Census report: Half of Americans poor or near poor

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By Andre Damon
22 October 2014

Forty-seven percent of Americans have incomes under twice the official poverty rate, making half of the country either poor or near-poor, according to figures released last week by the Census Bureau.

These figures are based on the Census Bureau’s Supplemental Poverty Measure (SPM), which takes into account government transfers and the regional cost-of-living in calculating the poverty rate. According to that calculation, there were 48.7 million people in poverty in the United States, three million higher than the official census figures released last month. The US poverty rate, according to the SPM, was 15.5 percent.

Data from the Census Bureau report

The release of these figures, as well as last month’s official poverty figures, have been greeted with silence in the media, despite the fact that the US is a mere two weeks away from a midterm election. As with every major social and political question, the issues of poverty and social inequality are being totally excluded from debate and discussion in the elections and ignored by the two big business parties.

The figures follow the release of a series of reports and studies documenting the growth of social inequality in the United States. Last week, Credit Suisse reported that the top one percent of the world’s population controls nearly half of all wealth, and that the United States has nearly ten times more super-wealthy people than any other country.

The census figures “show that poverty is still a major problem in the US,” said Christopher Wimer, Co-Director of the Center on Poverty and Social Policy at Columbia University, in a telephone interview Tuesday.

He said the SPM begins with a slightly higher poverty threshold then the official poverty figure, and then adjusts it based on the local cost of living and the prices of necessities of life.

As a result, both the poverty rate and the number of people in poverty are slightly higher than under the official poverty figure. But the biggest difference is that the more sophisticated supplemental measure shows the extent to which a much broader section of the population is struggling to make ends meet. “Because the supplemental poverty measure subtracts non-discretionary income, you get a lot more people hovering close to the poverty line,” Dr. Wimer said.

The official poverty threshold is calculated as “three times the cost of a minimum food diet in 1963,” adjusted for inflation. By that calculation, the poverty threshold of an adult living alone is $11,888, and an adult with two children is $18,769, both of which are absurdly low.

Since the SPM takes into account regional differences in the cost of living, it better reflects the true prevalence of poverty in high cost-of-living states, such as California, and cities, such as New York City.

“The supplemental poverty measure reflects the fact that the cost of living is much higher in many major metropolitan areas,” Dr. Wimer said. “Those areas also tend to have higher population densities, so that ends up affecting a lot of people.”

Based on the latest Census numbers, nearly one in four people in California lives below the poverty line. Using the supplemental measure, California has a poverty rate of 23.4 percent, compared with the state’s official poverty figures of about 16 percent.

Dr. Wimer said he and fellow researchers at Columbia University have followed a methodology similar to that used by the Census Bureau’s Supplemental Poverty Measure to study economic hardship among a representative sample of New York City residents.

They found that nearly a quarter of the city’s residents were in poverty—23 percent, compared to the official poverty rate of about 21 percent. Fifty-five percent of New York City residents had an income of below twice the poverty line.

Thirty-seven percent of New York City residents were affected by what the survey called “severe material hardships,” including “staying at a shelter, moving in with others or having utilities shut off.” The report added, “If we consider the number of New Yorkers who suffer moderate, if not truly severe, material adversity, the number climbs to 6 in 10 New Yorkers.”

Based on these findings, the report concluded, “Nearly two-thirds of New York City residents struggled to make ends meet at some point during 2012.”

The wealth of the super-rich, meanwhile, continues to soar, with the net worth of the Forbes 400 richest people in the United States surging 13 percent last year. Fifty-two members of the Forbes 400 resided in New York City, more than twice the number living in any other city.

Dr. Wimer noted that the Census SPM report shows the role played by government anti-poverty programs in keeping large sections of the population out of destitution. To the extent that there has been a decline in poverty in recent decades, “it is not driven by market income; the reduction has been coming from government policies and programs such as food stamps and unemployment insurance,” he said.

According to the Census SPM report, food stamps kept two percent of the population out of poverty in 2012, while unemployment insurance kept about one percent of the population out of poverty. The census figures reflect cutbacks in both of these programs in 2013.

With the expiration of federal extended unemployment benefits for the long-term unemployed at the end of last year, together with additional cutbacks to food stamps, the number of people affected by cuts to these vital anti-poverty programs will only increase.

Cuts to these programs have been implemented and supported by both the Democrats and Republicans. The Obama administration’s 2015 budget proposal, for example, calls for slashing the budget of the Department of Health and Human Services, which funds the Head Start preschool program, and the Department of Agriculture, which administers the food stamp program, by more than five percent.

 

http://www.wsws.org/en/articles/2014/10/22/pove-o22.html

Who Gives More of Their Money to Charity?

People Who Make More or Less Than $200k a Year?

Philanthropy and income have an inverse relationship.

Billionaire CEO Nicholas Woodman, news reports trumpeted earlier this month, has set aside $450 million worth of his GoPro software stock to set up a brand-new charitable foundation.

“We wake up every morning grateful for the opportunities life has given us,” Woodman and his wife Jill noted in a joint statement. “We hope to return the favor as best we can.”

Stories about charitable billionaires have long been a media staple. The defenders of our economic order love them — and regularly trot them out to justify America’s ever more top-heavy concentration of income and wealth.

