Category: Capitalism and Economy

Washington, DC – According to widespread reports here, Feb. 2, the Senate is close to an agreement that would allow a vote on Extended Unemployment Compensation (EUC) the week starting Feb. 3.

Bloomberg news quotes Senate Majority leader Harry Reid as saying, “I hope we have something on the floor next week.” Insiders report that a vote is close, with Democrats and some Republicans nearing agreement on a funding source for the jobless benefit extension.

To date, about 1.6 million job seekers have lost or been denied extended benefits. The number grows every day that congress fails to act.

The seeds for this disastrous cut to the unemployed were planted in December of last year, when Democrats failed to insist that the funds for Extended Unemployment Compensation were included in the budget deal. Congressional Republicans are generally hostile to any assistance for the unemployed.

A bipartisan consensus exists in Washington D.C. that federal spending must be cut and that social programs that serve working and low-income people need to be put on the chopping block. Recently unemployment insurance, food stamps and rental assistance have been targeted by politicians who favor austerity.

 

Milwaukee, WI – As soon as President Obama’s State of the Union address was over, debates around the speech’s central theme of wealth inequality were distributed in carefully packaged arguments to all who would listen.

In tackling the issue, Former Republican Congresswoman Michelle Bachman from Minnesota claimed the problem was not one of income inequality, but of income opportunity. According to the free market capitalist, a lack of jobs are the fundamental problem and we haven’t gone far enough yet in giving corporations freedom to grow as they see fit, and that this will create the jobs Americans need to heal our deeply divided society.

Senator Bernie Sanders from Vermont, the supposed “socialist” who works closely with the Democratic Party, towed the party line, claiming that solving the problem of soaring education costs will level the playing field and address the inequality gap. The Democrats say that in educating the population, they will provide Americans access to “better” jobs and make our corporations more dynamic, and thus, more profitable, making everyone wealthier along the way.

The problem with both arguments: neither deals with the issue.

When Democrats talk about the cost of education, they mean finding a way to help give middle class students access to getting a degree that leads to a “better” job. When Republicans talk about income opportunity, they mean to shift the blame for a bad economy back onto the poor themselves.

The gap between the 99% and the 1% cannot be solved with how many jobs there are, or what kind of job you have. Jobs themselves have nothing to do with the income gap. The income gap is a question of ownership and power in our society, with which group – working people or Wall Street has influence. The problem lies with who writes the paycheck.

The genius behind the Occupy Movement is that it places the issue in its right place: a problem of class. The working class in the U.S. is on the defensive, losing rights in the workplace, opportunities in school and society, and bargaining rights with the bosses–the 1%. The owners, on the other hand, are gaining more and more power, and seeing their wealth soar as a result.

President Obama’s challenge to employers to raise wages on their own is an empty one. It is a ploy to keep the left-liberals in the Democratic Party happy, while not doing anything to threaten the profits of the super rich. Further, it flies in the face of the experience of the labor movement in the United States, which saw Americans workers organize and struggle for every penny increase in wages and benefits. If the President wanted to take a serious stand for working people, he would do well to remember the words of the great Abolitionist Frederick Douglass, “Power concedes nothing without a demand.”

Working people in the United States need more jobs and higher wages. In an age where one in five children deals with hunger, this cannot be any clearer. We need people to construct buildings, drive ambulances, and work on new technologies. What we do not need is the bankers and corporate heads of Wall Street who suck billions out of workers labor and give nothing back but foreclosures and outsourced jobs.

That said, simply creating more jobs inside the 99%, either the so-called “better” jobs the Democrats propose or just any-old-job we can create as the Republicans wish, does not address the issue of the power divide between the haves and have-nots. It only exposes the fact that both political parties are representatives of the haves, and as such they never will address the real issues workers face.

We won’t find our answers on Wall Street, in Congress, or in the White House. Only when working people, as a class, see through the smoke screen, recognize the problem, and organize to take power in their workplaces and communities will we be able to toss out Wall Street bankers and corporate boards and make a better world possible.

 

 

Washington, DC – Attempts to restore Extended Unemployment Compensation (EUC) benefits stalled in the Senate, Jan. 14, when Republicans and Democrats clashed over what austerity measures and budget cuts would be linked to the proposed extension. Observers believe it is unlikely that any action on benefits for the long-term unemployed will take place before the end of the month.

The end of Extended Unemployment Compensation (EUC) benefits has impacted about 1.3 million workers.

The protracted economic crisis, which started at the end of 2007, engulfed the capitalist world and left in its wake persistently high unemployment rates. For millions of working people the results have been devastating.

It is important that heat be put on Congress in coming weeks to restore the benefits.

