via the Institute for Policy Studies) showing that in 2007 the top 1 percent owned over a third of the nation’s wealth while the bottom 50 percent had a measly 2.5 percent.

Here’s what Dennis Kucinich told me a couple months ago: “Every area of the economy is still about taking wealth from the great mass of people and putting it into the hands of a few. If you don’t have a economic democracy, you don’t have a political democracy.” ...

Why the Obama economics plan is working - BusinessWeek.com- msnbc.com

Why the Obama economics plan is working - BusinessWeek.com- msnbc.com

By Mike Dorning

updated 11:58 a.m. CT, Fri., April 9, 2010

It's never easy to separate politics from policy, and the past 18 months have only increased the degree of difficulty. The U.S. has been through a historic financial crisis followed by a historic election and a series of historic federal gambles — from bailing out AIG and GM to passing a $787 billion stimulus and a $940 billion health-care reform bill. All that risk has made policy more complicated and politics more fraught ("You lie," "Baby killer").

A Bloomberg national poll in March found that Americans, by an almost 2-to-1 margin, believe the economy has gotten worse rather than better during the past year. The Market begs to differ. While President Obama's overall job approval rating has fallen to a new low of 44 percent, according to a CBS News Poll, down five points from late March, the judgment of the financial indexes has turned resoundingly positive. The Standard & Poor's 500-stock index is up more than 74 percent from its recessionary low in March 2009. Corporate bonds have been rallying for a year. Commodity prices have surged. International currency markets have been bullish on the dollar for months, raising it by almost 10 percent since Nov. 25 against a basket of six major currencies. Housing prices have stabilized. Mortgage rates are low. "We've had a phenomenal run in asset classes across the board," says Dan Greenhaus, chief economic strategist for Miller Tabak + Co., an institutional trading firm in New York. "If Obama was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the President."

Little more than a year ago, financial markets were in turmoil, major auto companies were on the verge of collapse and economists such as Paul Krugman were worried about the U.S. slumbering through a Japan-like Lost Decade. While no one would claim that all the pain is past or the danger gone, the economy is growing again, jumping to a 5.6 percent annualized growth rate in the fourth quarter of 2009 as businesses finally restocked their inventories. The consensus view now calls for 3 percent growth this year, significantly higher than the 2.1 percent estimate for 2010 that economists surveyed by Bloomberg News saw coming when Obama first moved into the Oval Office. ...

�� America: The Grim Truth: Information Clearing House -� ICH

�� America: The Grim Truth: Information Clearing House -� ICH

By Lance Freeman

April 08, 2010 "Information Clearing House" -- Americans, I have some bad news for you:

You have the worst quality of life in the developed world – by a wide margin.

If you had any idea of how people really lived in Western Europe, Australia, New Zealand, Canada and many parts of Asia, you’d be rioting in the streets calling for a better life. In fact, the average Australian or Singaporean taxi driver has a much better standard of living than the typical American white-collar worker.

I know this because I am an American, and I escaped from the prison you call home.

I have lived all around the world, in wealthy countries and poor ones, and there is only one country I would never consider living in again: The United States of America. The mere thought of it fills me with dread.

Consider this: you are the only people in the developed world without a single-payer health system. Everyone in Western Europe, Japan, Canada, Australia, Singapore and New Zealand has a single-payer system. If they get sick, they can devote all their energies to getting well. If you get sick, you have to battle two things at once: your illness and the fear of financial ruin. Millions of Americans go bankrupt every year due to medical bills, and tens of thousands die each year because they have no insurance or insufficient insurance. And don’t believe for a second that rot about America having the world’s best medical care or the shortest waiting lists: I’ve been to hospitals in Australia, New Zealand, Europe, Singapore, and Thailand, and every one was better than the “good” hospital I used to go to back home. The waits were shorter, the facilities more comfortable, and the doctors just as good.

This is ironic, because you need a good health system more than anyone else in the world. Why? Because your lifestyle is almost designed to make you sick.

Let’s start with your diet: Much of the beef you eat has been exposed to fecal matter in processing. Your chicken is contaminated with salmonella. Your stock animals and poultry are pumped full of growth hormones and antibiotics. In most other countries, the government would act to protect consumers from this sort of thing; in the United States, the government is bought off by industry to prevent any effective regulations or inspections. ...

...

I’ll let you in on little secret: if you go to the beaches of Thailand, the mountains of Nepal, or the coral reefs of Australia, you’ll probably be the only American in sight. And you’ll be surrounded crowds of happy Germans, French, Italians, Israelis, Scandinavians and wealthy Asians. Why? Because they’re paid well enough to afford to visit these places AND they can take vacations long enough to do so. Even if you could scrape together enough money to go to one of these incredible places, by the time you recovered from your jetlag, it would time to get on a plane and rush back to your job.

If you think I’m making this up, check the stats on average annual vacation days by country:

Finland: 44
Italy: 42
France: 39
Germany: 35
UK: 25
Japan: 18
USA: 12

The fact is, they work you like dogs in the United States. This should come as no surprise: the United States never got away from the plantation/sweat shop labor model and any real labor movement was brutally suppressed. Unless you happen to be a member of the ownership class, your options are pretty much limited to barely surviving on service-sector wages or playing musical chairs for a spot in a cubicle (a spot that will be outsourced to India next week anyway). ...

