The real failings in the Obama recovery program lie not in the stimulus package –  though it is too heavily weighted toward tax cuts, and much of it merely offsets cutbacks by states – but in its efforts to revive financial markets. America’s failures provide important lessons to countries around the world that are or will be facing increasing problems with their banks:

• Delaying bank restructuring is costly, in terms of both the eventual bailout costs and the damage to the overall economy in the interim.
• Governments do not like to admit the full costs of the problem, so they give the banking system just enough to survive, but not enough to return it to health.
• Confidence is important, but it must rest on sound fundamentals. Policies must not be based on the fiction that good loans were made, and that the business acumen of financial-market leaders and regulators will be validated once confidence is restored.
• Bankers can be expected to act in their self-interest on the basis of incentives.. Perverse incentives fueled excessive risk-taking, and banks that are near collapse but are too big to fail will engage in even more of it. Knowing that the government will pick up the pieces if necessary, they will postpone resolving mortgages and pay out billions in bonuses and dividends.
• Socializing losses while privatizing gains is more worrisome than the consequences of nationalizing banks. American taxpayers are getting an increasingly bad deal. In the first round of cash infusions, they got about 67 cents in assets for every dollar they gave (though the assets were almost surely overvalued, and quickly fell in value). But in the recent cash infusions, it is estimated that Americans are getting 25 cents, or less, for every dollar. Bad terms mean a large national debt in the future.
• Don’t confuse saving bankers and shareholders with saving banks. America could have saved its banks, but let the shareholders go, for far less than it has spent.
• Trickle-down economics almost never works. Throwing money at the banks hasn’t helped homeowners: foreclosures continue to increase. Letting AIG fail might have hurt some systemically important institutions, but dealing with that would have been better than to gamble upwards of $150 billion and hope that some of it might stick where it is important. One of the reasons we may be getting bad terms is that if we got fair value for our money, we would by now be the dominant shareholder in at least one of the major banks.
• Lack of transparency got America’s financial system into this trouble. Lack of transparency will not get it out. The Obama administration is promising to pick up losses to persuade hedge funds and other private investors to buy out banks’ bad assets. But this will not establish ”market prices,” as the administration claims. Banks’ losses have already occurred, and their gains must now come at taxpayers’ expense. Bringing in hedge funds as third parties will simply increase the cost.
• Better to be forward looking than backward looking, focusing on reducing the risk of new loans and ensuring that funds create new lending capacity.

There is no ”mystique” in finance: The era of believing that something can be created out of nothing should be over. Short-sighted responses by politicians  — who hope to get by with a deal that is small enough to please taxpayers and large enough to please the banks — will merely prolong the problem.

An impasse is looming. More money will be needed, but Americans are in no mood to provide it — certainly not on the terms that we have seen The well of money may be running dry, and so, too, may be America’s legendary optimism and hope.

Joseph E. Stiglitz is University Professor at Columbia University. Among many books, he is the author ofGlobalization and Its Discontents. He received the Nobel Prize in Economics in 2001 for research on the economics of information. Most recently, he is the co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.

What seemed only a possibility a few months ago has now become a reality: The financial crisis that swept Wall Street has spread to all sectors of the economy at a pace that has alarmed even the most cautious analysts.

Economists are now stating openly that the recession will be deeper and longer than the preceding nine post-1945 recessions. Economics professor Jack Rasmus warns that, “the U.S. economy could be thrust toward a full-fledged Depression by early 2010.”

The layoffs are mounting daily and at a staggering rate. According to official government statistics, more than 500,000 workers lost their jobs in each of the last three months — the highest three-month job loss since 1931.

Taken over the last year, the number of jobless rose officially by 3.2 million, but when the “discouraged” (no longer seeking employment) and minimally employed are added, the totals are close to 5 million jobs lost.

Economists predict that if the recession continues its current course in 2009, there will be an additional 7 million workers left jobless. This would mean between 8 million and 12 million jobs lost in the span of 2008-2009. Professor Rasmus warns that as many as 20 million jobs could be lost by 2010.

The situation has become intolerable for working people. On every front, the country is confronted with a catastrophic situation: In addition to the massive job losses, more than 2 million people have lost their homes to foreclosure — and it is estimated that another 5 million to 7 million people risk foreclosure in the coming 18 months. A disproportionate number of those losing their homes are Blacks and Latinos.

Meanwhile, social services are being dismantled left and right as state and local budgets are facing unprecedented deficits. In California, a $16 billion budget deficit is being wielded as an axe to cut tens of thousands of public education and healthcare jobs.

Obama has just presented his new budget. Together with the $787 stimulus plan recently approved by the U.S. Congress and Obama’s three-point program to “stablize” the banking system, the budget is a central component of the Obama’s Economic Recovery Plan.

We are publishing below an interview with Professor Jack Rasmus on the five components of Obama’s economic recovery plan.

As readers will readily understand, the Obama plan underscores the absolute need for working people, with the trade unions in the lead, to organize and mobilize independently to put a stop to the corporate bailouts and to demand an economic recovery plan that bails out America’s working people and the oppressed.

Organizing the fightback around this perspective is the goal of the Workers’ Emergency Recovery Campaign (WERC) — a campaign that has gathered important support nationwide, including from prominent labor officials and nationally recognized leaders of progressive political campaigns.

– Alan Benjamin

Following is an interview with Jack Rasmus, a professor of economics at St. Mary’s College and Santa Clara University in Northern California. Prof. Rasmus is a member of the newly formed National Steering Committee of the Workers Emergency Recovery Campaign (WERC). The interview was conducted on March 2, 2009, by Alan Benjamin, organizer for the WERC.

WERC: What is your assessment of Obama’s economic recovery plan? Can you describe it for our readers and tell us if you think it will deliver the jobs and benefits that people are anxiously awaiting?

Jack Rasmus: The Obama Plan has five major components, The first is the $787 billion stimulus plan that was adopted recently by the U.S. Congress. The second, third and fourth parts aim to resuscitate the financial markets: Part 2 is the PPIF, or Public-Private Investment Fund; Part 3 is the TALF, or Term Asset-Backed Securities Loan Facility; and Part 4 is the Homeowner Affordability and Stability Plan. The fifth component is Obama’s proposed 2009 budget — which is likely to be modified substantially by the Republicans before it is finally adopted.

As for the stimulus package: As I have stated repeatedly, it’s too little too late. First, it’s not a jobs bill. By the end of 2009, there could be a total of 20 million people unemployed. We are now at 14 million jobs lost, and the job losses are accelerating. Over the past three months, we lost one million jobs each month, when job losses are calculated correctly. This package is not going to regenerate the jobs that we are talking about — and jobs are the most important thing, because job loss is what’s driving the collapse of consumption and bringing down the economy..

Thirty-eight percent of the stimulus package goes to providing aid; that is, unemployment, food stamps, vets’ benefits, medical aid, COBRA — as well as aid to state and local governments. This is all necessary, but what it shows is that this plan is aimed at softening the collapse, not at creating jobs. This aid will have little effect in terms of job creation. As for the aid to state and local governments, it is nowhere near the amount needed to halt the massive job cuts in state after state.

WERC: This is clear. In California Republican Governor Arnold Schwarzenegger is demanding that public-sector workers across the state take two days off per month with no pay. His plan also calls for tens of thousands of layoffs statewide.

The Progressive States Network (PSN) reported that the Obama stimulus plan would cover less than half of projected state deficits. The authors of the PSN report note, “A new study by the Center on Budget and Policy Priorities details that state deficits are projected to be $350 billion over the next 30 months. But the stimulus recovery plan includes only about $150 billion that can be used to address those shortfalls, meaning that 55% to 60% of projected state deficits will remain.”

Rasmus: Indeed. These “shortfalls” will mean millions of destroyed jobs, lives, families, and entire communities.

To continue with the stimulus plan: Another 38% of the package, or $300 billion, is tax cuts: (1) business tax cuts, (2) reversing the alternative minimum tax; and (3) payroll tax cuts. The business tax cuts will not have any effect in stimulating the economy. Some economists in fact are arguing they will have a negative effect that the spending from the tax cuts will be less than the amount of the tax cuts; they call this “negative multipliers.”

When you’re in a deep downturn like this, businesses sit on their tax cuts, waiting for better days ahead; they use the money to pay off their debts and that sort of thing. Even the payroll taxes will have virtually no effect in terms of consumption and stimulating the economy.

Only 24% of the stimulus plan, or $200 billion, will go to federal spending, with just $27 billion allocated this year to job-creating expenditures. The rest is long-term alternative energy technology and other similar projects, all of which are capital intensive.

The point is this: It’s not a jobs bill. Obama says the plan will create 3 million to 4 million jobs. But over what time period? It’s over multiple years, with the hope that the biggest impact will come in the second year.

This year the total spending impact of this bill, dollar-wise, is only $180 billion, which is roughly what 2008 stimulus package was last year. It had virtually no effect last year, and the conditions are even worse this year. We will continue to be gushing jobs this year at the continued rate of half a million to 1 million jobs per month.

We’re going to be in very bad shape at the end of the year. The number one cause driving foreclosures is job loss. I was just reading a statistic today that 72% of all the sub-prime loans issued between 2005 and 2007 are going to default. In other words, we haven’t seen the total impact of the housing price collapse. Housing prices will fall at least another 20%. There is no light at the end of this downturn tunnel.

With 20 million unemployed at the end of the year, with an additional 5 million to 7 million people losing their homes to foreclosure, the stimulus plan fails miserably when it comes to creating jobs — so bad that I predict they will have to come up with a Stimulus Plan II at some point.

So if there not a program this year to deal with this situation, the odds go up significantly that what I call an epic recession will become a classic global depression in 2010. We are on the cusp of this now. The momentum is moving in that direction.

WERC: Let’s look at the other components of Obama’s program. You mentioned that the administration is putting most of its hopes into reviving the banking system as a means to jump-start the economy. What about the Public-Private Investment Fund, for example?

In mid-February Treasury Secretary Tim Geithner announced that up to $1 trillion would be provided by the Treasury to “provide financing for private investors to buy ‘distressed securities.’” Geithner said the the goal is to clean up the banks’ “toxic assets so that the credit crunch that is hobbling the economy can be ended.” What is your take on the PPIF?

Rasmus: This is really Part Two of the big banks’ rescue plan — and the $1 trillion figure that Geithner presents is just for starters; the figure is going to increase significantly.

As you say, they plan to use taxpayer money to help the banks and investors buy bad assets that exist in these banks and financial institutions. It’s the existence of these bad assets that prevent the banks from making loans to businesses and homeowners. It’s what’s been clogging up the system.

But the Treasury has refused to deal with these bad assets. If you go back to then-Treasury Secretary Henry Paulson and the Troubled Assets Relief Plan (TARP), you can see that we gave the banks $700 billion in bailout funding. But Paulson didn’t buy up the bad assets, which was the whole idea behind the rescue plan. Why is that?

It’s because the banks are on strike. The banks don’t want to lend, or if they do, it’s at ridiculously high rates. They don’t want to sell all the bad assets on their books because they are essentially worthless now, and they don’t want to sell at their worthless market price.

If they sold them at their market prices, they would have even greater losses than they have now. They don’t want to loan when their balance sheets are so negative, because if they loan that reduces their reserves on hand. And this is freezing up the system.

Paulson and TARP could not buy them at above-market prices because Congress was looking over their shoulders and saying, “Hey! What are you doing, subsidizing these banks, giving them more than the market value of these assets?”

So, Paulson looked around, saw that he couldn’t do anything, and did nothing in relation to these bad assets.

Today, with the PPIF, we have essentially the same situation, but with a little twist.

What they’re trying to do with PPIF is to create a market price to sell these bad assets, thereby subsidizing not only the banks but the investors who would buy them. In other words, this $1 trillion is designed to give money incentives to the banks to make up the difference between what the price would be and what the market value would be. So, they are giving the banks a windfall to encourage them to sell at above-market price.

At the same time, they’re giving an incentive to the investors; in other words, they are subsidizing the investors as well, with taxpayer money, to come in and buy. They hope this will create a new market price that will take off on its own and unblock the lending. It’s going to cost well over $1 trillion to get that going, and it’s really questionable whether investors will want to buy those bad assets at any price.

WERC: All the business media report that investors are not willing to buy these assets, even at higher rates. …

Rasmus: That’s right. And if the $1 trillion doesn’t work, the government is prepared to throw more money at them. The investors know this, so they are going to sit and wait, saying that the price is not high enough and that you have to subsidize us even more. With the government already so committed to this effort, they will throw more money at the banks. Geithner and Obama are already saying that this is just a start, and that we may have to throw more money into this bad assets plan some time soon.

WERC: Some economists, and even some top-level financial gurus such as Former Federal Reserve chief Alan Greenspan, are saying that the government should simply take over and nationalize these bad assets. They say the Obama plan is doomed to fail.

Rasmus: The banks would love this. Keep in mind that Obama and Geithner are not talking about confiscating these bad assets. They are talking about is buying them. But they would have to buy at above-market price because the banks won’t sell them. The bankers are holding out for even-higher prices. That’s the crux of the problem.

And when Greenspan and the others talk about nationalization, we must be clear, that’s a misnomer. They don’t really mean nationalization. Buying preferred stock or even common stock does not amount to nationalization. It’s just partial receivership, or subsidization, at taxpayer expense.

Seizure of private companies on behalf of investors is not nationalization. Their goal is to buy the bad assets and then sell them back to private investors at below-market prices — all at taxpayers’ expense.

WERC: What is the total amount of bad assets, assuming there’s agreement on the amount?

Rasmus: Professor Rubini at New York University estimates that there’s at least $3.6 trillion in bad assets. Fortune magazine says $4 trillion. Geithner, last June, indicated he thought there was about $6 trillion.

So to buy these bad assets, the taxpayers; would have to fork over $6 trillion.

WERC: The figure is staggering. Clearly, this situation calls out for true nationalization.

Rasmus: Yes, it does. But what is true nationalization? It means totally taking over these banks and financial institutions — with bondholders and shareholders not just taking a haircut, but taking a scalping. It means getting rid of management. It means consolidating and running these banks on behalf of the interests of the working-class majority in the country. You don’t pay dividends. You don’t pay stock shares. you take full day-to-day operational control of all strategic decision-making. You run it and turn over the profits for public investment, not to line the pockets of private investors.

Without a doubt, what we need is a fully nationalized banking system.

WERC: Many of the initiators of the Workers Emergency Recovery Campaign are calling for the nationalization of the banks without compensation. They also say that the $700 billion in the Paulson plan — funds that are simply sitting in the banks waiting to ride out the recession — should be confiscated by the government and placed at the service of job creation.

Today, the government could nationalize the banks and use that $1 trillion in the PPIF fund — just to give one example — to put people back to work. If we assume a living wage of $50,000 per worker for one year, and we multiply this number by the 20 million projected unemployed workers, this gives us exactly $1 trillion. Shouldn’t the Obama administration earmark that $1 trillion to provide unionized, living-wage jobs for one year to the 20 million unemployed? Isn’t this a better way to jump-start the economy?

Rasmus: That’s the point I have been making all along. People are referring to the Great Depression. But what got us out of the Depression? It was not the New Deal.

The New Deal did not really come on the scene till 1935, with some success. It stopped the decline, but it did not generate the recovery, and after two years, Roosevelt and others started dismantling the New Deal. Once they started doing this and trying to balance the budget, in mid-1937, we went right back into the Depression. We did not come out of the Depression till 1942. Why was this? It was because government spending, i.e., public investment, rose from 20 percent to 40 percent of annual Gross Domestic Product (GDP), the total annual spending in the economy.

WERC: How are they planning to finance the PPIF: Would it be through the Treasury?

