Friday, February 20, 2009

Demagogy and empty promises as Obama signs stimulus bill

Demagogy and empty promises as Obama signs stimulus bill

By Patrick Martin

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The Obama administration staged an elaborate ceremony Tuesday for the signing of the $787 billion economic stimulus bill into law. The full White House entourage of aides and reporters was flown to Denver to watch Obama sign the bill with a pen handed to him by the proprietor of a local energy company, symbolizing the bill's focus on providing lucrative government contracts to businesses.

The most significant feature of the ceremony was the unrestrained demagogy of Obama's remarks to the audience. Not since Herbert Hoover told the American people in 1932, in the depths of the Great Depression, that "prosperity is just around the corner" has a US president engaged in such shameless and empty promises in the midst of an economic crisis.

Obama even withdrew the word "catastrophe" as a description of the dangers facing the US and world economy, although he had used it in the course of efforts to lobby Congress for passage of the legislation. Instead, he told a group of five columnists who accompanied him on Air Force One that there would be no return to conditions of mass suffering like those that prevailed during the 1930s. The American people should take note of this prediction and judge the president accordingly.

In his 20-minute speech in Denver, Obama began with a remark that typifies the social chasm between the privileged financial aristocracy and the vast majority of working people. "We have begun the essential work of keeping the American Dream alive in our time," he said. "And that's why we're here today."

President Obama skipped over the reality of the last three decades—roughly his entire adult life—which has seen a vast retrogression in living standards and social conditions for most American working people. During that time, much of the American Midwest has been deindustrialized, tens of millions of better-paying, long-term jobs have been wiped out, and the real per capita wages of American workers have declined.

The "American Dream" was long gone well before the current economic slump began, according to official calculations, in December 2007. Most American families were far more economically insecure in that year and month than they were 30 years before. Since then, they have gone from insecurity and anxiety to the realization of their worst fears—mass layoffs, foreclosures, the destruction of pensions, health coverage and other essential benefits.

Obama adopted what he and his speechwriters apparently thought was a modest standpoint, as he continued: "Now, I don't want to pretend that today marks the end of our economic problems. Nor does it constitute all of what we're going to have to do to turn our economy around. But today does mark the beginning of the end."

The claim that this is the "beginning of the end" is a lie that deserves to go down in history alongside George W. Bush's declaration that Iraq was rife with weapons of mass destruction and Richard Cheney's claim that Saddam Hussein was linked to the 9/11 terrorist attacks.

Even bourgeois economists who support Obama would not make such a claim. Most would concede that the US economy is plunging into a deep recession, even a depression, whose bottom cannot yet be discerned. White House officials themselves declared, during the congressional debate on the stimulus package, that unemployment was likely to rise throughout this year and into next year, even if the legislation was adopted.

There have been many over-the-top descriptions of the American Recovery and Reinvestment Act, the formal title of the 1,000-page bill that Obama signed. Some Obama apologists have suggested that it is far more ambitious than New Deal, because the total spending it authorizes is a much greater portion of the US Gross Domestic Product than anything proposed by Franklin Roosevelt.

Republican opponents have been particularly vociferous in painting the bill as gargantuan, with South Carolina Governor Mark Sanford observing, in a newspaper column, "If the stimulus bill were a country, it would be the 15th-largest country in the world."

Such comparisons are beside the point, however, since they ignore the actual dimensions of the financial and economic collapse, both in the US and worldwide, which is the most ominous in a century. Moreover, Roosevelt's reform policies had greater impact, even though they left intact the fundamental property relations of the capitalist system.

Under Roosevelt, the federal government became the employer of last resort for millions of unemployed workers, who were mobilized to carry out labor that directly benefited the population of the country, bypassing the private corporations paralyzed by the economic crisis. Agencies like the WPA and the CCC built dams and roads, created and improved national parks, and made a lasting contribution to the social welfare of the American people.

Nothing like that is proposed in Obama's stimulus bill. On the contrary, the president reassured his big business supporters that 90 percent of all jobs created would be in the private sector. In other words, 90 percent of the jobs will produce profits for the capitalist class. For that reason, the traditional lobbies of corporate America, like the US Chamber of Commerce and the National Association of Manufacturers, who vilified Roosevelt, supported and hailed the Obama stimulus bill—as the president noted with satisfaction in his Denver remarks.

Finally, there is the undeniable fact that very little in the so-called stimulus bill actually "stimulates" job creation. Much of the spending is for what would have been called, in the terminology of the New Deal, emergency relief—that is, money payments to the unemployed, extensions of healthcare benefits, expansion of Food Stamps.

The Republican opposition to these provisions only demonstrates the let-them-eat-cake mentality of the most predatory sections of the US financial aristocracy. But these measures were devised by the Obama administration to buy time, to avoid an immediate collapse in consumer spending that would have irreparable effects, on both the functioning of the profit system and the political stability of the United States. They do not constitute a serious program for reviving the US economy.

Obama closed his Denver speech with populist demagogy directed at his predecessor. He declared, "unlike the tax cuts that we've seen in recent years, the vast majority of these tax benefits will go not to the wealthiest Americans, but to the middle class, with those workers who make the least benefiting the most."

This rhetoric ignores two facts: the actual amount of the tax cut for working people, $400 per individual and $800 per family, is derisory. It is not enough to make a single mortgage or rent payment for most households. And the new administration has apparently already abandoned its pledge to eliminate the Bush tax cuts for the super-rich, preferring to allow the tax cut to expire as scheduled under current law at the end of 2010, giving the wealthy two additional years of a bonanza at the expense of the Treasury, at a time when resources are desperately needed for working people.

In the short term, Obama's promise of the "beginning of the end" may deceive some of the people. In the longer term, however, it will be utilized by his ultra-right critics in an effort rebuild their shattered political credibility. Thus Republican National Committee chairman Michael Steele declared that the stimulus package might provide a "slight bump" in the economy, but no lasting benefits. "There will be a slight uptick, it will flat-line, and it will continue to go down," he said.

This prediction is likely correct, but not because Steele has any genuine insight into either economy or politics. The Obama stimulus package will fail, not because it is "wasteful" or too large, but because the capitalist system itself has failed.

Government measures fail to halt severe decline of British economy

Government measures fail to halt severe decline of British economy

By Chris Talbot

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Recent economic data and forecasts reveal the dire state of the UK economy and the failure of measures introduced by the Labour government and Prime Minister Gordon Brown to arrest the continuing decline.

So sensitive are the government to any suggestion of Britain's economic collapse that business secretary Peter Mandelson exploded at the chief of Starbucks, Howard Schultz, at a diplomatic cocktail reception in New York yesterday. Schultz said the UK was in an economic "spiral" with "very, very poor" consumer confidence. Mandelson accused him of spreading unnecessary gloom, "Why should I have this guy running down the country? Who the f**k is he? How the hell are they [Starbucks] doing?"