 

Washington, DC – In a 60-37 vote, the Senate passed a procedural measure Jan. 7 that allows a bill to restore Extended Unemployment Compensation (EUC) benefits to move forward.

The cut to extended unemployment benefits impacted about 1.3 million people. Congress failed to renew the EUC benefits as its session was winding up in December of last year. Republicans largely opposed the benefits and Democrats were unwilling to go to bat for the unemployed, insisting an extension to benefits be a condition of the budget agreement.

The fight to restore the Extended Unemployment Compensation benefits is facing an uphill battle in Congress.

The benefits began during the Bush administration, as the economic crisis was unfolding. One result of that economic crisis is the persistent high rate of unemployment, which has become a long-term part of the U.S. economic landscape. Illinois, for example, has an unemployment rate of 8.9%.

 

 

San José, CA – While people around the world are celebrating the New Year, 1.3 million long-term unemployed Americans will be facing an immediate cut-off of their Federal Extended Unemployment Compensation (EUC) benefits. In addition, an estimated 1.9 million unemployed workers will lose their benefits as their six months of state Unemployment Insurance (UI) runs out in the first half of 2014. These cuts came about as Republicans in both the House and Senate opposed votes to extend the benefits.

At the end of 2013, only 41% of the unemployed were getting unemployment insurance from the states or the federal government. This was down more than a third from the 65% of unemployed who were getting unemployment benefits in 2010. With the end of the federal extended unemployment benefits, only 26% of the unemployed will be getting benefits in the new year. This is a record low percentage, dating back to 1950.

The all-time low in unemployment insurance benefits coverage of the unemployed is part of a larger pattern of cuts in government aid to those in need. Since the passage in 2011 of the ‘Budget Control Act’ the payroll tax cut has ended, food stamps have been cut, social programs are being cut under the sequestration process and now the long-term unemployed have been cut off from UI benefits. All of these tax increases and spending cuts have been a drag on the economy, with the cut in federal extended benefits estimated to cost some 200,000 jobs over the course of 2014.

The Republicans are demanding that the cost of extended unemployment benefits, about $25 billion for the next year, or less than 1% of the total federal budget, be matched by cuts in other programs. However there was no such demand when the federal government bailed out General Motors, which cost over $10 billion to the government. With the end of the bailout, General Motors is now talking about raising their managers’ salaries and paying out more to their shareholders in the form of higher dividends. This is just another example of how the government has bailed out the banks and big corporations during the financial crisis, but did little and is now doing even less for the unemployed and troubled home buyers.

 

San José, CA – The Extended Unemployment Compensation (EUC) program, which provides federal aid to jobless workers whose state Unemployment Insurance (UI) benefits have run out will expire at the end of 2013. This will cut off 1.3 million unemployed people immediately. Another 800,000 jobless workers who would have qualified for EUC won’t be able to extend their benefits in the first three months of 2014.

Federal EUC and the Extended Benefits (EB) programs were started more than five years ago as the recession which began in December 2007 drove the unemployment rate higher. At the time the EUC started in June of 2008, the official unemployment rate was 5.6%, while the latest report released Dec. 6 on the November 2013 labor market showed a higher national unemployment rate of 7.0%. In June 2008, there were more than 1.5 million long-term unemployed (out of work for more than six months), while last month there were still more than 4 million long term unemployed.

Almost 40% of all the unemployed in November 2013 have been out of work for more than six months. While this is a bit lower than the peak of almost 45% in 2010, it is still far higher than and any previous recession since the Great Depression. In contrast, the next highest percentage of long term unemployed, which followed the 1981-1982 recession, was only about 25%.

Despite the clear need for extending federal EUC program, the House of Representatives, with its Republican leadership, is getting ready to go home for the holidays. But while jobless workers are looking bleakly at a big lump of coal for the holidays, the stock market is hitting new record highs. And why not? The latest report on Gross Domestic Product, or GDP, released on Dec. 5 shows that corporate profits were equal to about 11.1% of GDP. GDP measures the total value of goods and services produced in the U.S. This is a record high and almost twice the average of 6.1% of GDP since 1929.

San José, CA – Today, Oct. 15, right-wing Republicans in the House of Representatives stopped the House Republican leadership from trying to pass a compromise measure to re-open the federal government and raise its debt ceiling. This marks another step towards the first U.S. debt crisis in history.

On Oct. 17, the federal government will not be able to borrow more money to pay its bills. The federal government will only be able to pay out what it collects in taxes, plus about $30 billion in cash that it has on hand. In the two weeks after that, the federal government will run short of money to pay all its bills, with the most likely date being Nov. 1, when $55 billion in Social Security benefits, Medicare payments, and military pay, benefits and retirement benefits are due.