Rasmus: Yes. They’ve got about $190 billion left over from that $700 billion TARP fund, and they will put in initially another $810 million, again, to subsidize the investors and the banks with the hope that they will come into the market to start buying and selling the bad assets at above the market price. They want to induce a market and a price, and they hope that once they do this, all the investors will step in and follow suit. But that’s a big if. I don’t see it coming.

Now the second part of the financial plan is designed to work in conjunction with the PPIF, and that’s the TALF, or Term-Backed Securities Loan Facility. This will be run by the Federal Reserve.

The Fed had $200 billion assigned for this last November 2008, but it just held onto it. Now in about a week they are going to issue another $800 billion. So they’ll have an addition $1 trillion for TALF.

WERC: Will this mean that the Federal Reserve will issue bonds for the TALF?

Rasmus: Not exactly. The idea is for Fed to lend money to investors, particularly investors in the hedge funds, money-marked mutual funds, and private equity funds — that is, to the shadow banks that are responsible for so much of the speculation that got us into the mess we’re in today — so that they can buy the bad assets. As you see, they are coming at it from two directions.

But bad assets of what? The plan is to buy up the securitized bonds and loans associated with consumer credit. We are on the verge of another sub-prime-like bust in the consumer credit markets — meaning auto loans, student loans, credit card loans, and commercial property loans.

The whole idea here is that the Fed will loan money to hedge funds and private equity funds to buy these bad assets that are about to collapse. Estimates are that defaults on credit cards alone are going to rise from their current 2% to 3% today to 8% to 10%.

It’s ironic, when you think about it, that the government is going to try to resurrect this thing through the shadow banking system and securitized markets, which collapsed from more than a trillion dollars in credit a few years ago and which have lost close to $4 trillion total. The hedge funds have lost $1 trillion of their total value, and yet we are going to give them money to buy out all these bad assets … all of this to try to stimulate and increase the lending to industry, to commerce, and the like.

This doesn’t make any sense. It just shows that the government has absolutely no confidence that the commercial banks can lead a recovery.

The question is, Is anyone going to re-enter into these securitized markets that have collapsed and buy up these bad assets, even with these government loans? Does anyone want to touch the toxic securitized markets? I don’t think so. Even with loans … unless the government gives them interest-free loans — and if that happens, the government should just enter and take over these consumer credit markets and provide credit directly through the Fed the auto, student, commercial property and other markets. Let the Fed provide the funds directly to, for instance, credit unions as the local loaning institutions. Why have middle-men come in and skim off the profits?

We must also keep in mind that the $2 trillion they are throwing at the banks with this plan is just the beginning. Everyone is lining up at the trough for a taxpayer payout.

WERC: Let’s talk now about Homeowner Affordability and Stability Plan, which is both the third financial package and the fourth component of the Obama recovery plan.

Rasmus: There are two parts to it. The first is $200 billion to go to Fannie Mae and Freddie Mac, because they already ran through the $200 billion we gave them back in August 2008. They have bought up the bad housing loans, or mortgage loans — and as their values continue to fall as housing prices fall, the values of the loans they bought up have collapsed. So they have run through their $200 billion, and they need $200 billion more.

It’s not really going to improve anything when you just keep buying up these bad loans. That’s the first part.

Regarding the second part, we have to keep in mind that Fannie Mae, Freddie Mac, and AIG, which is now supposedly “government owned,” only constitute about  20% to 30% of the housing market. That leaves 70% to 80% of the bad housing mortgage market, which the government had not been addressing. It’s this other portion that the Homeowner Affordability and Stability Plan now addresses — but with only $75 billion, a paltry sum!

And even this $75 billion is targeting subsidies to mortgage lenders; in other words, it’s trickle-down once again — that is, give money to the mortgage lenders to have the government and taxpayers pay to lower the interest rates on new home loans — up to $75 billion, which is not all the many home loans.

And what’s even more outrageous, these loans are to go to new buyers — not to those 5 million to 7 million homeowners who face foreclosure, delinquency, or default. The government is not attempting to do anything about people who are losing their homes. What they plan to do is subsidize the markets, so that the lenders can create new, affordable buyers to buy up some of the foreclosed homes.

This is a sop, a freebie, thrown to the mortgage lenders who are asked to come in buy some of the foreclosures and some of the huge stock of homes, to help them sell all the new homes. So really, it’s a plan to benefit the mortgage lenders and construction firms holding all these new, unsold homes.

WERC: Now, let’s get to the last item: the 2009 budget. This is the part that many are touting as New Deal and even “socialist,” if we are to believe Rush Limbaugh.

Rasmus: This is a $3.6 trillion budget with a lot of spending. There is going to be a firestorm over it. Watch the Republicans, the corporations and the banking interests come out of the woodwork. The gloves are going to come off. This is where the big split in the capitalist class is going to reveal itself, because there are some proposals in this plan that would shift income. It’s a shift that is insufficient, — too little too late, once again — but it is certainly moving in a better direction.

This is what we know so far about the budget:

It will increase taxes on the wealthiest 2% of households — but it will only increase taxes from 35% to 39.5%. This will effect people making more than $250,000 per year. This amounts to a rollback to the Clinton period. But that tax increase on the top-margin rate does not take effect until  2011, when the Bush tax cuts expire. This is absurd. It should take effect in 2009. They shouldn’t be putting it off, when funding is needed so desperately to stop teacher layoffs, prevent home foreclosures, or to stop autoworker layoffs.

What’s more, they will not come close to obtaining the funding they need for a real economic recovery by only rolling back the capital gains’ and capital incomes’ tax cuts only to the 1990s levels. They have to roll them back to the pre-Reagan, pre-1980s, rates. They have to raise these rates back to 50%, minimum.

So there is some increase in the tax rate, but it is delayed and it is far less than what is needed. Again, 2009 is a critical juncture year. If the declining situation is not reversed, the odds are increasing that we will be moving in 2010 to a global recession. There really is no way out without a real re-distribution of income, reversing the redistribution of income from workers to investors and corporations that has been going on since 1980.

Second, on healthcare. The budget calls for $634 billion in healthcare funding, but this is only half of what is needed for single-payer. Also, if this funding goes to the private insurance companies, as appears to be the case, there will be no real solution to the healthcare crisis in our country. Only single-payer offers a solution.

Third, the budget calls for deprivatizing student loans. This is one point that is commendable in the plan.

The details of the plan are only emerging. We will have to monitor it closely. But one thing is certain: What has been proposed by the Obama administration is likely to be modified substantially by the Republicans and centrist Democrats. There is going to be a big fight, with major changes expected.

WERC: The government is talking about incurring a $1.75 trillion deficit with this budget. What does this mean? How will the deficit be financed?

Rasmus: First, it should be noted that the real deficit by 2010 will be $2.25 trillion.

One way they are talking about financing this deficit is with carbon credits. These are carbon pollution permits. The government is expecting a $526 billion revenue from this source, though it’s questionable whether they will be able to raise this amount. Governments and corporations in Europe want to give corporations credits for free. They’ll try that here too.

They will issue more Treasury bonds, and they will simply have go to the printing presses and print more money. Clearly, they are in a bind — especially if the economy continues to tank.

WERC: You have made many predictions that have actually come true — unlike just about every mainstream economist and forecaster. What are your predictions today?

Rasmus: We’re on the knife’s edge of a transition between this epic recession and a depression. The bank bailout will require trillions more dollars. And even then, the impact is likely to be marginal.

The depression could be triggered by one or more of the following factors: sovereign debt crises in Eastern Europe, deepening job losses in the United States, the collapse of the treasuries’ markets; the collapse of the global bond markets. These are among the many possible scenarios.

WERC: What is to be done?

Rasmus: I have outlined some policy recommendations here. Readers who would like to delve into this question in greater depth can get my full set of proposals on my website, which is www.kyklosproductions.com. You can also see my latest article in the March 2009 of “Z” magazine, where I describe my full set of proposals for recovery as an alternative to the Obama program.

From Democracy Now February 13, 2009

Both the House and Senate are set to vote today on the $789 billion economic stimulus package. The vote follows weeks of political wrangling that culminated in compromise legislation struck on Wednesday. The final size of the package is less than what both the House and Senate originally passed and far smaller than what many economists say is needed. But it still marks the nation’s largest economic rescue program since Franklin Roosevelt launched the New Deal.

Guests:
Michael Hudson, Distinguished Research Professor at University of Missouri, Kansas City. A former Wall Street economist, he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire. His latest article, “Obama’s Awful Financial Recovery Plan,” is online at counterpunch.org

Robert Kuttner, Journalist and economist. He is the co-founder and co-editor of The American Prospect magazine, as well as a Distinguished Senior Fellow of the think tank Demos. His latest book is called Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.

JUAN GONZALEZ: Both the House and Senate are set to vote today on the $789 billion economic stimulus package. The vote follows weeks of political wrangling that culminated in compromise legislation struck on Wednesday. The final size of the package is less than what both the House and Senate originally passed and far smaller than what many economists say is needed. But it still marks the nation’s largest economic rescue program since Franklin Delano Roosevelt launched the New Deal.

The final bill includes $507 billion in spending programs and $282 billion in tax relief. Independent Senator Joseph Lieberman hailed it as a bipartisan achievement.

SEN. JOSEPH LIEBERMAN: We came a long way in a relatively short time to achieve something big and urgently necessary for our country and our people. And when I say “we,” I mean the President, the House, the Senate, members of both political parties. Everybody gave something in these negotiations to achieve something bigger for our country and our people.

JUAN GONZALEZ: House Democrats have voiced criticism that the final legislation more closely resembles the less-expensive measure approved by the Senate. $20 billion in education funding was cut, along with $30 billion for state governments to prevent reductions in social services to the poor and unemployed. But some key boosts to social programs were preserved, including a $20 billion allotment for food stamps.

Most Republican lawmakers have opposed the stimulus. The partisan divide extended to the White House Thursday, when Senator Judd Gregg of New Hampshire withdrew his nomination as Commerce Secretary. The Republican, Gregg, cited what he called “irresolvable conflicts” with the economic stimulus plan.

SEN. JUDD GREGG: Well, I want to begin by thanking the President for considering me for the position of Secretary of Commerce. This was truly a great honor, and I had felt that I could bring some very positive and instructive things to this administration and was looking forward to that. However, as we proceeded down the road here since the nomination was made, it’s become clear to me that—you know, I’ve been my own person for thirty years. I’ve been a governor, and I’ve been a congressman, I’ve been a senator, made my own decisions, stood for what I believe in. You know I’m a fiscal conservative, as everybody knows, fairly strong one.

And it just became clear to me that it would be very difficult, day in and day out, to serve in this cabinet or any cabinet, for that matter, and be a part of a team and not be able to be 100 percent with the team, 110 percent with the team. You know, you can’t have a blocking back who only pulls off every second or third play.

JUAN GONZALEZ: Gregg is Obama’s second Commerce pick to withdraw from nomination, following New Mexico Governor Bill Richardson.

Meanwhile, more federal aid for the nation’s banking system is likely on the horizon. In a new report, New York University economist Nouriel Roubini estimates financial firms stand to lose up to $3.6 trillion on troubled loans and devalued assets. Echoing other economists, Roubini concludes the US banking system is “effectively insolvent.”

AMY GOODMAN: For more on the economy, we’re joined now by two guests. Here at the firehouse studio, Michael Hudson, Distinguished Research Professor at University of Missouri, Kansas City. A former Wall Street economist, he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire. His latest article, “Obama’s Awful Financial Recovery Plan.” It’s online at counterpunch.org.

Joining us from Washington, D.C., Robert Kuttner, journalist and economist, co-founder and co-editor of The American Prospect magazine, as well as Distinguished Senior Fellow at the think tank Demos. His latest book is called Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.

Michael Hudson, let’s begin with you here in New York. Why do you think that Obama’s financial recovery plan is “awful”?

MICHAEL HUDSON: Because it’s not leading to recovery at all. It’s now up to $12 trillion. It’s a giveaway to the banks, to the creditors, without a single penny for actual debt reduction. And I had thought that at least half a percentage point, $50 billion, was going to be to write down troubled mortgage debtors, but it turns out that not a penny of mortgage debt is going to be written down. When the banks have lent more money than a mortgage owes, with 38 percent, the government is going to create its own debt to come in and make up the difference, so the debt is going to continue to grow exponentially, and it’s way beyond the ability of the economy to pay. If people have to pay the amount of debt that they have now, there won’t be any money to buy goods and services, companies will not sell as much, they’ll invest less, they’ll hire less, and they’ll continue to downsize.

And what’s happened is that this is the greatest transfer of wealth really in American history. It’s doubled the American debt. The closest parallel I can think of is William the Conqueror’s conquest of England. He came with a military band, conquered the land and imposed taxes over the whole land, basing it all on the Domesday Book, what—the rent could be squeezed out. In this case, the rip-off has been non-military. The bankers have done insider dealing to get the government to give them or guarantee them $12 trillion of bad loans they’ve made, many of them fraudulent.

And then they’re trying to blame the poor for all this, as if the poor are somehow exploiting the rich by taking out more loans than they can pay. Yesterday, Senator McCain said—he warned that all of this debt was going to be paid by the future generation, and we’re exploiting them. But that’s not how to think of it at all. When you have a debt that goes to a future generation, you have taxpayers paying to bondholders, just like in the nineteenth century you had the western states paying to the eastern states. So what you’ve done is given $12 trillion to the richest one percent—or ten percent of the population, and you’ve indebted the economy and the government to them for the next hundred years. You’ve created a new class of ruling families.

And Obama has—by doing this, he’s broken with every president in history. Whenever the debts have exceeded the ability to pay, they’ve been written down to the ability to pay, either through bankruptcy or through conscious government write-down. But instead of writing down the debts, he says the creditors are not going to lose money, despite what Mr. Roubini said. They may have lost money, but they will be made whole by the government. And that’s crazy. That’s why every economic chart you see, there will be a gradual rise and then a sudden collapse. Everything is turned into a vertical fall. Prices, international shipping, employment, profits, they’ve all hit a wall. And there’s no way that the economy can recover when people have to pay interest and amortization instead of buying goods and services, or companies will have to pay their junk bond holders instead of investing in new equipment.

JUAN GONZALEZ: Let me ask Robert Kuttner—I don’t know if your analysis is as pessimistic of the recovery package. But also, I’d like to ask you why, if everyone agrees that the heart of the original trigger for this crisis was the mortgage crisis, is the—the helping out of homeowners continues to be pushed back in the response to it?

ROBERT KUTTNER: Well, my analysis is somewhat different from Mr. Hudson’s analysis. I don’t think this adds up to $12 trillion, and we can have a little debate about that. But I do think that the plan does not go nearly far enough and, in some respects, is just completely wrongheaded.

I think you have to divide what needs to be done into three areas. Number one, we need to refinance mortgages directly so that aid goes directly to homeowners, and the banks and the bondholders who profited from these Mafia loans take the hit, and homeowners stay in their homes. That’s what Roosevelt did in the ’30s with the Home Owners’ Loan Corporation, where the government refinanced mortgages directly. So that’s the first big problem. They haven’t done anything, and the approach they’re taking, when they do get around to it, is wrong, because it bails out bondholders and bankers rather than homeowners.

Secondly, the stimulus is too small by about a factor of three. Just to take one example, state and local governments are going to be out of revenues to the tune of $400 to $500 billion over the next two years. The money in the stimulus package, about $140 billion. So, you know, these are layoffs of teachers and police and fire and cuts in programs that are completely needless. All the government has to do is write a check, and state and local services can continue.