Schulz's remark reflected a precipitous decline in UK banking shares this week. Shares in Lloyds fell by 32 percent last Friday after it was announced that losses in its HBOS subsidiary were expected to reach nearly £11 billion ($15.6 billion). Its shares—the most widely held in Britain with more than three million small investors - have now fallen by 80 percent since the Government pushed through the merger with HBOS last autumn in an attempt to rescue it from collapse.

Only last week Eric Daniels, the chief executive of Lloyds, told the parliamentary Treasury Select Committee investigating the banking crisis, that HBOS was "strategically a very good acquisition and will prove to be so in a couple of years".

There is now every possibility that the government will have to extend its 43 percent share in Lloyds to complete ownership. This will be a further humiliation for Prime Minister Gordon Brown. Lloyds was regarded as the most conservative of the British banks because it resisted aggressive business lending and mortgage sales. HBOS was formed from a merger between the demutualised Halifax Building Society and the Bank of Scotland. It pursued a policy of aggressive speculation in property.

Brown persuaded Lloyds to rescue HBOS because a bank collapse would impact on the whole UK financial system. According to Daily Mail journalist Peter Oborne, Brown collared Lloyd's chairman Sir Victor Blank at a cocktail party and "told him the government would waive competition regulations if Lloyds were to merge with HBOS". Blank had already been recruited by Brown as a "business ambassador" to advise the government on how to deal with the financial crisis.

Meanwhile the Royal Bank of Scotland (RBS), now 80 percent owned by the government, is expected to announce record losses next week. It announced last month it had made losses of £8 billion in 2008 and would have to write off some £20 billion in the acquisition of Dutch bank ABN Amro. RBS is now in negotiations with the government over an insurance scheme designed to cover losses from its "toxic" assets.

According to the Daily Telegraph up to 10 percent of the £2 trillion assets of RBS are in doubt. This puts the government attempt to make an insurance charge of 4 percent to cover losses in doubt. RBS could not afford the charge and maintain sufficient assets to keep within current banking regulations. The implication is that RBS is insolvent and that the government may have to take it over - something that the pro-market Labour government is desperately trying to avoid.

Lloyds and Barclays—which has seen shares fall by 80 percent over the last year and a 14 percent loss in profits after taking into account £5.4 billion charges on bad debts—are also in delicate negotiations with the government over how to insure against further losses.

Oborne, whose recent book The Triumph of the Political Class exposes the decay of the British parliamentary system and its domination by a financial aristocracy, points out that Sir Victor Blank is one of "a small cabal of New Labour financiers who conquered the summit of the banking profession over the last decade." These included the former head of RBS, Sir Fred Goodwin, "a long-standing crony of the Prime Minister", and head of HBOS Lord Stevenson, "a former boss of Peter Mandelson and mentor of Tony Blair."

Also at HBOS was Sir James Crosby, another of Brown's closest advisors. Crosby was made chairman of a government task force attempting to bring in a controversial identity card scheme, as well as deputy chairman of the banking regulatory body the Financial Services Authority. He was forced to resign last week when it his association with HBOS's risky lending policies became clear in the parliamentary Treasury Select Committee's investigation.

The ability of the UK government to bail out the banking system without causing a collapse in sterling has become a growing concern for Britain's ruling elite. The pound has lost a quarter of its value over the last year, measured against a trade-weighted currency average.

Ben Broadbent, economist at Goldman Sachs told the Economist that the government's banking insurance scheme could cost up to 8 percent of GDP. If other measures to bail out banks are included (such as rescuing British depositors in the failed Icelandic banks) the total rises to 14 percent of GDP. The Economist points out that even without financial bailouts the deepening recession means that public debt—as a share of GDP—could rise by 20-30 percentage points by 2011.

It is hardly surprising that the British media has now gone in for what is described as "banker bashing" in an attempt to deflect the growing public anger at the scale of the banking rescues and the impact it will have on future public spending on social services. Gordon Brown and Chancellor of the Exchequer Alistair Darling have tried to reflect this sentiment in their public statements. But this has amounted to only muted criticisms of the millions of pounds bonuses that bankers are still paying themselves. Darling merely restricted bonus payments at RBS—despite the government's majority ownership—to 175 million pounds ($247.5 million) claiming this is a legal contract the bank has already made.

Sections of the British ruling class are becoming increasingly concerned about the state of the economy and the inability of the government to take effective action. Earlier this week the Confederation of British Industry (CBI) issued a report predicting that 2009 would see the biggest drop in UK output since the Second World War and estimated that unemployment would rise by more than a million in 2009, totaling more than 3 million by 2010.

"Firms are making cutbacks much quicker than in previous recessions because they are worried about lending," the CBI report said. It is expecting the economy to contact by 3.3 percent this year.

The CBI's chief economic adviser Ian McCafferty said: "Given the rapid contraction in global economic activity, and the continuing credit squeeze, we believe the UK will be mired in a deep recession for the whole of 2009, lasting six quarters in total and accompanied by a significant rise in unemployment."

House prices were predicted to fall by more than 15 percent in 2009, manufacturing output could fall by more than 10 percent and business investment is expected to drop by at least 9 percent. The fall in house prices—which have already fallen by 20 percent since their peak in 2007—will hit wide sections of working class people who are now moving into "negative equity", paying mortgages higher in value than their property is worth. Grossly inflated house and commercial property prices were what led the International Monetary Fund recently to predict that Britain would be the worst hit of all the G7 countries.

Last week the Governor of the Bank of England, Mervyn King, admitted "The UK is in a deep recession," and the Bank predicted that the economy would shrink by more than 4 percent in 2009. King announced he would be introducing a policy of "quantitative easing"—effectively printing money as the Bank of England buys up government bonds and private sector assets. The Bank interest rate is now down to one percent, but King said that "Bank rate doesn't have to go to zero, because we're getting to the point where it doesn't make a great deal of difference where it is."

King refused to accept any responsibility for the disastrous situation, saying, "It is not sensible for anybody to pretend that we can forecast the future." The role of the Bank, he said, was to combat the "animal spirits" of the market that were giving rise to a sudden and near-universal loss of confidence.

The official position of the British government is to reassure the public that the recession is only a temporary downturn. But ministers are increasingly positioning themselves for a leadership contest and are prepared to break ranks. Speaking to a group of Yorkshire businessmen, Schools Secretary Ed Balls, who used to be Brown's assistant at the Treasury, revealed something of the real pessimism that is gripping ruling circles.

He said "The reality is this is becoming the most serious global recession, I am sure, for over 100 years . . . I think this is a financial crisis more extreme and more serious than that of the 1930s."

A growing response from the trade union bureaucracy and sections of industry to the steep decline has been to whip up a chauvinistic campaign to "defend British jobs". A leading proponent of protectionist measures is now Lord Digby Jones, formerly Minister of Trade under Gordon Brown and before that head of the CBI.

Jones traveled round the country speaking to unemployed workers for a Channel 4 television documentary. He complained bitterly that while the government is bailing out the banks its industrial initiative is "too little, too late".