From now through mid-November, the federal government will have to postpone payment on about $100 billion in payments if the debt ceiling is not raised. This comes to almost 8% of Gross Domestic Product (GDP, the standard measure of the size of the economy based on production of goods and services) on an annual basis, enough to throw the economy in a recession even worse than the one following the financial crisis in 2008.

Background to the crisis

The looming debt crisis has several roots. The first are the budget deficits of the federal government, where it spends more than it collects in taxes, so it has to borrow the difference by selling bonds. The federal government budget deficit ballooned to about $1.4 trillion (or $1400 billion), equal to 10% of GDP, in 2009 because the deep recession lowered tax revenues and the federal government increased spending to bail out Wall Street and stimulate the economy. Since then, a combination of higher tax revenues, spending cuts and economic growth have reduced the deficit to almost $600 billion, or about 4% of GDP in 2012, a decline of 60% in relation to the size of the economy.

The total amount of bonds that the U.S. government sells to pay for the budget deficit is the public debt, which is now $16.75 trillion ($16,750 billion). The federal government has a self-imposed limit on the public debt of $16.7 trillion, which means that the government can no longer borrow more money. The reported debt is slightly higher than the limit because the federal government has been shifting money around to avoid running out of cash for the last five months.

While there have been disputes over the debt ceiling in the past, they have been largely partisan affairs that did not come close to forcing the government to actually delay payment. But the recent rise of Tea Party Republicans means that the Republicans, especially in the House of Representatives, are controlled by right wingers who are more than willing to shut down the government and even force the government not to pay its bills in order to achieve their goal of ending Obama’s health care reform known as Obamacare.

What drives the Tea Party

Many Republican members of congress were denying the possibility of a partial shutdown of the federal government right up to the point that the government shut down. Their behavior is similar to their stance on climate change – just deny that it is happening so one doesn’t have to do anything.

Digging a little deeper, one sees that the government agencies that were most affected by the shutdown, such as the Department of Education, Housing and Urban Development (HUD), the Environmental Protection Agency (EPA) and the Department of Labor, are the programs most hated by the right wing.

There is also an extreme free-market logic among Tea Party Republicans that the government is bad for business and the economy and that a shutdown of the government will be good for business.

What is likely to happen

The world isn’t going to end on Oct. 17 if the debt ceiling is not raised. But the economic effects are already being felt, as the uncertainty of repayment of bonds after that date is causing the prices of bonds coming due soon to fall, which leads to higher interest rates. The interest rate on the shortest term U.S. bonds (called bills), which come due in 30 days, has now tripled and is higher than the interest rates on 60-day bills, which come due later.

While Democrats and the Obama administration are warning of the danger of default, which is what happens when the federal government does not repay its bonds or interest payment, it is hard to see how the government won’t give Wall Street what it wants. But there is chance that some bank or financial institution will find itself in a squeeze if the federal government doesn’t pay on time, triggering another financial crisis.

What is more likely is that the sudden drop in federal government spending will trigger a new recession. This could quickly feed upon itself in what economists call the ‘multiplier effect,’ where the individuals, businesses and institutions that aren’t being paid by the federal government then cut back their own purchases and payments, putting the economy into a downward spiral.

What a debt crisis would mean

If the House Republicans do manage to block any agreement to reopen the government and raise the debt ceiling, the self-inflicted crisis will mark another step in the decline of the U.S. as a world power. Ever since World War II, the U.S. government has been both a protector of Wall Street and big business and the head of worldwide empire of pro-U.S. governments that protect U.S. financial and business interests, backed by the U.S. military.

From an economic point of view, the end in 1971 of the post-World War II system of fixed exchange rates centered on the U.S. dollar, called Bretton Woods, was an early sign of the decline of the U.S. relative to the rising nations of Europe and Japan. This was followed by the OPEC oil boycott in 1973, and then the U.S. military defeat in Vietnam in 1975, showing the rise of the Third World.

Today the withdrawal of U.S. troops from Iraq and coming U.S. withdrawal from Afghanistan shows that the U.S., despite using hundreds of thousands of troops and spending trillions of dollars, is no longer to set up stable, pro-U.S. governments that can defend U.S. business interests. With the looming debt crisis, more and more governments around the world are losing faith in the economic power of the U.S. and the safety of U.S. government bonds. Foreign governments and investors now own more than $5.5 trillion of U.S. government bonds, and any sell-off in the bond market triggered by a debt crisis would quickly spread a financial crisis around the world.