...

... In most countries in the developed world, higher education is either free or heavily subsidized; in the United States, a university degree can set you back over US$100,000. Thus, you enter the working world with a crushing debt. Forget about taking a year off to travel the world and find yourself – you’ve got to start working or watch your credit rating plummet....

...

If the people cannot make a change, how about the media? Not a chance. From Fox News to the New York Times, the mass media in the United States is nothing but the public relations wing of the corporatocracy, primarily the military industrial complex. At least the citizens of the former Soviet Union knew that their news was bullshit. In America, you grow up thinking you’ve got a free media, which makes the propaganda doubly effective. If you don’t think American media is mere corporate propaganda, ask yourself the following question: have you ever heard a major American news outlet suggest that the country could fund a single-payer health system by cutting military spending?

...

Robert L. Borosage: The Showdown with Chermany

Robert L. Borosage: The Showdown with Chermany

Where will the jobs come from? Double exports in five years, says President Obama. That offers a ray of hope in a bleak landscape -- the recovery act spending is winding down, states and localities are laying off employees, banks still are not making loans, and consumers are reeling from unemployment, stagnant wages, and losses in home values and retirement plans, Moreover, the US can't go back to the old economy where trade deficits reached 6% of GDP, and we were borrowing over $2 billion a day from abroad to pay for goods made elsewhere.

But if the US is to sell more abroad and borrow less, countries with trade surpluses -- notably Germany and China -- will have to spend more, buy more, save less and export less. That is the only way to reduce the dangerous and unsustainable imbalances in the global system that the G-20, governments, representing the leading economies in the world, agreed was essential to a secure recovery.

Only China and Germany clearly haven't got the message. The Chinese continue to manipulate their currency, now starkly undervalued against the dollar. This is a centerpiece of a comprehensive mercantilist policy to grow by dominating export markets. Germany, the world's second greatest surplus country, continues to restrain demand at home, while subsidizing its high end export engines.

Both countries reject any change of course. China's Premier Wen Jiabao scorned US pressure on the Chinese to revalue its currency, summoning up the wondrous gall to accuse the US and other countries of "protectionism" for seeking to depreciate their currencies. Germany's government similarly has spurned calls led by the French to increase demand domestically to help fuel European recovery.

Martin Wolf of the Financial Times, coins the neologism Chermany to describe these trading giants and highlights the absurdity of their position. The Germans are insisting that its trading partners in Europe - dramatized by the Greeks but truly represented by the French with deficits at about 9% GDP -embrace austerity to reduce their deficits rapidly. But if Europe is to avoid a deep recession and is to play its part in a global recovery, then Germany will have to buy more from its partners. It will have to kick up domestic demand and save less. By rejecting this course, the Germans could well push Europe back into recession.

Similarly, the Chinese demand that the US bolster the dollar by rolling back deficits and raising interest rates. And they want to sustain their export markets in the US. But the only result of this impossible combination would be crippling high unemployment here, and the export of a global recession. This isn't an acceptable outcome. ...

What The Top U.S. Companies Pay In Taxes

Forbes.com - Magazine Article
What The Top U.S. Companies Pay In Taxes
Christopher Helman, 04.01.10, 3:00 PM ETHOUSTON -

As you work on your taxes this month, here's something to raise your hackles: Some of the world's biggest, most profitable corporations enjoy a far lower tax rate than you do--that is, if they pay taxes at all.

The most egregious example is General Electric. Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.

Avoiding taxes is nothing new for General Electric. In 2008 its effective tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%.

...

Corporations are getting smarter, not just about doing more business in low-tax countries, but in moving their more valuable assets there as well. That means setting up overseas subsidiaries, then transferring to them ownership of long-lived, often intangible but highly profitable assets, like patents and software.

As a result, figures tax economist Martin Sullivan, companies are keeping some $28 billion a year out of the clutches of the U.S. Treasury by engaging in so-called transfer pricing arrangements, where, say, Microsoft's overseas subsidiaries license software to its U.S. parent company in return for handsome royalties (that get taxed at those lower overseas rates).

---

"Corporations are paying lower amounts of their profits in taxes now than in the past," says Douglas Schackelford, who teaches tax law at the University of North Carolina at Chapel Hill. "Other countries have been lowering their rates, but not the U.S."

Mind you, not all global megacorps enjoy such low tax rates. Try to muster some pity for Big Oil. ExxonMobil paid more income taxes than any other U.S. company last year, some $15 billion, or 47% of pretax earnings. Exxon's peers Chevron and ConocoPhillips likewise paid out more than half their earnings in income taxes. The oil companies are oddities among the multinationals because many of the oil-rich countries where they do business levy even higher taxes than the U.S.

Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. No wonder that of $15 billion in income taxes last year, Exxon paid none of it to Uncle Sam, and has tens of billions in earnings permanently reinvested overseas.

Likewise, GE has $84 billion in overseas income parked indefinitely outside the U.S.

Naturally the Obama administration wants to put an end to this. It has proposed doing away with tax deferrals on overseas income. If the plan passes, a U.S. company that pays a 25% tax on profits in China would have to pay an additional 10% income tax to Uncle Sam to bring it up to the 35% corporate rate. "Eliminating deferrals would put U.S. companies on an unlevel playing field," says the Tax Foundation's Hodge, "especially if competing with the likes of Germany, which only taxes companies on domestic operations." ...