Jones said, "I've seen at first-hand the measures that other countries have taken to protect their manufacturing skills base and I'm worried that, unless we follow suit, the country will pay the price for years to come. Unless the Government takes bold steps right now to preserve jobs, skills and factories, we could blight an entire generation with long-term unemployment."

He called on workers to accept pay cuts in order to retain their jobs.

"What I'm calling for is a triple sacrifice. If a major company has a faltering order book and needs to puts its factories on a two-day week, the company should bear some of the cost, the workers should accept lower wages in return for keeping their jobs and the Government should make a contribution toward keeping the factory open." Jones said.

The call for workers to make sacrifices in order to protect British industry is an attempt to divert them from defending their own interests. UK manufacturing industry currently exports only £150 billion pounds worth of goods. This is a miniscule amount when compared to the losses of even one major British bank. Since the 1980s the British economy has become entirely dominated by finance capital. The Labour government has an incestuous relationship with the financial aristocracy and has turned its whole efforts towards bailing out the banks.

It is essential that the enormous anger over the destruction of jobs and Brown's bailout of his banking cronies is not turned into a reactionary nationalist direction. Workers must organize independently of trade union leaders who have assisted employers in round after round of redundancies and are now attempting to whip up campaigns against foreign workers. Unity with other workers throughout Europe and the rest of the world, facing attacks from the same profit system, must be opposed to reactionary protectionism.

US automakers outline massive attack on jobs, wages

US automakers outline massive attack on jobs, wages

By Jerry White

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General Motors and Chrysler LLC submitted plans to the US Treasury Department Tuesday outlining their strategy to return to profitability through an unprecedented assault on the jobs, wages and working conditions of autoworkers.

The companies, which were mandated to submit "viability" plans in exchange for $17.4 billion in federal loans, said the accelerating downturn in the US and world economy required more "aggressive" measures than initially thought. They also asked for another $21 billion in government financing to stave off bankruptcy.

The Obama administration is seeking to use the near collapse of the two industrial icons as an opportunity to permanently restructure class relations in the US. The assault on autoworkers—long among the best paid industrial workers in the US—will be used as a precedent to roll back the conditions of the entire working class to levels of poverty and exploitation not seen since the 1930s.

The media has already begun a campaign to brand autoworkers as selfish dinosaurs who are stubbornly holding onto such "outmoded" conceptions as the belief they should have medical care after a lifetime of labor. "The UAW 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," Gary N. Chaison, a so-called labor expert at Clark University in Worcester, Massachusetts, told the New York Times.

Far from opposing the assault on its members, the United Auto Workers union has reached a tentative agreement to modify its 2007 labor agreements covering 133,000 workers at GM, Chrysler and Ford. According to press leaks, the agreement includes a pay freeze until September 2011—eliminating cost-of-living increases and lump sum bonuses in 2009 and 2010 up to $3,295—as well as reductions in the number of higher-paid skilled trades positions and overtime payments.

In the last three weeks, the UAW accepted the elimination of the Jobs Bank—a 25-year-old program that provided income security to laid-off workers—as well as a reduction in supplemental unemployment benefits, a benefit first won by the UAW in 1955, which gave laid-off workers the equivalent of most of their take-home pay.

The union is also collaborating with the companies to push out higher-paid veteran workers through buyouts and early retirement. Under the terms of the 2007 agreement, the companies can hire new workers at $14 an hour instead of the current $28 an hour. The auto bosses praised the UAW for all but closing the labor cost gap with non-union workers at US plants operated by Toyota, Nissan and Honda. The equalization of low-wage pay is mandated by the government loan package.

Announcing the agreement UAW President Ronald Gettelfinger trumpeted the new concessions, saying, "The changes will help these companies face the extraordinarily difficult economic climate in which they operate." Like every other concession made by the UAW, the new cuts will do nothing to protect jobs. Since the givebacks began with the 1980 Chrysler bailout, more than 700,000 UAW workers have lost their jobs.

According to its submission, General Motors will eliminate 47,000 jobs out of its global workforce of 244,000, including 21,000 salaried and hourly positions in the US. The number one US automaker said it would close 14 plants—up from nine originally proposed in December—in North America and Europe by 2012. In three years, the number of GM manufacturing plants will fall to 33, down almost half from 59 plants in 2000.

Chrysler, which already reduced its workforce from 87,000 at the end of 2006 to 54,000 presently, said it would cut another 3,000 jobs. The company has eliminated 12 shifts at its factories, equal to a third of production capacity, and has discontinued four models.

Ford Motor Co., which borrowed billions from private sources before the credit crisis erupted, has said it can make it through 2009 without government assistance and was not required to submit plans. Nevertheless, it is expected to outline its own downsizing schedule and is receiving concessions from the UAW on par with GM and Chrysler.

The auto companies are carrying out an international attack on jobs and wages. GM has not yet announced the plants it will close, although Bloomberg News reports the company's Opel division in Europe may shut factories in Antwerp, Belgium and Bochum, Germany. Another plant in Eisenach, Germany may be sold and the sale or liquidation of GM's Saab division would lead to the closure of a plant in Sweden.

One reason for delaying the announcement on plant closures is that GM is seeking to unleash a competitive struggle between workers in different factories and countries to wrench even further concessions in the name of "saving jobs." GM is demanding $1.2 billion in concessions from European unions and is currently negotiating with the governments of Canada, Germany, Britain, Sweden and Thailand for billions more in government bailouts and tax concessions.

State officials from North Rhine-Westphalia in Germany reportedly traveled to Detroit to ask GM executives not to make public its plans to close the Bochum plant. In 2004, thousands of workers occupied the factory after threats to close the plant.

Like the UAW, the perspective of the unions in Europe and Canada is based on economic nationalism, and they have no answer to the global attack on autoworkers' jobs and living standards. This was underscored by the statements of the Canadian Auto Workers union, which pledged not to be underbid by the concessions granted by the UAW. At a press conference Tuesday night, CAW President Ken Lewenza said he was committed to maintaining "our cost competitive advantage" with the American auto union "in doing business and creating investment decisions for the future here in Canada and protecting jobs not only for our active members but our retirees moving forward."

For more than 30 years the UAW has promoted "Buy American" nationalism as a means of blocking any struggle by auto workers against the destruction of jobs and to impose ever greater givebacks in the name of making the US companies more competitive. The flag-waving and anti-foreigner chauvinism was accompanied by the transformation of the UAW into an adjunct of corporate management.

While accepting the destruction of its members' jobs and living standards, the UAW has reportedly balked on demands that the companies pay half of the $50 billion owed to a union-controlled retiree health care trust in sharply devalued company shares, instead of cash. The UAW bureaucracy is motivated in this by self-interest, not by concern that 800,000 retired workers, spouses and dependents may lose their medical benefits. The union has already negotiated such concessions and is more than willing to do so in the future.

In 2007, the UAW allowed the auto companies to dispense with their obligations to retirees in exchange for the setting up of the trust fund—a so-called Voluntary Employees Beneficiary Association, or VEBA—which it saw as a means to guarantee a steady stream of income and offset the loss of dues as tens of thousands of its members lost their jobs.