Our charities depend, the argument goes, on the generosity of the rich. The richer the rich, the better off our charitable enterprises will be.

But this defense of inequality, analysts have understood for quite some time, holds precious little water. Low- and middle-income people, the research shows, give a greater share of their incomes to charity than people of decidedly more ample means.

The Chronicle of Philanthropy, the nation’s top monitor of everything charitable, last week dramatically added to this research.

Between 2006 and 2012, a new Chronicle analysis of IRS tax return data reveals, Americans who make over $200,000 a year decreased the share of their income they devote to charity by 4.6 percent.

Over those same years, a time of recession and limited recovery, these same affluent Americans saw their own incomes increase. For the nation’s top 5 percent of income earners, that increase averaged 9.9 percent.

By contrast, those Americans making less than $100,000 actually increased their giving between 2006 and 2012. The most generous Americans of all? Those making less than $25,000. Amid the hard times of recent years, low-income Americans devoted 16.6 percent more of their meager incomes to charity.

Overall, those making under $100,000 increased their giving by 4.5 percent.

In the half-dozen years this new study covers, the Chronicle of Philanthropy concludes, “poor and middle class Americans dug deeper into their wallets to give to charity, even though they were earning less.”

America’s affluent do still remain, in absolute terms, the nation’s largest givers to charity. In 2012, the Chronicle analysis shows, those earning under $100,000 handed charities $57.3 billion. Americans making over $200,000 gave away $77.5 billion.

But that $77.5 billion pales against at how much more the rich could — rather painlessly — be giving. Between 2006 and 2012, the combined wealth of the Forbes 400 alone increased by $1.04 trillion.

What the rich do give to charity often does people truly in need no good at all. Wealthy people do the bulk of their giving to colleges and cultural institutions, notes Chronicle of Philanthropy editor Stacy Palmer. Food banks and other social service charities “depend more on lower income Americans.”

Low- and middle-income people, adds Palmer, “know people who lost their jobs or are homeless.” They’ve been sacrificing “to help their neighbors.”

America’s increasing economic segregation, meanwhile, has left America’s rich less and less exposed to “neighbors” struggling to get by. That’s opening up, says Vox policy analyst Danielle Kurtzleben, an “empathy gap.”

“After all,” she explains, “if I can’t see you, I’m less likely to help you.”

The more wealth concentrates, the more nonprofits chase after these less-than-empathetic rich for donations. The priorities of these rich, notes Kurtzleben, become the priorities for more and more nonprofits.

The end result? Elite universities get mega-million-dollar donations to build mahogany-appointed students dorms. Art museums get new wings. Hospitals get windfalls to tackle the diseases that spook the high-end set.

Some in that set do seem to sense the growing disconnect between real need and real resources. Last week billionaire hedge fund manager David Einhorn announced a $50 million gift to help Cornell University set students up in “real-world experiences” that address the challenges hard-pressed communities face.

“When you go out beyond the classroom and into the community and find problems and have to deal with people in the real world,” says Einhorn, “you develop skills for empathy.”

True enough — but in a society growing ever more unequal and separate, not enough. In that society — our society — the privileged will continue to go “blind to how people outside their own class are living,” as Danielle Kurtzleben puts it.

We need, in short, much more than Empathy 101. We need more equality.

Labor journalist Sam Pizzigati, an Institute for Policy Studies associate fellow, writes widely about inequality. His latest book is “The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970.”

 

http://www.alternet.org/economy/guess-who-gives-more-their-money-charity-people-who-make-more-or-less-200k-year?akid=12386.265072.PjWDq0&rd=1&src=newsletter1023920&t=15&paging=off&current_page=1#bookmark

Obama Is a Republican

He’s the heir to Richard Nixon, not Saul Alinsky.

illustration by Michael Hogue

illustration by Michael Hogue

Back in 2008, Boston University professor Andrew Bacevich wrote an article for this magazine making a conservative case for Barack Obama. While much of it was based on disgust with the warmongering and budgetary profligacy of the Republican Party under George W. Bush, which he expected to continue under 2008 Republican nominee Sen. John McCain, Bacevich thought Obama at least represented hope for ending the Iraq War and shrinking the national-security state.

I wrote a piece for the New Republic soon afterward about the Obamacon phenomenon—prominent conservatives and Republicans who were openly supporting Obama. Many saw in him a classic conservative temperament: someone who avoided lofty rhetoric, an ambitious agenda, and a Utopian vision that would conflict with human nature, real-world barriers to radical reform, and the American system of government.

Among the Obamacons were Ken Duberstein, Ronald Reagan’s chief of staff; Charles Fried, Reagan’s solicitor general; Ken Adelman, director of the Arms Control and Disarmament Agency for Reagan; Jeffrey Hart, longtime senior editor of National Review; Colin Powell, Reagan’s national security adviser and secretary of state for George W. Bush; and Scott McClellan, Bush’s press secretary. There were many others as well.

According to exit polls in 2008, Obama ended up with 20 percent of the conservative vote. Even in 2012, after four years of relentless conservative attacks, he still got 17 percent of the conservative vote, with 11 percent of Tea Party supporters saying they cast their ballots for Obama.