In Pictures: What The 25 Top U.S. Companies Pay In Taxes

Flat Unemployment Rate Masks the Race Gap | CommonDreams.org

Flat Unemployment Rate Masks the Race Gap | CommonDreams.org

The U.S. economy added 162,000 jobs in March, but the unemployment rate held steady at 9.7 percent, according to new figures released by the Labor Department Friday.

On the whole, the economic news was mixed, but for African Americans, it was particularly troubling. The unemployment rate for whites held steady at 8.8 percent compared to February and went down for Asians from 8.4 percent to 7.5 percent. But it rose to 16.5 percent for blacks from 15.8 percent. Hispanics showed a slight increase as well from 12.4 percent to 12.6 percent.

"It's very disappointing," said Peter Edelman, a former Clinton administration official who directs the Center on Poverty, Inequality, and Public Policy at the Georgetown University.

While there have long been disparities in white and minority employment, Edelman said, the latest unemployment numbers from the Labor Department show that while "some white people got jobs, some black people and Latinos actually fell behind more."

"We're seeing a whole set of things happening in the recession that are making the inequity worse," said Seth Wessler, a researcher at the Applied Research Center, a racial justice think tank in Oakland.

Chief among those factors are the massive cuts meted out to public services on the state and local level, particularly to public transportation.

"If the bus line you depend on is cut, it's impossible to look for a job or even hold onto the one you have," Wessler said, "and we know that across the country - from New York to Los Angeles - bus service is being cut and fares are increasing."

"We know that people of color are much more likely to depend on public transportation," he added. "White people are not being impacted in quite the same way." ....

Corporate America Squeals About Welfare Cuts

Corporate America Squeals About Welfare Cuts

The Republican Party and major corporations have joined forces in the first major rearguard attack on health care reform, charging that the cost of complying with "Obamacare" is resulting in hundreds of millions of dollars in added business expenses.

The crime that reform is guilty of: Slashing corporate welfare.

Under the previous system, major corporations were subsidized by the government to provide prescription drug coverage to their employees. At the same time, corporations could claim on their tax returns that it was they -- not the taxpayers -- who paid for the drug coverage, and could write the expense off as a tax deduction.

Health care reform cuts out that fat. The corporations still get taxpayer money to help pay for their employees' drug coverage, but they can no longer continue the fiction that they're using their own money to do it.

Being forced to operate on a diet of leaner corporate welfare benefits will make U.S. companies less able to compete, Republicans argue. The charge-offs play into the line that Republicans are pushing -- namely that health care reform is a "job killer."

So far, Boeing, AT&T, AK Steel, 3M, Caterpillar, Deere, Prudential and Valero Energy have all said that reform is forcing them to take significant charge-offs on their balance sheet. The welfare cuts don't go into effect for several years, but accounting rules require the reduction to be taken in the year the law is passed.

"A jobs narrative is emerging in the wake of the CAT, John Deere, Verizon (and many other) announcements as it is becoming clear that the health care bill is having an immediate and negative effect on the economy," said Ken Spain, spokesman for the National Republican Congressional Committee. "In short, the bill is a job-killer." ...

Globalization Marches On | CommonDreams.org

Globalization Marches On | CommonDreams.org

Growing popular outrage has not challenged corporate power.

by Noam Chomsky

Shifts in global power, ongoing or potential, are a lively topic among policy makers and observers. One question is whether (or when) China will displace the United States as the dominant global player, perhaps along with India.

Such a shift would return the global system to something like it was before the European conquests. Economic growth in China and India has been rapid, and because they rejected the West's policies of financial deregulation, they survived the recession better than most. Nonetheless, questions arise.

...

Economist and China specialist Martin Hart-Landsberg explores the dynamic in a recentMonthly Review article. China has become an assembly plant for a regional production system. Japan, Taiwan and other advanced Asian economies export high-tech parts and components to China, which assembles and exports the finished products.

The Spoils of Power

The growing U.S. trade deficit with China has aroused concern. Less noticed is that the U.S. trade deficit with Japan and the rest of Asia has sharply declined as this new regional production system takes shape. U.S. manufacturers are following the same course, providing parts and components for China to assemble and export, mostly back to the United States. For the financial institutions, retail giants, and the owners and managers of manufacturing industries closely related to this nexus of power, these developments are heaven sent.

And well understood. In 2007, Ralph Gomory, head of the Alfred P. Sloan Foundation, testified before Congress, "In this new era of globalization, the interests of companies and countries have diverged. In contrast with the past, what is good for America's global corporations is no longer necessarily good for the American people."

Consider IBM. According to Business Week, by the end of 2008, more than 70 percent of IBM's work force of 400,000 was abroad. In 2009 IBM reduced its U.S. employment by another 8 percent.

For the work force, the outcome may be "grievous," in accordance with Smith's maxim, but it is fine for the principal architects of policy. Current research indicates that about one-fourth of U.S. jobs will be "offshorable" within two decades, and for those jobs that remain, security and decent pay will decline because of the increased competition from replaced workers.