The biggest problem of all is the Geithner plan to try and bring hedge funds and private equity companies with loans from the Federal Reserve as a way of propping up banks. It’s resuscitating the same system that got us into this mess. It’s totally wrongheaded. All of the economists who I respect, from Joe Stiglitz to Paul Krugman to Nouriel Roubini, all argue that, sooner or later, we’re going to have to nationalize the banks, clean out the bad assets, make the bad actors take a hit, replace corrupt management, and clean the slate so that we start out with new—with viable banks that can get the credit system operating again. And the longer we defer that with more pyramid schemes financed by the Fed or the Treasury or the taxpayers, the deeper the hole is.
You asked the question, why we’re not doing it right. The problem is political. On the one hand, Obama has hired a lot of Bob Rubin’s protégés, who aren’t even advocating the right policy. On the other hand, the Republicans are stonewalling him across the board. And so people like Susan Collins, senator from Maine, who are pretty conservative get to block this thing. The only way to end this blockage is for Obama to go to the country and to become a lot more radical, because the times demand radical solutions.

AMY GOODMAN: We’re talking to economists Robert Kuttner and, here in New York, Michael Hudson. We’ll be back with them in a minute.

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AMY GOODMAN: Our guests are two economists. Robert Kuttner joins us from Washington, D.C. His latest book is Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency. Michael Hudson is also with us. He’s here in New York. He has also written many books. His latest article, though, is “Obama’s Awful Financial Recovery Plan.” Juan?

JUAN GONZALEZ: Yeah, Michael Hudson, I’d like to ask you—Robert Kuttner just mentioned the whole issue of the Obama administration attempting to bring in private equity firms to help bail out the system. But isn’t part of the problem of these private equity funds, hedge funds, that they are even less transparent than your average corporation, which at least is filing SEC reports and has boards of directors and has to respond to shareholders to some degree? These are even more of the problem of lack of transparency that we’ve had in the financial system generally.

MICHAEL HUDSON: Well, AIG insurance company has been given $135 billion by the US government to pay hedge fund bets that it was on the wrong side of. Now, to invest in a hedge fund, you have to sign a document with the Securities and Exchange Commission saying you have over a million dollars to lose, and you can lose all your money, and it’s not going to affect your life, that you can take the risk, and you’ll be OK if you lose it all. That’s what you have to do to get a hedge fund.

These are the people who Obama is rescuing, not the people who have less than a million dollars and who really have risked their life in buying the houses, the homes, and losing their jobs. He’s protecting the people who could lose all their money, and they’d function, and not protecting the people who actually need help. That’s the irony of all this.

And it’s almost unprecedented that someone who was elected with an overwhelming mandate for change should then feel that he has to depend on Republicans, whereas you had George Bush come in with maybe a half a percentage point victory and say he has a mandate to make the most sweeping changes in history. There’s a complete disconnect there.

AMY GOODMAN: So how does he get it passed in the Senate then?

MICHAEL HUDSON: How did—

AMY GOODMAN: How would he get his plan passed in the Senate then, if he doesn’t bring some Republicans on board?

MICHAEL HUDSON: A president is able to use a bully pulpit. He had a lot of public—enormous public support. He could have gone to the people, like Roosevelt did, and said, “Here is my plan, and I’m going to protect the workers and American industry who are productive. I’m not going to support the extractive sector.” And instead, he talked as if he was supporting labor, he talked as if he was supporting industry, but all the money he’s been given—has been given to essentially Wall Street and, as Mr. Kuttner said, to Mr. Rubin’s protégés.

And if you want to see a kind of scenario where this is leading, you can look at what Mr. Rubin did in Russia and the Baltic countries and the post-Soviet economies. Right now, they’re all broke, and there’s no visible means of support. And in a way, you could say that countries like Latvia represent a foretaste of what we will be moving towards if the program isn’t drastically inverted to help the actual economy instead of the financial claims on the economy. Finance is extracting the income from the economy, not producing it, and they’re the people who are getting the benefit and getting the guarantees.

AMY GOODMAN: What’s a zombie bank?

MICHAEL HUDSON: Well, it’s very funny. A zombie bank is supposed to be a bank that has negative equity. And the word “zombie” comes basically from parasitology. Everybody—people often say the financial sector is a parasite extracting. But a parasite does more than that. It doesn’t just take nourishment from the host; it takes over the host’s brain, so the host thinks it’s actually part of the host’s body and, in fact, it’s its child, and it nurtures it. And the financial sector represents itself as being part of the economy. Mr. Geithner, two days ago, said that we can’t have a recovery of the economy without making the banks healthy and whole and profitable. And that’s just the wrong thing.

We can’t have a recovery in the economy until we let the banks take the losses and we let the hedge funds essentially take their losses. There was no need to give $135 billion to AIG, which yesterday was raided by Britain’s office of serious crimes for financial fraud, when the US government refused to move against it for fraud. It’s paying the fraudsters instead of paying the victims, and then it’s blaming the victims as if somehow the bank’s a zombie instead of the bank turning the economy into a zombie economy run by insiders in Washington giving themselves what Bloomberg Financial said was $9 trillion two months ago and two days ago an added two-and-a-half trillion, which, to me, makes up $12 trillion, rounding off.

JUAN GONZALEZ: Robert Kuttner, I’d like to ask you—a couple of days ago, the top bankers in the country testified before Congress. I was struck that there was a similar type of testimony conducted by the top bankers in Britain recently before Parliament. The difference was that all of the British bankers are basically out of jobs. They were testifying after losing their jobs, whereas the American bankers, except for John Thain at Merrill Lynch, most of them still have their jobs. Your sense of how the banking CEOs are being dealt with in this country?

ROBERT KUTTNER: Well, they’re being coddled. I mean, if you look at Citigroup, the Treasury has put in $45 billion of direct equity capital into Citigroup. It’s guaranteed another $306 billion of toxic assets. You can buy all of Citigroup for about $25 billion. So the taxpayers effectively own it. What the government ought to do is exercise the rights of ownership, go in there, put a majority of public appointees on the board, get rid of existing management. I think in the case of Citigroup, the best thing you could do is break it up, because it is a zombie bank in the sense of it being insolvent. And most of the large banks are insolvent. Their debts exceed their capital. And what Geithner is doing, he’s trying to just disguise this by one more effort to double down using the same kind of financial razzle dazzle that got us into this trouble. So it would be much cleaner to put these banks into receivership.

And if that sounds radical, it is radical, but it’s important to keep in mind that the FDIC, which is the one agency that’s behaved responsibly in this whole mess, the FDIC does this every day of the week. If a bank that has FDIC insurance goes bust, the FDIC goes in, they shut the thing down, they fire incumbent management, the shareholders lose everything, they take it over as a publicly owned bank. The biggest case of this was a bank called IndyMac in California, one of the worst of the subprime malefactors. And the FDIC went in, and they took it over. They put 150 people in to run it. And now they’re gradually selling it back to private owners. So you could do this with the biggest banks, and I think you need to do it with the biggest banks. It does nothing but defer the day of reckoning and dig the hole deeper to pretend that an insolvent bank can somehow be kept on life supports with more and more infusions of taxpayer money.

AMY GOODMAN: Economist Michael Hudson?

MICHAEL HUDSON: Mr. Kuttner is quite right to single out Citibank and the large banks. What the newspapers call a subprime problem is really a big bank problem. Almost all of this negative equity is concentrated in four or five, maybe ten, of the very biggest banks.

And what have they done with the bailout money? They’ve gone and bought the small and healthy banks, infecting the small healthy banks with their philosophy of salesmanship. Now, on the way over here, at Heathrow Airport, they had the British investigation in Parliament on the BBC television in the lounge. And it turned out that the heads of every one of these British banks who were fired were salesmen. None of them were bankers. They were into just selling. And when I was on Wall Street, that was my experience. They had stopped doing research. They had stopped doing analysis. And what they wanted were people who could sell bonds and sell mutual funds. And the whole idea has turned into salesmanship.

For Citibank, their practice for years was what they called stretching the envelope. And what that means is breaking the law and daring the government to try to move against it, by saying, “If you move against this, if you close us down or prosecute us for stretching the envelope,” such as when Citibank bought—merged with the insurance company in violation of the Glass-Steagall Act, “then we’ll bring the whole economy down in a crisis.” And they’re holding the economy hostage in order to extract this money from the government. That’s the real problem. That’s what frightens the senators, and I’m sure that’s what frightens Mr. Obama, that these guys are threatening to wreck the economy if we don’t give them everything they want.

JUAN GONZALEZ: And, Robert Kuttner, from the perspective of ordinary Americans who are dealing with not only losses of jobs and the situation with the—so many homes now worth less than the mortgages that are out on them, I was struck recently by some of these major banks increasing the interest rates on their credit cards. Now, here you have interest rates in the United States at an all-time low, yet banks like Citibank are charging 21 percent interest on the credit card. They’re increasing the interest rates. How can ordinary Americans have an impact on trying to get the leaders in Washington and the Obama administration to change some course now in this—in their efforts to develop a rescue package?

ROBERT KUTTNER: Well, ordinary Americans should be kicking and screaming. There should be ceilings on what banks can charge on credit cards, like they were in the old days when you had usury laws.

You know, banking, done properly, is very simple. Someone applies for a loan; a loan officer assesses the credit worthiness of that borrower, puts an interest rate on the loan. And the banking system is almost like a public utility. It’s not a big drain on the real economy. It supplies capital and credit to the real economy. And when you get these exaggerated, convoluted schemes that are bets on bets on bets, you create the kind of leverage that then comes crashing down when you have something like subprime. So I think the historic task of this administration is a radical simplification of the banking system so that the banking system doesn’t need to charge 23 and 30 percent on credit cards to try and recoup the loss that it made gambling on subprime bonds.

AMY GOODMAN: I want to ask about the stimulus package. It’s supposed to be voted on today. It is the nation’s largest economic rescue program since FDR. Is it big enough? And talk about the Judd Gregg, as well, Michael Hudson, the [inaudible]—

MICHAEL HUDSON: Well, in any rescue program, the first question is, who’s being rescued? And who’s being rescued are apparently the very wealthy, not the people who one would think is being rescued. And then, how are they being rescued? They’re being rescued by making the lower income brackets pay to the higher income brackets. So this sort of turns everything, the usual Progressive Era idea, upside-down. It’s a regressive idea. And it almost makes you wonder whether America is becoming a failed economy. Mr. Kuttner was right, quite right, when he said you have to transform banking. And if you don’t transform banking along the lines that he and I seem to agree on, then the economy will fail. It’s that serious.

AMY GOODMAN: Robert Kuttner, your response to the economic stimulus plan? Do you think it’s big enough?

ROBERT KUTTNER: I think it’s important that Mr. Hudson and I and your listeners and viewers keep straight the difference between the banking rescue and the stimulus package, which are two very different pieces of legislation. I think it was a real political blunder to put them forward in the same week, because people tend to confuse them.

The banking rescue put forward by Mr. Geithner is a complete disaster. The problem with the stimulus package is not that it helps the wrong people. For the most part, it helps the right people. But it’s too small by a factor of about two-thirds, because the stimulus package is about two-and-a-half percent of GDP per year for two years. The economy is declining at the rate of about five percent of GDP. I mentioned before the state and local government figures, where state and local government is out about three times the revenue that the stimulus package is going to replace. So I think some of the things in the stimulus package are absolutely admirable: down payments on high-speed rail, on clean energy, on infrastructure repair, on food stamps, on unemployment compensation, on public health. But the problem is, even though $789 billion is a huge amount of money, given the scale of this collapse, it’s too small to do the job.

And I think in order to have any effect of any significance, they’re going to have to come back again by April, May, June, maybe as part of the budget process, and put even more money into it. And it is going to take an incredible persuasion job by the chief executive to persuade the American people that you need to spend another trillion, another trillion and a half. And you need to recapitalize the banks, but to do it right, by nationalizing them, but that’s going to take more money, too. And if you think of the controversy that he faced in getting a $789 billion package through Congress, imagine what’s going to happen when he comes back and says, “By the way, we need another trillion and a half.” And he has to be damn sure that that money doesn’t go to bankers, that it goes to ordinary Americans.

AMY GOODMAN: What about Judd Gregg? What’s the politics of this, Robert Kuttner?

ROBERT KUTTNER: Well, this was a miscalculation, a blunder. I think it’s an example of Obama’s excessive tendency to bend over backwards to be bipartisan. And, you know, sometimes when you bend over backwards, things happen that you can’t repeat in family broadcasting. And I think that’s what the Republicans are doing to Mr. Obama. So he’s going to have to do this with Democrats, and he’s going to have to make it embarrassing for Republicans to block him.

Republican senators and congressmen have people—and congresswomen have people in their districts who are hurting, too, just as much as Democratic legislators have people who are hurting. If he goes to the country, the way he did in Elkhart the other day or the way he did in Peoria, and spins out a narrative that ties the suffering of ordinary people to the failed policies that we need to reverse, he can really move public opinion. And he’s got to resolve to do that, and he’s got to think much bigger.

AMY GOODMAN: I want to thank you both for being with us. Robert Kuttner, economist; co-founder, co-editor of The American Prospect magazine; latest book, Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency. Michael Hudson, Distinguished Research Professor at the University of Missouri, Kansas City, former Wall Street economist. “Obama’s Awful Financial Recovery Plan” is his latest article. It’s online at counterpunch.org.

Martin Wolf started off his Financial Times column for February 11 with the bold question: “Has Barack Obama’s presidency already failed?” The stock market had a similar opinion, plunging 382 points. Having promised “change,” Mr. Obama is giving us more Clinton-Bush via Robert Rubin’s protégé, Tim Geithner. Tuesday’s $2.5 trillion Financial Stabilization Plan to re-inflate the Bubble Economy is basically an extension of the Bush-Paulson giveaway – yet more Rubinomics for financial insiders in the emerging Wall Street trusts. The financial system is to be concentrated into a cartel of just a few giant conglomerates to act as the economy’s central planners and resource allocators. This makes banks the big winners in the game of “chicken” they’ve been playing with Washington, a shakedown holding the economy hostage. “Give us what we want or we’ll plunge the economy into financial crisis.” Washington has given them $9 trillion so far, with promises now of another $2 trillion– and still counting.

A true reform – one designed to undo the systemic market distortions that led to the real estate bubble – would have set out to reverse the Clinton-Rubin repeal of the Glass-Steagall Act so as to prevent the corrupting conflicts of interest that have resulted in vertical trusts such as Citibank and Bank of America/Countrywide/Merrill Lynch. By unleashing these conglomerate grupos (to use the term popularized under Pinochet with Chicago Boy direction – a dress rehearsal of the mass financial bankruptcies they caused in Chile by the end of the 1970s) the Clinton administration enabled banks to merge with junk mortgage companies, junk-money managers, fictitious property appraisal companies, and law-evasion firms all designed to package debts to investors who trusted them enough to let them rake off enough commissions and capital gains to make their managers the world’s highest-paid economic planners.

Today’s economic collapse is the direct result of their planning philosophy. It actually was taught as “wealth creation” and still is, as supposedly more productive than the public regulation and oversight so detested by Wall Street and its Chicago School aficionados. The financial powerhouses created by this “free market” philosophy span the entire FIRE sector – finance, insurance and real estate, “financializing” housing and commercial property markets in ways guaranteed to make money by creating and selling debt. Mr. Obama’s advisors are precisely those of the Clinton Administration who supported trustification of the FIRE sector. This is the broad deregulatory medium in which today’s bad-debt disaster has been able to spread so much more rapidly than at any time since the 1920s.

The commercial banks have used their credit-creating power not to expand the production of goods and services or raise living standards but simply to inflate prices for real estate (making fortunes for their brokerage, property appraisal and insurance affiliates), stocks and bonds (making more fortunes for their investment bank subsidiaries), fine arts (whose demand is now essentially for trophies, degrading the idea of art accordingly) and other assets already in place.