Significantly, the Obama administration has appointed former investment banker Ron Bloom, who helped the UAW set up the VEBA, as a senior adviser to the task force overseeing the restructuring of the auto industry. This is an indication the Obama administration is seeking to use the services of the UAW in exchange for some other perk to the union bureaucracy, such as a position on a corporate or government board or increased equity in the companies.

At the same time, if no agreement with the union is reached by March 31 the administration has not ruled out throwing the companies into the bankruptcy courts, where a judge would tear up labor agreements and impose the dictates of Wall Street.

Detroit Free Press columnist Tom Walsh warned workers might not accept concessions if they thought the administration would continue to prop up the companies. "A wild card in the Detroit bailout drama is the attitude of rank-and-file UAW members," he said. If workers believed Obama, whom the union supported, would return the favor by keeping the automakers afloat, he said, "they may just reject any major givebacks, even if President Ron Gettelfinger recommends concessions."

Workers should have no illusions in the Obama White House. It has appointed Timothy Geithner—the architect of the Wall Street bailout—to head the auto task force. While Geithner opposed any restrictions on executive pay for the bankers, he insists autoworkers accept poverty wages to "revive" the auto industry and make it a profitable investment for the same financial speculators whose greed and recklessness produced the economic catastrophe.

Autoworkers are not responsible for the crisis in the auto industry. They had no control over the decisions made by multimillionaire executives and their Wall Street backers. Nor are they responsible for the collapse of the capitalist profit system, which is spreading throughout the globe, leading to a wave of corporate bankruptcies and mass unemployment.

Autoworkers must reject the UAW's policy of labor-management "partnership" and assert their own interests by launching a fight against wage and benefit cuts and mass layoffs. Such a struggle can only be successful if it is organized independently of and against the UAW through the setting up of rank-and-file committees in the factories and surrounding communities.

The undemocratic ban on strikes included in the federal loan package and agreed to by the UAW must be rejected and an industry-wide strike launched. This struggle should be expanded to workers in the non-union transplants, and a special appeal made to GM and other workers to support the struggle throughout Canada, Mexico, Europe, Asia and South America. The auto companies are global entities—a fact underscored by the coordinated attack on workers throughout the world. The working class can oppose this attack only through their international unity.

This industrial action must be combined with a political struggle by the working class to break with the two parties of big business and a fight for political power through the establishment of a workers government. The active participation of the Obama administration in the attack on autoworkers demonstrates that the Democratic Party, no less than the Republican Party, defends the interests of big business and the financial elite.

Obama’s mortgage plan aims to bolster the banks

Obama’s mortgage plan aims to bolster the banks

By Tom Eley

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On Wednesday, President Barack Obama revealed portions of a plan that aims to stem the collapse of the US housing market. The Homeowner Affordability and Stability Plan (HASP) is designed to provide a modicum of relief to homeowners while protecting the interests of the major financial institutions, mortgage lenders and mortgage securities investors who bear primary responsibility for the collapse of the housing market.

The plan will not lower the crippling debt homeowners owe the banks. It offers nothing to the hundreds of thousands of US households already foreclosed upon, and will not affect the vast majority of the approximately 12 million households already “underwater”—those who owe more on their loan than their house’s market value.

The collapse of the US housing market triggered the implosion of the credit bubble built up over previous decades. In 2007, the failure of the American subprime mortgage sector undermined the vastly inflated assets of the US banking system and that of much of Europe, sparking the crisis that spread from the financial industry to the broader US and global economy. Now the world economic crisis is rebounding back upon the American housing sector, accelerating foreclosures and driving down home prices. At least 1 million homes have been foreclosed on since 2006, and predictions on foreclosures for the next four years range between 5.9 million and 8 million.

The housing crisis has already impoverished significant sections of the population. Much of the wealth of working class and middle-class families is based on home ownership. In recent years, workers’ access to consumer credit, college tuition, and even major health procedures has been based on their ability to borrow against what were, until 2006, rising home values. US households have lost as much as $13 trillion in wealth from the housing and stock market crashes.

Details of HASP will be made public on March 4, but according to an outline released by the White House, it will depend on the voluntary participation of lenders, whom Obama hopes to induce into participation through generous incentives. The federal government will give banks thousands of dollars in subsidies in return for interest rate reductions on certain loans, with the aim of bringing monthly payments down to an affordable level. Mortgage lenders will also be paid annual service fees of $1,000 for each altered loan, among other enticements.

A second part of the program pertains to loans financed by Fannie Mae and Freddie Mac, the federally sponsored mortgage giants which together finance the majority of US home loans. This would permit interest rate refinancing for families whose outstanding debt has neared, or slightly exceeded, their home’s value—but not for families whose home value has fallen significantly below the principal they owe on their loan.

The immediate cost of the program will be $275 billion. For the $75 billion to be made available to private lenders, the Troubled Asset Relief Program (TARP) will provide $50 billion and Fannie and Freddie the other $25 billion. The Treasury Department will purchase $200 billion in preferred stock from Fannie and Freddie, up from a previously arranged commitment of $100 billion made in September after the two lenders went into federal receivership. The overall size of Fannie’s and Freddie’s loan portfolios will be allowed to expand by $50 billion to $900 billion each, liabilities for which the federal government will presumably be responsible.

Obama introduced the program in Mesa, Arizona, a state particularly hard-hit by the housing crisis. In a speech replete with references to the “the American dream” and the “middle class,” Obama said the aim was to help families “who have played by the rules and acted responsibly.”

Obama offered an assessment of the origins of the housing crisis that found homeowners equally culpable as banks and mortgage companies. According to Obama, “It was brought about by big banks that traded in risky mortgages in return for profits that were literally too good to be true; by lenders who knowingly took advantage of homebuyers; by homebuyers who knowingly borrowed too much from lenders; by speculators who gambled on rising prices; and by leaders in our nation’s capital who failed to act amidst a deepening crisis.”

But while Obama claimed that “banks and lenders must be held accountable for ending the practices that got us into this crisis in the first place,” his program does nothing of the sort. On the contrary, it offers rich new streams of revenue to compensate banks for their failed loans.

Obama signaled once again that the American people would ultimately be made to pay the cost of the housing and credit collapse. “Individuals must take responsibility for their own actions,” he declared. “And all of us must learn to live within our means again.”

While his administration hands out hundreds of billions to the banks, Obama is preparing unprecedented austerity measures for the working class. His reference to “living within our means” implies that for millions of workers, the possibility of owning a home will vanish.

The central obstacle to resolving the housing crisis, like the broader economic crisis, is not the fantasy of workers living beyond their means. Nor is it a technical “market” impediment resolvable by government programs. Standing in the way of a solution to the crisis is a failed socioeconomic system and a financial aristocracy that will brook no infringements on its wealth and prerogatives.

Every previous effort to address the housing crisis, no matter how modest, has been undermined by the resistance of the financial elite. For example, last year’s government-sponsored “Hope for Homeowners” program resulted in the modification, according to some calculations, of a grand total of 25 mortgages.

