Category Archives: Economic Policy
New York Attorney General Andrew Cuomo recented initiated a lawsuit against a real estate appraisal unit of the Fortune 500 company First American Corp.He says the appraiser colluded with Washington Mutual, one of the largest savings and loan companies, to inflate home values. According to Cuomo, the practice is widespread and has contributed to the sub-prime mortgage crisis.
I’ve known that for 15 years Andrew…thanks for the update.
It is no secret that Realtors, appraisers, and lenders have been colluding for years to drive an over-inflated housing market, by selling over-valued homes to people who couldn’t afford them. Result? A giant crap sandwich.
Cuomo claims that during the housing boom, mortgage companies started leaning harder on appraisers to basically lie about home values. “We believe this is a problem all across the industry,” he says. “We believe the federal government has not been effective at regulating it. We believe it has serious consequences long-term.”
As usual, your governing bodies are behind the learning curve. All they needed to do was pick up a newspaper at any point over the past ten years or so and begin reading the classified section in large cities like Atlanta, Dallas, New York, and L.A. To their collective amazement, they would have found hundreds of ‘small’ three bedroom ranch homes selling for hundreds of thousands of dollars beyond their fair-market-value.
Who pays $890,000 for a two bedroom condo? Who pays over $1 million for a three bedroom ranch with no garage at a whopping 2300 square feet?
The foolishness was as plain as day, but no one flinched…not Realtors, not the banks, not the government…no one. Why? The reason is simple. We are living a valueless debt driven economy that is only being precariously propped up by a few vital sectors – over inflated health-care, over inflated housing, and over inflated energy commodities…that’s it.
If any of these cogs few out of the U.S. economy, we would be looking depression right in the face. The sad part is that at the core of this nonsense is the gullible American consumer. As a nation, we are starry eyed and foolish when it comes to consumption. We spend beyond our means and the sky is the limit. As long as we can put hot dogs on the table and keep the cable on, we’ll spend…no matter what. Even if it means abandoning that home you couldn’t afford in cities like Phoenix, where 10,00 homes stand vacant – too embarrassed to face family and friends with your failure…willing to eat your mistake and take the debt to your grave. We’ve been programmed and it’s pathetic.
Predatory lenders simply identified the stupidity and took advantage of it. Their practices made it easier for people to overpay for a home, or to borrow too much against their current house, or even to borrow on a second and even third mortgage! And now, with home prices falling, homeowners are getting creamed. Some homeowners are taking losses as high as 30%, as they are unable to refinance out of their high-interest sucker loans, that they were fully aware of at closing time.
I’ve been a landlord for 10 years and I’ve seen more criminal activity at the hands of shady Realtors and lenders in the last five or six years than I’ve ever seen before. These people should be punished and I applaud Cuomo for pursuing them, however, in the end, I believe that a good portion of these homeowners should be left to burn if only to set an example to other sheep in the herd. They knew full well what they could afford or not afford and they knew of the potential consequences. Time to be grown ups, face the music, and learn that the land of milk and honey can turn sour if you buy more than you need.
Poverty isn’t what it used to be. If one takes the time to characterize the modern poor vs. the historical poor, they would find that the avenues out of poverty are quickly being closed by the new world economy and the dynamic that is ‘globalism.’
The postmodern American economy is in utter disarray and social safety net policies used throughout the 20th century, have de-evolved, resulting in a new demographic of poor people. The most visible result of this disarray is that poor children are relatively worse off now than at the beginning of the 20th century despite all of the political rhetoric through the years. More alarmingly, their opportunities out of poverty are slim and none. Maanufactuing jobs that could be had on a high school diploma have evaporated to a large extent, and many are simply priced out of trade school or college.
What is so dangerous about the new poverty is the sense of surprise it brings. Poverty can hit so suddenly, that people can fall so far behind so fast, and lose everything they’ve worked for in a matter of a few months, because they are literally living paycheck by paycheck. The new poverty is about our loss of faith in relationships we once had with companies and the government. It seems nothing is guaranteed anymore. Many people work for several companies in their lifetime because they are simply burned out or pushed out or outsourced out of their old one. Workers cannot depend on a pension, savings, or even Social Security. The new poverty is a complex sociological issue that has many causes and seemingly fewer and fewer solutions.