They were not wrong. In my opinion, Obama has governed as a moderate conservative—essentially as what used to be called a liberal Republican before all such people disappeared from the GOP. He has been conservative to exactly the same degree that Richard Nixon basically governed as a moderate liberal, something no conservative would deny today. (Ultra-leftist Noam Chomsky recently called Nixon “the last liberal president.”)

Here’s the proof:

Iraq/Afghanistan/ISIS

One of Obama’s first decisions after the election was to keep national-security policy essentially on automatic pilot from the Bush administration. He signaled this by announcing on November 25, 2008, that he planned to keep Robert M. Gates on as secretary of defense. Arguably, Gates had more to do with determining Republican policy on foreign and defense policy between the two Bush presidents than any other individual, serving successively as deputy national security adviser in the White House, director of Central Intelligence, and secretary of defense.

Another early indication of Obama’s hawkishness was naming his rival for the Democratic nomination, Sen. Hillary Clinton, as secretary of state. During the campaign, Clinton ran well to his right on foreign policy, so much so that she earned the grudging endorsement of prominent neoconservatives such as Bill Kristol and David Brooks.

Obama, Kristol told the Washington Post in August 2007, “is becoming the antiwar candidate, and Hillary Clinton is becoming the responsible Democrat who could become commander in chief in a post-9/11 world.” Writing in the New York Times on February 5, 2008, Brooks praised Clinton for hanging tough on Iraq “through the dark days of 2005.”

Right-wing columnist Ann Coulter found Clinton more acceptable on national-security policy than even the eventual Republican nominee, Senator McCain. Clinton, Coulter told Fox’s Sean Hannity on January 31, 2008, was “more conservative than he [McCain] is. I think she would be stronger in the war on terrorism.” Coulter even said she would campaign for Clinton over McCain in a general election match up.

After Obama named Clinton secretary of state, there was “a deep sigh” of relief among Republicans throughout Washington, according to reporting by The Daily Beast’s John Batchelor. He noted that not a single Republican voiced any public criticism of her appointment.

By 2011, Republicans were so enamored with Clinton’s support for their policies that Dick Cheney even suggested publicly that she run against Obama in 2012. The irony is that as secretary of state, Clinton was generally well to Obama’s left, according to Vali Nasr’s book The Dispensable Nation. This may simply reflect her assumption of state’s historical role as the dovish voice in every administration. Or it could mean that Obama is far more hawkish than conservatives have given him credit for.

Although Obama followed through on George W. Bush’s commitment to pull U.S. troops out of Iraq in 2011, in 2014 he announced a new campaign against ISIS, an Islamic militant group based in Syria and Iraq.

Stimulus/Deficit

With the economy collapsing, the first major issue confronting Obama in 2009 was some sort of economic stimulus. Christina Romer, chair of the Council of Economic Advisers, whose academic work at the University of California, Berkeley, frequently focused on the Great Depression, estimated that the stimulus needed to be in the range of $1.8 trillion, according to Noam Scheiber’s book The Escape Artists.

The American Recovery and Reinvestment Act was enacted in February 2009 with a gross cost of $816 billion. Although this legislation was passed without a single Republican vote, it is foolish to assume that the election of McCain would have resulted in savings of $816 billion. There is no doubt that he would have put forward a stimulus plan of roughly the same order of magnitude, but tilted more toward Republican priorities.

A Republican stimulus would undoubtedly have had more tax cuts and less spending, even though every serious study has shown that tax cuts are the least effective method of economic stimulus in a recession. Even so, tax cuts made up 35 percent of the budgetary cost of the stimulus bill—$291 billion—despite an estimate from Obama’s Council of Economic Advisers that tax cuts barely raised the gross domestic product $1 for every $1 of tax cut. By contrast, $1 of government purchases raised GDP $1.55 for every $1 spent. Obama also extended the Bush tax cuts for two years in 2010.

It’s worth remembering as well that Bush did not exactly bequeath Obama a good fiscal hand. Fiscal year 2009 began on October 1, 2008, and one third of it was baked in the cake the day Obama took the oath of office. On January 7, 2009, the Congressional Budget Office projected significant deficits without considering any Obama initiatives. It estimated a deficit of $1.186 trillion for 2009 with no change in policy. The Office of Management and Budget estimated in November of that year that Bush-era policies, such as Medicare Part D, were responsible for more than half of projected deficits over the next decade.

Republicans give no credit to Obama for the significant deficit reduction that has occurred on his watch—just as they ignore the fact that Bush inherited an projected budget surplus of $5.6 trillion over the following decade, which he turned into an actual deficit of $6.1 trillion, according to a CBO study—but the improvement is real.

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Republicans would have us believe that their tight-fisted approach to spending is what brought down the deficit. But in fact, Obama has been very conservative, fiscally, since day one, to the consternation of his own party. According to reporting by the Washington Post and New York Times, Obama actually endorsed much deeper cuts in spending and the deficit than did the Republicans during the 2011 budget negotiations, but Republicans walked away.

