Free Book: “The End of Loser Liberalism: Making Markets Progressive”

By Dean Baker

Progressives need a fundamentally new approach to politics. They have been losing not just because conservatives have so much more money and power, but also because they have accepted the conservatives’ framing of political debates. They have accepted a framing where conservatives want market outcomes whereas liberals want the government to intervene to bring about outcomes that they consider fair.

This is not true. Conservatives rely on the government all the time, most importantly in structuring the market in ways that ensure that income flows upwards. The framing that conservatives like the market while liberals like the government puts liberals in the position of seeming to want to tax the winners to help the losers.

This “loser liberalism” is bad policy and horrible politics. Progressives would be better off fighting battles over the structure of markets so that they don’t redistribute income upward. This book describes some of the key areas where progressives can focus their efforts in restructuring market so that more income flows to the bulk of the working population rather than just a small elite.

By releasing The End of Loser Liberalism: Making Markets Progressive under a Creative Commons license and as a free download, Baker walks the walk of one of his key arguments — that copyrights are a form of government intervention in markets that leads to enormous inefficiency, in addition to redistributing income upward. (Hard copies areavailable for purchase, at cost)  Distributing the book for free not only enables it to reach a wider audience, but Baker hopes to drive home one of the book’s main points via his own example. While the e-book is free, donations to the Center for Economic and Policy Research are welcomed.

Read the book (other formats coming soon)

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The End of Loser Liberalism: Making Markets Progressive by Dean Baker is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Washington Post Discards All Journalistic Standards in Attack on Social Security

Reprinted from the Center for Economic and Policy Research (October 29, 2011)

By Dean Baker

News outlets generally like to claim a separation between their editorial pages and their news pages. The Washington Post has long ignored this distinction in pursuing its agenda for cutting Social Security, however it took a big step further in tearing down this barrier with a lead front page story that would have been excluded from most opinion pages because of all the inaccuracies it contained.

The basic premise of the story, as expressed in the headline (“the debt fallout: how Social Security went ‘cash negative’ earlier than expected”) and the first paragraph (“Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone. It went ‘cash negative.'”) is that Social Security faces some sort of crisis because it is paying out more in benefits than it collects in taxes. [The “runaway national debt” is also a Washington Post invention. The deficits have soared in recent years because of the economic downturn following the collapse of the housing bubble. No responsible newspaper would discuss this as problem of the budget as opposed to a problem with a horribly underemployed economy.]

This “treacherous milestone” is entirely the Post’s invention, it has absolutely nothing to do with the law that governs Social Security benefit payments. Under the law, as long as their is money in the trust fund, then Social Security is able to pay full benefits. There is literally no other possible interpretation of the law.

As the article notes the trust fund currently holds $2.6 trillion in government bonds, so it is nowhere close to being unable to pay benefits. The whole point of building up the trust fund was to help cover costs at a future date when taxes would not be sufficient to cover full benefits. Rather than posing any sort of crisis, this is exactly what had been planned when Congress last made major changes to the program in 1983 based on the recommendations of the Greenspan commission.

The article makes great efforts to confuse readers about the status of the trust fund. It tells readers:

“The $2.6 trillion Social Security trust fund will provide little relief. The government has borrowed every cent and now must raise taxes, cut spending or borrow more heavily from outside investors to keep benefit checks flowing.”

This is the same situation the the government faces when Wall Street investment banker Peter Peterson or any other holder of government bonds decides to cash in their bonds when they become due. In such cases it “must raise taxes, cut spending or borrow more heavily from outside investors.” The Post’s reporters and editors should understand this fact.

The article then goes on to incorrectly accuse Senate Majority Leader Harry Reid of misrepresenting the finances of Social Security:

“In an MSNBC interview, he [Senator Reid] added: ‘Social Security does not add a single penny, not a dime, a nickel, a dollar to the budget problems we have. Never has and, for the next 30 years, it won’t do that.’

Such statements have not been true since at least 2009, when the cost of monthly checks regularly began to exceed payroll tax collections. A spokesman said Reid stands by his comments and his view that Social Security is entirely self-financed.”

Of course Senator Reid is exactly right. The system is self-financed under the law. In 2009 it began drawing on the interest on the government bonds it held. That is exactly what the law dictates, when Social Security needs more money than it collects in taxes, it is supposed to draw on the bonds that were purchased with Social Security taxes in the past. This means it is self-financing.


Again, this is like Peter Peterson selling his government bonds to finance one of his political ventures. Just like Social Security, he is drawing on his own money. The Post may have missed it, but there was a big debate last summer over raising the government’s $14.3 trillion debt ceiling. This $14.3 trillion figure included the $2.6 trillion borrowed from Social Security. If Social Security sells some of these bonds and this money is used to pay benefits, it does not raise the debt subject to the ceiling by a penny. This is very simple and very clear.

The article then turns to Morgan Stanley director Erskine Bowles who describes a plan he put forward along with former Senator Alan Simpson, his co-chair on a deficit commission appointed by President Obama [the article wrongly describes this plan as being the commission’s plan. That is not true, the commission did not approve any plan.]

“It would have hit upper-income workers while raising benefits for the most needy, those with average lifetime earnings of less than $11,000 a year. ‘By making these relatively small changes, you make it solvent and you make it be there for people who depend on it,’” Bowles said. ‘I thought that’s what we as Democrats were supposed to be for.'”