Globalism has clearly not helped the situation. For years talk of free trade and the benefits of that trade, was standard political speak. Bob Zoellick, a U.S. trade representative at a recent press conference said, “If one is concerned about developing countries, both history and recent studies would suggest an open system is going to be the formula for them. Others like Joseph S. Nye, Jr., Dean of Harvard’s Kennedy School, claim that globalization “has improved the lot of hundreds of millions of poor people around the world.” I do not agree.
I would argue that globalization has been a losing proposition for most of the countries, including the U.S. When you talk to people like Robert Reich or anyone else that supports free trade, and express concerns, you’re labeled as an isolationist. However, I’m not arguing for an isolationist position – merely to construct free trade in a common sense fashion that softens the broad sword that usually comes down on the world’s poor with brutal consequences. Reich and others suggest that these people must simply get themselves re-educated and lift themselves up. The problem is they often do not have the resources to do so, so they are simply cast aside as a necessary evil of global economic expansion.
The visible results of globalism do not appear to be as positive as supporters would have us believe. The vast majority of countries, over the last two decades, have experienced slower growth than was seen in the previous two. Moreover, poorer countries have generally suffered the worst declines in the growth of income per person.
Then there is China. Supporters of free trade point to China as a beacon of progress – but at what cost? China has highly protected domestic markets that close off foreign import across broad sectors of their economy, illegal currency manipulation, and a state owned banking system…remember…they are a Communist nation. As a result, China has been able to resist import pressure from the West especially in the areas of durable goods and technology, as they jail anyone who dissents and poison they’re rural inhabitants with a level of pollution the world has never seen. It begs the question – is this free trade or trade for free?
There is clearly something wrong with the prevailing orthodoxy. Strategies for common sense economic development have been abandoned in the name of profit, and it is generally assumed that open markets, privatization, and attracting foreign investors will do the job in a humane fashion. So far this is not the case.
The last two decades of globalization have also shown substantially diminished progress in health outcomes for infants and older children, as well as life expectancy, which has also dropped in the U.S. recently. The same is true for other social indicators, including education and literacy, with the slowdown in progress far worse among lower-income countries.
A world in which many third world countries enslave poor children for the purpose of making consumer goods, and where half of all people survive on less than $2 a day, speaks volumes to the failure of globalization, especially whens world trends are moving in the wrong direction from a human rights perspective. The U.S., nor can the rest of the world, afford not to re-think economic policy simply because free trade is fashionable, or to bow to the whims of special interests and their paymaster multinational corporations. No one is arguing to quell the expansion of trade to international markets, however it must be done with humanity as a primary concern, not a socio-economic afterthought.
In short, the globalists have it wrong, and people are beginning to wise up…finally.
A few days ago I posted on to this blog on recent developments in the Republican party in regards to globalism and free trade. In short, support among Republicans for free trade is ebbing…and quickly at that. However, president Bush once again seems to be rallying around a narrow minded ideology of trading American jobs and prosperity for profit, rather than listening to the cries of help from the middle class and his own party! Business as usual at the White House.
In the last six years, the Bush administration has signed 11 free trade agreements, including seven new agreements in Latin America, and in spite of the under current of opposition to new deals, is pushing new agreements with Peru, Colombia, and Panama. To defend his position, Bush argued just days ago that free trade is necessary because “More exports support better and higher-paying jobs — and to keep our economy expanding, we need to keep expanding trade.”
The problem is, these high paying jobs aren’t materializing.
Bush said these three agreements would lower agricultural and industrial tariffs on American businesses as well, while providing 75 million new consumers for American goods. Although the President acknowledged that many Americans are questioning free trade, he added that “the federal government is providing substantial funding for trade adjustment assistance that helps Americans make the transition from one job to the next.”
Another problem is, the program is filled with massive loopholes that make it almost moot to most Americans.
Link here for AFL-CIO congressional testimony regarding (TAA) loopholes.
In spite of all these outcries, the administration is currently working toward a new trade agreement with South Korea that will be closed to beef autos, and steel, according to analysts.
What Bush continues to struggle with is the fact that the very foundation of globalism and free trade, as well as the benefits that it was supposed to bring to this country, have been proved false. Globalists insist, as echoed by Bush, that free trade creates new jobs and keeps consumer goods cheap. Thus, free traders claim markets will continue to expand.
The opposite is happening.