Obama’s economic conservatism extends to monetary policy as well. His Federal Reserve appointments have all been moderate to conservative, well within the economic mainstream. He even reappointed Republican Ben Bernanke as chairman in 2009. Many liberals have faulted Obama for not appointing board members willing to be more aggressive in using monetary policy to stimulate the economy and reduce unemployment.

Obama’s other economic appointments, such as Larry Summers at the National Economic Council and Tim Geithner at Treasury, were also moderate to conservative. Summers served on the Council of Economic Advisers staff in Reagan’s White House. Geithner joined the Treasury during the Reagan administration and served throughout the George H.W. Bush administration.

Health Reform

Contrary to rants that Obama’s 2010 health reform, the Patient Protection and Affordable Care Act (ACA), is the most socialistic legislation in American history, the reality is that it is virtually textbook Republican health policy, with a pedigree from the Heritage Foundation and Massachusetts Gov. Mitt Romney, among others.

It’s important to remember that historically the left-Democratic approach to healthcare reform was always based on a fully government-run system such as Medicare or Medicaid. During debate on health reform in 2009, this approach was called “single payer,” with the government being the single payer. One benefit of this approach is cost control: the government could use its monopsony buying power to force down prices just as Walmart does with its suppliers.

Conservatives wanted to avoid too much government control and were adamantly opposed to single-payer. But they recognized that certain problems required more than a pure free-market solution. One problem in particular is covering people with pre-existing conditions, one of the most popular provisions in ACA. The difficulty is that people may wait until they get sick before buying insurance and then expect full coverage for their conditions. Obviously, this free-rider problem would bankrupt the health-insurance system unless there was a fix.

The conservative solution was the individual mandate—forcing people to buy private health insurance, with subsidies for the poor. This approach was first put forward by Heritage Foundation economist Stuart Butler in a 1989 paper, “A Framework for Reform,” published in a Heritage Foundation book, A National Health System for America. In it, Butler said the number one element of a conservative health system was this: “Every resident of the U.S. must, by law, be enrolled in an adequate health care plan to cover major health costs.” He went on to say:

Under this arrangement, all households would be required to protect themselves from major medical costs by purchasing health insurance or enrolling in a prepaid health plan. The degree of financial protection can be debated, but the principle of mandatory family protection is central to a universal health care system in America.

In 1991, prominent conservative health economist Mark V. Pauley also endorsed the individual mandate as central to healthcare reform. In an article in the journal Health Affairs, Pauley said:

All citizens should be required to obtain a basic level of health insurance. Not having health insurance imposes a risk of delaying medical care; it also may impose costs on others, because we as a society provide care to the uninsured. … Permitting individuals to remain uninsured results in inefficient use of medical care, inequity in the incidence of costs of uncompensated care, and tax-related distortions.

In 2004, Senate Majority Leader Bill Frist (R-Tenn.) endorsed an individual mandate in a speech to the National Press Club. “I believe higher-income Americans today do have a societal and personal responsibility to cover in some way themselves and their children,” he said. Even libertarian Ron Bailey, writing in Reason, conceded the necessity of a mandate in a November 2004 article titled, “Mandatory Health Insurance Now!” Said Bailey: “Why shouldn’t we require people who now get health care at the expense of the rest of us pay for their coverage themselves? … Mandatory health insurance would not be unlike the laws that require drivers to purchase auto insurance or pay into state-run risk pools.”

Among those enamored with the emerging conservative health reform based on an individual mandate was Mitt Romney, who was elected governor of Massachusetts in 2002. In 2004, he put forward a state health reform plan to which he later added an individual mandate. As Romney explained in June 2005, “No more ‘free riding,’ if you will, where an individual says: ‘I’m not going to pay, even though I can afford it. I’m not going to get insurance, even though I can afford it. I’m instead going to just show up and make the taxpayers pay for me’.”

The following month, Romney emphasized his point: “We can’t have as a nation 40 million people—or, in my state, half a million—saying, ‘I don’t have insurance, and if I get sick, I want someone else to pay’.”

In 2006, Governor Romney signed the Massachusetts health reform into law, including the individual mandate. Defending his legislation in a Wall Street Journal article, he said:

I proposed that everyone must either purchase a product of their choice or demonstrate that they can pay for their own health care. It’s a personal responsibility principle.

Some of my libertarian friends balk at what looks like an individual mandate. But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on government is not libertarian.

As late as 2008, Robert Moffitt of the Heritage Foundation was still defending the individual mandate as reasonable, non-ideological and nonpartisan in an article for the Harvard Health Policy Reviewthisarticleappeared-novdec14

So what changed just a year later, when Obama put forward a health-reform plan that was almost a carbon copy of those previously endorsed by the Heritage Foundation, Mitt Romney, and other Republicans? The only thing is that it was now supported by a Democratic president that Republicans vowed to fight on every single issue, according to Robert Draper’s book Do Not Ask What Good We Do.

Senior Obama adviser David Axelrod later admitted that Romney’s Massachusetts plan was the “template” for Obama’s plan. “That work inspired our own health plan,” he said in 2011. But no one in the White House said so back in 2009. I once asked a senior Obama aide why. His answer was that once Republicans refused to negotiate on health reform and Obama had to win only with Democratic votes, it would have been counterproductive, politically, to point out the Obama plan’s Republican roots.