Actually the plan put forward by Bowles and Simpson would have implied large cuts for most low-income workers who would not have met the work requirements needed for the higher benefit. The cut would have taken the form of a 0.3 percentage point reduction in the annual cost of living adjustment. This cut would be cumulative, after 15 years of retirement a beneficiary would be seeing a benefit that is roughly 4.5 percent lower as a result of the Bowles-Simpson plan. The plan also phased in an increase in the age for receiving full benefits to 69, which is also a benefit cut for lower income retirees.

For lower income retirees Social Security is the overwhelming majority of their income. This means that the benefit cut advocated by Bowles and Simpson would imply the loss of a much larger share of their income than the end of the Bush tax cuts would for the wealthy. However, the Post has never described the ending of these tax cuts as a “modest” or “small” tax increase.

It is also worth noting that “upper-income workers” who would face benefit cuts under the Bowles-Simpson plan are people with average earnings of more than $40,000 a year. This is not ordinarily viewed as the cutoff for upper income. In reference to the ending of the Bush tax cuts, the Post once ran a front page story questioning whether people earning $500,000 a year were wealthy. Clearly they apply a different standard to Social Security beneficiaries.

To push its line of fat and happy seniors the Post misrepresented research by Gene Steurele on returns from Social Security taxes. At one point it told readers:

“That return is diminishing, in part because people today have paid more into the system than previous generations. But a two-earner, middle-income couple retiring this year can expect to get $913,000 in Social Security and Medicare benefits over their lifetimes, in return for $717,000 in payroll taxes.”

The trick in this picture is that the return refers to Social Security and Medicare, not just Social Security which is the topic of the article. The Steurele paper actually has the Social Security returns shown separately in the exact same chart. Stuerele calculated that the two-earner couple referred to in the article would pay a bit less than $600,000 in taxes into the system and collect around $560,000 in benefits.

[This couple will get more back in Medicare benefits than they paid in taxes, but this is primarily because our health care costs twice as much per person as in any other wealthy country. This is a good argument for reforming the U.S. health care system but has nothing to do with the topic of the article.]

This article also repeatedly refers to the debate over cutting benefits as being an “ideological battle.” There is no evidence presented in this piece that there is any ideological issue at stake. On the one hand are hundreds of millions of workers who want to see the benefits that they paid for. On the other hand are many wealthy people, exemplified by people like Peter Peterson and Erskine Bowles who would rather use Social Security money to keep their own taxes low or to serve other purposes.

This is a battle over who gets the money. The references to ideology just confuse the situation.

[Addendum: In a comment below my article, Art Dover calls my attention to another inaccuracy in the article. It asserts: “The payroll tax holiday is depriving the system of revenue.” This is not true. Under the law, Social Security is 100 percent reimbursed from general revenue for the taxes that were lost as a result of the payroll tax holiday. This is yet another fabrication by the Post in its crusade to cut Social Security.]


Dean Baker is the author of The End of Loser Liberalism: Making Markets Progressive, Taking Economics Seriously, False Profits: Recovering from the Bubble Economy, Plunder and Blunder: The Rise and Fall of the Bubble Economy, The United States Since 1980, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, Social Security: The Phony Crisis (with Mark Weisbrot), and The Benefits of Full Employment (with Jared Bernstein). He was the editor of Getting Prices Right: The Debate Over the Consumer Price Index, which was a winner of a Choice Book Award as one of the outstanding academic books of the year. He appears frequently on TV and radio programs, including CNN, CBS News, PBS NewsHour, and National Public Radio. His blog, Beat the Press, features commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in economics from the University of Michigan.

Remembering FDR’s Engagement with Another Occupation

Reprinted from New Deal 2.0 (October 28, 2011)

By David Woolner

FDR engaged with the Bonus Army instead of cracking down. Today’s mayors should take note.

The violence that broke out in Oakland earlier this week and the wounding of Scott Olsen, a Marine veteran, recalls a similar “occupy movement” involving veterans that took place in Washington at the onset of the Great Depression.

In 1932, thousands of unemployed World War I veterans, desperate from lack of work, converged on Washington, mostly by riding the rails, in support of a bill that would have allowed them to receive immediate cash payment of the war service “bonus” they were due in 1945. The veterans called themselves the “Bonus Army” or “Bonus Expeditionary Force.” By the end of May of that year, more than 20,000 had occupied a series of abandoned buildings near the Washington Mall and a sprawling shantytown they built on the Anacostia Flats not far from the Capitol. On June 15, 1932, the House of Representatives passed a bill in favor of the veteran payments, but as both President Hoover and a majority in the Senate opposed it, the “Bonus bill” went down to defeat two days later.

In the wake of this defeat, roughly 15,000 members of the Bonus Army decided that they would continue their occupation as a protest against the government’s decision. By late July, President Hoover decided it was time to clear the city of the protesters, using four troops of cavalry under the command of General Douglas MacArthur. Late in the afternoon of July 28, General MacArthur’s troops — with sabers drawn — cleared the buildings near the Mall. They then fired tear gas among the men, women, and children encamped in Anacostia (many veterans were accompanied by their families); stormed the area on horseback, driving them out; and intentionally burned the shantytown to the ground in the process. More than 1,000 people were injured in the incident and two veterans and one child died.

In attacking the shantytown, MacArthur had exceeded his orders, which were simply to clear the buildings and surround the camp so as to contain it. But this meant little to the public, who were outraged at the treatment the veterans had received at the hands of the government and furious at Hoover for ordering the operation. Hoover, nevertheless, remained publically unrepentant and refused to apologize to the veterans — moves that contributed greatly to his massive loss to Franklin Roosevelt a few months later.