But even if a financial crisis is avoided, a deep recession in the U.S. will also spread around the world. Europe’s economy is still in a depression with the euro-zone crisis and many economies in the Third World are slowing down already. Another worldwide recession, following so closely on the 2008-2009 so-called Great Depression, could again shake the very foundations of the world capitalist economy.

San José, CA – Today, Oct. 15, right-wing Republicans in the House of Representatives stopped the House Republican leadership from trying to pass a compromise measure to re-open the federal government and raise its debt ceiling. This marks another step towards the first U.S. debt crisis in history.

On Oct. 17, the federal government will not be able to borrow more money to pay its bills. The federal government will only be able to pay out what it collects in taxes, plus about $30 billion in cash that it has on hand. In the two weeks after that, the federal government will run short of money to pay all its bills, with the most likely date being Nov. 1, when $55 billion in Social Security benefits, Medicare payments, and military pay, benefits and retirement benefits are due.

From now through mid-November, the federal government will have to postpone payment on about $100 billion in payments if the debt ceiling is not raised. This comes to almost 8% of Gross Domestic Product (GDP, the standard measure of the size of the economy based on production of goods and services) on an annual basis, enough to throw the economy in a recession even worse than the one following the financial crisis in 2008.

Background to the crisis

The looming debt crisis has several roots. The first are the budget deficits of the federal government, where it spends more than it collects in taxes, so it has to borrow the difference by selling bonds. The federal government budget deficit ballooned to about $1.4 trillion (or $1400 billion), equal to 10% of GDP, in 2009 because the deep recession lowered tax revenues and the federal government increased spending to bail out Wall Street and stimulate the economy. Since then, a combination of higher tax revenues, spending cuts and economic growth have reduced the deficit to almost $600 billion, or about 4% of GDP in 2012, a decline of 60% in relation to the size of the economy.

The total amount of bonds that the U.S. government sells to pay for the budget deficit is the public debt, which is now $16.75 trillion ($16,750 billion). The federal government has a self-imposed limit on the public debt of $16.7 trillion, which means that the government can no longer borrow more money. The reported debt is slightly higher than the limit because the federal government has been shifting money around to avoid running out of cash for the last five months.

While there have been disputes over the debt ceiling in the past, they have been largely partisan affairs that did not come close to forcing the government to actually delay payment. But the recent rise of Tea Party Republicans means that the Republicans, especially in the House of Representatives, are controlled by right wingers who are more than willing to shut down the government and even force the government not to pay its bills in order to achieve their goal of ending Obama’s health care reform known as Obamacare.

What drives the Tea Party

Many Republican members of congress were denying the possibility of a partial shutdown of the federal government right up to the point that the government shut down. Their behavior is similar to their stance on climate change – just deny that it is happening so one doesn’t have to do anything.

Digging a little deeper, one sees that the government agencies that were most affected by the shutdown, such as the Department of Education, Housing and Urban Development (HUD), the Environmental Protection Agency (EPA) and the Department of Labor, are the programs most hated by the right wing.

There is also an extreme free-market logic among Tea Party Republicans that the government is bad for business and the economy and that a shutdown of the government will be good for business.

What is likely to happen

The world isn’t going to end on Oct. 17 if the debt ceiling is not raised. But the economic effects are already being felt, as the uncertainty of repayment of bonds after that date is causing the prices of bonds coming due soon to fall, which leads to higher interest rates. The interest rate on the shortest term U.S. bonds (called bills), which come due in 30 days, has now tripled and is higher than the interest rates on 60-day bills, which come due later.

While Democrats and the Obama administration are warning of the danger of default, which is what happens when the federal government does not repay its bonds or interest payment, it is hard to see how the government won’t give Wall Street what it wants. But there is chance that some bank or financial institution will find itself in a squeeze if the federal government doesn’t pay on time, triggering another financial crisis.

What is more likely is that the sudden drop in federal government spending will trigger a new recession. This could quickly feed upon itself in what economists call the ‘multiplier effect,’ where the individuals, businesses and institutions that aren’t being paid by the federal government then cut back their own purchases and payments, putting the economy into a downward spiral.

What a debt crisis would mean

If the House Republicans do manage to block any agreement to reopen the government and raise the debt ceiling, the self-inflicted crisis will mark another step in the decline of the U.S. as a world power. Ever since World War II, the U.S. government has been both a protector of Wall Street and big business and the head of worldwide empire of pro-U.S. governments that protect U.S. financial and business interests, backed by the U.S. military.