The resulting dot.com and real estate bubbles were not inevitable, not economically necessary. They were financially engineered by the political deregulatory power acquired by banks corrupting Congress through campaign contributions and public relations “think tanks” (more in the character of doublethink tanks) to promote the perverse fiction that Wall Street can be and indeed is automatically self-regulating — a travesty of Adam Smith’s “Invisible Hand.” This hand is better thought of as covert. The myth of “free markets” is now supposed to consist of governments withdrawing from planning and taxing wealth, so as to leave resource allocation and the economic surplus to bankers rather than elected public representatives. This is what classically is called oligarchy, not democracy.

This centralization of planning, debt creation and revenue-extracting power is defended as the alternative to Hayek’s road to serfdom. But it is itself the road to debt peonage, a.k.a. the post-industrial economy or “Information Economy.” The latter term is another euphemistic travesty in view of the kind of information the banking system has promoted in the junk accounting crafted by their accounting firms and tax lawyers (off-balance-sheet entities registered on offshore tax-avoidance islands), the AAA applause provided as “information” to investors by the bond-rating cartel, and indeed the national income and product accounts that depict the FIRE sector as being part of the “real” economy, not as an institutional wrapping of special interests and government-sanctioned privilege  acting in an extractive rather than a productive way.

“Thanks for the bonuses,” bankers in the United States and England testified this week before Congress and Parliament. “We’ll keep the money, but rest assured that we are truly sorry for having to ask you for another few trillion dollars. At least you should remember our theme song: We are still better managers than the government, and the bulwark against government bureaucratic resource allocation.” This is the ideological Big Lie sold by the Chicago School “free market” celebration of dismantling government power over finance, all defended by complex math rivaling that of nuclear physics that the financial sector is part of the “real” economy automatically producing a fair and equitable equilibrium.

This is not bad news for stockholders of more local and relatively healthy banks (healthy in the sense of avoiding negative equity). Their stocks soared and were by far the major gainers on Tuesday’s stock market, while Wall Street’s large Bad Banks plunged to new lows. Solvent local banks are the sort that were normal prior to repeal of Glass Steagall. They are to be bought by the large “troubled” banks, whose “toxic loans” reflect a basically toxic operating philosophy. In other words, small banks who have made loans carefully will be sucked into Citibank, Bank of America, JP Morgan Chase and Wells Fargo – the Big Four or Five where the junk mortgages, junk CDOs and junk derivatives are concentrated, and have used Treasury money from the past bailout to buy out smaller banks that were not infected with such reckless financial opportunism. Even the Wall Street Journal editorialized regarding the Obama Treasury’s new “Public-Private Investment Fund” to pump a trillion dollars into this mess: “Mr. Geithner would be wise to put someone strong and independent in charge of this fund – someone who can say no to Congress and has no ties to Citigroup, Robert Rubin or Wall Street.”

None of this can solve today’s financial problem. The debt overhead far exceeds the economy’s ability to pay. If the banks would indeed do what Pres. Obama’s appointees are begging them to do and lend more, the debt burden would become even heavier and buying access to housing even more costly. When the banks look back fondly on what Alan Greenspan called “wealth creation,” we can see today that the less euphemistic terminology would be “debt creation.” This is the objective of the new bank giveaway. It threatens to spread the distortions that the large banks have introduced until the entire system presumably looks like Citibank, long the number-one offender of “stretching the envelope,” its euphemism for breaking the law bit by bit and daring government regulators and prosecutors to try and stop it and thereby plunging the U.S. financial system into crisis. This is the shakedown that is being played out this week. And the Obama administration blinked – as these same regulators did when they were in charge of the Clinton administration’s bank policy. So much for the promised change!

The three-pronged Treasury program seems to be only Stage One of a two-stage “dream recovery plan” for Wall Street. Enough hints have trickled out for the past three months in Wall Street Journal op-eds to tip the hand for what may be in store. Watch for the magic phrase “equity kicker,” first heard in the S&L mortgage crisis of the 1980s. It refers to the banker’s share of capital gains, that is, asset price inflation in Bubble #2 that the Recovery Program hopes to sponsor.

The first question to ask about any Recovery Program is, “Recovery for whom?” The answer given on Tuesday is, “For the people who design the Program and their constituency” – in this case, the bank lobby. The second question is, “Just what is it they want to ‘recover’?” The answer is, the Bubble Economy. For the financial sector it was a golden age. Having enjoyed the Greenspan Bubble that made them so rich, its managers would love to create yet more wealth for themselves by indebting the “real” economy yet further while inflating prices all over again to make new capital gains.

The problem for today’s financial elites is that it is not possible to inflate another bubble from today’s debt levels, widespread negative equity, and still-high level of real estate, stock and bond prices. No amount of new capital will induce banks to provide credit to real estate already over-mortgaged or to individuals and corporations already over-indebted. Moody’s and other leading professional observers have forecast property prices to keep on plunging for at least the next year, which is as far as the eye can see in today’s unstable conditions. So the smartest money is still waiting like vultures in the wings – waiting for government guarantees that toxic loans will pay off. Another no-risk private profit to be subsidized by public-sector losses.

While the Obama administration’s financial planners wring their hands in public and say “We feel your pain” to debtors at large, they know that the past ten years have been a golden age for the banking system and the rest of Wall Street. Like feudal lords claiming the economic surplus for themselves while administering austerity for the population at large, the wealthiest 1 per cent of the population has raised their appropriation of the nationwide returns to wealth – dividends, interest, rent and capital gains – from 37 per cent of the total ten years ago to 57 per cent five years ago and it seems nearly 70 per cent today. This is the highest proportion since records have been kept. We are approaching Russian kleptocratic levels.

The officials drawn from Wall Street who now control of the Treasury and Federal Reserve repeat the right-wing Big Lie: Poor “subprime families” have brought the system down, exploiting the rich by trying to ape their betters and live beyond their means. Taking out subprime loans and not revealing their actual ability to pay, the NINJA poor (no income, no job, no audit) signed up to obtain “liars’ loans” as no-documentation Alt-A loans are called in the financial junk-paper trade.

I learned the reality a few years ago in London, talking to a commercial banker. “We’ve had an intellectual breakthrough,” he said. “It’s changed our credit philosophy.”

“What is it?” I asked, imagining that he was about to come out with yet a new magical mathematics formula?

“The poor are honest,” he said, accompanying his words with his jaw dropping open as if to say, “Who would have guessed?”

The meaning was clear enough. The poor pay their debts as a matter of honor, even at great personal sacrifice and what today’s neoliberal Chicago School language would call uneconomic behavior. Unlike Donald Trump, they are less likely to walk away from their homes when market prices sink below the mortgage level. This sociological gullibility does not make economic sense, but reflects a group morality that has made them rich pickings for predatory lenders such as Countrywide, Wachovia and Citibank. So it’s not the “lying poor.” It’s the banksters’ fault after all!

For this elite the Bubble Economy was a deliberate policy they would love to recover. The problem is how to start a new bubble to make yet another fortune? The alternative is not so bad – to keep the bonuses, capital gains and golden parachutes they have given themselves, and run. But perhaps they can improve in Bubble Economy #2.

The Treasury’s newest Financial Stability Plan (Bailout 2.0) is only the first step. It aims at putting in place enough new bank-lending capacity to start inflating prices on credit all over again. But a new bubble can’t be started from today’s asset-price levels. How can the $10 to $20 trillion capital-gain run-up of the Greenspan years been repeated in an economy that is “all loaned up”?

One thing Wall Street knows is that in order to make money, asset prices not only need to rise, they have to go down again. Without going down, after all, how can they rise up? Without a crucifixion for the economy, how can there be a resurrection? The more frenetic the price fibrillation, the easier it is for computerized buy-and-sell programs to make money on options and derivatives.

So here’s the situation as I see it. The first objective is to preserve the wealth of the creditor class – Wall Street, the banks and the other financial vehicles that enrich the wealthiest 1 per cent and, to be fair within America’s emerging new financial oligarchy, the richest 10 per cent of the population. Stage One involves buying out their bad loans at a price that saves them from taking a loss. The money will be depicted to voters as a “loan,” to be repaid by banks extracting enough new debt charges in the new rigged game the Treasury is setting up. The current loss will be shifted the onto “taxpayers” and made up by new debtors – in both cases labor, onto whose shoulders the tax burden has been shifted steadily, step by step since 1980.

An “aggregator” bank (sounds like “alligator,” from the swamps of toxic waste) will buy the bad debts and put them in a public agency. The government calls this the “bad” bank. (This is Geithner’s first point.) But it does good for Wall Street – by buying loans that have gone bad, along with loans and derivative guarantees and swaps that never were good in the first place. If the private sector refuses to buy these bad loans at prices the banks are asking for, why should the government pretend that these debt claims are worth more. Vulture funds are said to be offering about what they were when Lehman Brothers went bankrupt: about 22 cents on the dollar. The banks are asking for 75 cents on the dollar. What will the government offer?

Perhaps the worst alternative is that is now being promoted by the banks and vulture investors in tandem: the government will guarantee the price at which private investors buy toxic financial waste from the banks. A vulture fund would be happy enough to pay 75 cents on the dollar for worthless junk if the government were to provide a guarantee. The Treasury and Federal Reserve pretend that they simply would be “providing liquidity” to “frozen markets.” But the problem is not liquidity and it is not subjective “market psychology.” It is “solvency,” that is, a realistic awareness that toxic waste and bad derivatives gambles are junk. Mr. Geithner has not been able to come to terms with how to value this – without bringing the Obama administration down in a wave of populist protest – any more than Mr. Paulson was able to carry out his original Tarp proposal along these lines.

The hardest task for today’s banksters is to revive opportunities for creditors to make a new killing. (It’s the economy that’s being killed, of course.) This seems to be the aim of the Public/Private investment company that Mr. Geithner is establishing as the second element in his plan. The easiest free lunch is to ride the wave of a new bubble – a fresh wave of asset-price inflation to be introduced to “cure” the problem of debt deflation.

Here’s how I imagine the ploy might work. Suppose a hapless family has bought a home for $500,000, with a full 100 per cent $500,000 adjustable-rate mortgage scheduled to reset this year at 8 per cent. Suppose too that the current market price will fall to $250,000, a loss of 50 per cent by yearend 2009. Sometime in mid 2010 would seem to be long enough for prices to decline by enough to make “recovery” possible – Bubble Economy 2.0. Without such a plunge, there will be no economy to “rescue,” no opportunity for Tim Geithner and Laurence Summers to “feel your pain” and pull out of their pocket the following package – a variant on the “cash for trash” swap, a public agency to acquire the $500,000 mortgage that is going bad, heading toward only a $250,000 market price.

The “bad bank” was not quite ready to be created this week, but the embryo is there. It will take the form of a public/private partnership (PPP) of the sort that Tony Blair made so notorious in Britain. And speaking of Mr. Blair, I am writing this from England, where almost every America-watcher I talk to has expressed amazement at Obama’s performance last week idealizing England’s counterpart to George Bush when it comes to unpopularity contests. Blair’s tenure in office was a horror story, not something to be congratulated for. He entered into the disastrous public/private partnership that doubled, tripled or quadrupled the cost of public projects by adding on a heavy financial overhead. If Obama does not realize how he shocked Britain and much of Europe with his praise, then he is in danger of foisting a similar public/private financialized “partnership” on the United States.

The new public/private institution will be financed with private funds – in fact, with the money now being given to re-capitalize America’s banks (headed by the Wall St. banks that have done so badly). Banks will use the Treasury money they have received by “borrowing” against their junk mortgages at or near par to buy shares in a new $5 trillion institution created along the lines of the unfortunate Fanny Mae and Freddie Mac. Its bonds will be guaranteed. (That’s the “public” part – “socializing” the risk.) The PPP institution will have the power to buy and renegotiate the mortgages that have passed into the hands of the government and other holders. This “Homeowner Rescue Trust” will use its private funding for the “socially responsible” purpose of “saving the taxpayer” and middle class homeowners by renegotiating the mortgage down from its original $500,000 to the new $250,000 market price.

Here’s the patter talk you can expect, with the usual euphemisms. The Homeowners Rescue PPP will appear as a veritable Savior Bank resurrected from the wreckage of Bubble #1. Its clients will be families strapped by their mortgage debt and feeling more and more desperate as the price of their major asset plummets more deeply into Negative Equity territory. To them, the new PPP will say: “We’ve got a deal to save you. We’ll renegotiate your mortgage down to the current market price, $250,000, and we’ll also lower your interest rate to just 5.50 per cent, the new rate. This will cut your monthly debt charges by nearly two thirds. Not only can you afford to stay in your home, you will escape from your negative equity.”

The family probably will say, “Great.” But they will have to make a concession. That’s where the new public/private partnership makes its killing. Funded with private money that will take the “risk” (and also reap the rewards), the Savior Bank will say to the family that agrees to renegotiate its mortgage: “Now that the government has absorbed a loss (in today’s travesty of “socializing” the financial system) while letting let you stay in your home, we need to recover the money that’s been lost. If we make you whole, we want to be made whole too. So when the time comes for you to sell your home or renegotiate your mortgage, our Homeowners Rescue PPP will receive the capital gain up to the original amount written off.”

In other words, if the homeowner sells the property for $400,000, the Homeowners Rescue PPP will get $150,000 of the capital gain. If the home sells for $500,000, the bank will get $250,000. And if it sells for more, thanks to some new clone of Alan Greenspan acting as bubblemeister, the capital gain will be split in some way. If the split is 50/50 and the home sells for $600,000, the owner will split the $100,000 further capital gain with the Homeowners Rescue PPP. It thus will make much more through its appropriation of capital gains (the new debt-fueled asset-price inflation being put in place) than it extracts in interest!

This would make Bubble 2.0 even richer for Wall Street than the Greenspan bubble! Last time around, it was the middle class that got the gains – even if new buyers had to enter a lifetime of debt peonage to buy higher-priced homes. It really was the bank that got the gains, of course, because mortgage interest charges absorbed the entire rental value and even the hoped-for price gain. But homeowners at least had a chance at the free ride, if they didn’t squander their money in refinancing their mortgages to “cash out” on their equity to support their living standards in a generation whose wage levels had stagnated since 1979. As Mr. Greenspan observed in testimony before Congress, a major reason why wages have not risen is that workers are afraid to strike or even to complain about being worked harder and harder for longer and longer hours (“raising productivity”), because they are one paycheck away from missing their mortgage payment – or, if renters, one paycheck or two away from homelessness.

This is the happy condition of normalcy that Wall Street’s financial planners would like to recover. This time around, they may not be obliged to make their gains in a way that also makes middle class homeowners rich. In the wake of Bubble Economy #1, today’s debt-strapped homeowners are willing to settle merely for a plan that leaves them in their homes! The Homeowners Rescue PPP can appropriate for its stockholder banks and other large investors the capital gains that have been the driving force of U.S. “wealth creation,” bubble-style. That is what the term “equity kicker” means.

This situation confronts the economy with a dilemma. The only policies deemed politically correct these days are those that make the situation worse: yet more government money in the hope that banks will create yet more credit/debt to raise house prices and make them even more unaffordable; credit/debt to inflate a new Bubble Economy #2.

Lobbyists for Wall Street’s enormous Bad Bank conglomerates are screaming that all real solutions to today’s debt problem and tax shift onto labor are politically incorrect, above all the time-honored debt write-downs to bring the debt burden within the ability to pay. That is what the market is supposed to do, after all, by bankruptcy in an anarchic collapse if not by more deliberate and targeted government policy. The Bad Banks, having demanded “free markets” all these years, fear a really free market when it threatens their bonuses and other takings. For Wall Street, free markets are “free” of public regulation against predatory lending; “free” of taxing the wealthy so as to shift the burden onto labor; “free” for the financial sector to wrap itself around the “real” economy like parasitic ivy around a tree to extract the surplus.