FDR, for his part, was disgusted by the whole affair. When a smaller group of about 3,000 Bonus Marchers converged on Washington with the same demand a year later, FDR took quite a different approach. Where Hoover had refused to meet with the protesters, FDR invited a delegation to come to the White House. He also provided the marchers housing in an unused army fort, made sure that they were given three meals a day plus medical attention, and sent Eleanor Roosevelt to engage them in further discussions and check on their condition. Not wanting to single out any group for special treatment, in the end he refused to support their demand for the early payment of their pensions. But the men were offered work in the newly formed Civilian Conservation Corps (CCC), which 90 percent accepted. Shortly thereafter the Bonus Marchers voted to disperse, and those that opted to return home rather than join the CCC were given free rail passage.

Perhaps the municipal authorities in Oakland, New York, and elsewhere might learn something from FDR. They could use a lesson on the value of dialogue and the benefits a government that is responsive to the needs — if not the demands — of its citizens.


David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book on U.S.-UK economic relations in the 1930s, entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

How the 99 Percent Really Lost Out – in Far Greater Ways Than the Occupy Protesters Imagine

Reprinted from Truthout.org (October 29, 2011)

By Gar Alperovitz

“Property is theft,” French anarchist Pierre-Joseph Proudhon famously declared in 1840 – a judgment clearly shared by many of those involved in the occupations in the name of the 99 percent around the country, and especially when applied to Wall Street bankers and traders. Elizabeth Warren also angrily points out that there “is nobody in this country who got rich on his own. Nobody.” Meaning: if the rich don’t pay their fair share of the taxes which educate their workers and provide roads, security and many other things, they are essentially stealing from everyone else.

But this is the least of it: Proudhon may have exaggerated when, for instance, we think of a small farmer working his own land with his own hands. But we now know that he was far closer to the truth than even he might have imagined when it comes to how the top 1 percent really got so rich, and why the 99 percent lost out. The biggest “theft” by the 1 percent has been of the primary source of wealth – knowledge – for its own benefit.

Knowledge? Yes, of course, and increasingly so. The fact is, most of what we call wealth is now known to be overwhelmingly the product of technical, scientific and other knowledge – and most of this innovation derives from socially inherited knowledge, at that. Which means that, except for trivial amounts, it was simply not created by the 1 percent who enjoy the lion’s share of its benefits. Most of it was created, historically, by society – which is to say, minimally, the other 99 percent.

Take a simple example: In our own time, over many decades, the development of the steel plow and the tractor increased one man’s capacity to farm, from a small plot (with a mule and wooden plow) to many hundred acres. What changed over the years to make this possible was a great deal of engineering, steelmaking, chemistry and other knowledge developed by society as a whole.

Another obvious example: Many of the advances that have propelled our high-tech economy in recent decades grew directly out of research programs financed and, often, collaboratively developed, by the federal government and paid for by the taxpayer. The Internet, to take the most well-known example, began as a government defense project, the Advanced Research Projects Agency Network (ARPANET), in the 1960s. Today’s vast software industry rests on a foundation of computer language and operating hardware developed, in large part, with public support. The Bill Gateses of the world might still be working with vacuum tubes and punch cards were it not for critical research and technology programs created or financed by the federal government after World War II.

The iPhone is another example: Its microchips, cellular communication abilities and global positioning system (GPS) all flowed from developments traceable to significant direct and indirect public support from the military and space programs. The “revolutionary” multi-touch screen was developed by University of Delaware researchers financially supported by the National Science Foundation and the CIA. It is not only electronics: of the 15 modern US-developed “blockbuster” drugs with over $1 billion in sales, 13 received significant public research and development support.

But taxpayer-financed government programs (including, of course, all of public education!) are only the tip of the iceberg. And here we are not talking rhetoric, we are talking the stuff of Nobel prizes. Over the last several decades, economic research has begun to pinpoint much more precisely how much of what we call “wealth” society in general derives from long, steady, century-by-century advances in knowledge – and how much any one individual at any point in time can be said to have earned and “deserved.”

Recent estimates indicate, for instance, that national output per capita has increased more than twentyfold over the 200-plus years since 1800. Output per hour worked has increased an estimated fifteenfold since 1870 alone. Yet the modern person is likely to work each hour with no greater commitment, risk or intelligence than his counterpart from the past. The primary reason for such huge gains is that, on the whole, scientific, technical and cultural knowledge has grown at a scale and pace that far outstrips any other factor in the nation’s economic achievement.

A half-century ago, in 1957, economist Robert Solow showed that nearly 90 percent of productivity growth in the first half of the 20th century alone, from 1909 to 1949, could only be attributed to technical change in the broadest sense. The supply of labor and capital – what workers and employers contribute – appeared almost incidental to this massive technological “residual.” (Solow received the Nobel Prize for this and related work in 1987.) Another leading economist, William Baumol, calculated that “nearly 90 percent … of current GDP [gross domestic product] was contributed by innovation carried out since 1870.”

The truly central and demanding question is obviously this: If most of what we have today is attributable to knowledge advances that we all inherit in common, why, specifically, should this gift of our collective history not more generously benefit all members of society? The top 1 percent of US households now receives far more income than the bottom 150 million Americans combined. The richest 1 percent of households owns nearly half of all investment assets (stocks and mutual funds, financial securities, business equity, trusts, nonhome real estate). A mere 400 individuals at the top have a combined net worth greater than the bottom 60 percent of the nation taken together. If America’s vast wealth is mainly a gift of our common past, how, specifically, can such disparities be justified?