This pattern follows 30 years of stagnation or decline for the majority as wealth poured into few pockets, leading to what has probably become the greatest inequality between the haves and the have-nots since the end of American slavery.

While China is becoming the world's assembly plant and export platform, Chinese workers are suffering along with the rest of the global work force. This is an unsurprising outcome of a system designed to concentrate wealth and power and to set working people in competition with one another worldwide.

Globally, workers' share in national income has declined in many countries-dramatically so in China, leading to growing unrest in that highly inegalitarian society. ...

Robert L. Borosage: Jobs, Focus, Jobs, Focus

Robert L. Borosage: Jobs, Focus, Jobs, Focus

The economy is said to be recovering, but the people are not. The jobs are gone, and haven't started to come back. 25 million people are in need of full time work. Incomes are stagnant; more and more are losing health care. Even the uptick in jobs that will be reported on Friday is misleading, reflecting temporary hiring for the census and recovery from snow bound February.

So what is the strategy? Obama initially got the big things right. A big recovery plan -- featuring deficit financed investment in infrastructure, aid to states and localities, a boost to new energy -- would stem the collapse and put people to work. The bank rescue would get the financial system lending again. Investments in new energy -- and in education, research and development and infrastructure -- would rebuild the economy on a new foundation, while capturing a leading role in the new green industrial revolution.

....

First, the president needs to explain to Americans where we are. That we can't wait for a recovery to create jobs, because there is no recovery to the old economy. That economy was based on debt financed bubbles that burst. We can't go back there and should not want to.

That requires we dig out of a very deep hole. This will take time. In the short term, the president should get back in front of the jobs debate in Washington. He put some $260 billion in his budget for jobs creation and unemployment support -- but has said little about it since. It is time to champion measures big enough to deal with the scope of the challenge. 105 co-sponsors have joined Rep. George Miller on legislation calling for $100 billion to go to localities and non-profits for jobs. Estimates are that it could save or generate over a million jobs. Conservatives in both parties scorn spending more money on jobs, even as layoffs of teachers and police and fire fighters increase. The president should take this on and champion the bill as one part of the response, calling for paying for it by reviving his tax on the banks to get our money back.

Then the White House should turn tax day, April 15, into trade day. On that date, the Treasury must decide whether to recognize reality and name China, among others, as a country that is manipulating its currency to gain trade advantage. Do it. Speak truth. Enlist allies to join. Declare that the US will no longer simply ignore the reality that some countries are playing by a different set of rules. While the president takes the issue to the G-20, the Congress will start hearing s on tariffs to counter the effect of undervalued currencies. The labor movement could launch a drive across the country to pass buy America standards for public procurement at the state and local level. The common sense proposition - that taxpayer dollars should be spent to create maximum jobs here, not abroad - is popular across the political divides.

The point of all of this is simple and necessary. China and the mercantilist nations have to be confronted with the reality that we are not going back to the old economy -- where the US borrows money to serve as the consumer of last resort to the world and they can depend totally on export led growth.

...

Arianna Huffington: When It Comes to Innovation, Is America Becoming a Third World Country?

Arianna Huffington: When It Comes to Innovation, Is America Becoming a Third World Country?

Is America turning into a third world country? That was the provocative topic of a panel I took part in last week at a conference sponsored by The Economist entitled "Innovation: Fresh Thinking For The Ideas Economy."

Once upon a time, the United States was the world's dominant innovator -- partly because we didn't have much competition. As a result of the destruction wreaked by WWII, the massive migration of brainpower to the U.S. caused by the war, and huge amounts of government spending, America had the innovation playing field largely to itself. None of these factors exist as we enter the second decade of the 21st century.

America now has plenty of countries it's competing with -- many of which are much more serious about innovation than we are. Just look at the numbers:

A report by the Information Technology and Innovation Foundation looked at the progress made over the last decade in the area of innovation. Out of the 40 countries and regions it examined, the U.S. ranked dead last.

A study on innovation by the Boston Consulting Group concluded that America is "disadvantaged in several key areas, including work force quality and economic, immigration, and infrastructure policies."

In 2009, patents issued to American applicants dropped by 2.3 percent. Those granted to foreign-based applicants increased by over 6 percent.

Why are we falling behind like this? For one thing, we've lost our educational edge. America once led the world in high school graduation rates. We are now ranked 18th out of 24 industrialized countries.

And the percentage of 15-year-olds performing at the highest levels of math is among the lowest. South Korea, Belgium and the Czech Republic, among others, have at least five times the number the U.S. does.

Plus, we are no longer investing in innovation. Until 1979, around 50 percent of all research and development funds were provided by the federal government. That number has fallen to 27 percent. And, during the 1990s, the bottom fell out of U.S. funding for applied science,dropping by 40 percent.

The economic crisis is also taking a toll on innovation. Venture capital investment in the U.S. for the first three quarters of 2009 was $12 billion. Over the first three quarters of 2008, it was $22 billion.

These numbers may not place us in the third world ... yet. But the trend is not a good one.

....

For starters, we need to kick our high-speed Internet plans into high gear. A robust, broadband-charged, countrywide information superhighway is going to be key to staying ahead of the innovation curve.