A number of commentators have expressed concerns over the limited character of HASP. That the plan will do little to help the majority of the 12 million American households who are underwater—a number that could increase to 16 million within a year—may well reduce it to “a rose-colored bit of incrementalism,” according to a New York Times analysis. If even a small proportion of this number chooses to “walk away” rather than continue to lose money to declining home prices, this would “force the administration to come up with a new, much larger housing bailout down the road,” the newspaper commented.

There is nothing in the plan to compel participation of banks, mortgage servicers or mortgage securities investors, other than a pledge by the administration to push for congressional action to allow bankruptcy judges latitude to change payment terms for embattled homeowners. Wall Street is bitterly opposed to such legislation.

In an analysis published February 12, BusinessWeek noted, “One reason foreclosures are so rampant is that banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem.” According to BusinessWeek, financial industry lobbyists “say they will fight to restrict the types of loans the bankruptcy proposal covers and new powers granted to judges… The industry strategy all along has been to buy time and thwart regulation, financial-services lobbyists tell BusinessWeek.”

Trends in refinancing also reveal the intransigence of the financial industry. The Wall Street Journal pointed out that recent efforts to refinance loans have, in more than half of all cases, resulted in higher or unchanged monthly payments. This is so because those most often needing refinancing have already fallen behind on payments. The banks add “past-due amounts—which can include principal, interest, taxes and insurance—driving monthly payments higher.”

As with all of the measures proposed in response to the economic crisis, including Obama’s stimulus plan and bank bailout scheme, the premise of his housing program is that nothing be done that touches on the basic interests of the financial elite. It makes no serious analysis of the roots of the housing crisis or the social interests that underlie the collapse, and consists of improvised half-measures.

Even so, the plan he announced on Wednesday is already eliciting protests from hedge funds and other big investors who reject any measures that could further devalue their mortgage-linked assets.

Most of the plan’s details have yet to be revealed, but there are suggestions that participating households will be made to eventually bear the cost of any interest rate modifications. According to the Wall Street Journal, the “plan may require that homeowners eventually pay back the difference between the original payment and the reduced rate. While borrowers would get a lower monthly payment, they would still technically owe a big additional payment at the end of their loan’s term.”

Speaking in Florida last week, Obama indicated that this would be the case. “The borrower is going to have to probably—if they get some assistance—agree to give up some equity once housing prices recover so that both sides are giving a little bit,” he said.

Underscoring the chasm between the design and scope of Obama’s plan and the dimensions of the housing crisis, the Commerce Department released a report hours before his Arizona speech pointing to a more rapid collapse in the housing market than had been previously anticipated. New home construction fell to its lowest level ever in January—declining 16.8 percent from December to an annualized rate of 466,000 homes. Building permits also hit a record low. MarketWatch described the data as “far below the weakest levels of construction in the post-World War II era.”

Nearly five million on jobless benefits in US

Nearly five million on jobless benefits in US

By Jerry White

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The Labor Department reported Thursday that the number of US workers receiving unemployment benefits hit 4.99 million in the week ending February 7, the highest number in 27 years. First time claims for state unemployment benefits were a higher-than- expected 627,000 for the week ending February 14, as corporations continued to cut back on production and slash their staffs by thousands of workers.

At least 3.6 million jobs have been wiped out since the recession began in December 2007. Officially, the jobless rate reached a 16-year high of 7.6 percent last month—or 11.6 million people. If all of those who have been forced to take part-time employment or have given up looking for work are included, the figure is closer to 10 percent according to the government.

The spike in jobless claims came as production at factories, mines and utilities fell 1.8 percent last month for the third monthly decline in a row. Worst hit were auto plants and their suppliers where production dropped a staggering 23 percent.

A wave of plant closings and mass layoffs were announced in the auto industry this week. General Motors told the Treasury Department that it would eliminate 47,000 out of its global workforce of 244,000. This number would include 21,000 hourly and salaried workers in the US. The 100-year-old company, which requested an increase in emergency loans to prevent bankruptcy, said it would close 14 plants in North America and Europe by 2012.

Chrysler LLC, which also requested additional financial aid, said it would cut 3,000 jobs on top of the 32,000 the company has slashed since the end of 2006. Ford Motor Company’s finance unit will eliminate 20 percent of its workforce, or about 1,200 workers. US auto sales have fallen to their lowest level in nearly three decades.

Goodyear Tire & Rubber Co., the largest US tire maker, posted a fourth-quarter net loss of $330 million Wednesday and announced plans to cut almost 5,000 jobs. The cuts equal almost 7 percent of the workforce of the Akron, Ohio-based company, which eliminated 4,000 jobs and imposed a salary freeze in the second half of last year.

Auto parts giant Delphi announced it was eliminating 775 jobs--425 hourly and 350 salaried--at its steering division plant in Saginaw, Michigan. This is the latest blow to the once important automotive center, 100 miles north of Detroit. Fewer than 10,000 workers are still engaged in manufacturing in Saginaw County, the lowest number in nine decades.

Last week Toyota announced it was offering buyouts to all 25,000 of its North American workers and cutting the work week by 10 percent at some US factories. The world’s largest automaker will also halt production at 11 of its 12 plants in Japan for three days in April, reducing total operating time during that month to 17 days.

Derek, a young worker at Chrysler’s Sterling Heights Assembly plant just north of Detroit, told the World Socialist Web Site, “We’re working one week and are off two weeks because of slow sales. The union hasn’t told us anything and we are all wondering how long this will go on.

“It’s scary and it’s happening to everybody who’s got to work for a living. Right now I’m glad my wife is working steady and we’ve been able to make ends meet. But it’s dicey. We are watching every penny. In another two years there won’t be a middle class left in America.”

The US Federal Reserve warned Wednesday that the economic situation was even worse than thought and predicted conditions would continue to deteriorate throughout 2009. The Fed estimated that the official unemployment rate could climb as high as 8.8 percent this year, far higher than its initial estimate of 7.6 percent made last November.

Fed officials also predicted that the world’s largest economy would contract between 0.5 and 1.3 percent this year, far worse than earlier forecasts.

Such a situation would mark the first full calendar year contraction since 1991 and the worst drop since the 1.9 percent fall in 1982, when the US was in the depths of a deep recession..

The Fed’s updated economic outlook declared that “given the strength of the forces currently weighing on the economy,” Fed officials “generally expected that the recovery would be unusually gradual and prolonged."

The central bank's projections followed the release of a Commerce Department report showing that new home construction and applications for future projects both fell to record lows last month. Construction of new homes and apartments plummeted 16.8 percent in January from the previous month, falling to a seasonally adjusted annual rate of 466,000 units, also a record low. Analysts had instead expected a pace of 530,000 housing units.

Building permits, a measure of future activity, also sank to a record low pace of 521,000 units in January, a 4.8 percent drop from the prior month. “Conditions in the market for new homes have not been this bad since the 1930s, and they continue to worsen,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, told the Associated Press. He predicted that housing starts would remain depressed for months to come.