Early in the American republic, Thomas Paine urged that everything “beyond what a man’s own hands produce” was a gift that came to him simply by living in society, and, hence, “he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came.” Another American reformer, Henry George, challenged what he called “the unearned increment” that is created when population growth and other societal factors increase land values.

To be sure, someone who genuinely makes a real contribution deserves to be rewarded. But Proudhon is right on target for many, many others: when what is created by all of society for many centuries gets turned into wealth, and, somehow, directly or indirectly, shunted away from the 99 percent by the 1 percent, much of that process, in fact, is reasonably described as “theft.” The demand of the occupations that this theft stop, that it be reversed, is also right on target – both in what we know about how wealth is created, and, above all, in what we know about how a just society ought to organize its affairs.

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This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

Gar Alperovitz is the Lionel R. Bauman professor of political economy at the University of Maryland and co-founder of the Democracy Collaborative.  An updated version of his widely praised 2005 book, “America Beyond Capitalism,” will be released next month. Most recently, he authored “Neither Revolution Nor Reform: A New Strategy for the Left” in Dissent Magazine.

Tell USGS if You Felt the Earthquake

If you felt the earthquake last night, you can report it to the USGS, here:

How the Legal System Was Subverted by the Rich

Reprinted from Tomdispatch.com (October 25, 2011)

How the Legal System Was Deep-Sixed and Occupy Wall Street Swept the Land

By Glenn Greenwald

As intense protests spawned by Occupy Wall Street continue to grow, it is worth asking: Why now? The answer is not obvious. After all, severe income and wealth inequality have long plagued the United States. In fact, it could reasonably be claimed that this form of inequality is part of the design of the American founding — indeed, an integral part of it.

Income inequality has worsened over the past several years and is at its highest level since the Great Depression.  This is not, however, a new trend. Income inequality has been growing at rapid rates for three decades.  As journalist Tim Noah described the process:

“During the late 1980s and the late 1990s, the United States experienced two unprecedentedly long periods of sustained economic growth — the ‘seven fat years’ and the ‘long boom.’ Yet from 1980 to 2005, more than 80% of total increase in Americans’ income went to the top 1%. Economic growth was more sluggish in the aughts, but the decade saw productivity increase by about 20%. Yet virtually none of the increase translated into wage growth at middle and lower incomes, an outcome that left many economists scratching their heads.”

The 2008 financial crisis exacerbated the trend, but not radically: the top 1% of earners in America have been feeding ever more greedily at the trough for decades.

In addition, substantial wealth inequality is so embedded in American political culture that, standing alone, it would not be sufficient to trigger citizen rage of the type we are finally witnessing. The American Founders were clear that they viewed inequality in wealth, power, and prestige as not merely inevitable, but desirable and, for some, even divinely ordained. Jefferson praised “the natural aristocracy” as “the most precious gift of nature” for the “government of society.” John Adams concurred: “It already appears, that there must be in every society of men superiors and inferiors, because God has laid in the… course of nature the foundation of the distinction.”

Not only have the overwhelming majority of Americans long acquiesced to vast income and wealth disparities, but some of those most oppressed by these outcomes have cheered it loudly. Americans have been inculcated not only to accept, but to revere those who are the greatest beneficiaries of this inequality.

In the 1980s, this paradox — whereby even those most trampled upon come to cheer those responsible for their state — became more firmly entrenched. That’s because it found a folksy, friendly face, Ronald Reagan, adept at feeding the populace a slew of Orwellian clichés that induced them to defend the interests of the wealthiest. “A rising tide,” as President Reagan put it, “lifts all boats.” The sum of his wisdom being: it is in your interest when the rich get richer.

Implicit in this framework was the claim that inequality was justified and legitimate. The core propagandistic premise was that the rich were rich because they deserved to be. They innovated in industry, invented technologies, discovered cures, created jobs, took risks, and boldly found ways to improve our lives. In other words, they deserved to be enriched. Indeed, it was in our common interest to allow them to fly as high as possible because that would increase their motivation to produce more, bestowing on us ever greater life-improving gifts.

We should not, so the thinking went, begrudge the multimillionaire living behind his 15-foot walls for his success; we should admire him. Corporate bosses deserved not our resentment but our gratitude. It was in our own interest not to demand more in taxes from the wealthiest but less, as their enhanced wealth — their pocket change — would trickle down in various ways to all of us.

This is the mentality that enabled massive growth in income and wealth inequality over the past several decades without much at all in the way of citizen protest. And yet something has indeed changed.  It’s not that Americans suddenly woke up one day and decided that substantial income and wealth inequality are themselves unfair or intolerable. What changed was the perception of how that wealth was gotten and so of the ensuing inequality as legitimate.

Many Americans who once accepted or even cheered such inequality now see the gains of the richest as ill-gotten, as undeserved, as cheating.  Most of all, the legal system that once served as the legitimizing anchor for outcome inequality, the rule of law — that most basic of American ideals, that a common set of rules are equally applied to all — has now become irrevocably corrupted and is seen as such.