This is a travesty of freedom. As the premature neoliberal Adam Smith explained, “The government of an exclusive company of merchants, is, perhaps, the worst of all governments.” But worst of all is the “freedom” of today’s economic discussion from the wisdom of classical political economy and from historical experience regarding how societies through the ages have coped with the debt overhead.

How to save the economy from Wall Street

There is an alternative to ward all this off, and it is the classic definition of freedom from debt peonage and predatory credit. The only real solution to today’s debt overhang is a debt write-down. Until this occurs, debt service will crowd out spending on goods and services and there will be no recovery. Debt deflation will drag the economy down while assets are transferred further into the hands of the wealthiest 10 percent of the population, operating via the financial sector.

If Obama means what he says, he would use his office as a bully pulpit to urge repeal the present harsh creditor-oriented bankruptcy law sponsored by the banks and credit-card companies [and pushed through by then-Senator Joe Biden. Editors]. He would campaign to restore the long-term trend of laws favoring debtors rather than creditors, and introduce legislation to restore the practice of writing down debts to reflect the debtor’s ability to pay, imposing market reality to debts that are far in excess of realistic valuations.

A second policy would be to restore the power of state attorneys general to bring financial fraud charges against the most egregious mortgage lenders – the prosecutions that the Bush Administration got thrown out of court by claiming that under an 1864 National Bank Act clause, the federal government had the right to override state prosecutions of national banks – and then appointing a non-prosecutor to this enforcement position.

On the basis of reinstated fraud charges, the government might claw back the bank bonuses, salaries and bank earnings that represented the profits from America’s greatest financial and real estate fraud in history. And to prevent repetition of the past decade’s experience, the Obama Administration might help popularize a new psychology of debt. The government could encourage “the poor” to act as “economically” as Donald Trumps or Angelo Mozilos would do, making it clear that debt write-downs are a right.

Also to ward off repetition of the Bubble Economy, the Treasury could impose the “Tobin tax” of 1 per cent on purchases and options for stocks, bonds and foreign currency. Critics of this tax point out that it can be evaded by speculators trading offshore in the rights to securities held in U.S. accounts. But the government could simply refuse to provide deposit insurance and other support to institutions trading offshore, or simply could announce that trades in such “deposit receipts” for shares would not have legal standing. As for trades in derivatives, depository institutions – including conglomerates owning such banks – can simply be banned as inherently unsafe. If foreigners wish to speculate on financial horse races, let them.

Financial policy ultimately rests on tax policy. It is the ability to levy taxes, after all, that gives value to Treasury money (just as it is the inability to collect on debts that has depreciated the value of commercial bank deposits). It is easy enough for fiscal policy to prevent a new real estate bubble. Simply shift the tax system back to where it originally was, on the land’s site-rental value. The “free lunch” (what John Stuart Mill called the “unearned increment” of rising land prices, a gain that landlords made “in their sleep”) would serve as the tax base instead of burdening labor and industry with income taxes and sales taxes. This would achieve the kind of free market that Adam Smith, John Stuart Mill and Alfred Marshall described, and which the Progressive Era aimed to achieve with America’s first income tax in 1913. It would be a market free of the free lunch that Chicago Boys insist does not exist.  But the recent Bubble Economy and today’s Bailout Sequel have been all about getting a free lunch.

A land tax would prevent housing prices from rising again. It is the most hated tax in America today, largely because of the disinformation campaign that has been mounted by the real estate interests and amplified by the banks that stand behind them. The reality is that taxing land appreciation rather than wages or corporate profits would save homeowners from having to take on so much debt in order to obtain housing. It would save the economy from seeing “wealth creation” take the form of the “unearned increment” being capitalized into higher bank loans with their associated carrying charges (interest and amortization).

The wealth tax originally fell mainly on real estate. The most immediate and politically feasible priority of the Obama Administration thus should be to repeal the Bush Administration’s drastic tax cuts for the top brackets and its moratorium on the estate tax. The aim should be to bring down the polarization between creditors and debtors that has concentrated over two-thirds of the returns to wealth in the richest 1 per cent of the population.

If alternatives to the Bubble Economy such as these are not promoted, we will know that promises of change were mere rhetoric, Tony Blair style. Mr. Geithner may have given the game away in his February 10 statement that “Access to public support is a privilege, not a right.” The literal meaning of “privilege” is “private law” (Lat. leges), a law to benefit individuals as a special interest separate from the public interest. The problem is that Mr. Geithner is seeking to save a system that creates no real jobs products. The debt that banks sell is not really a “product.” Extracting interest and receiving public bailouts to make financial gamblers whole is extractive, not productive.

The banking system often has been characterized as parasitic. The metaphor is appropriate on more than one plane. Most people think of parasites simply as leeches, draining nourishment from the host. But biological nature is more complex. In order for parasites to succeed they must first numb the host’s pain-warning system so that they can get a foothold. They then take control of the host’s brain. The trick the host into believing that the parasite is part of its own body, and indeed even its child, to be nurtured, protected and given preference. They turn the host into a zombie. So the problem we are facing is not “zombie banks,” but the ability of Wall Street to create a zombie economy.

This is what the financial sector has done vis-à-vis the economy at large. It depicts itself and the rest of the symbiotic FIRE sector as part of the “real” economy, so that its extraction of interest, economic rent and monopoly prices is payment for providing a “service”: the privilege of credit creation, landlordship and “corporate management. Like his predecessor Hank Paulson, Mr. Geithner claims that recovery cannot occur until the banking system is put back on its feet in sufficiently solvent and indeed, prosperous condition to “get credit flowing again,” he said. “Without credit, economies cannot grow at their potential.” But is the solution really to create yet more debt for the already debt-ridden U.S. economy? It was the Greenspan debt bubble that brought it to a halt! Interest and amortization charges on new debt will eats into the ability of consumers and companies to spend and invest. Claiming that economic recovery must be led by renewed debt creation threatens only to deepen debt dependency and further erode discretionary consumer spending power.

When it comes to cleaning up the Greenspan Bubble legacy by writing down homeowner mortgage debt, the Treasury proposal offers homeowners $50 billion – just 0.5 percent of the $10 trillion Wall Street bailout to date, and less than half the amount given to AIG to pay its hedge fund speculators on their derivative gambles. The Treasury has handed out $25 billion to each and every big bank, so just two of these banks alone got as much as the reported one-quarter of all homeowners in America suffering from Negative Equity on their homes and in need of mortgage renegotiation. Yet today’s economic shrinkage cannot be reversed without a recovery in consumer demand. The economy has lost the “virtual wealth” in higher-priced homes and the stock market, and must rely on after-tax earnings. But I see little concern for wage earners in the Treasury plan. Without debt relief, consumer spending and business investment will not recover.

This debt dimension is what the Treasury’s “recovery” plan leaves out of account. It seeks to recover the debt-bubble economy, not the real economy of production and consumption.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com

DETROIT — With its access to a government lifeline possibly at risk, General Motors executives were locked in intense negotiations Monday with leaders of the United Automobile Workers over ways to cut its vast bills for retiree health care.

G.M. will file what is expected to be the largest restructuring plan of its 100-year history on Tuesday, a step it must take to justify its use of a $13.4 billion loan package from the federal government.

The plan will outline in considerable detail, over as many as 900 pages, how G.M. will further cut its work force, shutter more factories in North America and reduce its lineup of brands to just four, from eight, according to executives knowledgeable about its contents. The remaining core brands will be Chevrolet, Cadillac, GMC and Buick.

But G.M.’s plan to shrink its way to profitability will not mean much without an agreement with the U.A.W.

On Monday, G.M. pressed union leaders in a meeting in Detroit for a deal on financing what was the centerpiece of the 2007 U.A.W. contract — a perpetual, G.M.-financed trust to cover health care costs of hundreds of thousands of retired hourly workers and their surviving spouses.

Both sides were hopeful that either an agreement, or at least significant progress, might be achieved by the time G.M. submitted its plan, according to three people familiar with the substance of the negotiations.

Talks are also continuing between the U.A.W. and Ford Motor and Chrysler. But the focus of negotiations has been with G.M., which has to address how a company that lost more than $20 billion last year can afford $5 billion a year in medical bills.

In its overall plan, G.M. needs to show President Obama’s new cabinet-level task force that it can substantially reduce costs and make a convincing case about its long-term viability by a March 31 deadline.

The company has already extended buyout offers to its entire United States unionized work force to reduce their ranks by another 20,000 jobs. It has also announced a 14 percent reduction in salaried workers around the world, leaving many of its white-collar workers in Detroit with limited prospects.

The plan will also probably include revisions in executive compensation and targets for cutting dealers and brands like Saturn and Pontiac.

Details of the plan have been closely guarded. G.M.’s board met Monday to review its contents, which will not be completed possibly until Tuesday, according to one G.M. official who asked not to be identified because of confidentiality agreements.

Chrysler was also said to be in the final stages of completing its plan on Monday, which will include further cuts in its manufacturing operations in the United States and more details on its strategy to rebuild its product lineup with a network of foreign alliances.

The plan was still under discussion late Monday with officials at Cerberus Capital Management, owner of an 80 percent stake, according to a person with knowledge of the situation.

The White House press secretary said Monday that the Obama administration was “anxious” to see the plans, but shared no timetable on when the president’s task force would comment.

“We’re anxious to take a look at the plans, understanding that it is extremely important to have a strong and viable auto industry,” the press secretary, Robert Gibbs, told reporters aboard Air Force One. “Obviously that is going to require some restructuring to ensure its viability.”

On Monday, the president designated the Treasury secretary, Timothy F. Geithner, and the chairman of the National Economic Council, Lawrence H. Summers, to oversee the task force on the auto industry.

The move surprised executives at G.M. and Chrysler, who were expecting the appointment of a “car czar” who would play an active part in negotiations between G.M. and Chrysler and their unions and lenders.

The task force is not likely to complete any review of the plans for at least a week or 10 days, according to an administration official who spoke on condition of anonymity. The president expects negotiations between G.M. and the U.A.W. and others to continue without pause for the plan’s submission, the official said.

Talks between G.M. and its bondholders have cooled while the automaker considers the framework of an agreement offered by the bondholders to reduce G.M.’s debt to $9 billion, from $28 billion.

The U.A.W. talks, however, have been constant since Saturday, when Ron Gettelfinger, the union’s president, at one point cut off discussions with G.M. — only to drive across town to take up the topic of retiree health care with Ford.

Ford has not received government loans, so it is significant that the U.A.W. appears to believe it must address retiree health care at all three Detroit auto companies simultaneously.

G.M. has the most at stake with the U.A.W. Its future obligations for retiree health care are estimated at $47 billion, and by next year it is required by its contract to contribute more than $10 billion to the trust set up in 2007.

The company, which nearly ran out of money before receiving the first $9.4 billion of its $13.4 billion in late December, is pressing the U.A.W. to accept stock for as much as 50 percent of its next contribution to the trust, according to two people knowledgeable about the discussions.

Mr. Gettelfinger, for his part, is trying to protect one of the jewels of the U.A.W. contract, which is essentially health care for life for anyone who worked on the assembly line and their surviving spouses. G.M. has already canceled health care for more than 100,000 of its salaried retirees.

“The U.A.W. at this point understands that it can very well turn into the villain of this whole thing by insisting that its workers receive health care benefits that few workers do,” said Gary N. Chaison, a labor expert at Clark University in Worcester, Mass.

U.A.W. members are bracing for bad news, and worrying that their health care plan will be sacrificed to keep G.M. from going bankrupt.

“Where does it all stop?” said Mike Green, president of U.A.W. Local No. 652, which represents workers in Lansing, Mich. “It would be devastating. Our typical person works between 30 and 40 years. They did their part. Why should they have it taken away with the sweep of a pen?”

Micheline Maynard contributed reporting from Detroit, and Jackie Calmes from Washington.

http://www.nytimes.com/2009/02/17/business/economy/17auto.html?_r=2&pagewanted=print

[youtube=http://www.youtube.com/watch?v=Wnxm4MfV9hE&hl=en&fs=1]

View: Part 2 Part 3

AMY GOODMAN: The House approved an $819 billion stimulus package Wednesday, marking one of the most expensive pieces of legislation ever to move through Congress. Despite an all-out lobbying push by President Obama, the bill passed without a single Republican vote. Eleven Democrats also opposed the measure.

The Los Angeles Times says the package is “the largest attempt since World War II to use the federal budget to redirect the course of the nation’s economy.” The two-year stimulus plan totals $275 billion in tax cuts and nearly $545 billion in domestic spending. It would provide up to $1,000 per year in tax relief for most families, increase funding for alternative energy production, and direct more than $300 billion in aid to states to help rebuild schools, provide healthcare to the poor and reconstruct highways and bridges.

House Republicans argued the bill tilted heavily toward new spending instead of tax cuts and that it would do little to stimulate the economy. This is Georgia Republican Paul Broun.

REP. PAUL BROUN: I see this as a huge leap toward socialism as a nation. It’s creating new government programs, it’s creating new government jobs, that don’t have any sunlight to those programs, to those jobs. It expands programs that are already there. It further—some of the tax relief, I believe and hope the gentlemen will agree with me, actually just furthers through the refundable tax credits a dependency upon government. My friend Star Parker had wrote a book one time that she called Uncle Sam’s Plantation. And what this does is it economically enslaves people. And that’s what we see happening.

AMY GOODMAN: President Obama hailed the passage of the legislation and made no mention of the unanimous Republican opposition. He will now turn his attention to the Senate, where Democrats are scheduled to begin debate on the measure on Monday and the price tag is likely to reach $900 billion.

Hours before yesterday’s House vote, President Obama told a group of about a hundred business leaders that Congress must not delay efforts to restart the economy and put people back to work.

PRESIDENT BARACK OBAMA: The businesses that are shedding jobs to stay afloat, they can’t afford inaction or delay. The workers who are returning home to tell their husbands and wives and children that they no longer have a job and all those who live in fear that their job will be next on the cutting blocks, they need help now. They are looking to Washington for action, bold and swift. And that is why I hope to sign an American recovery and reinvestment plan into law in the next few weeks.

And most of the money that we’re investing as part of this plan will get out the door immediately and go directly to job creation, generating or saving three to four million new jobs. And the vast majority of these jobs will be created in the private sector, because, as these CEOs well know, business, not government, is the engine of growth in this country.

AMY GOODMAN: Obama’s comments come at a time when the economy that is losing more than half a million jobs a month, including more than 65,000 layoffs announced just this week.

William Greider joins us now, the national affairs correspondent for The Nation magazine; the author of several books, including The Soul of Capitalism: Opening Paths to a Moral Economy and One World, Ready or Not: The Manic Logic of Global Capitalism. His forthcoming book is called Come Home, America: The Rise and Fall (and Redeeming Promise) of Our Country. He joins us in our firehouse studio.

Welcome to Democracy Now!

WILLIAM GREIDER: Thanks, Amy.

AMY GOODMAN: It’s good to have you here in the studio.

WILLIAM GREIDER: Likewise, yes.

AMY GOODMAN: The state of the economy right now, what President Obama just said, the fact that they’ve pushed through this more than $800 billion economic stimulus package. The House at this point, with—as Boehner, I think, came onto the floor with a—holding his hand up in a big zero, saying the Republicans are not going to give them anything.

WILLIAM GREIDER: The Republicans, it’s very clear, they are staking out a sort of—what they think is a no-lose, hard-right position: “We will be against anything significant this new president is attempting, because we know it’s going to fail, not because it’s Obama’s fault, but because this force, the negative forces bearing down on our economy and the world are overwhelming.” So they think, you know, six months from now they will say, “We told you this was socialism,” “We told you this was wasteful,” etc.