Builders have cut the number of new homes on the market for almost two years, Newport told the AP, but sales have fallen even more quickly. As a result, the Commerce Department said last month that it would take 12.9 months to sell all the new homes on the market, the longest on record.

Home foreclosures also continue to mount. Credit Suisse reported last month that 2 million homeowners faced foreclosure proceedings last year and that up to 10 million homes could face foreclosure in the coming years.

The Commerce Department said the Northeast was the worst area of the country for housing starts, with a drop of 42.9 percent to a record low of 36,000 units at a seasonably adjusted annual rate. The Midwest was second with a 29.3 percent decline.

Layoffs continue to spread to every sector of the economy. In the past few weeks job-cutting in the technology sector has been particularly harsh, with substantial layoffs announced by Pioneer (10,000), Cisco (3,000), Panasonic (15,000), NEC (20,000), Electronic Arts (1,100) and AOL (700). The web site Tech Crunch reported that 300,000 workers in the technology sector have lost their jobs since it began tracking the number in August 2008.

States and public institutions, hard hit by falling revenues and federal budget cuts, are also cutting jobs.

After a five-day impasse the California state legislature approved a $41 billion budget Thursday morning. Governor Arnold Schwarzenegger, who had initially crafted the budget in conjunction with state Democrats, is expected to sign the deal, which includes billions in spending cuts for schools, healthcare institutions and social programs and which will inevitably result in large job cuts.

The governor of Tennessee said that because of monies received from the federal stimulus package the state would reduce a number of planned layoffs, originally set at 2,300, but would still have to cut other jobs nonetheless.

In Pennsylvania, Governor Edward Rendell said that if the unions accepted $80 million in concessions over the next two years the number of layoffs would stay below 1,000. If not, up to 3,000 workers would lose their jobs.

Governors in Maryland, Kentucky and other states have also indicated that layoffs are coming.

Jobless Hit With Bank Fees on Benefits

Jobless Hit With Bank Fees on Benefits

AP IMPACT: More pain for unemployed as banks turn profit on new debit card jobless benefits


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The Associated Press

First, Arthur Santa-Maria called Bank of America to ask how to check the balance of his new unemployment benefits debit card. The bank charged him 50 cents.

He chose not to complain. That would have cost another 50 cents.

So he took out some of the money and then decided to pull out the rest. But that made two withdrawals on the same day, and that was $1.50.

For hundreds of thousands of workers losing their jobs during the recession, there's a new twist to their financial pain: Even when they're collecting unemployment benefits, they're paying the bank just to get the money — or even to call customer service to complain about it.

Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 — even though they could decline charges for more than what's on the card.

"They're trying to use my money to make money," said Santa-Maria, a laid-off engineer who lives just outside Albuquerque, N.M. "I just see banks trying to make that 50 cents or a buck and a half when I should be given the service for free."

The banks say their programs offer convenience. They also provide at least one way to tap the money at no charge, such as using a single free withdrawal to get all the cash at once from a bank teller. But the banks benefit from human nature, as people end up treating the cards like all the other plastic in their wallets.

Some banks, depending on the agreement negotiated with each state, also make money on the interest they earn after the state deposits the money and before it's spent. The banks and credit card companies also get roughly 1 percent to 3 percent off the top of each transaction made with the cards.

"It's a racket. It's a scam," said Rachel Davis, a 38-year-old dental technician from St. Louis who was laid off in October. Davis was given a MasterCard issued through Central Bank of Jefferson City and recently paid $6 to make two $40 withdrawals.

..Neither banks nor credit card companies will say how much money they are making off the programs, or what proportion of the revenue comes from user versus merchant fees or interest. It's difficult to estimate the profits because they depend on how often recipients use their cards and where they use them.

But the potential is clear.

In Missouri, for instance, 94,883 people claimed unemployment benefits through debit cards from Central Bank. Analysts say a recipient uses a card an average of six to 10 times a month. If each cardholder makes three withdrawals at an out-of-network ATM, at a fee of $1.75, the bank would collect nearly $500,000. If half of the cardholders also dial customer service three times in any given week (the first time is free; after that, it's 25 cents a call), the bank's revenue would jump to more than $521,000. That would yield $6.3 million a year.

Rachel Storch, a Democratic state representative, received a wave of complaints about the fees from autoworkers laid off from a suburban St. Louis Chrysler plant. She recently urged Gov. Jay Nixon to review the state's contract with Central Bank with an eye toward reducing the fees.

"I think the contract is unfair and potentially illegal to unemployment recipients," she said.

Central Bank did not return two messages seeking comment.

Glenn Campbell, a spokesman for Rep. Russ Carnahan, D-Mo., said the congressman would support a review of the debit card programs nationwide.

Another 10 states — including the unemployment hot spots of California, Florida and South Carolina — are considering such programs or have signed contracts. The remainder still use traditional checks or direct deposit.

With the national unemployment rate now at 7.6 percent, the market for bank-issued unemployment cards is booming. In 2003, states paid only $4 million of unemployment insurance through debit cards. By 2007, it had ballooned to $2.8 billion, and by 2010 it will likely rise to $10.5 billion, according to a study conducted by Mercator Advisory Group, a financial industry consulting firm.

The economic stimulus plan signed by President Barack Obama this week will increase federal unemployment benefits by $40 billion this year. Subsequently, there will be more money from which banks can collect fees. The U.S. Department of Labor allows the fees as long as states create a way for recipients to get their money for free, spokeswoman Suzy Bohnert said.

.."Beyond that, the individual decides how to manage his drawdowns using the debit card," she said in an e-mail.

A typical contract looks like the agreement between Citigroup and the state of Kansas, which took effect in November. The state expects to save $300,000 a year by wiring payments to Citigroup instead of printing and mailing checks.

Citigroup's bill to the state: zero. The bank collects its revenue from fees paid by merchants and the unemployed.

"If you use your card the right way, you're not going to pay fees at all," said Paul Simpson, Citigroup's global head of public sector, health care and wholesale cards.

But that's not always practical.

Santa-Maria, the laid-off New Mexico engineer, said he didn't pay any fees the first time he was laid off, for several months in 2007. His unemployment benefits were paid by paper checks. He found a new job last year but was laid off again last fall.

This time, he was issued a Bank of America debit card — a "prepaid" card in industry lingo — but he was surprised to learn he had to pay fees to get his money. He asked the bank to waive them. It said no. That's when Santa-Maria called back to ask how to check his account online. He logged on and saw that the call cost him a half dollar. To avoid more fees, Santa-Maria found a Bank of America ATM at a strip mall and withdrew $80 at no charge. When he got back to his car, he decided to take out the rest of his money — $250 — and deposit it in his bank account.

Afterward, Santa-Maria logged on to his account and saw a charge of $1.50 for two withdrawals in one day.