While the Founders accepted outcome inequality, they emphasized — over and over — that its legitimacy hinged on subjecting everyone to the law’s mandates on an equal basis. Jefferson wrote that the essence of America would be that “the poorest laborer stood on equal ground with the wealthiest millionaire, and generally on a more favored one whenever their rights seem to jar.” Benjamin Franklin warned that creating a privileged legal class would produce “total separation of affections, interests, political obligations, and all manner of connections” between rulers and those they ruled. Tom Paine repeatedly railed against “counterfeit nobles,” those whose superior status was grounded not in merit but in unearned legal privilege.

After all, one of their principal grievances against the British King was his power to exempt his cronies from legal obligations. Almost every Founder repeatedly warned that a failure to apply the law equally to the politically powerful and the rich would ensure a warped and unjust society.  In many ways, that was their definition of tyranny.

Americans understand this implicitly. If you watch a competition among sprinters, you can accept that whoever crosses the finish line first is the superior runner. But only if all the competitors are bound by the same rules: everyone begins at the same starting line, is penalized for invading the lane of another runner, is barred from making physical contact or using performance-enhancing substances, and so on.

If some of the runners start ahead of others and have relationships with the judges that enable them to receive dispensation for violating the rules as they wish, then viewers understand that the outcome can no longer be considered legitimate. Once the process is seen as not only unfair but utterly corrupted, once it’s obvious that a common set of rules no longer binds all the competitors, the winner will be resented, not heralded.

That catches the mood of America in 2011.  It may not explain the Occupy Wall Street movement, but it helps explain why it has spread like wildfire and why so many Americans seem instantly to accept and support it.  As was not true in recent decades, the American relationship with wealth inequality is in a state of rapid transformation.

It is now clearly understood that, rather than apply the law equally to all, Wall Street tycoons have engaged in egregious criminality — acts which destroyed the economic security of millions of people around the world — without experiencing the slightest legal repercussions. Giant financial institutions were caught red-handed engaging in massive, systematic fraud to foreclose on people’s homes and the reaction of the political class, led by the Obama administration, was to shield them from meaningful consequences. Rather than submit on an equal basis to the rules, through an oligarchical, democracy-subverting control of the political process, they now control the process of writing those rules and how they are applied.

Today, it is glaringly obvious to a wide range of Americans that the wealth of the top 1% is the byproduct not of risk-taking entrepreneurship, but of corrupted control of our legal and political systems. Thanks to this control, they can write laws that have no purpose than to abolish the few limits that still constrain them, as happened during the Wall Street deregulation orgy of the 1990s.  They can retroactively immunize themselves for crimes they deliberately committed for profit, as happened when the 2008 Congress shielded the nation’s telecom giants for their role in Bush’s domestic warrantless eavesdropping program.

It is equally obvious that they are using that power not to lift the boats of ordinary Americans but to sink them. In short, Americans are now well aware of what the second-highest-ranking Democrat in the Senate, Illinois’s Dick Durbin, blurted out in 2009 about the body in which he serves: the banks “frankly own the place.”

If you were to assess the state of the union in 2011, you might sum it up this way: rather than being subjected to the rule of law, the nation’s most powerful oligarchs control the law and are so exempt from it; and increasing numbers of Americans understand that and are outraged.  At exactly the same time that the nation’s elites enjoy legal immunity even for egregious crimes, ordinary Americans are being subjected to the world’s largest and one of its harshest penal states, under which they are unable to secure competent legal counsel and are harshly punished with lengthy prison terms for even trivial infractions.

In lieu of the rule of law — the equal application of rules to everyone — what we have now is a two-tiered justice system in which the powerful are immunized while the powerless are punished with increasing mercilessness. As a guarantor of outcomes, the law has, by now, been so completely perverted that it is an incomparably potent weapon for entrenching inequality further, controlling the powerless, and ensuring corrupted outcomes.

The tide that was supposed to lift all ships has, in fact, left startling numbers of Americans underwater. In the process, we lost any sense that a common set of rules applies to everyone, and so there is no longer a legitimizing anchor for the vast income and wealth inequalities that plague the nation.

That is what has changed, and a growing recognition of what it means is fueling rising citizen anger and protest. The inequality under which so many suffer is not only vast, but illegitimate, rooted as it is in lawlessness and corruption. Obscuring that fact has long been the linchpin for inducing Americans to accept vast and growing inequalities.  That fact is now too glaring to obscure any longer.


Glenn Greenwald is a former constitutional and civil rights litigator and a current contributing writer at Salon.com. He is the author of two New York Times bestselling books on the Bush administration’s executive power and foreign policy abuses. His just-released book, With Liberty and Justice for Some: How the Law Is Used to Destroy Equality and Protect the Powerful(Metropolitan Books), is a scathing indictment of America’s two-tiered system of justice.  He is the recipient of the first annual I.F. Stone Award for Independent Journalism.

Copyright 2011 Glenn Greenwald

Words You’ll Never Hear a Politician Speak, But Should

In the fascinating brief video below, William K. Black, lawyer, academic, former bank regulator and author of “The Best Way to Rob a Bank Is to Own One,” speaks with blistering clarity about what needs to be done (that is currently not being done) to prevent the next financial meltdown. As a close observer of the S&L meltdown of the 1980s, he knows whereof he speaks. He is especially critical of Bernanke, Geithner and Obama.

Picture of 40 Wall Street
thanks to herval and New York Pictures

Worst Food Additive Ever? It’s in Half of All Foods We Eat and Its Production Destroys Rainforests and Enslaves Children

Reprinted from Alternet (October 24, 2011)

The production of this ingredient causes jaw-dropping amounts of deforestation (and with it, carbon emissions) and human rights abuses.