As FCC Chair Julius Genachowski explains, broadband isn't just important for faster email and video games -- it's the central nervous system for democracies and economies of the future:

Broadband is indispensable infrastructure for the 21st century. It is already becoming the foundation for our economy and democracy in the 21st century... [and] will be our central platform for innovation in the 21st century.

How indispensable is it? In a study of 120 countries, researchers found that every 10 percent increase in broadband adoption increased a country's GDP by 1.3 percent.

Unfortunately, when it comes to broadband, America is also falling behind.

In 2001, the United States ranked 4th among industrialized countries in broadband access. By last year, we had dropped to 15th. As for average broadband download speed, we rank19th.

Nearly 93 million Americans still don't have broadband in their homes. And while 82 percent of those who attend college in the U.S. have access to broadband, only 46 percent of high school graduates do.

To help close the widening gap between us and the rest of the digitally connected world, the Obama administration has proposed a National Broadband Plan, with the goal of increasing broadband access from around 65 percent currently to 90 percent by 2020. ...

Arianna Huffington: The Imperative Need for America to Become an Innovation Nation

On Monday, I wrote about the troubling state of America's commitment to innovation, spurred by a panel discussion I'd taken part in.

After the panel, I found myself having a fascinating follow-up discussion with a Harvard professor, a psychiatrist, a Broadway producer, a biotech entrepreneur, a business consultant, a film producer, an author, and a jazz musician.

It wasn't as crowded as it sounds since my conversation was with one person, John Kao. In his polymath career, Kao has taken on each of these roles. He now spends most of his time writing, lecturing, and advising governments and corporations on innovation.

Our talk about the importance of developing a "national innovation agenda" and having governments act as "impresarios" creating the conditions that allow a society to move forward in smarter, faster ways, was interrupted when Kao had to put on his jazz musician hat and go on stage to play. In keeping with the innovation theme, he and his fellow musician ended up improvising, to the delight of the crowd.

On my flight home, I started reading Kao's book, Innovation Nation, which he gave me as I was leaving the conference. It was both frightening and inspiring. Frightening because of the details it provides about the ways America is falling behind the rest of the world; inspiring because Kao imbues it with a sense of optimism and great possibility.

Yes, there is much to be concerned about -- evidence that we are heading in the wrong direction ("We are rapidly becoming the fat, complacent Detroit of nations," he writes). But Kao reminds us of all the times in the past America has rallied, marshalling its forces to innovate and rise to meet great challenges.

After Pearl Harbor, America's naval force was decimated. But, Kao points out, just three years later "America had a hundred aircraft carriers fully armed with new planes, pilots, tactics, and escort ships, backed by new approaches to logistics, training methods, aircraft plants, shipyards, and women workers" along with "such game changing innovations as the B-29... and nuclear fission."

Same with our reaction to the Soviet's launch of Sputnik, when "we responded with massive funding for education, revamped school curricula in science and math, and launched a flurry of federal initiatives that eventually put Neil Armstrong in position to make his 'giant leap for mankind.'"

So, even though we currently find ourselves "basking in our faded glory," Kao believes "America has the potential to become the first [Innovation Nation], a blend of enlightened self-interest and outward-reaching altruism." ...

...

Heartland hurt has many asking: Is China worth it? | McClatchy

Heartland hurt has many asking: Is China worth it? | McClatchy

By Kevin G. Hall | McClatchy Newspapers

SHARON, Pennsylvania — With a heavy heart, Wheatland Tube Co. President Bill Kerins surveys an empty lot where just a few years ago, a massive steel-pipe plant that employed hundreds of workers stood.

Needing to expand production, Wheatland purchased that plant in 2002. Within a few years, however, cheap imports of standard pipe from China surged from a meager 10 tons to more than 750,000 tons by 2007.

"It came in at prices we couldn't even consider competing with," Kerins said. "Finished product was brought in at less than our cost of raw materials."

Wheatland Tube sought relief through trade laws, but by the time the Bush administration acted, it was too late. The plant closed in 2007, and more than 200 jobs were lost.

The woes where western Pennsylvania meets northeast Ohio are the back story to the growing tension over China's trade policy and currency manipulation.

By April 15, the Treasury Department must declare whether it thinks that China manipulates its currency, the yuan, to give its own manufacturers a leg up on American competitors such as Wheatland Tube.

This fight over China's currency blossoms every spring in Washington, about the same time the cherry trees that ring the Tidal Basin do. This year, however, the U.S. economy's struggling to create jobs and reduce a high unemployment rate. That puts greater focus on what trade with China, now second only to Canada, means to U.S. jobs.

...

Another source of anger in the U.S. business community is China's "indigenous innovation policy," where state-owned companies are encouraged to "Buy China." A survey by the American Chamber of Commerce in China, published March 21, found that 37 percent of its members reported a drop in sales even before the policy took effect. The Buy China policy further disadvantages U.S. companies operating there.
...
"The yuan is undervalued by at least 25 (percent) to 40 percent," said Fred Bergsten, head of the Peterson Institute for International Economics, the leading free-trade voice among policy research organizations.

Unless China revalues its currency, he said, U.S. exports — a job-creation priority for the Obama administration — will continue to suffer from China's "blatant protectionism." He estimated that China's artificial exchange rate is costing the U.S. in the range of 1.5 million jobs.
...
China's now the third-largest market for U.S. exports behind Canada and Mexico, and is one of the most important destinations for U.S. agricultural products and a beacon for U.S. service providers. Restricting China trade isn't an option, Kirk suggested.