New Mexico authorities bargained with Bank of America to get lower fees for unemployment recipients, said Carrie Moritomo, a spokeswoman for the state Department of Workforce Solutions. The state saves up to $1.5 million annually by not printing checks.

Bank of America spokeswoman Britney Sheehan pointed out that the fees charged in New Mexico are similar to those charged in the 29 other states with unemployment debit cards.

"We worked with the Department of Workforce Solutions and believe the fee schedule is reasonable and consistent with similar programs," she said.

..Banks could issue unemployment debit cards with no fees for cardholders, but that would likely mean that states would have to pay more of the administrative costs, said Mark Harrington, director of marketing for Citigroup's prepaid card services. If a state demanded no cardholder fees and could pay the difference, Citigroup might enter such a contract.

"We would be open to that," Harrington said. "We're not looking to structure any programs where we would lose money, but we're definitely flexible."

Simpson noted that the cards can save money for jobless workers who have no bank accounts. In the past, these people had to use corner check-cashing shops that charged fees as high as 2 percent, or $6 for a $300 check. Now, they can swipe their cards at McDonald's, Wal-Mart or elsewhere for free.

Kenna Gortler, a laid-off paper mill worker in Oregon, said her union is advising members to avoid the debit cards and sign up to get their benefits through direct deposit. More than 300 of her fellow workers have lost their jobs at the mill in the last three months, and horror stories about ATM fees and overdraft charges are starting to filter back to others who are just now signing up for their benefits.

"It's discouraging," Gortler said. "People have limited funds and they don't need to be giving money to the banks. They need to be keeping that money to feed their families and pay bills."

Many Employers Are Just Using the Recession to Stick it to Workers

Many Employers Are Just Using the Recession to Stick it to Workers

By Dave Lindorff

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Whatever the truth is about where this economy is heading, one thing is clear: employers are taking every opportunity to slash employment and, if they are unionized, to hammer unions for pay cuts, even when there is no justification for these actions.

Take Safeway Inc., a large national supermarket chain. The company, which had $44 billion in sales in 2007, and which, based upon third quarter figures for 2008 was well on the way to show record sales for 2008, appears to be using the economic downturn as a justification for laying off employees and making remaining employees work harder.

I can only give anecdotal information on this, but the Genuardi¹s Family Market store (a Safeway subsidiary) where I live, in Upper Dublin, PA, an upper middle-class suburb north of Philadelphia, according to its employees, has been laying off cashiers, and slashing its night work force; the people who restock the shelves and unload the delivery trucks when the store is closed. The management is doing this not because sales have slumped. They haven¹t. People may not be buying new cars, but they are still buying food, and in fact, if they are cutting back on eating out, as restaurant chains are reporting, they are probably actually buying more groceries, not less. Management is making these cuts simply because they can get away with it.

The layoffs, in the face of continued heavy business, means that cashiers are working harder. It means that the night staff, cut by half, is working twice as hard. But with jobs getting scarce, what is their option? If they don¹t like the speed-up, where are they going to go in the current environment? Meanwhile, if service gets worse, customers will accept the decline because they¹ll blame it on the economy, not noticing that there is really no justification for employee cutbacks at the supermarket.

Temple University, which is a major public higher education institution in Philadelphia, is reportedly telling all departments to make substantial cuts in their budgets . This will inevitably lead to layoffs of faculty and support staff critical to the education mission. And yet, what is the justification for such draconian measures? The governor initially announced plans to cut the state's contribution to the university¹s annual budget for next year by a few million dollars, but the new Economic Recovery Act stimulus package includes huge grants to the states, including Pennsylvania, more than compensating for those cuts. Furthermore, state-funded universities across the country, including Temple, are reporting increased applications and enrollments, as students whose parents cannot afford to send them to private colleges, send them instead to public institutions, and as workers who lose their jobs decide that the economic downturn is a good time to go to college and get an education. That means more tuition revenues coming in. Moreover, student aid, including Pell Grants for lower-income students, have been substantially increased in the stimulus package, meaning more money for public colleges. Money might be marginally tighter at places like Temple (while, as with most public institutions, the university¹s endowment is not a significant contributor to the operating budget, small as it is it is certainly significantly reduced because of the market collapse), but it¹s certainly not down by enough to put universities in crisis. It may not even be down at all.

It might be understandable that state and local governments would be considering layoffs, or reduced pay and hours for public employees, given the slump in tax revenues from property taxes, sales taxes and income taxes. It is certainly necessary for the auto industry, which has seen sales plummet, to lay off workers. Luxury stores like Circuit City are going bust. But not all employers are hurting alike. Health care industries are still booming. Public colleges are doing fine. Supermarkets are doing well. Energy companies are okay.

Criticism of the nationwide wave of layoffs by companies and employers that really don¹t need to beggar their workers or push them out onto the street came from an unusual quarter recently, when Steve Korman, chief executive of a privately held Philadelphia-area company called Korman Communities, blasted corporate executives for laying off workers when they don¹t really need to. Korman had gotten upset when he saw Pfizer Inc.¹s CEO Jeff Kinder say, on a television business program, that he planned to lay off 8000 workers in anticipation of a merger with Wyeth, another drug company. The layoffs were not being made because Pfizer was losing money or in trouble financially, but rather to improve profits. Korman, who owns stock in Pfizer, got angry and spent $16,000 to run ads in the Philadelphia Inquirer and the New York Times, saying:

"I have listened to the executives of many companies say that they are eliminating thousands of jobs to 'improve the bottom line,' I own stock in many of these companies and would prefer that the company make a smaller profit and [that] the stock fall, in the short term, rather than affect the lives of our neighbors and their families as jobs are lost.

"Please join me in reminding all CEOs that we are not just dealing with numbers and profit, but with real people and real families who need to keep their jobs."

Korman sent individual letters saying much the same thing to 16 companies in which he is an investor, including Federal Express, Google, Cisco Systems, Caterpillar, General Electric, ExxonMobil, Kraft, Nokia, Intel, Johnson&Johnson, Apple, EMC, Chevron, DuPont, Coca-Cola, Oracle and Dow.

If this phenomenon is bad enough that it has upset a prominent capitalist like Korman, it is clearly a major problem.

The irony is that as all these companies slash their workforces, and force remaining workers to work harder, and as public institutions like Temple University and other colleges cut their faculties and increase class sizes for remaining teaching staff, they are undermining any stimulus that taxpayers are subsidizing in the massive stimulus bill, and thus making the recession worse, not to mention wasting the huge deficit-spending measure itself.

Nobody would argue with a company¹s laying off of workers when sales collapse and there is no money coming in, but in many cases this is not what has been happening.

One reason there is a tidal wave of layoffs even at viable businesses and institutions across the country is simply the lack of or weakness of labor unions. With workers at most employers unorganized (unions represent only some 8 percent of private employees), it is easy for managers to engender an attitude of fear and passivity among employees, which makes it easier to pick them off, and to make those on the job work ever harder. Furthermore, without labor contracts, there is little workers can do to resist speedups that can seriously threaten their health, safety and well-being.