By Jill Richardson

On August 10, police and security for the massive palm oil corporation Wilmar International (of which Archer Daniels Midland owns a majority share) stormed a small, indigenous village on the Indonesian island of Sumatra. They came with bulldozers and guns, destroying up to 70 homes, evicting 82 families, and arresting 18 people. Then they blockaded the village, keeping the villagers in — and journalists out. (Wilmar claims it has done no wrong.)

The village, Suku Anak Dalam, was home to an indigenous group that observes their own traditional system of land rights on their ancestral land and, thus, lacks official legal titles to the land. This is common among indigenous peoples around the world — so common, in fact, that it is protected by the United Nations Declaration on the Rights of Indigenous Peoples.

Indonesia, for the record, voted in favor of the Declaration on the Rights of Indigenous Peoples in 2007. Yet the government routinely sells indigenous peoples’ ancestral land to corporations. Often the land sold is Indonesia’s lowland rainforest, a biologically rich area home to endangered species like the orangutan, Asian elephant, Sumatran rhinoceros, Sumatran tiger, and the plantRafflesia arnoldii, which produces the world’s largest flower.

So why all this destruction? Chances are you’ll find the answer in your pantry. Or your refrigerator, your bathroom, or even under your sink. The palm oil industry is one of the largest drivers of deforestation in Indonesia. Palm oil and palm kernel oil, almost unheard of a decade or two ago, are now unbelievably found in half of all packaged foods in the grocery store (as well as body care and cleaning supplies). These oils, traditional in West Africa, now come overwhelmingly from Indonesia and Malaysia. They cause jawdropping amounts of deforestation (and with it, carbon emissions) and human rights abuses.

“The recipe for palm oil expansion is cheap land, cheap labor, and a corrupt government, and unfortunately Indonesia fits that bill,” says Ashley Schaeffer of Rainforest Action Network.

The African oil palm provides two different oils with different properties: palm oil and palm kernel oil. Palm oil is made from the fruit of the tree, and palm kernel oil comes from the seed, or “nut,” inside the fruit. You can find it on ingredient lists under a number of names, including palmitate, palmate, sodium laureth sulphate, sodium lauryl sulphate, glyceryl stearate, or stearic acid. Palm oil even turns up in so-called “natural,” “healthy,” or even “cruelty-free” products, like Earth Balance (vegan margarine) or Newman-O’s organic Oreo-like cookies. Palm oil is also used in “renewable” biofuels.

A hectare of land (2.47 acres) produces, on average, 3.7 metric tons of palm oil, 0.4 metric tons of palm kernel oil, and 0.6 tons of palm kernel cake. (Palm kernel cake is used as animal feed.) In 2009, Indonesia produced over 20.5 million metric tons, and Malaysia produced over 17.5 million metric tons. As of 2009, the U.S. was only the seventh largest importer of palm oil in the world, but as the second largest importer of palm kernel oil, it ranks third in the world as a driver of deforestation for palm oil plantations.

Indonesia has lost 46 percent of its forests since 1950, and the forests have recently disappeared at a rate of about 1.5 million hectares (an area larger than the state of Connecticut) per year. Of the 103.3 million hectares of remaining forests in 2000, only 88.2 million remained in 2009. At that time, an estimated 7.3 million hectares of oil palm plantations were already established, mostly on the islands of Sumatra and Borneo. Indonesia plans to continue the palm oil expansion, hoping to produce an additional 8.3 million metric tons by 2015 — this means a 71 percent expansion in area devoted to palm oil in the coming years.

At stake are not only endangered species and human lives, but carbon emissions. One of the ecosystems at risk is Indonesia’s peat swamps, where soil contains an astounding 65 percent organic matter. (Most soils contain only two to 10 percent organic matter.) Laurel Sutherlin of Rainforest Action Network describes the draining and often burning of these peat swamps as “a carbon bomb.” Destruction of its peat swamps as well as its rainforests makes Indonesia theworld’s third largest carbon emitter after the U.S. and China.

Among the horror stories coming out of Southeast Asian palm oil plantations are accounts of child slave labor. Ferdi and Volario, ages 14 and 21, respectively, were each met by representatives of the Malaysian company Kuala Lampur Kepong in their North Sumatra villages. They were offered high-paying jobs with good working conditions, and they jumped at the opportunity. According to an account by Rainforest Action Network: “The two worked grueling hours each day spraying oil palm trees with toxic chemical fertilizers, without any protection to shield their hands, face or lungs. After work, Ferdi and Volario were forced inside the camp where they’d stay overnight under lock and key, guarded by security. If they had to use the bathroom, they’d do their best to hold it until morning or relieve themselves in plastic bags or shoes.” They escaped after two months and were never paid for their work.

What is the industry doing about such horrific claims? It has established the Roundtable on Sustainable Palm Oil (RSPO). Kuala Lampur Kepong, Wilmar International, and Archer Daniels Midland are all members, and so are their customers, Cargill, Nestlé and Unilever, as well as environmental groups like the World Wildlife Fund and Conservation International. But, according to Sutherlin, membership in RSPO means nothing — other than that an organization paid its dues. “That’s the first level of greenwash,” says Sutherlin.

RSPO certifies some products and companies, and Sutherlin says that does have some meaning, but leaves major loopholes open. For example, there are no carbon or climate standards, and there have been problems with the implementation of social safeguards. “It’s been a spotty record about their ability to enforce the standards for how people are treated and how communities are affected,” notes Sutherlin. Yet, he says, RSPO is “the best game in town.”