I think they’re wrong on several—I think the President is doing what he said he would do. He’s trying to be bipartisan. And I suspect he will keep doing that, regardless of the Republican position, because he understands that the country is in deep trouble, and people are not interested in another cat-and-dog fight. They want to see something happen. If it doesn’t work, do something more, try something else. But the idea of just standing back and making their ideological speeches about socialism is ridiculous.

AMY GOODMAN: Seems like the person who’s leading the way now, who lost a little support over the last few years but is coming back with a vengeance, is Rush Limbaugh leading the charge.

WILLIAM GREIDER: Is he pounding that drum? Well, he’s welcome to it. I think there’s a long-term political strategy that the President is following, which is good for him, and good for the country maybe, in which he said he’s speaking not to Rush Limbaugh, not to John Boehner and the right-wingers in the Congress; he’s talking to just folks all across the country, including Republicans.

AMY GOODMAN: Now, I’d like you to lay out what the terms of this bill are, what the package are. But then I want to go beyond the Democratic-Republican spectrum—

WILLIAM GREIDER: Yeah, yeah.

AMY GOODMAN: —about what you think needs to happen. What’s in this bill?

WILLIAM GREIDER: A lot of really good stuff that will be stimulative, just because it keeps—either keeps people working or it creates new jobs and begins—only begins, but begins—these deeper reform imperatives the country faces, like energy conservation and conversion, like ecological protection, expanding healthcare for people, especially at the bottom end of the income ladder. In any other season, Amy, it would be quite extraordinary to stand back and see what they’re doing. In our present circumstances, I have to say, it is probably not enough to—

AMY GOODMAN: Well, you’ve said it’s two or three times too small.

WILLIAM GREIDER: Yeah. I mean, you can measure what’s missing now in demand and business activity and lay it alongside this package, and this package looks way inadequate. I think the White House understands that, but they’re not going to triple it. What they are doing is starting a process that will at least, perhaps, slow the hemorrhage. That’s—I’m sure that’s their hope.

There are a bunch of obstacles that I think make it very difficult to get out of this ditch. One of them is scale, the scale of what kind of response you’re—another is the financial system, which, despite the hundreds of billions pumped into banks, is still essentially dysfunctional. And they’re now wrestling at the Treasury Department and the White House with, OK, how do we change the game that Henry Paulson and the Republicans played for six, nine months unsuccessfully?

AMY GOODMAN: And do you expect someone like Timothy Geithner, who—yesterday we had on Independent Senator Bernie Sanders, who is opposed to his confirmation, saying he was part of this massive problem. Do you expect that he would be able to?

WILLIAM GREIDER: Well, I am among those who urged our new president not to appoint him for that very reason. And—

AMY GOODMAN: Did you talk to Obama about that?

WILLIAM GREIDER: No, no. I’m just—in the pages of The Nation—I’m not sure he’s a reader, but perhaps he will become a reader as things get worse. I’ve been writing for some months, the system is not just broken and not just injured; it is collapsed. And as long as the government continues to play putting Humpty Dumpty back together again, I think it will fail. That’s not an ideological statement. It’s just—I think it’s the reality.

And so, I hope, without great confidence, that Larry Summers, the economic adviser, and Tim Geithner and the President decide to take a deep breath, jump over the political barriers and say, “We are taking control of the banking system, temporarily, maybe for a few years. But we have to make this system function for the American economy right now.” And handing them the money and asking them to do the right thing is not sufficient. We know that. It’s not just their excesses; it’s the fact that the banks have a very clear self-interest in not lending, in not beginning investment. They’re hunkering down, trying to save themselves from total failure. Once the government makes that recognition, then it can direct things more forcefully and intelligently.

And I don’t expect them to do that, but I just add this: I hope, I hope that the President is saying to his economic wizards, “OK, we’re going to do your plan, your halfway steps and the many parts to it. But what’s your second plan? When this doesn’t succeed, what do I do then?” because if they don’t do that, they’re going to wind up caught in the same game that Henry Paulson and George Bush were caught in. You try this, you throw some money this way, you throw it that way, nothing happens, and then you come back with a new plan, and so forth.

AMY GOODMAN: Bill Greider, we’re going to come back to this discussion. I want to ask you more about nationalizing the banks. Bill Greider is with us, national affairs correspondent for The Nation magazine. His forthcoming book, Come Home, America. Stay with us.

[break]

AMY GOODMAN: Our guest is Bill Greider. He is with The Nation magazine. His forthcoming book is called Come Home, America: The Rise and Fall (and Redeeming Promise) of Our Country.

So, you’re on the train yesterday. You bump into Bill Parsons, the—

WILLIAM GREIDER: Richard Parsons.

AMY GOODMAN: Richard Parsons, rather.

WILLIAM GREIDER: You don’t bump into Richard Parsons. He’s—he was the leader of Time Warner. He’s just now been made chairman of the board at Citigroup.

AMY GOODMAN: And you’ve been calling for the nationalizing of banks like Citigroup.

WILLIAM GREIDER: Well, I think they should just get it over with and close Citigroup down, because it’s insolvent. And—

AMY GOODMAN: Did you tell Richard Parsons this on the train?

WILLIAM GREIDER: I didn’t. That would be, first of all, impolite. But secondly, we were in what Amtrak calls the quiet car, where you do not talk. So that’s my excuse for not badgering him.

But you know what he was doing. He witnessed what happened to the three executives of the auto companies when they flew their private jet to Washington with their hands out for money, and he decided, given that Citigroup has now received, what, $45 billion straight up and another $300 billion in guarantees, it would be awkward for him to fly in to his meeting with the President. Obama had a bunch of corporate execs in yesterday to lead cheers for them and get them going. And good for him, right? He’s down with the folks. Of course, it was in the—he’s on the Acela train, which is the fast train.

AMY GOODMAN: Well, I guess the question is, is Citigroup down with the folks? And what has happened to the billions of dollars that have been given to bail out these companies that they are not accounting for? And it’s not just President Bush. It’s not just Henry Paulson. The Democrats joined with the Republicans in supporting this.

WILLIAM GREIDER: Absolutely. This has been, up to now, bipartisan failure, and it continues not to have the crucial feature, which is answering the question: What does the public get for this money? And this sounds unbelievable, but it’s literally true. The government, Treasury and the Federal Reserve pumps this money in and demands almost nothing in return, in terms of a prescribed behavior, guaranteed conduct—we will do this, we will stop doing that, so forth and so on.

So these guys are all going out and—you know, Citigroup was embarrassed just last week, because somebody revealed that they had on order and were about to get a new $50 million executive jet. And that’s why Richard Parsons is on the train this week, because as soon as the public finds that out, they’re thinking, “Oh, no. They’ve done it again!” And it’s just very simple political logic for Washington to say, “We have to exercise control over these institutions, at some level of penetration, to stop this misbehavior, first, and then to make them do some positive things that the country needs right now.” And in the case of Citigroup, this is—

AMY GOODMAN: You say it’s insolvent.

WILLIAM GREIDER: Yeah, that’s not an opinion of mine. I mean, I talk to people who are really serious bank specialists, and they’ve been saying that for many months. It’s the so-called toxic assets in their—and this is not unique to Citigroup—but the toxic assets that build up in a way that you—that the government—if it tried to do this for every one of the largest banks, it would make this stimulus package look like peanuts. It’s huge. It’s maybe a couple of trillion dollars still out there.

I think you can get pretty old-fashioned about this. The bank examiners go in, and they make Citigroup lay it all out. And at some point, they can decide: “This bank is too gone to save. It’s too big to save, and it’s got too much failure already in it. So we will organize its liquidation.”

The other alternative is to nationalize it and begin to deconstruct the bad pieces and build new banks. I mean, to me, this is the exciting prospect. This is boring to a lot of people, but it’s the heart of the matter. If you don’t nationalize it, then you’re simply sort of prettying up, you know, the old roses and hoping that they bloom again.

What government should be doing now, and it’s a long process, is rebuilding the banking and financial system across the entire country so that it serves the economy, serves the society, rather than being these little citadels of high profit and extraordinary salaries. What happened in the last twenty-five years is that everything got concentrated in big guys, including really strong regional banks that got swallowed up by the bigger banks. Thousands of smaller community banks got wiped out. Either they got sold or they closed down, etc. This is a huge project, and we won’t get back to what Americans at large can regard as an equitable and prosperous economy until that structure is rebuilt. Citigroup is not going to do that. Even if you prop it up for ten years, it’s not going to do that.

AMY GOODMAN: What are the forces that would do that?

WILLIAM GREIDER: Politics, actually. I mean, and people around the country. I’ve done a lot of reporting over the years, on the ground, with just people in different parts of this country trying to—as I described them in my earlier book, trying to reinvent capitalism, trying to make it not just humane but socially supportive to industry, small businesses, consumers, workers, etc. They’re terrific people. They’re very smart. A number of them are veterans of Wall Street. They did a few years making high salaries and ripping and running in the markets, and they said, “That’s not what my life is about,” and they went to Oklahoma or California or wherever and started firms, that are investment firms, that operate on very different principles. If I were king, or if I had the President’s ear, I would say, “Get those people into the White House now.” There are thousands of them.

AMY GOODMAN: Can you think of examples?

WILLIAM GREIDER: Well, the names are—there’s a—I just heard from her. I’m going to blank her name, but she’s from Portland or somewhere on the West Coast. She has—I think it’s called 21st Century Investments. Don’t hold me to the names. But she is one of those people, and she just sends out a report every once in a while: “These are the companies we’ve just invested in.” And, of course, the investment standards of those companies—for those companies are the same standards any of us would want to apply. Are they sound ecologically? Do they treat their workers with equity and fairness and include them in the decision making? Are they viable? Do they have a future? Are they making something the country will need?

All I’m getting at is, if we get our heads out of Washington for a minute and look across the country, there is enormous potential for reinvention and innovation, and not just in that area but in others. And that’s what I’m hoping this president will get to.

AMY GOODMAN: Bill Greider, I want to ask you what role economic globalization played in all of this. Right now, at the World Economic Forum, Wen Jiabao, the Chinese premier, said Beijing blames the United States for the economic breakdown, saying, “inappropriate macroeconomic policies […] and […] unsustainable model of development characterized by prolonged low savings and high consumption; […the] blind pursuit of profit; […] and the failure of financial supervision” all contributed.

WILLIAM GREIDER: Wow! That’s strong. That’s very.

AMY GOODMAN: And China is the largest holder of US government debt.

WILLIAM GREIDER: Did he—China is our banker. I mean that literally. China, having accumulated huge trade surpluses and capital, has been the lender. It’s not the only one—there are others—but it’s the lead lender that has kept Americans going in the illusion that you could, year after year, borrow and spend more than you produced. Economics doesn’t allow that, not forever—for a while maybe, but not forever.

And so, we’re in a position now where China—we have to get a bailout from China and Japan, the Arab oil states and some others to keep us going as we work through this huge global recession. And I think the deal that’s possible is that the US can say to those creditors, “OK, give us the loans. We’ll go a bit deeper in the hole of debt. But we—because we’re such good consumers, we will be the lead engine that pulls the world out of this recession. In exchange, we are telling you now that the trade system, the global trading system, must be reformed and balanced. We can’t go on like this. Ultimately, you can’t go on like this.”

And by that, I mean bringing down the trade deficits, which have rung up more than $5 trillion in debt over the last fifteen years; imposing some rules on US multinationals, so that they can’t just roam the world as free riders, moving jobs and production wherever they choose without regard to the home country. I mean, there’s a long list of reforms, which I’ve written about and I write about in this new book. My point is, this is a moment. If the Obama administration has the nerve to go for a global compact that doesn’t just help a recovery but actually rearranges the world in fundamental terms—I don’t know if they’re big enough to do that—

AMY GOODMAN: And those terms are…?

WILLIAM GREIDER: Well, you’d start with balanced trade, not perfectly, but—and you’d start with a new global institution for finance that represents both, not just the advanced countries with strong economies, but the developing countries, and balances their interests through currency exchange and other—it would begin to build a structure of global rights for workers and communities, which is, of course, absent, utterly now. And by that, I mean a way to mediate between the high-wage workers in countries like ours, in Europe, Japan, and those folks at the bottom who are in the sweatshops.

I mean, the reality of our time, not so well understood, is that it’s very much like the English Industrial Revolution. The workers are exploited on both ends. If you think of the—you know, William Blake, the poet, wrote about the “dark Satanic mills” in England in 1800. The skilled craft workers were thrown out of their jobs, and they were replaced with children. And the children, of course, were completely defenseless and exploited. But so were those other workers who had been cut out of the prosperity that their country was achieving. That’s a small picture of what is happening globally now. And I’m among those who have been railing at this for twenty years, actually, without much effect.

But now we’re in a crisis that maybe will awaken the governing elites to the reality that they have to confront this and build labor rights and other protections into the system, or we’ll go right back into that hole.

AMY GOODMAN: It’s interesting you talk about building labor rights, because last fall it was reported Bank of America received something like, what was it, $25 billion from the government. Three days later, according to the Huffington Post, Bank of America’s top executives were busy. Were they trying to right the sinking ship? No, they were coordinating a conference call to organize opposition to the Employee Free Choice Act—

WILLIAM GREIDER: Absolutely.

AMY GOODMAN: —the top legislative priority of organized labor unions.

WILLIAM GREIDER: Of course, yes. I was at a forum last night in New York City and talked. And a woman and her husband came up afterwards, who were employees of IBM, and they were saying, you know, IBM is at the White House meeting with the President and doing good talk about the economy and all that, and meanwhile is shutting down jobs and moving them to Asia.

So what’s the nature of this game? Are we trying now to revive the American economy for everybody? Or are we simply facilitating the process that’s already underway, which is that the US multinationals, for the last twenty-five years, have systematically gutted high value-added jobs, the ones with the good wages, when they could, when they needed to, and gone to cheap labor elsewhere? And—

AMY GOODMAN: Do you see—

WILLIAM GREIDER: Sorry.

AMY GOODMAN: Do you see the system—right now, the World Economic Forum is going on at Davos.

WILLIAM GREIDER: Yeah.

AMY GOODMAN: The World Social Forum is going on in Brazil. Do you see going back to 1999, when you had those thousands of people in the streets of Seattle, with Bill Clinton coming in on a plane in the middle of the night, in the teargas, who had pushed so hard for so-called free trade—

WILLIAM GREIDER: Yeah.

AMY GOODMAN: —really twisted the arms of Congress members, when NAFTA was clearly going down, to force it all to happen?

WILLIAM GREIDER: We’re not there yet. I think more likely, to be blunt, is that Seattle will look like an organized and civil appeal of popular distress compared to what I think we’re going to see. And by that, I mean you can’t do this to people year after year—that is, upturn their lives, take away what they thought they had earned, and so forth and so on, without provoking rather intense political reactions.

We’re just, just beginning to see a few bubbles like that around this country. They’re rioting in eastern Europe and some places in Asia. I don’t say we’re going to have riots, but I think people will—and I hope for this—people, out of their own distress and anger, will organize their own politics, and they will make themselves seen and heard around this country. And we’ve seen some—sit-down strike in Chicago, which actually succeeded in getting the workers their rights. We’re seeing the beginnings of a foreclosure, anti-, stop the foreclosure movement. The Nation has a terrific piece this week by Ben Ehrenreich describing that. That’s what happened in the ’30s, of course, that the people did not finally wait for Washington to do the right thing and solve the problem. They recognized that that wasn’t in the cards, and they would take their action, as they could, on the ground, in the workplace, elsewhere, politics.

This is—this gets messy really fast. And some of it gets ugly. But if people understand their own power as citizens and act on it—takes some courage—that will be the core of this politics we’re in.

AMY GOODMAN: Bill Greider, I want to thank you for being with us. He is national affairs correspondent for The Nation magazine. Forthcoming book, Come Home, America: The Rise and Fall (and Redeeming Promise) of Our Country.