The left wing of the House Democratic caucus was dubious enough about Obama’s plan as it was, preferring a single-payer plan. Thus it was necessary for Obama to portray his plan as more liberal than it really was to get the Democratic votes needed for passage, which of course played right into the Republicans’ hands. But the reality is that ACA remains a very modest reform based on Republican and conservative ideas.

Other Rightward Policies 

Below are a few other issues on which Obama has consistently tilted rightward:

Drugs: Although it has become blindingly obvious that throwing people in jail for marijuana use is insane policy and a number of states have moved to decriminalize its use, Obama continued the harsh anti-drug policy of previous administrations, and his Department of Justice continues to treat marijuana as a dangerous drug. As Time put it in 2012: “The Obama Administration is cracking down on medical marijuana dispensaries and growers just as harshly as the Administration of George W. Bush did.”

National-security leaks: At least since Nixon, a hallmark of Republican administrations has been an obsession with leaks of unauthorized information, and pushing the envelope on government snooping. By all accounts, Obama’s penchant for secrecy and withholding information from the press is on a par with the worst Republican offenders. Journalist Dan Froomkin charges that Obama has essentially institutionalized George W. Bush’s policies. Nixon operative Roger Stone thinks Obama has actually gone beyond what his old boss tried to do.

Race: I think almost everyone, including me, thought the election of our first black president would lead to new efforts to improve the dismal economic condition of African-Americans. In fact, Obama has seldom touched on the issue of race, and when he has he has emphasized the conservative themes of responsibility and self-help. Even when Republicans have suppressed minority voting, in a grotesque campaign to fight nonexistent voter fraud, Obama has said and done nothing.

Gay marriage: Simply stating public support for gay marriage would seem to have been a no-brainer for Obama, but it took him two long years to speak out on the subject and only after being pressured to do so.

Corporate profits: Despite Republican harping about Obama being anti-business, corporate profits and the stock market have risen to record levels during his administration. Even those progressives who defend Obama against critics on the left concede that he has bent over backward to protect corporate profits. As Theda Skocpol and Lawrence Jacobs put it: “In practice, [Obama] helped Wall Street avert financial catastrophe and furthered measures to support businesses and cater to mainstream public opinion. …  He has always done so through specific policies that protect and further opportunities for businesses to make profits.”

I think Cornell West nailed it when he recently charged that Obama has never been a real progressive in the first place. “He posed as a progressive and turned out to be counterfeit,” West said. “We ended up with a Wall Street presidency, a drone presidency, a national security presidency.”

I don’t expect any conservatives to recognize the truth of Obama’s fundamental conservatism for at least a couple of decades—perhaps only after a real progressive presidency. In any case, today they are too invested in painting him as the devil incarnate in order to frighten grassroots Republicans into voting to keep Obama from confiscating all their guns, throwing them into FEMA re-education camps, and other nonsense that is believed by many Republicans. But just as they eventually came to appreciate Bill Clinton’s core conservatism, Republicans will someday see that Obama was no less conservative.

Bruce Bartlett is the author of The Benefit and the Burden: Tax Reform—Why We Need It and What It Will Take.

http://www.theamericanconservative.com/articles/obama-is-a-republican/

The next financial crisis may be just around the corner


by Jerome Roos on October 20, 2014

Post image for The next financial crisis may be just around the corner
As growth stalls, stocks tumble and investors fret, the question is no longer if there will be another crisis, but when and where it will strike first.The headlines look eerily familiar: global growth is stalling, stocks are tumbling and peripheral bond yields are rising sharply. With the Federal Reserve expected to wind down its asset buyback scheme later this month and the Ebola outbreak and geopolitical instability spooking investors, world markets are returning to a highly volatile state. “The market pathologies we all grew to know during the crisis of 2008 are returning,” the Financial Times wrote last week. The question is no longer if there will be another crisis, but when and where it will strike first.

The bottom line is that the global financial meltdown of 2008-’09 and the European debt crisis of 2010-’12 have never truly been resolved. After governments disbursed record bailouts in the wake of the Wall Street crash, the world’s leading central banks simply papered over the remaining weaknesses by subsidizing essentially defunct financial institutions to the tune of trillions of dollars, buying up swaths of toxic assets and providing loans at negative real interest rates in the hope of reviving the credit system and saving the banks.

But instead of fixing the underlying problems of structural indebtedness, record unemployment, rampant inequality and a seemingly never-ending recession, these measures have only made matters worse. For one, they have fed an enormous credit bubble that dwarfs even the previous one, which nearly sank the world economy back in 2008. The latest Geneva report by the International Center for Monetary and Banking Studies notes that total world debt — excluding that of the financial sector — has shot up 38% since the collapse of Lehman Brothers, reaching new historic highs. Last year, global public and private debt stood at 212% of global output, up from 180% in 2008.

With this tidal wave of cheap credit sloshing through the world financial system, investors went looking for the highest yields. Since the US housing market and European bond markets were still reeling from the last crisis, they turned towards the stock exchange. Between mid-2013 and mid-2014, the average global return on equity rose to a whopping 18 percent. Yale economist Robert Shiller has shown that “the gap between stock prices and corporate earnings is now larger than it was in the previous pre-crisis periods,” and “if markets were to return to their normal earning levels, the average stock market in the world should fall by about 30 per cent.”