Rather than simply relying on RSPO’s certification, Rainforest Action Network has focused its campaign on the U.S. agribusiness giant Cargill, which has a hand in fully 25 percent of palm oil on the global market. Rainforest Action Network is asking Cargill to sign on to a set of social and environmental safeguards and to provide public transparency on its palm oil operations. If Cargill cleans up its act, perhaps it will help put pressure on other major multinationals like Unilever, Procter & Gamble, and Nestlé, which also source palm oil from unethical suppliers like Wilmar International.

Journalists have also criticized environmental groups for “cozy relationships with corporate eco-nasties.” The World Wildlife Fund has come under attack for its partnership with Wilmar, the corporation that attacked a Sumatran village. Its involvement in RSPO serves as a reminder of the accusations in a 2010 Nation article, which claimed that “many of the green organizations meant to be leading the fight are busy shoveling up hard cash from the world’s worst polluters–and burying science-based environmentalism in return.” (WWF says it received no payment from Wilmar in this particular case.)

The ugly issue of palm oil even touches the beloved American icon, the Girl Scout cookie. When Girl Scouts Madison Vorva and Rhiannon Tomtishen began a project to save the orangutan for their Bronze Awards, they discovered the link between habitat loss and palm oil. Then they looked at a box of Girl Scout cookies and found palm oil on the list of ingredients. The two 11-year-olds — who are now ages 15 and 16 — began a campaign to get the Girl Scouts to remove palm oil from its cookies.


It took five years to get a response from the supposedly wholesome Girl Scouts USA (whose 2012 slogan is “Forever Green“). While the organization ignored its own members for several years, it was unable to ignore the coverage the girls received from Time magazine, the Wall Street Journal, and several major TV networks. Once the story was so well-covered by the media, Girl Scouts USA responded, promising it would try to move to a sustainable source of palm oil by 2015. In the meantime, it would continue buying palm oil that could have come from deforested lands or plantations that use child slave labor, but would also buy GreenPalm certificates, which fund a price premium that goes to producers following RSPO’s best practice guidelines.

So what should consumers do? For the time being, avoiding products containing palm oil is probably your best bet. Since palm oil is so ubiquitous this will likely mean opting to buy fewer processed foods overall. Don’t forget to check your beauty and cleaning products, too. In a handful of cases, such as Dr. Bronner’s soaps, palm oil comes from fair trade, organic sources. But this is hardly the norm, and with the immense amount of palm oil used in the U.S., it’s unlikely that sustainable sources could cover all of the current demand.


Jill Richardson is the founder of the blog La Vida Locavore and a member of the Organic Consumers Association policy advisory board. She is the author of Recipe for America: Why Our Food System Is Broken and What We Can Do to Fix It.

A Jubilee for Student Debt?

Reprinted from Yes! Magazine (October 20, 2011)

Some—including Wall Street protesters—say relieving students of nearly a trillion dollars in loans will help the rest of us, too. Ellen Brown asks, could it really work?

By Ellen Brown

Among the demands of the Wall Street protesters is student debt forgiveness—a debt “jubilee.” Occupy Philly has a “Student Loan Jubilee Working Group,” and other groups are studying the issue.

Commentators say debt forgiveness is impossible.  Who would foot the bill?  But there is one deep pocket that could pull it off—the Federal Reserve.  In its first quantitative easing program (QE1), the Fed removed $1.3 trillion in toxic assets from the books of Wall Street banks.  For QE4, it could remove $1 trillion in toxic debt from the backs of millions of students.

The economy would be the better for it, as was shown by the G.I. Bill, which provided virtually free higher education for returning veterans, along with low-interest loans for housing and business. The G.I. Bill had a sevenfold return, making it one of the best investments Congress ever made.

There are arguments against a complete student debt write-off, including that it would reward private universities that are already charging too much, and it would unfairly exclude other forms of debt from relief.  But the point here is that it could be done, and it would represent a significant stimulus to the economy.

Toxic Student Debt: The Next “Black Swan”?

The Occupy Wall Street movement is heavily populated with students—many without jobs—groaning under the impossible load of student debts that have been excluded from the usual consumer protections.  A whole generation of young people has been seduced into debt peonage by the promise of better jobs if they invest in higher education, only to find that the jobs are not there when they graduate.  If the students default on their loans, lenders can now jack up interest rates and fees, garnish wages, and destroy credit ratings; and the debts can no longer be discharged in bankruptcy.

Total U.S. student debt has risen to $1 trillion—more than U.S. credit card debt.  Defaults are also rising; and with a very tight job market, the situation is expected to get worse.  The threat of massive student loan defaults requiring another taxpayer bailout has been called a systemic risk as serious as the bank failures that brought the U.S. economy to the brink of collapse in 2008.  To prevent a repeat of that disaster, we need to defuse the student debt time bomb before it blows.  But how?

The Federal Reserve could do it in the same way it defused the 2008 crisis: by aiming its fire hose of very-low-interest credit at the struggling student population.  Since September 2008, the Fed has made trillions of dollars available to financial institutions at a fraction of 1 percent interest; and in audits since then, we’ve seen that the Fed is capable of coming up with any amount of money required—accounting entries, available with the stroke of a computer key.

The Fed is not allowed to lend to individuals directly, but it can buy Treasury securities; and with the Student Aid and Fiscal Responsibility Act (SAFRA) of March 2010, the Treasury is now formally in the business of student lending.  The Fed can also buy asset-backed securities, including securitized student debt; and there is talk of another round of quantitative easing aimed at just that sort of asset.