"Where do we think we will replace that $300 billion in exports if we unilaterally pull out of China?" he asked. "I think it's much more worth the effort to try to engage them, and try to get them to reform some of their manufacturing policies, not only to our benefit but to their benefit, which is the case President (Barack) Obama is making."
...

Read more: http://www.mcclatchydc.com/2010/03/25/91084/heartland-hurt-has-many-asking.html#storylink=omni_popular#ixzz0jLI74zcl

Tight job market is squeezing out young workers | McClatchy

Tight job market is squeezing out young workers | McClatchy

By Tony Pugh | McClatchy Newspapers

WASHINGTON — Teens and young adults, short on experience and skills, have been giving up the job search at higher rates than other workers are during this great recession.

Frustrated by a lean job market, nearly 1.3 million workers ages 16 to 24 have left the labor force since the recession hit in December 2007. That's about 6 percent of them, and it's nearly three and a half times the exodus rate of workers ages 25 to 54.

With a jobless rate of 18.5 percent for 16- to 24-year-olds, some have gone back to school, some are volunteering, some are joining the military and some are just chilling at home until the economy heats up again.

...

Read more: http://www.mcclatchydc.com/2010/03/24/90996/tight-job-market-is-squeezing.html#ixzz0jFeC2Bho

FT.com / UK - Recovery depends on Main Street

FT.com / UK - Recovery depends on Main Street

By Robert Reich

Published: March 24 2010 02:00 | Last updated: March 24 2010 02:00

Can the American economy recover if only its big global companies, Wall Street and high-income Americans are doing better, but its small businesses and middle and lower-income Americans are not? The short answer is no.

The earnings of companies in the Standard & Poor's 500 stock index tripled in the fourth quarter, but this does not mean the rest of the US economy is doing well. Much of their sales were into fast-growing markets in places like India, China and Brazil. Meanwhile, they continued to slash jobs and cut costs at home.

Alcoa, for example, had $1.5bn in cash at the end of 2009, double what it had on hand at the end of 2008. Sounds terrific until you realise how it did it. By cutting 28,000 jobs - 32 per cent of its workforce - and slashing capital expenditures 43 per cent.

Nor does the fact that big US companies have lots of cash signal a broader recovery. The S&P 500 are now holding $932bn in cash and short-term investments and can borrow cheaply. So far in 2010, big US corporations have issued $195.2bn of debt, excluding government-guaranteed bonds. But this cash is not going into new investment. Much is being used to buy other companies, which usually leads to more job losses.

Much of the rest is being used to buy back their own stock in order to boost their share prices. There were 62 such buy-backs in February, valued at $40.1bn - the biggest share buy-back since September 2008. The major beneficiaries are shareholders, including top executives, whose pay is linked to share prices. But the buy-backs do nothing for most Americans.

None of this is stopping supply-side fanatics from arguing government needs to cut taxes on big corporations to spur the recovery. Their argument is absurd. Big companies do not know what to do with all the cash they have as it is. They are not investing it in new plant or jobs. So why should the government cut their taxes and enlarge their cash hoards even more?

The picture on Main Street is the opposite. Small businesses are not selling much as they have to rely on American consumers and Americans still are not buying much.

Small businesses are also finding it hard to get credit. In a credit survey in February from the National Federation of Independent Businesses, only 34 per cent of small businesses reported normal and adequate access to credit. Not incidentally, the NFIB's Small Business Optimism Index fell 1.3 points last month.

While big companies are finding it easy to borrow in the bond markets, smaller companies depend on bank credit, whose supply remains limited. Last year, total bank lending fell 7.4 per cent, the biggest decline in almost 60 years, and there is no sign of a turnround. To the contrary, a rising number of commercial loans are going bad. Banks still face further losses on mortgages and commercial loans so lack the reserves to increase lending.

This is a problem because companies with fewer than 100 employees accounted for almost half of net job growth during the last two recoveries, according to the US Labor Department's Bureau of Labor Statistics. ,,,

Craig D. Rose: On to the Unemployment Crisis

Craig D. Rose: On to the Unemployment Crisis

Okay, health care is done, now a quick deep breath and on to a bigger crisis: how to get millions of Americans back to work.

The gross numbers alone are daunting:

- Nearly 15 million people flat out unemployed.

- Almost 9 million working part-time because they can’t find full-time work

Millions more marginally attached workers or so-called discouraged and not counted as unemployed.

The bottom line is that America needs more than 10 million jobs just to get back to where we were two years ago. That would be difficult enough if we had at least begun adding jobs. But the U.S. economy continues to lose jobs.

The problem is so deep that even those with jobs are affected. That’s because that vast army of the unemployed is depressing incomes for those who do have jobs, according the Bureau of Labor Statistics, which pegs the decline in income at 1 percent for year ending February.

If the unemployment is rightfully deemed a crisis, the future offers little prospect of relief.

This past week the Obama administration’s economic team, led by Treasury Secretary Timothy Geithner, told Congress it expects the economy to generate about 100,000 per month for the remainder of this year. That’s better than losing jobs but 100,000 jobs monthly is barely what’s needed to keep pace with new workers entering the job market.