At the same time, trillions of dollars found their way into the housing markets of emerging economies. In Brazil, for instance, foreign investment in urban transformation projects for the World Cup and the Olympics led to a speculative housing bubble that saw residential property prices rise by more than 80% between 2007 and 2013. In Turkey, too, a massive influx of foreign credit fed a construction boom that has dramatically transformed the urban landscape, with skyscrapers, shopping malls and infrastructural mega-projects mushrooming across the Istanbul skyline. In both countries the resultant social displacements have led to sustained protest and social unrest.

The mother of all credit bubbles, however, has been quietly building up elsewhere, in China, where the government — in a desperate bid to ward off the spillover effects of the Great Recession — has pumped over $13 trillion worth of credit into the economy. This has in turn given rise to a monstrous $4.4 trillion shadow banking system and a housing bubble of truly epic proportions, leaving ghost towns sprawled across the country. It has also turned China into one of the most indebted developing countries in the world, with total public and private debt (excluding financial institutions) skyrocketing to 217% of GDP last year, up from from 147% of GDP in 2008.

The shadow banking system is not just a Chinese problem. In the United States and Europe, debt creation is also increasingly the product of off-balance sheet lending by non-bank financial institutions like hedge funds, insurance companies, private equity funds and broker dealers. The shadow banking system remains largely unregulated, allowing lenders to take much greater risks than ordinary banks could. For this reason, the IMF has warned that the world’s $70 trillion shadow banking system poses a major threat to global financial stability. In the US, shadow banking activities already amount to 2.5 times the size of conventional bank activity.

Meanwhile, troubling signs are emerging in Europe, where four years of austerity have trapped the world’s largest economy in a debilitating deflationary spiral. Even Germany, the EU’s economic powerhouse, is falling back into recession, while Greece returned to the eye of the storm after its stock market went into free fall last week. Greek bonds are now trading far above the 7% mark, which back in 2011 was widely considered to be “the point of no return.” Investors appear to be concerned over the health of Greek banks, the rising popularity of the anti-austerity party SYRIZA, and government plans to exit the bailout early in order to stem SYRIZA’s rise in the polls.

Add to this the growing geopolitical instability in Ukraine and the Middle East, and the conditions appear to be ripe for another round of market panic. Sooner or later, one of the bubbles is bound to pop — and the consequences will not be pretty. What is different this time around is that total debt levels are now even more unmanageable than they were back in 2008, while governments — having already used up most of their fiscal and monetary firepower over the past six years — are even less capable of mounting a proper response. We do not yet know when or where the next crisis will strike, but when it does it will be big. This time we better come prepared.

Jerome Roos is a PhD researcher in International Political Economy at the European University Institute, and founding editor of ROAR Magazine. This article was written as part of his regular column for TeleSUR English.

http://roarmag.org/2014/10/market-panic-next-financial-crisis/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+roarmag+%28ROAR+Magazine%29

The American oligarchy

http://www.globalresearch.ca/wp-content/uploads/2014/04/american_oligarchy.jpg

18 October 2014

There is an unspoken rule in American politics, expressed ever more clearly in each election cycle, that the more important an issue is, the less it can be discussed—much less decided—by the election. The US military has embarked on a new war in the Middle East, democratic rights have been eviscerated, millions are without jobs, household incomes are falling, and a record number of people are being deported from the country. Yet, with the 2014 midterm election just 17 days away, none of these issues are being discussed.

What accounts for this hollowing-out of American politics and the transformation of elections into empty biennial rituals? As with all significant political transformations, these changes are rooted in deeper social processes. One does not have to look all too far to identify them.

Over the past several weeks, report after report has been released documenting the extraordinary growth of social inequality in the United States and throughout the world.

Late last month, Forbes magazine reported that the 400 richest people in the United States saw their wealth grow 14 percent over the past year. The following week, the Organization for Economic Cooperation and Development reported that global social inequality has eclipsed the pre-Great Depression highs of the 1920s.

This week, Credit Suisse reported that the top one percent of the world’s population control nearly half of all wealth, with the ultra-rich concentrated in the United States.

This was followed by the release of a paper by economists Emmanuel Saez and Gabriel Zucman showing that wealth in the US is increasingly monopolized not merely by the wealthiest 10 percent or even the top 1 percent, but by the top 0.1 percent. They concluded, “Virtually all the increase in the top 10 percent and top 1 percent shares over the last three decades is due to the rise in the top 0.1 percent share, from 7 percent in the late 1970s to 22 percent in 2012.”

Even US Federal Reserve Chair Janet Yellen, who is overseeing the continued handout of oceans of cash to the financial markets, felt compelled to warn of the “extent of and continuing increase in inequality in the United States.” She noted in remarks Friday, “By some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then.”

How can these vast changes in economic relationships not have had a profound and transformative impact on political life?