The Market Wants More

When the Federal Reserve’s expected “QE3” turned into the tepid and ineffectual “Operation Twist,” the stock market reacted by plummeting.  To appease investors, Chairman Ben Bernanke then assured them that the Fed was “ready to do more.”  How much more and in what way wasn’t specified; but Alan Blinder, former Vice Chairman of the Federal Reserve Board of Governors, suggested some possibilities.  He wrote in the Wall Street Journal on September 28th:

“To maintain the size of its balance sheet, the Fed has been reinvesting the proceeds in Treasurys. But starting “now” (the Fed’s word), and continuing indefinitely, those proceeds will be reinvested in agency bonds and MBS instead. . . . A future round of quantitative easing (QE4?) that concentrates on private-sector securities like MBS, rather than on Treasurys, is now imaginable … Indeed, if we indulge ourselves in a bit of blue-sky thinking, we can even imagine the Fed doing QEs in corporate bonds, syndicated loans, consumer receivables and so forth.”

Syndicated consumer loans include asset-backed securities (ABS) of the sort purchased by the Fed through its Term Asset-backed Securities Loan Facility (TALF) created in November 2008. According to the Fed’s website, that includes securities backed by bundles of student loans.

Quantitative easing is a tool reserved for economic crises, and toxic student debt appears to be the next “black swan” on the horizon. Buying up a trillion dollars in student loans could be a nice stimulus package for the economy.

In July 2010, the  New York Fed posted a staff report titled “Shadow Banking,” showing that the money supply had shrunk by about $4 trillion since the 2008 credit crisis.  The shrinkage was hidden because it was not in the traditional banking system but was in the “shadow” banking system—an array of non-bank financial institutions including investment banks, hedge funds, money market funds, SIVs, conduits, and monoline insurers.  Adding back a trillion dollars in student aid could go a long way toward curing this shortfall.

What this could do for the economy was suggested by the G.I. Bill, which provided free technical training and educational support, along with government-subsidized loans and unemployment benefits, for nearly 16 million returning servicemen.  Economists have determined that for every 1944 dollar invested, the country received approximately $7 in return, through increased economic productivity, consumer spending, and tax revenues. The G.I. Bill not only made higher education accessible to all, but it created a nation of homeowners, new technology, new products, and new companies.

Eliminating, reducing, or deferring student loan debt will free up the budgets of millions of students, allowing them to spend more on goods and services, increasing demand and creating jobs, and adding to tax revenues.  As long as the money is spent on goods and services rather than on financial money-making-money schemes, the result will not be inflationary.  Retailers will just put in more orders for goods, causing producers to produce more and to hire more workers.  Supply will rise along with demand, keeping prices stable.  Overall prices will not increase until the country hits full employment, which is far from where we are today.

Interest-free Student Loans: Taking a Cue from Abroad

The government of New Zealand now offers zero percent loans to students, with repayment to be made from their income after they graduate; and so does the government of Australia.  The loans in the Australian Higher Education Loan Programme (or HELP) do not bear interest, but the government gets back more than it lends, because the principal is indexed to the Consumer Price Index (CPI), which goes up every year.  They are contingent loans, payable only if or when the borrower’s income reaches a certain level.

Assume, then, that the Fed bought up $1 trillion in U.S. student debt and waived the interest.  With a default rate even as high as 10 percent, it would get back $900 billion of this money.  The $100 billion difference is only one-seventh the bailout money authorized by Congress to rescue Wall Street banks; and if the Fed’s investment generated anything close to the returns from the G.I. Bill, its $100 billion outlay could produce a several-hundred-billion dollar return.

To prevent abuse of the system, colleges should be required to stay within certain well-defined parameters for providing affordable, high quality education; and students should also meet well-defined standards.  Properly monitored, a federal investment in higher education can be a win-win-win—good for the economy, the government, and the people.  A generous student loan program will create jobs, increase tax revenues, and give young people a fair shot at the American dream, a dream that has become a mirage for 99 percent of the population.


Ellen Brown is an attorney and president of the Public Banking Institute. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are Web of Debt and ellenbrown.com.

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The Decembrists: Why Haven’t They Been Invited to the Celtic Festival?

Our daughter in Austin today sent me an email saying that she has been “listening to the album ‘The King is Dead’ by the Decemberists relentlessy these days.”

She pointed out that their song, “Rox in the Box” has a “Celtic feel to it.”

So true.

Why hasn’t this group appeared yet at our Celtic Festival here in Grass Valley? (I have to admit, “Rox in the Box” is more Celtic-sounding than many of their other songs, but … they could pass for Celtic!).

Their last album was “The King is Dead.”

Their next album (November 1st) is “Long Live the King.”

For more information, see http://en.wikipedia.org/wiki/The_Decemberists and http://decemberists.com/ .

Get the rocks in the box
Get the water right down to your socks
This bulkhead’s built of fallen brethren bones

We all do what we can
We endure our fellow man
And we sing our songs to the headframes’ creaks and moans

And it’s one two three
On the wrong side of the lee
What were you meant for?
What were you meant for?
And it’s seven eight nine
You get your shuffle back in line
And if you ever make it to ten you won’t make it again

And you won’t make a dime
On this gray Granite Mountain Mine
Of dirt you’re made and to dirt you will return

So while we’re living here
Let’s get this little one thing clear
There’s plenty of men to die; you don’t jump your turn

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