In other words, 100,000 jobs monthly would hold lock things at the status quo.

Further ahead, Geithner and company predict the unemployment rate – now 9.7 percent nationally and 12.5 percent in California – will edge down to 8.9 percent by the close of 2011. I don’t think I’ll hold either my breath or the Champagne for that prospect.

What should make this all the more scary is that none of the plans being offered for dealing with unemployment even pretend to deal with the scope of the problem.

...

Rather than a credit crunch, we have a debt crisis at nearly every level - personal, state, federal and financial. (Oh, that’s right; we took care of the debt problem on Wall Street. What a load off my mind.)

Think American innovation will bail us out?

Well, while the U.S. was inventing synthetic collateralized debt obligations (don’t ask, but as Counterpunch readers now we all own them since taxpayers bailed out AIG), China was blowing past us in the manufacture of wind turbines and photovoltaic panels.

Oh, our engineers can beat their engineers?

Maybe, but will our engineers work for $9,000 annually – that’s going rate for these technical workers in China. With a master’s degree, no less.

Think training will get America? We’ve all heard that one and it’s true that employment in certain technical niches has increased (though not for electrical engineers and computer programmers). But there’s no way these technical occupations can absorb the millions who need work.

And keep this in mind: This past week the top scientist at Advanced Materials, a Silicon Valley company which is the world’s largest supplier of equipment to make semiconductors and photovoltaic, said he was moving to China. According to the New York Times, “companies are concluding their researchers need to be close to factories and consumers.”

Factories – remember those? What we forgot as we watched a third of America’s manufacturing move abroad is that this sector employs more scientists and technical workers than any other.

There’s ample evidence that things would have been much worse without the stimulus package passed last year. Most estimates are that we’d have roughly two million fewer jobs now without that program.

But for those looking for a plausible plan to get back to a reasonable level of employment, there’s little on the table now but despair.

Of course, many with a deep-seated faith in the ability of the US economy to renew itself, to come up with the latest widget, and to generate jobs may believe the absence of serious programs for unemployment is a good thing. Government tinkering will only cause harm, they say. Let the free market reign.

Well, if you believe that one, AIG has got a deal for you: billions of dollars in synthetic collateralized debt obligations. And there are thousands of financial wizards who can tell you how they work.

What they can’t explain is how to get America back to work.

Craig D. Rose is a San Diego-based journalist who writes about energy and the economy.

Massive Change in US Student Loans Slipped in to Bill | CommonDreams.org

Massive Change in US Student Loans Slipped in to Bill | CommonDreams.org

The Democratic-led U.S. House of Representatives Sunday approved President Barack Obama’s bid to implement what would be the biggest overhaul in decades of the federal student loan program.

Under the legislation, federal subsidies to private student loan lenders would stop and the government’s role in lending would increase – creating billions of dollars in projected savings that would go largely in grants to needy students.

The measure, opposed by private lenders and critics of an expanding federal government, was included in a package of proposed changes to an overhaul of the U.S. health care system.

The House passed the package after giving final approval to the health care bill that is ready for Mr. Obama to sign into law.

...

Mostly Republican critics complain the action would amount to an unwarranted government takeover of the program and reduce students’ options in securing a loan.

But primarily Democratic backers argue it would eliminate the middle men – private lenders – from the process, allowing the government to save billions of dollars.

The measure would cut banks and student loan giant Sallie Mae out of most of the $92-billion (U.S.) college student loan business and require that all federal students loans originate with the government.

Private lenders would still have a role in servicing loans, such as helping collect them. Direct federal loans, unlike loans by banks, must be serviced by U.S. workers.

“This is good for students, taxpayers and American jobs,” said House Education Committee Chairman George Miller, a Democrat.

Non-partisan congressional budget analysts project that the measure would save about $61-billion over 10 years. Savings would go increased federal grants to the neediest students as well as to other education programs, including funding of community and historically black colleges.

While the House approved the measure last year, it stalled in the Senate in the face of a threatened Republican procedural hurdle that take 60 votes in the 100-member chamber to clear.

Democrats, however, now plan to bring up the measure in a manner that would require only a simply majority, 51 votes, to pass....

Op-Ed Columnist - Taking On China and Its Currency - NYTimes.com

Op-Ed Columnist - Taking On China and Its Currency - NYTimes.com

Published: March 14, 2010

Tensions are rising over Chinese economic policy, and rightly so: China’s policy of keeping its currency, the renminbi, undervalued has become a significant drag on global economic recovery. Something must be done.

To give you a sense of the problem: Widespread complaints that China was manipulating its currency — selling renminbi and buying foreign currencies, so as to keep the renminbi weak and China’s exports artificially competitive — began around 2003. At that point China was adding about $10 billion a month to its reserves, and in 2003 it ran an overall surplus on its current account — a broad measure of the trade balance — of $46 billion.

Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure. This is the most distortionary exchange rate policy any major nation has ever followed.

And it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset.

So how should we respond? First of all, the U.S. Treasury Department must stop fudging and obfuscating. ....