At a time when San Francisco jobs and services are threatened by the announced $575 million projected budget shortfall for 2009, and when nationally more than 6 million jobs were lost in 2008 …

THE NEED IS FOR BOLD LEADERSHIP
AND AN EVEN BOLDER PROGRAM.
WE NEED A NATIONAL RECOVERY PLAN.
LABOR SHOULD LEAD IT.
WE OFFER THE FOLLOWING PLAN.

—–

We here at the San Francisco Labor Council were hit on January 6, 2009 with the news of a San Francisco $575 million budget shortfall for the coming year.  The knee-jerk proposals coming from the local Chamber of Commerce et al. have been “cut-cut-cut.” Our Council leadership is working to figure out a plan to protect jobs and services.  But there are no solutions at the local and state levels for this national crisis. At best there are limited stop-gap measures.

On January 9, 2009, the AFL-CIO in its daily blog that unemployment is actually 13.5%, some 6.3 % higher than the “official” Department of Labor rate of 7.2%.  It is also reported that unemployment is expected to continue to rise into 2010 — with some economists predicting 25 million unemployed going into 2010 if the current rate of job loss continues. The proposed $775 billion stimulus includes approximately 40% for tax cuts, mostly for companies. This leaves $465 billion for actual economic stimulus, since tax cuts have little impact. This is short of the $1+ trillion stimulus that virtually all the “outside” economists and the Congressional Progressive Caucus are insisting is needed at a minimum.

The recovery plan must put people first. Putting forward a workers’ recovery plan becomes our job, Labor’s job, in coalition with existing and potential allies and com-mu-nity allies already engaged in fighting the crisis.  To implement this recovery program, Labor will need to mobilize union members and their organizations.

—–

We face a once-in-a-lifetime economic crisis that threatens the very foundations of our economic well-being. The crisis threatens the well-being of America’s working people, and their families. [See Appendix No. 1: “Facts on the Ground.”]

As this crisis shakes the base of the financial system, it has exposed the dangers of deregulation, it has exposed the blatant corruption of corporate domination of government, and it has exposed the fallacies of “free market” and “free trade.” But it has also opened the way to push the government to promote a massive response on behalf of working people.  It is both an opportunity and a requirement that we act immediately to stabilize workers and their families and that we redirect our economic system in a more economically just and environmentally sustainable direction.

The same corporate and banking elite that deliberately deregulated and manipulated our economy in pursuit of ever-bigger profits and larger markets are working hard to keep their prerogatives intact.  The elite corporate-dominated economy is in deep recession, and in danger of taking the entire working class into a depression.

Organized labor, in our view, must take the lead and must promote aggressively demands for policies that would reverse our government’s pro-business biases and steer policy toward dramatic improvement for the US workforce.

Recommendation:

The AFL-CIO and CTW should prioritize the following policies in the economic recovery debate of 2009 and beyond.  They should allocate adequate resources to launch a national 50-state campaign and mobilize the members and their communities for achieving these goals.  The members should be informed and involved step by step as this national campaign is being developed.

WE OFFER THE FOLLOWING GUIDELINES AND PROPOSALS FOR THE DEVELOPMENT OF A RECOVERY PROGRAM INTENDED TO PREVENT A DEPRESSION

To end this recession and prevent a depression, there needs to be  gainful productive employment for all, a focus on our domestic economy, an environmentally sustainable economy, with universal health care and reliable pensions — not on a military-industrial economy, and not a deregulated speculative economy.

I. Any bailout must be for workers, their families, children, students, seniors, small farmers, small business.  The everyday folks.  This financial collapse can be traced to the three-decade suppression of workers’ wages and living standards. A massive stimulus is required to stabilize, retain and employ the working class in productive work, and to keep businesses, small farmers, and goods and services which serve ordinary people from further decline or economic “wipe out.”.

There must be accountability for how all public monies were and are used and for whom.  No blank checks.

We must make a two-fold demand to Congress: (1) track all tax dollars given out, to whom and for what, and (2) recapture by whatever means what was not used properly.

Bailing out Wall St. is pouring tax dollars down a sinkhole. Wall St. and Main St. cannot both be bailed out at the same time, because Wall St. is about profiting from speculation, and the bail-out is funding the speculation. We need to fund Main St. by sustaining the public sector, building a productive economy — not financial speculation — and by halting foreclosures and defaults.

There must be a multi-dimension government intervention. And for all of the policy proposals below, there must be public oversight and full accountability for all monies requested, given and spent.

II. POLICIES LABOR NEEDS TO FIGHT FOR AND TO MOBILIZE US   TO WIN:

JOB RETENTION AND CREATION

“Economic recovery must first restore and protect jobs with a $1 trillion minimum job creation-retention            program. That will boost consumption and economic recovery in the short run (0-2 yrs).

But long-term consumption and recovery depends on a resurgence in union membership and   collective-bargaining effectiveness, and that starts with the Employee Free Choice Act. Also long-run consumption depends on other factors as well, such as comprehensive resolution of the health care and retirement (pensions-social security-401k funding crises) and de-privatizing the student loan markets, so that    working class kids can get an education without being financially indentured to banks for the rest of their lives.”

— Jack Rasmus, PhD, January 5, 2009

a)  NATIONWIDE, we will need at least 6 million new jobs to maintain the well-being of the working class.  The loss of 5 million jobs in the 12 months since November 2007 means that the talk of creating between 3 million and 4 million jobs in the next two years is insufficient.

b)  The PUBLIC SECTOR must be supported.  Massive federal assistance must immediately go to the states and to the cities to maintain employment, health, and education, as well as services and ongoing projects.  It must go for public-education teachers, including higher education, public health nurses, doctors and other care-givers, public facilities maintenance crews, etc. Federal aid to states should carry a strong encouragement for states to rapidly adopt progressive tax options supporting state-funded services and infrastructure, such as “further federal assistance will depend upon the state legislature having reached a certain benchmark in progressive tax law.”  Protecting the public sector will stabilize our communities, our cities and our society as a whole, boost the public morale and help stimulate an economic rebound.  Not protecting the public sector will accelerate the decline.

c)  Policies must be implemented to preserve current jobs and create new productive jobs.  Outsourcing overseas must be halted by imposing severe restrictions on outsourcing what would otherwise be domestic employment.

d)  Nationally, we need additional investment in the public infrastructure.  The projects and the money for repairing and developing public infrastructure must be controlled by the public and done in the public interest, with strict oversight and accountability of private entities.

Public money to Big Auto, must first, stabilize union wages, contracts and employment, and it must require no further outsourcing  to non-union plants or overseas.  The public, through government and the workers in Big Auto, must have a voice in what gets produced and why.  Environmental and social criteria should guide the disbursement of public monies .  Merely rescuing the auto industry and its infrastructure would waste this unique opportunity to greatly relieve our transportation system of its dependency on the auto.  This is the perfect time to begin redirecting transportation production toward rapid mass transit.  We must address the global warming crisis at the same time that we put workers in auto plants and related industries back on the job.  In the event any of the auto companies do not meet these mandates from the taxpayers and government, they will be placed under public ownership and public control to make certain that these objectives are met.

III.    NO SCAPEGOATING IMMIGRANT WORKERS:

The current economic crisis cannot be allowed to be used to scapegoat immigrant workers.  Stabilization of the legal rights and secure status of immigrant workers must be a priority of the AFL- CIO & CTW , despite pressures brought by the economic downturn. Our nation’s millions of immigrant workers must be part of the solution of decent-paying jobs and revived economic activity. But to the part of the solution, they must have their civil and labor rights. Currently many employers take advantage of immigrants’ lack of rights to pay sub-standard waged, thereby undermining the wages of other workers. Immigrants should be put on a path to citizenship so that they can exercise their rights as workers and contribute to a higher standard of living in their communities.

IV. ECONOMIC SECURITY

a)  Housing Security: Access to affordable housing and access to reasonable loans must be stabilized. Fannie Mae & Freddie Mac should be publicly run as well as publicly owned. The trigger of the current economic crisis was the collapse of the housing market.  It is flooding our country with foreclosures, undermining the value of all real estate and the economic activity associated with it.  Until these foreclosures stop, our economic crisis cannot end.  We need a moratorium on declarations of default, foreclosures, and on foreclosure-related evictions and utility shutoffs.  We need government-supervised renegotiating of mortgages, and government financing of mortgages in order to eliminate foreclosures as a threat to economic activity.

b) Health Care for All:  There must be a national universal single payer health care system, such as proposed in HR 676, or in a Medicare expansion plan.  This will ultimately result in a huge cost savings to working people, a huge relief for union and employers, and an across-the-board boost to the American people.  It will positively affect more people than any other program.  The current $2.3 trillion national tab for health care is double that of other single payer national programs.  The US health care costs are 17+% of GDP while the average for the other single payer health care systems runs around 9% of GDP. The delivery of care cannot be improved while the insurance companies are left in control of health care financing and decision-making.

While our health system is far and away the most expensive in the world. It leaves tens of millions without any medical insurance at all and many more without decent coverage — and all these uncovered or poorly covered are in danger of not getting necessary health care.  In many parts of the country, our health care infrastructure in our cities and in our countryside is in ruins.  These inefficiencies burden our economic system with widespread avoidable illnesses afflicting workers and their communities and huge unnecessary costs.  It is long overdue that we carry out what every other Western European country has done and have the government assure health care for all.

We need to move as quickly as possible toward building a health care system that assures health care for all.  We should expand public programs financing health care so that they could encompass our entire health care system.  We should break the control of industries like private insurance and pharmaceuticals over our health care system so that it prioritizes people’s health over profits.

At the same time, we need to repair our health care infrastructure so that there will be health care available in all parts of the country.  Shuttered facilities in underserved areas are ready for rehabilitation and the proper incentives could redirect health care workers to the communities that need them most.  Revived health care facilities would provide a major boost to economic activity in currently underserved communities.

c) Pension Protection: Repeal the Pension Protection Act, which was designed to destroy defined benefit pension plans..  Labor must act decisively to blunt the attack on jointly trusted Defined Benefit Pension and these plans must be protected.  There are only 28,000 DBP remaining out of about 125,000 such plans.

Further, Congress must re-institute an inviolate lock-box to the Social Security Security and Medicare  Trust Funds, thereby preventing any agency of the government from taking any money out of the Social Security Trust and Medicare Trust Funds.  The annual Social Security tax surplus of $100 billion or more must be left in the Fund, and the $2.46 trillion surplus which has been taken out of Social Security and used to pay down the deficit must be recaptured and returned to the Social Security Trust Fund.

d)    Wage standards have to be maintained and improved.  Federal allocations also need to carry prevailing-wage standards. A significant cause of the rapid economic decline is that workers’ incomes have been suppressed and their purchasing power stagnant since 1980.  There should be no cuts for workers, only for the corporate elite.  Our government leaders gave hundreds of billions of dollars without accountability to a handful of bankers and market speculators et al., and left tens of millions of workers hoping for a short extension of unemployment insurance while permitting and overseeing the closure of our libraries, schools, hospitals and other public facilities.

The Employee Free Choice Act is a vital component of a recovery program for workers and their families and vital for the recovery of the economy itself.  Long term, our national economy recovery is dependent upon working class earnings’ growth, which can result only from unionization. Workers can support economic activity only to the extent that they have decent-paying jobs.  In this country, the key to decent-paying jobs is unionization — but government policy since the 1940s has made this increasingly difficult.  We need a labor policy that enables workers who want unions to join them without management interference and to expeditiously obtain union contracts.  The Employee Free Choice Act is the policy needed to allow unions to play this indispensable part in fostering prosperity.

We believe the Employee Free Choice Act must be one of the top priorities of the AFL-CIO and CTW.  The Empolyee Free Choice Act is important for the workers’ right to improve their lives and their communities, and crucial for workers’ strength.  It is also crucial in restoring the economy.  But Labor needs to bring forward a comprehensive economic recovery program and it needs to bring the power of organized working people to bear on Congress and on the Obama administration to motivate such a recovery.

V.    FINANCING THIS PROGRAM

a)    Obama must reverse the tax cuts for the rich — immediately upon taking office.  There is no justification for giving public money to the rich.  Instead the highest income earners and the corporations should be taxed at a much higher rate.

b)    The new administration must retroactively tax Windfall Revenue on the oil-energy industry, on executive compensation and on corporate foreign retained earnings.

c)    The new administration must roll back capital income taxation to 1981.  Capital gains, dividends, interest and rent income taxation and inheritance taxes have been, according to Jack Rasmus, PhD, the central factor responsible for the radical shifting of wealth to the top 1% of tax paying households, or 1.1 million households.  This 1% now own 20% of the IRS reported income, equivalent to what the 1% held in 1928, and this shift, according to two economists at UC Berkeley, is heavily responsible for the runaway speculative investment tht contributed to the current crisis.

d)    The new administration must repatriate an estimated $2 Trillion from 27 Offshore Tax Havens.  The German government has moved on its wealthy investors diverting income to avoid taxation.  The US government must do the same.

VI.    FUND HUMAN NEEDS NOT WAR

The US-initiated wars around the world are draining the lifeblood from our public sector and leaving working class families with unbearable difficulties and impossible debt for many years to come.  The current war expenditures are now estimated at more than 3 trillion in ultimate costs. This cannot be sustained.  The last year’s total annual costs for the military budget, past war debt and care for veterans is $863 billion.  We can’t have both guns and butter. Organized Labor must actively oppose these wars and the costly war budget and strongly urge the transformation of large sectors of the military-industrial economy into job retraining for a sustainable domestic and green economy. Labor must aggressively act to stabilize and advance the domestic economy and the interests of the American people.

PROGRAM SUMMARY: *

Housing and Jobs: two keys to stabilizing workers and their families

$1+ Trillion Jobs Creation-Retention Program

1st Measure: $125 billion for Emergency Unemployment Insurance and New

Domestic Assistance Retraining Fund.

2nd Measure: $300 billion Government Sector Jobs Program

3rd Measure: $300 billion for Infrastructure-Public Works Jobs Creation

$200 billion first fiscal year, & $50 billion in each of following years.

4th Measure: $100 billion for further stimulating Growth Sector Jobs Stimulus

Targeting industries like health care & related services with past rapid growth

5th Measure: $100 billion for Manufacturing sector job retention & creation

via direct government subsidies.

6th Measure: $125 billion for Bailout and Consolidation of the Auto Industry*

$50 billion minus $14 billion already received first year; $50 billion second year;                    and $25 billion dedicated to funding “employee assistance” for displaced autoworkers.

*Auto bailout:  this needs to focus on 3 aspects: protecting the autoworkers and the workers of the related industries form “more of the same” with government money; and second, what gets produced needs to be under strict regulation of what serves our communities (mass transit, smaller efficient vehicles for hauling and passengers), and what serves the environment;  and third, all “bailout” money must be tied to proof of    actual employment and proof of no further outsourcing overseas and to non-union suppliers. Also, public ownership of the consolidated Big 3 must be considered.

Housing-Property Market Stabilization and Consumption Demand

1st Measure: Reset Mortgage Rates for All Loans Originated 2002-2007.

2nd Measure: Reset Principle Loan Balances for All Loans Originated 2002-07

3rd Measure: Create Federal Homeowner-Small Business Loan Corp. (HSBLC) to Provide Direct            Lending to the Homeowner-Small Business Property Markets

4th Measure: One Year Moratorium on All Foreclosures and Default Proceedings

5th Measure: 15% Homeowners Investment Tax Credit

6th Measure: Restoration of ‘Regulation Q’, setting maximum interest rates lenders can charge.

Financing Provisions for Jobs Program

1st Measure:  Retroactive Windfall Taxes: Oil-energy Industry Windfall Profits, Executive Compensation,     and Corporate Foreign Retained Earnings Taxes, Reach back three years.