From an economic point of view, the end in 1971 of the post-World War II system of fixed exchange rates centered on the U.S. dollar, called Bretton Woods, was an early sign of the decline of the U.S. relative to the rising nations of Europe and Japan. This was followed by the OPEC oil boycott in 1973, and then the U.S. military defeat in Vietnam in 1975, showing the rise of the Third World.

Today the withdrawal of U.S. troops from Iraq and coming U.S. withdrawal from Afghanistan shows that the U.S., despite using hundreds of thousands of troops and spending trillions of dollars, is no longer to set up stable, pro-U.S. governments that can defend U.S. business interests. With the looming debt crisis, more and more governments around the world are losing faith in the economic power of the U.S. and the safety of U.S. government bonds. Foreign governments and investors now own more than $5.5 trillion of U.S. government bonds, and any sell-off in the bond market triggered by a debt crisis would quickly spread a financial crisis around the world.

But even if a financial crisis is avoided, a deep recession in the U.S. will also spread around the world. Europe’s economy is still in a depression with the euro-zone crisis and many economies in the Third World are slowing down already. Another worldwide recession, following so closely on the 2008-2009 so-called Great Depression, could again shake the very foundations of the world capitalist economy.

San José, CA – Four years after the Great Recession of 2007-2009 officially ended, millions of working people are being left behind by the expansion of the economy. While the stock market and corporate profits reached new highs, there are still millions of fewer jobs than before the recession began, and the official unemployment rate is closer to its recession high than the low before the recession. Things are bad.

Students and Youth Hit Hard

One of the groups hit hard by the economic crisis is college students and youth. The crisis led to class cuts and tuition hikes at public colleges and universities across the country. While the pace of budget cuts and tuition increases slowed with the economic expansion, they still continue today. One example is the growing threat to Historically Black Colleges and Universities (HBCU), many of which are seeing dramatic and dangerous drops in enrollments because of cuts in federal student loan programs.

Double Whammy

Youth who do manage to graduate from college, which is taking longer and becoming more expensive than ever, face a double whammy. On one hand the economic crisis sped up the restructuring of the labor market. Over the last 30 years millions of manufacturing jobs were automated away, off-shored by multinational corporations, and/or workers’ wages and benefits were cut. Now, government is one of the last remaining sectors with decent paying jobs, benefits and union representation. However, this sector has been hit harder by the Great Recession of 2009 than any other recession since the 1930s. Hundreds of thousands of local and state jobs are being lost, while government workers face wage and pension cuts and loss of union protection. Republican politicians are taking away hard-earned bargaining rights in states like Wisconsin and Michigan.

Restructuring Youth: Low-wage, Part-time and Temporary

In addition to the loss of jobs that pay a living wage and benefits, more and more permanent, full-time jobs are being replaced by temporary and part-time jobs. Today about half of all recent college graduates are either unemployed or underemployed, with part-time or temporary jobs, many of which don’t even require a college degree.

Skyrocketing Student Debt

There is an explosion of student loan debt, which totals as much as $1.2 trillion. Student loan debt is now the largest form of consumer (non-mortgage) debt, about 40% of the total. Caught between rising tuition and the cost of living on one hand and stagnant grants and wages, college students and their families have been borrowing more and more to pay for college. This student debt is a growing burden on youth, especially those who were not able to graduate or find a full-time, permanent, decent paying job.

Boom then Bust, Repeat

The boom and bust cycle under capitalism is not an accident – it is part and parcel of a capitalist economy. Wages are pushed down to grow profits, and this limits workers ability to spend. Then the profits are reinvested in expanding production, thereby increasing the ability to produce more, but the workers cannot buy all that they produce, and a periodic crisis of overproduction, or what we call recessions occur.

Crisis upon Crisis

On top of this, the build up in debt and deregulation and expansion of the financial sector following the end of the post-World War II economic boom in the 1970s led to growing financial crisis in the U.S. From the Third World debt crisis and Savings and Loan crisis in the 1980s to the Asian Economic Crisis of the 1990s, and most recently to the financial crisis in 2008, these crises have grown and become a greater and greater threat to the economy as a whole.

People Over Profits

The government is turning away from stimulating the economy to policies of more and more austerity – higher taxes on working people and cuts to programs that serve the people. The spending cuts are really felt at the state and local levels, hurting education funding from Head Start through university level. With financial regulation blocked by the power of Wall Street, it is more and more clear that the government, along with both political parties, are bought and paid for by the rich. They offer no real hope for working people and college-aged youth. Only a socialist economy, one based on people’s needs and not profit, can offer an alternative of expanding access and affordability to higher education, while creating jobs that pay a living wage.

Masao Suzuki teaches economics at a community college in California and is a member of the Freedom Road Socialist Organization (FRSO).