Granted, some jobs have been created, but the jobs, according to the U.S. Department of Labor, are mainly service sector jobs that are not exposed to outsourcing, unlike manufacturing and high tech jobs that are. The caveat here, is that these service sector jobs pay up to 60% less than the manufacturing and high tech jobs that have been lost. The job creation is simply not an apples to apples comparison, and that fact is conveniently left out of free trader dialog. Also, many college graduates are finding it difficult to find gainful employment than even warrants going to college or justifying the ever increasing tuition costs and student loan interest rates, which this administration has allowed to sky rocket.
Simply put, Republicans cannot and traditionally have not been able to manage the economy. Unfortunately, we have been at the mercy of Reagan and two Bush’s – all big time spenders, all incompetent in the area of macro economics and trade policy. If you look at economic records and rates of job creation and unemployment going back to Harry Truman, the data proves this out. During Carter’s administration for example, the economy added 10 million jobs and reduced government spending, all in the face of high inflation. George H.W. Bush holds the dubious honor of having both the poorest GDP growth and income growth for working class Americans on record. The deficit also exploded by $100 billion in only four years. Bush Jr. is even worse than daddy.
The economy is the worst it has ever been under the current president. The Bush administration’s annual loss stands at three-quarters of a trillion dollars and he has only managed a net gain of 5.6 million jobs – the worst ever. The numbers of ‘working poor’ and unemployed are creeping up as well, while the income gap between the rich and poor is the widest it has been since the 1920’s – great for lords at the top, not so much for the serfs at the bottom. The trade deficit with China speaks for itself.
So, what does it all mean? On a macro level, it means our current policies are not working. Short-sighted conservative corporate fat cats are gutting the economic fish for a seemingly final meal. Real economic growth comes from the bottom – via a thrifty working class that is able to save and rely on affordable health-care, guaranteed retirement, and reasonable consumer prices. Free trade was supposed to provide all of this. Instead, we have gotten currency manipulation from China, higher prices on essential goods like home energy, garbage consumer products, trade deficits, an insurance crisis, an evaporating manufacturing and high tech sector, and a cash strapped middle class who cannot even escape the crunch through re-education, because there’s nothing to re-educate to. And then when you’re in your senior years, you get to coast to the finish line with a reverse mortgage. All of this smells to me.
Can someone explain this to Bush please…and Robert Reich while you’re at it?
There are signs of increasing resistance to globalization in a new Wall Street Journal-NBC News Poll. Sixty percent of Republican respondents said they agreed with the statement that free trade has been bad for the U.S. and said they would agree with a Republican candidate who favored tougher regulations to limit foreign imports.
Now that is interesting to say the least.
While Bush continues to call for continued global trade expansion, the rest of his party is having second thoughts which reflects a substantial shift in sentiment from eight years ago when King George could say or do no wrong. Leading Republican candidates are still trying to promote free trade though. “Our philosophy has to be not how many protectionist measures can we put in place, but how do we invent new things to sell” said former New York City Mayor Rudy Giuliani. “That’s the view of the future. What protectionists are trying to do is lock in the inadequacies of the past.”
No Rudy – what protectionists are trying to do is save he middle class from ruin.
President Clinton championed a less-protectionist bent by promoting the North American Free Trade Agreement (NAFTA) during his administration, however his wife, and the current Democratic front-runner, Hillary Clinton, uses more skeptical rhetoric, going as far as coming out against a U.S. trade deal with South Korea altogether. Other leading Democrats have been harshly critical of trade expansion as well. In a March 2007 Wall Street Journal/NBC poll, 54% of Democratic voters said free-trade agreements have hurt the U.S., compared with 21% who said they have helped. This, along with eroding support among Republicans represents a fresh challenge to free-market conservatives and greedy American companies that benefit from cheap labor abroad, and unrestricted wage leverage when dealing American workers.
On Chris Matthew’s show Hardball recently, Robert Reich, a longtime supporter of the globalist ideal, had difficulty deflecting barbs from Pat Buchanan when dealing with the subjects of worker security, real living wages and the eroding dollar. To be perfectly honest, Reich’s answers seemed a bit trite and somewhat academic in tone. He had no real answers regarding what has happened.
Even relatively small trade deals are facing resistance. Trade pacts with Peru and Panama still have a chance of passing in the current congressional term, however deals with South Korea and Colombia are in serious jeopardy. Some legislators believe South Korea isn’t opening its market wide enough to American beef and autos. Presidential “fast track” trade negotiating authority has lapsed as well. Without such authority, which requires Congress to take an up-or-down vote on trade deals, the next president would have trouble pursuing large trade agreements at all.