Economist's View: "US Sprawl is not a Market Outcome"

Economist's View: "US Sprawl is not a Market Outcome"

I think John Stossel should be ignored when it comes to economics, he either doesn't know what he is talking about or he is willing to mislead people. For example, he was still claiming that tax cuts pay for themselves long after it should have been clear to any decent journalist that this was a false claim (he went so far as as late as 2007 -- long after the "Bush tax cuts paid for themselves" myth had been thoroughly debunked -- to say he wasn't sure the Bush tax cuts were desirable since the extra revenue the tax cuts generated will allow government to grow larger).

But whether I think John Stossel and his predictable libertarian views should be ignored or not, people are responding to his latest column claiming that urban sprawl is good (because, to a libertarian, it is very rare that government can improve upon market outcomes no matter how bad the market outcome might be). Richard Green explains how zoning laws discourage mixed use development and promote urban sprawl, and how zoning laws are used to keep the poor from locating in certain areas:

US sprawl is not a market outcome, by Richard Green: A discussion is going around the internet about John Stossel's "libertarian" piece on the virtues of sprawl. John Norquist, on the other hand, labels sprawl a "communist plot," and Matthew Yglesias notes how bulk zoning requirements promote sprawl.

A point John likes to make is sprawl is at least in part the result of government housing finance policy. The New York Times this morning:

I.R.S. requirement keeps the agency from acquiring mortgages made in buildings where more than 20 percent of the square footage is commercial — space that is used for, say, a hotel or a doctor’s office.

Mixed use development is not going to happen if it can't get financed. Most of Paris, London, large swaths of San Francisco (i.e., some of our best urban places) would not qualify for US housing finance rules. And of course, single use zoning would ban them all.

But most insidious is that zoning is used as a tool to keep low-to-moderate income people out of suburbs. The town next door to mine--San Marino--has zoning requirements so onerous that it is not possible to build small housing there. Even my town, Pasadena, which at least has a bunch of apartments, prevents construction of granny flats on lots smaller than 15,000 square feet. These rules keep out the poor, which reduces expenditures on social services, which makes property values higher, which keeps out the poor, which...

Of course poor people must live somewhere, and so they live in cities with old housing stock that was built before the era of stringent zoning. So cities with old housing stock are placed at a fiscal disadvantage, which induces people with means to leave, which puts them at a greater fiscal disadvantage, etc...

OpEdNews - Article: The Offshored Economy

OpEdNews - Article: The Offshored Economy
By Paul Craig Roberts (about the author)

In the 20th century, Detroit, Michigan, symbolized American industrial might. Today it symbolizes the off-shored economy.

Detroit's population has declined by half. A quarter of the city -- 35 square miles -- is desolate with only a few houses still standing on largely abandoned streets. If the local government can get the money from Washington, urban planners are going to shrink the city and establish rural areas or green zones where neighborhoods used to be.

President Obama and economists provide platitudes about recovery. But how does an economy recover when its economic leaders have spent more than a decade moving high productivity, high value-added middle class jobs offshore along with the Gross Domestic Product associated with them?

Some very discouraging reports have been issued this month from the Bureau of Labor Statistics. There have been record declines in both jobs and hours worked. At the end of last year, the U.S. economy had fewer jobs than at the end of 1997, 12 years ago. Hours worked at the end of last year were less than at the end of 1995, 14 years ago.

The average work week is falling and currently stands at 33.1 hours for non-supervisory workers.

In a major problem for economic theory, labor productivity or output per man hour and labor compensation have diverged markedly over the last decade. Wages are not rising with productivity. Perhaps the explanation lies in the productivity data. Susan Houseman found that U.S. labor productivity statistics might actually be reflecting the low wages paid to off-shored labor. An American company with production in the U.S. and China, for example, produces aggregate results in labor output and labor compensation. The productivity statistics thus measure the labor productivity of global corporations, not that of U.S. labor.

Charles McMillion has pointed out that unit labor costs actually fell during 2009, but that non-labor costs have been rising throughout the decade. The rise in non-labor costs perhaps reflects the decline in the dollar's foreign exchange value and the increased dependence on imported factors of production.

Economists and policymakers tend to blame auto management and unions for Detroit's fall. However, American manufacturing has declined across the board. Evergreen Solar recently announced that it is shifting its production of solar fabrication and assembly from Massachusetts to China.

A U.S. Department of Commerce study of the precision machine tool industry has found that the U.S. comes in last. The U.S. industry has a shrinking market share and the smallest increase in export value. The Commerce Department surveyed American end-users of precision machine tools and found that imports accounted for 70 percent of purchases. Some U.S. distributors of precision machine tools do not even carry U.S. brands.

The financial economy which was to replace the industrial economy is nowhere in sight. The U.S. has only five banks in the world's top 50 by size of assets. The largest U.S. bank, JPMorgan Chase ranks seventh. Germany has seven banks in the top 50, and the United Kingdom and France each have six. Japan and China each have five banks in the top 50, and together the small countries of Switzerland and the Netherlands have six with combined assets $1.185 trillion more than the five largest U.S. banks.

Moreover, after the derivative fraud perpetrated on the world's banks by the U.S. investment banks, there is no prospect of any country trusting American financial leadership.

The American economic and political leadership has used its power to serve its own interests at the expense of the American people and their economic prospects. By enriching themselves in the short-run, they have driven the U.S. economy into the ground. The U.S. is on a path to becoming a Third World economy.