The historian Edward Gibbon once summed up the political form of the Roman Empire as “an absolute monarchy disguised by the forms of a commonwealth.” Taking our cue from his definition, we can say that the United States has become an oligarchy disguised by the outward, increasingly threadbare trappings of a democracy.

Whatever the pretense of “one person, one vote,” the fact is that the top 0.1 percent dictates policy and essentially selects the personnel tasked with carrying it out. A somewhat broader, still highly privileged and small, section of the population has some influence—the top 5 or 10 percent. The interests and concerns of the bottom 90 percent have absolutely no impact on government actions.

Money buys elections. The 2012 election, the most expensive election cycle in history, was decided by some $6.3 billion in campaign cash. An analysis of elections to the House of Representatives found that 93 percent were decided by which candidate raised the most money. In the 2004 elections, a stunning 98 percent of victorious candidates out-spent their opponents.

2014 is set to be the most expensive non-presidential election in US history, despite widespread popular indifference.

Not only do the politicians do the bidding of the wealthy, they are themselves increasingly numbered among the rich and super-rich. Earlier this year, the Center for Responsive Politics reported that, for the first time in history, most members of the US Congress are millionaires.

Not content with the power it already has, the US ruling class is moving to remove all remaining restraints on money in politics. In April, the United States Supreme Court issued a ruling removing the cap on the total amount of money individuals can contribute to political campaigns.

The financial oligarchy has used its unlimited political power and influence to divert an ever-greater share of the US economy to financial speculation and fraud. The Obama administration and the Federal Reserve, after bailing out the banks, have kept interest rates at zero for nearly six years, fueling a raging financial bubble.

The dictatorship of the wealthy is inextricably tied to the basic structure of the capitalist system. Economic life is totally subordinated to the insatiable profit demands of the giant banks and corporations, whose top executives account for a growing portion of America’s ultra-rich. As the Socialist Equality Party program states, “All the basic needs of the working class come into immediate and direct conflict with the dictatorship of the giant banks and financial institutions over every aspect of political and economic life.”

No progressive change—ending social inequality, guaranteeing the social and economic rights of working people, halting the drive to dictatorship, preventing a new world war—can be achieved without expropriating the vast fortunes of the financial aristocracy and nationalizing the banks and corporations under the democratic control of the working class, i.e., initiating the socialist restructuring of the US and world economy.

Andre Damon

 

http://www.wsws.org/en/articles/2014/10/18/pers-o18.html

Bill Gates: Piketty’s Attack on Income Inequality Is Right

Bill Gates has posted a review of Capital in the Twenty-First Century, an acclaimed book by economist Thomas Piketty about how income equality is a necessary result of unchecked capitalism. Gates, one of the most successful capitalists of our time, agrees with Piketty’s most important conclusions. That said, he also finds parts of the book to be flawed and incomplete, but says Piketty has started vital debate on these issues.

Gates writes, Yes, some level of inequality is built in to capitalism. As Piketty argues, it is inherent to the system. The question is, what level of inequality is acceptable? And when does inequality start doing more harm than good? That’s something we should have a public discussion about, and it’s great that Piketty helped advance that discussion in such a serious way. … I agree that taxation should shift away from taxing labor. It doesn’t make any sense that labor in the United States is taxed so heavily relative to capital. It will make even less sense in the coming years, as robots and other forms of automation come to perform more and more of the skills that human laborers do today. But rather than move to a progressive tax on capital, as Piketty would like, I think we’d be best off with a progressive tax on consumption.

 

~Slashdot~

Cuba leads fight against Ebola in Africa

 …as west frets about border security

Cuban doctors and health workers arrive at Freetown's airport to help the fight against Ebola in Sie
Cuban doctors and health workers arrive at Freetown’s airport to help the fight against Ebola in Sierra Leone. Photograph: Florian Plaucheur/AFP/Getty Images

As the official number of Ebola deaths in west Africa’s crisis topped 4,000 last week – experts say the actual figure is at least twice as high – the UN issued a stark call to arms. Even to simply slow down the rate of infection, the international humanitarian effort would have to increase massively, warned secretary-general Ban Ki-moon.

“We need a 20-fold resource mobilisation,” he said. “We need at least a 20-fold surge in assistance – mobile laboratories, vehicles, helicopters, protective equipment, trained medical personnel, and medevac capacities.”

But big hitters such as China or Brazil, or former colonial powers such France and the UK, have not been stepping up to the plate. Instead, the single biggest medical force on the Ebola frontline has been a small island: Cuba.

That a nation of 11 million people, with a GDP of $6,051 per capita, is leading the effort says much of the international response. A brigade of 165 Cuban health workers arrived in Sierra Leone last week, the first batch of a total of 461. In sharp contrast, western governments have appeared more focused on stopping the epidemic at their borders than actually stemming it in west Africa. The international effort now struggling to keep ahead of the burgeoning cases might have nipped the outbreak in the bud had it come earlier.

André Carrilho, an illustrator whose work has appeared in the New York Times and Vanity Fair, noted the moment when the background hum of Ebola coverage suddenly turned into a shrill panic. Only in August, after two US missionaries caught the disease while working in Liberia and were flown to Atlanta, did the mushrooming crisis come into clear focus for many in the west.