Beyond trade, Republicans appear to be seeking a move away from the president on everything else, and with good reason. Everything else is a mess. Asked in general terms, a 48% plurality of Republicans said the next president should “take a different approach” from Bush, while 38% wanted to continue on his ideological path. In that poll, Giuliani maintained his lead in the Republican field with support from 30% of respondents. Former Sen. Fred Thompson drew 23% in the survey, and 15% for Sen. John McCain.
“We’re seeing a lot of jobs farmed out,” said Mr. Pirtle, whose father works for General Motors Corp., – concerned by reports of safety problems with Chinese imports, he added, “The stuff we are getting, looking at all the recalls, to be quite honest, it’s junk.”
In the Republican campaign so far, elevating populist trade concerns has been left to the long shots. “The most important thing a president needs to do is to make it clear that we’re not going to continue to see jobs shipped overseas….and then watch as a CEO takes a $100 million bonus,” said Mike Huckabee, “If Republicans don’t stop it, we don’t deserve to win in 2008.”
We can only hope that the tide of anti-globalism takes firm root and some of the front runners begin to wise up.
Popular backlash against globalisation is sweeping rich countries around the globe according to a recent Harris poll. Large majorities of people in the US and in Europe want higher taxation for the rich and pay caps for corporate executives to offset the perceived unjustified rewards to the priveledged few and the negative effects of globalisation on working people. It’s about time.
Leaders in the World Trade Organization call anti-globalism hate speech, I call it predictable outrage.
In the U.S., Congress is awash with anti-globalist sentiment as the Senate prepares to vote on new trade restrictions aimed at China. I have been blogging about the destructive effects of unrestricted globalism since 1990 and continue to oppose unrestricted free trade at the expense of our way of life. Conservative pundits, many economists, and some analysts have been peddling globalism and what they believe to be the necessary melding of economies into one international marketplace in order for our way of life to continue. This argument in fact was championed and still defended by former Clinton cabinet member Robert Reich.
Reich, and these other globalist ideolouges are short-sighted and ultimately incorrect in their conclusions.
Many assumptions were made that have proven fatal to the globalist theory. For instance, the theory assumes that more education, at least according to Reich, equals higher income. This might be true if “higher end” jobs are made available to these eventual skill empowered graduates. The fact is, countries like China have been handed or more appropriately, stolen proprietary technology in aerospace, computer technology, and other areas that has led to manufacturing and capital flight from this country with a destination of China. In turn, the corresponding jobs within such sectors of the U.S. economy have evaporated. The original globalist theory had countries like China making sneakers and toasters, not complex microchips and high-tech aerospace parts. Meanwhile we brush our teeth with poison Chinese toothpaste, our pets die of tainted dog food, our kids play with lead based Chinese toys, and factory workers burn to death in Chinese steel mills with no consequence.
Another assumption did not account for developing countries to simply violate international trade policy at the expense of countries like the U.S. For example, China artificially devalues its currency to gain a trading advantage. Overtly unfair trade barriers are thrown up that make selling goods by U.S. companies in the Pacific Rim almost impossible. Couple this with some good old fashioned American coporate greed and you have a situation that has seen Chinese imports to the U.S. increase ten-fold since 1995 while real wages in the U.S. and exports steadily stagnate or even decline. We remain productive but we work like packmules to acheive that productivity as corporate management holds the baton of globalism and the threat of job loss over our collective head if we do not continue at the current breakneck pace. Yet, our most cherished and longest standing companies like General Motors and Ford suffer, and in the background, our corrupt politicians and unscrupulous corporate culture slowly sell our economy down the river. Where does it end?
If continued growth in GDP and a robust tax base is to continue, this country must be willing to protect certain industries for the sake of propping up a middle class that is being squeezed to the limit. If we do not, we may very well find ourselves in a shrinking economy as countries like China, Korea, Brazil and the European Union surpass U.S. productivity and per capita income. It may not be as outlandish as it sounds. I am not making an argument for unilateral protectionism, but when U.S. workers are made to compete against workers producing steel in China who earn $2500.00 American dollars per year and are expected to do it with no health care, no retirement security and a crumbling education system…something must change if modern Western culture is to survive.