2nd Measure: Rollback Capital Incomes Tax Cut to 1981

3rd Measure: Repatriation of $2 Trillion from Offshore Tax Havens, redeposit it in US                    banks to provide liquidity, instead of doing so at taxpayer expense.

Sustaining the Recovery Long Term: Single Payer Health Care

Coverage, Employee Free Choice Act, Real Pension Protection, and

De-Privatization of Student Loan Market, Public Ownership

1st Measure: Suspend and then repeal the Pension Protection Act of 2006 whose provisions are designed

to undermine defined benefit pension plans.  Prohibit pension funds from being invested in hedge

funds and other high risk gambles.

2md Measure: Pass the Employee Free Choice Act

3rd Measure: Establish a Single Payer Universal Health Plan, specifically, HR 676.

4th Measure: De-Privatize the Student Loan Market, put under public control.

[ * This program summary is based on the valuable contribution of Dr. Jack Rasmus, economist and professor at St. Marys College and Santa Clara University. The SF Labor Council Economic Crisis Committee, which has produced this report, wishes to thank Dr. Rasmus for sharing his most current analysis, insight and proposals for economic recovery with our committee. While we agree with much of Dr. Rasmus’s analysis, our committee did not adopt all of his proposals..]

APPENDIX NO. 1

Facts on the Ground

More than 5 million jobs were lost in the 12 months between November 2007 and November 2008, the first full year of the recession.  A million more jobs were lost in November 08.  More than a million were lost in December 08.  January 2009 may be worse than December 2008.  These figures include the officially unemployed, the “discouraged” workers no longer eligible or collecting unemployment insurance that the Department of Labor does not include in the official figures, and an equivalency of the workers who were involuntarily forced from full time to part time.

Even though Americans own and probably buy more cars per capita than any other people, we are only producing a portion of the cars we buy.  Since 1979 the Big 3 auto companies have outsourced over 2/3rds of their employment outside the US.  Auto workers in the UAW have shrunk from 1,500,000 to around 400,000, while GM and Ford have invested heavily in Mexico, Russia and China.

Several million households have faced and are facing defaults and foreclosures.  Millions of people who just a short while ago were secure in their homes are now being forced out at great financial loss and disruption to their families.

We have not hit bottom yet because the workforce has not stopped losing employment and health care and retirement plans.  The end of rising unemployment is not in sight at all.

Since the late 1970s ,workers’ purchasing power has declined, wages having been kept down for three decades.  People then depended upon extra overtime, longer hours, weekend work, second jobs, all adults working, then easy credit, and then the equity from their homes.  All this is gone.  Equity lines of credit are being frozen for many people.  Easy credit is no longer so easy.  For millions, home equity has been lost, and many people now owe more on their homes than their homes are worth on today’s market.

Manufacturing in the US is way down.  Construction is way off.  State and local governments are facing huge budget deficits.  Higher education institutions are denying entry to thousands while the corporate elite are pushing to privatize education.  The wealthy and corporations deprive communities of a fair share of taxation so vital to public education, higher education, public health and all the variety of public services the people take for granted and depend upon.

Forty nine million people have no health care.  It is reported that up to another 50 million people cannot afford the co-pays their insurance plans demand.

Nearly 100,000 Defined Benefit Pension plans have been dismantled, leaving less than 30,000 DBPs.  The Pension Protection Act of 2006 set out to destroy the DBPs.  And upcoming new Financial Accounting Standards Board rules are rumored to declare the remaining DBPs even further underfunded.  Looming just behind the curtain is the demand by Big Business and Wall St. to privatize Social Security.  On January 7, 2009 the Associated Press reported that President-elect Obama pledged to tackle out-of-control Social Security and Medicare spending — even though Social Security collects a large surplus annually and will do so at current rates through 2018.

America’s workers have faced an economic assault on their wages and conditions and benefits for three decades.  In the eight years of the G. W. Bush regime, we have experienced an unprecedented assault and dramatic cut in our civil rights and in the separation of powers.  Simultaneously we have experienced religion casting a pall over every aspect of our lives, creating deep divisions within our population.  Worse, this cultural religious divide has us debating peripheral religious issues while our standard of living is being suppressed and our collective wealth is being stolen, and our health care system and pension are being dismantled.

Follow-up Implementation Resolution for the Economic Crisis Committee Report

Whereas it is urgent to act promptly to influence the Obama Transition team and Administration to put people first in any recovery plan, and to put enough money in the plan to head off a depression, and

Whereas, the recession will slow and reverse when enough working people are back earning a paycheck, foreclosures are halted, and municipal and state budgets are supported, pensions and Social Security are safe, and the people have health care, and

Whereas, the proposed stimulus plan is insufficient to employ enough people fast enough to stem the tide of the rapid acceleration of the recession, therefore

Be It Resolved that the SFLC Economic Crisis Recovery Guidelines and Proposals be immediately forwarded to our affiliates for their support and communication with their state and national officers, and posted on the SF Labor Council’s website, and

Further Be It Resolved that the Council promptly forward the SFLC Recovery Guidelines and Proposals to the Greater Bay Area Central Labor Councils and the CLC’s in Sacramento, Los Angeles and Counties; and

Further Be It Resolved that the Council forward the SFLC Recovery Guidelines and Program to Art Pulaski at the State Labor Federation followed up by contact from President Casey and/or Executive Director Tim Paulson; and

Further Be It Resolved President Casey and the Executive Director Paulson urge speedy adoption of the SFLC Recovery Guidelines and Program by the above CLC’s by directly contacting their respective leaders, and urging they communicate their support to the State Federation of Labor as well as to the AFL-CIO & CTW; and

Finally Be It Resolved that President Casey and Executive Director Paulson communicate the Recovery Guidelines and Program to the AFL-CIO and CTW, and other International Union leaders, with follow-up calls and urge strenuous lobbying immediately with the President-elect Obama Administration.

Fraternally submitted by he Economic Crisis Committee* on January 12, 2009,

Economic Crisis Committee Members:

Denis Mosgofian, Chair, GCC-IBT 4N

Alan Benjamin, OPEIU 3

Tom Edminister, UESF

Ramon Castelbranch, CFA

Dean Coate, IFPTE 21

David Welsh, Lettercarriers 214

Conny Ford, OPEIU 3, VP, SFLC

(adopted unanimously by the San Francisco Labor Council  Delegates Meeting on January 12, 2009)

Paul Krugman’s Op-Ed article in the February 1, 2009 New York Times, entitled “Bailouts for Bunglers,” is the latest in a series of major articles where prominent, mainstream economists have advocated nationalization or government takeover of the failed U.S. banking system.

For example, last week, (Janurary 26, 2009) CNN reported that Joseph Stiglitz, the former economic advisor to President Bill Clinton and current Columbia University professor advocated government takeover of the banks. Stiglitz asserted that with the banks owned by and under government control they would be able to deal with the bad assets more efficiently, and he added that nationalizing the banks would enable then to operate more in the national interests. But he also said that once the banks have recovered and stood on a firm financial basis, the banks should revert back into private hands.

In addition, William Greider, currently the National Affairs Correspondent for The Nation magazine and a former Rolling Stone and Washington Post editor, has recently appeared on Democracy Now! and on the PBS Bill Moyers Journal and has written an article, “The Crisis Is Global” for The Nation (January 15, 2009), where he advocates a government takeover of the banks. Greider states, “Obama and his advisers are eager to get another $350 billion in bailout funds, but they have remained silent on whether this will finance a government takeover of the system. Without such a move, the taxpayers will essentially be financing the slow death of failed institutions while getting nothing in return.”

Moreover, Rolfe Winkler, a Chartered Financial Analyst, states in an article entitled, A Bad Bank Is a Very Bad Idea, published in the New York Daily News on February 2, 2009, that “Marking down assets means losses have to be recognized. A better solution than forcing them onto taxpayers would be to nationalize the banks outright, wiping out shareholders and forcing bank creditors to absorb their share of losses.”

Paul Krugman, in his article reproduced below, echoes basically the same refrain when he says, “If taxpayers are footing the bill for rescuing the banks, why shouldn’t they get ownership, at least until private buyers can be found?”

But, it must be asked, if the banks can be run more efficiently by the government than by private owners, why not keep the banks as publicly owned, nationalized enterprises, where they would be mandated to operate in the interests of everyone and not merely in the interests of rich bank owners?

Many labor and social justice activists today also believe that the banks should be nationalized without compensation as well as have every bank relinquish all misused public funds. Then the banks can be operated in the public interest so that the small depositors’ savings are protected and loans could only be made on a socially planned and rational basis, not for the private profit of a fabulously wealthy few where everyone else’s well-being is jeopardized.

Referenced Articles

Paul Krugman, Bailouts for Bunglers, The New York Times
http://www.nytimes.com/2009/02/02/opinion/02krugman.html

Joseph E. Stiglitz, How to rescue the bank bailout, CNN.com
http://www.cnn.com/2009/POLITICS/01/26/stiglitz.finance.crisis/

William Greider, The Crisis is Global, The Nation
http://www.thenation.com/doc/20090202/greider

Rolfe Winkler A Bad Bank Is a Very Bad Idea, New York Daily News
http://www.nydailynews.com/opinions/2009/02/02/2009-02-02_a_bad_bank_is_a_very_bad_idea.html

Question: What is going on with the auto bailout, and what should labor’s response be?

Jerry Tucker: The Democrats and Republicans in the Congress – the very same folks who placed no conditions on the bailout to the banks, with no accountability whatsoever to boot – pressed for leaner and meaner auto corporations as a condition for releasing up to $34 billion for the auto bailout. They told the automakers that they have to eliminate 40,000 jobs and become “more competitive” if they are to get the money.

The bailout plan will allow them to downsize in this country and export more jobs and ultimately import the vehicles we have built for years from their plants in other, even lower wage, countries. And they can, under that agenda, do all this short of declaring bankruptcy. This is union-busting, pure and simple.

They are not just threatening jobs; they are threatening the jobs bank, pensions and the union’s healthcare plan, all of the gains we’ve made over the years. And not only just for autoworkers. Those gains set wage and benefit precedents for millions of additional U.S. workers and raised the standard of living for the entire working class.

Healthcare and pensions are deferred wages, legacy costs. The workers’ paid into these funds over decades of hard work. Since 1972 they have paid into the various funds. To take those funds away, as is now being proposed, would be a crime.

Question: What has the leadership of the UAW done about this?

Tucker: What was so dramatic about those hearings in Washington is that Ron Get-tlefinger and his cohorts in the UAW leadership have agreed to all the concessions demanded of them. The labor movement must not go along with this concessionary pact. Long ago, the union gave up on “adversarialism” with the company. They were among the first to buy into the “labor-management” cooperation schemes. But now many of us are questioning whether the UAW remains an independent union. To more and more of us, the union has become the handmaiden of the corporations.

A few decades ago there were 1.5 million autoworkers in this country. Today there are fewer than 400,000. Most of the jobs have been outsourced. In the name of keeping these jobs in this country – which never happened – auto workers were told they had to make concessions in terms of wages and conditions. Time after time, workers, spurred on by the UAW leadership, made these concessions – and still the bosses took their jobs to Mexico or Southeast Asia. Now they are moving our jobs to Russia.

Question: Tell us about the resistance to this buyout plan among the rank-and-file of the union. And also tell us about the Labor Single-Payer Conference in St. Louis in mid-January.

Jerry Tucker: There has been a lot of opposition among the ranks of the union. Car caravans of auto workers traveled from many cities in the Midwest to Washington to send one message to the Congress: “Don’t Cut Any of Our Jobs or Benefits!” But these workers were not allowed in the Senate hearings, and nor was their real message carried by the corporate media.

Another important development is the growing discussion about the need for Congress to nationalize the Big 3 – that is, bring them under public ownership.

Under such a measure, the industry could be re-tooled to produce more efficient cars and electric cars. Detroit could begin producing high-speed rail. We could revitalize a mass transportation system and introduce a truly Green transportation policy. We not only could save every job, we could create hundreds of thousands of new jobs.

We need a publicly owned restructured system of auto / vehicle production and transportation. This would be the ideal time to take the step toward creating this system. Congress could do this.

As to the conference in St. Louis, many of us in labor are convinced that we need a socially responsible solution to the healthcare crisis. And we are convinced that any plan – such as the one pushed by the folks around Obama – that includes a mix of public and private sectors is a toxic combination that would be destructive to people in need of healthcare.

We are aiming to build a labor grassroots movement in the new situation created by the Obama victory on November 4. Obama said healthcare is a priority, so we intend to tell him what kind of healthcare is expected from the labor movement, from the people who made his election possible.

For this, we need labor at all levels to get involved in this drive for Medicare For All, which is another term we intend to use to promote our single-payer plan. Labor needs to tell Obama with one voice that the best economic stimulus program would be to enact single-payer healthcare.

We cannot sit back and simply hope that things will get better. The financial executives have organized themselves and lobbied for bailouts. We must now do the same. We must organize ourselves and mount a campaign, insisting that government programs benefit the majority of the population first and foremost, not the super wealthy small minority.

At this historic crossroads, as we face the prospects of another Great Depression, we, the undersigned dedicate ourselves to forging the broadest unity in action among those in the labor movement, Black and Latino organizations, immigrant rights groups, and antiwar and other social justice protest movements to secure the emergency measures listed below.

We endorse these demands as necessary steps to address the pressing needs of working people and the oppressed in general so that we can all enjoy a secure and comfortable life and find relief from an economic crisis we had no part in creating. We are committed to reaching out to more workers and encouraging them to endorse our demands and join our movement, the Workers Emergency Recovery Campaign (WERC), so that we can form committees across the country, organize educational forums, and then aim at building a national conference to promote this campaign. In this way we can begin to win the majority of working people to this agenda. In solidarity we can win.

Here are 10 fundamental demands that we believe should be included in a Workers’ Emergency Recovery Plan to Bail out Working People — NOT Wall Street:

1. Put a halt to the Wall Street bailout plan. Not one more penny should be earmarked to bail out the bankers and speculators. It’s time to bail out working people.
2. Enact a moratorium on all home foreclosures, utility shut-offs, evictions and rent hikes. Nationalize the mortgage industry, including Fannie Mae and Freddie Mac.
3. Enact H.R. 676 — the universal, single-payer healthcare plan. Take the private insurance companies out of the healthcare equation. Guarantee fully funded pensions for retirees, along with healthcare and other benefits.
4. Enact the Employee Free Choice Act (EFCA) so that every worker can have union representation.
5. Stop the layoffs in auto and other industries across the country. Nationalize the Big 3 automakers. Re-tool the auto industry to build rapid mass transit, solar, and wind systems.
6. Stop the scapegoating of immigrant workers. Stop the ICE raids and deportations.
7. End all funding for the U.S. wars in Iraq and Afghanistan and bring our troops home now. The war expenditures in these countries alone are estimated at $3 trillion. Redirect all war funding to meet human needs.
8. Enact a massive national reconstruction public works program (minimum expenditure needed of $1 trillion) to rebuild the nation’s schools, hospitals and crumbling infrastructure and to put millions of people back to work at a union-scale wage. Provide all necessary funding for a genuine reconstruction program in the Gulf Coast; enact the Gulf Coast Civic Works Act (H.R. 4048).
9. Defend and expand the rights and economic security of those who are unable to work. Grant living-wage benefits to single parents, disabled, seniors, and the unemployed. End the arbitrary, punitive time limits, sanctions, denial of education, and forced unwaged workfare in the TANF welfare program.
10. Tax the corporations and the rich — not working people — to finance a workers’ recovery plan. The rich currently enjoy historically high levels of wealth while being taxed at bargain-basement rates. Implement a retroactive tax on windfall revenue on the oil-energy industry, return capital income taxation to 1981 levels, and repatriate the $2 trillion from the offshore tax havens.