“Suddenly we could put a face and a name to these patients, something that I had not felt before. To top it all, an experimental drug was found and administered in record time,” explained the Lisbon-based artist. “I started thinking on how I could depict what I perceived to be a deep imbalance between the reporting on the deaths of hundreds of African patients and the personal tragedy of just two westerners.”

The result was a striking illustration: a sea of beds filled with black African patients writhing in agony, while the media notice only the single white patient.

“It’s natural that people care more about what’s happening closer to their lives and realities,” Carrilho said. “But I also think we all have a responsibility to not view what is not our immediate problem as a lesser problem. The fact that thousands of deaths in Africa are treated as a statistic, and that one or two patients inside our borders are reported in all their individual pain, should be cause for reflection.”

With the early alarm bells ignored, the handful of international health agencies which did act were quickly overwhelmed, allowing Ebola to slip across the border of Guinea and gather pace in Liberia and Sierra Leone.

The sentiment behind Carrilho’s illustration neatly encapsulates a renewed media frenzy now that as two cases have been imported into the US, and a Spanish nurse infected over the past month.

“What I’d like to see is a little less hysteria in the US and the UK,” said Andrew Gleadle, programme director for the International Medical Corps (IMC), which recruits health personnel for global humanitarian disasters, as he snatched a breather between shifts in Sierra Leone. “We may get a few isolated cases [in the west] but we’re not going to get an epidemic. We need more focus on west Africa where the real problem is.”

The WHO estimates Sierra Leone alone needs around 10,000 health workers. Médecins sans Frontières, the international medical aid charity which has led efforts from the beginning, has about 250 staff on the ground in the affected countries. The second-largest government brigade is from the African Union, which is dispatching about 100 health workers.

It’s not the first time Cuba has played an outsized role in a major disaster. Its government may be beset by allegations of human rights abuse, but its contribution to relief brigades is unrivalled: currently, some 50,000 Cuban-trained health workers are spread over 66 countries. Cuba provided the largest medical contingent after the Haiti earthquake disaster in 2010, providing care to almost 40% of the victims. And while some 400 US doctors volunteered in the aftermath of that quake, fewer than 10 had registered for the IMC’s Ebola effort, the organisation said.

Sierra Leone president Ernest Bai Koroma personally welcomed the Cuban delegation in the capital Freetown. “This is a friendship that we have experienced since the 1970s and today you have demonstrated that you are a great friend of the country,” he said as they gathered in a room draped with the Cuban flag.

In August 1960, Che Guevara, a former doctor, dreamed of a world in which every medic would “[utilise] the technical knowledge of his profession in the service of the revolution and the people”. Thus began a history of service in some the world’s poorest and most forgotten states.

The island nation began forging links with the continent during the 1960s, when Cuban soldiers fought alongside southern Africa’s liberation fighters. Guevara personally pitched into the brutal battlefields of the newly independent Democratic Republic of Congo, but after becoming suspicious about rebel leaders’ motives, suggested they replaced fighters with medical aid.

Ties deepened in the 1970s as Africa’s newly independent nations flirted with socialism, and aligned themselves with the communist state who opposed their former colonial rulers. Teachers, doctors and soldiers from Cuba poured into 17 African countries.

Today, fading signposts with Spanish street names, peeling posters with improbable slogans (“Viva la revolución siempre!” – long live the revolution, always – says one in Freetown) and a love of salsa music remain across much of west Africa.

But help will soon be coming from places other than Cuba. The US will pour in $400m, plans to build at least a dozen 100-bed field hospitals using some 4,000 troops, and has deployed 65 health officials to Liberia. Japan, the world’s fourth-richest nation, has pledged $40m and India $13m. China has chipped in around $5m, as well as a Chinese-built and staffed mobile clinic in Sierra Leone.

But even if efforts to roughly double the current bed capacity of about 1,000 in Liberia, Guinea and Sierra Leone succeed, these facilities will still lack the health personnel needed to staff them.

In part, slow staff recruitment is down to the high number of medics who have already been infected, hovering around 300 so far.

“Even if you know what you’re doing, people make mistakes. It’s very, very difficult to wear those suits in hot weather,” said Chikwe Ihekweazu, an epidemiologist who worked with the WHO during the 2004 outbreak in Sudan, where temperatures can soar up to 42C.

“A lot of health workers died in the beginning and that obviously had an impact on recruitment. But the rates have fallen, and what that shows is that health workers can learn, with the correct training in infection control.”

Others are also hopeful that staff numbers will increase. Gleadle, of the IMC, said the slow pace at which centres were being scaled up might actually draw in more volunteers in the long run.

He said: “Even if we have a 100-bed centre, you wouldn’t fill them up in one day. You start slowly, then take a deep breath and escalate over time. I think as we build more treatment centres and hopefully none of our workers fall ill because we’re going slowly, that will encourage others.”

And he pointed out that there would be a silver lining, of sorts, as the disease marched on. “One way to see a positive side is that it means there are more survivors with immunity. They can then be very, very valuable in going back to their communities to educate others and help, without that risk of falling sick again.”

 

http://www.theguardian.com/world/2014/oct/12/cuba-leads-fights-against-ebola-africa

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