Only a new militancy and sense of solidarity among American workers, and a revitalization of the nearly moribund labor movement, can rescue this situation, which will only get worse as the economy continues to sink.

The US Media & Democracy in Crisis

The US Media & Democracy in Crisis

By Robert Parry

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For those of us who have criticized the U.S. mainstream media for failing to resist right-wing pressure over the past three decades, there is a sad sense of vindication watching the downward spiral of so many once-venerable newspapers. But this trend carries with it a new threat to American democracy.

The core problem is this: as flawed as the MSM has been – as complicit as the New York Times and the Washington Post were in many of George W. Bush’s war crimes, for instance – journalists for mainstream news outlets provide most of the factual information that the rest of us rely on.

No Internet-based news outlet, including our own, can claim that it has the capability to do the daily news reporting that is now done by the mainstream news media.

And the serious threat to American democracy is that as the MSM is reduced to a shadow of its former self, the influence of the well-funded right-wing media will grow disproportionately.

The Right has followed a three-decade strategy of building and maintaining its own media infrastructure – and though some right-wing outlets might stumble, most of them are sure to survive with hefty subsidies from wealthy right-wing foundations and business interests.

By contrast, the American Left largely has stayed on the sidelines of what the Right calls “the war of ideas.” The Left has invested far less money in media institutions and think tanks than the Right has.

In essence, liberals and progressives have counted on mainstream journalists to somehow soldier on for the truth even as right-wing anti-journalism groups have targeted those same journalists. (I know this because I was one of those mainstream journalists in the 1980s and 1990s.)

Over the years, there has been a profound short-sightedness in the Left’s media strategy. But even today, there is little indication that the liberals and progressives have learned any lessons. Instead, there remains a lot of wishful thinking that somehow a few independent Web sites will manage to counter the right-wing media behemoth.

One of the ironies in this contrast between the media strategies of the Right and the Left is that the supposed rugged individualists on the Right have constructed what amounts to a cradle-to-grave home for right-wing “journalists” who are groomed from their college days to become authors and TV personalities and can grow old as editors and producers as long as they toe the Right’s line.

Meanwhile, the supposed collectivists on the Left expect independent or progressive journalists to somehow carve out their own media niche and survive with minimal outside support.

It should be no surprise then why so many MSM journalists look at this media environment and do whatever they can to avoid sustained attacks from the powerful Right, for fear of ending up out on the street.

A Look-back

To understand how this dangerous dynamic took shape requires looking back to the 1970s when the Right felt aggrieved because mainstream journalists exposed many of the lies about the Vietnam War and unearthed Richard Nixon’s Watergate criminality.

(Some of the Right’s grievances can be traced back even further, to the civil rights days when Southern segregationists blamed Northern reporters for highlighting injustices toward African-Americans.)

In the latter part of the 1970s, angry Republicans and right-wing ideologues began to team up under the leadership of Nixon’s former Treasury Secretary Bill Simon, who used his control of the Olin Foundation to pull together like-minded foundations (Smith-Richardson, Scaife, etc.) to inject money into a right-wing media infrastructure and anti-journalism attack groups.

This initiative gained momentum with the 1980 election of Ronald Reagan, a former actor and ad man who surrounded himself with media savvy advisers. They, in turn, began collaborating with CIA propaganda experts in devising “perception management” tactics that could be directed against the American people as well as at troublesome mainstream journalists.

To get around legal prohibitions on the CIA influencing U.S. politics, CIA Director William Casey transferred Walter Raymond Jr., one of the CIA’s top propagandists, to Reagan’s National Security Council where Raymond headed up a government-wide task force on “public diplomacy.” [For details, see Robert Parry’s Lost History.]

The right-wing media infrastructure continued to grow with the influx of mysterious money from the likes of Rev. Sun Myung Moon, the Korean theocrat who launched the Washington Times in 1982. Later, Australian media mogul Rupert Murdoch got into the act with purchases of U.S. newspapers and eventually the founding of the neoconservative Weekly Standard and right-wing Fox News.

By the late years of the Reagan-Bush-41 era, right-wing talk radio was taking off with Rush Limbaugh and other angry white men filling the AM dial with venomous attacks on liberals. When Bill Clinton managed to eke out a victory in 1992, he immediately came under sustained attack from this potent right-wing media machine.

Meanwhile, in the mainstream press, generally conservative (or neoconservative) owners began cracking down on independent-minded journalists as early as the mid-1970s. But that trend grew stronger in the 1980s when journalists found it harder and harder to challenge the propaganda and cover-ups of the Reagan administration.

As journalists with integrity were weeded out – and as the American Left largely stayed disengaged and silent – the MSM survivors came to understand that their livelihoods required them to tilt their stories right-ward. By the Clinton years, it made perfect sense to join the Right’s media in piling on regarding the trivial “Clinton scandals.”

After years of getting pounded as “liberal,” the MSM was determined to shed the liberal label by being tougher on a Democrat than on any Republican. That tilt contributed to the Republican Revolution of 1994 and eventually to Clinton’s impeachment in 1998 (though he managed to survive a Senate trial).

The spillover of the MSM/Right’s animosity toward Clinton influenced the harsh coverage of Al Gore in Campaign 2000, as Washington’s insider community pined for what was expected to be George W. Bush’s restoration of “the adults” in Washington. [For details, see our book, Neck Deep.]

Growing Asymmetry

This de facto MSM/Right merger meant lots of shoddy anti-Gore reporting and mostly fawning coverage of the Bush campaign. Resistance to this biased journalism fell mostly to small Web sites and a handful of under-funded liberal/progressive magazines and radio stations.

However, the asymmetry was devastating. Even though Gore succeeded in narrowly out-polling Bush, the results were close enough – and the right-wing media imbalance strong enough – to allow Bush to sneak away with the presidency, aided by five Republican justices on the U.S. Supreme Court.

With Bush in the White House, the dominant MSM/Right media refrain suddenly shifted to the need for national unity. Then, after the 9/11 attacks, this MSM/Right alliance marched the nation in lockstep behind Bush and headlong into the Iraq War.

There were a few dissident voices in mainstream American journalism, particularly from the Washington bureau of the Knight-Ridder chain. But the sustained opposition came mostly from small Web sites and a few scattered independent or progressive voices.

Only after Bush's Hurricane Katrina debacle in 2005 and the public’s growing disillusionment with the Iraq War did the MSM begin to deviate somewhat from the Right’s fealty to Bush. Even then, however, key MSM institutions, such as the Washington Post’s editorial section, staunchly defended Bush’s neocon policies in Iraq and elsewhere.

Now, in the early weeks of the Obama administration, there are already signs that the alliance between the MSM and the Right is strengthening again. [See, for example,’s “Obama & the Media Dilemma” and “’Bitter’ Gore; ‘Principled’ McCain.”]

A factor in this trend may be that MSM journalists, looking at the rapid decline of their own institutions, don’t want to get themselves black-listed from possible future work at right-wing outlets.

The predicament facing key mainstream news outlets is indeed grim as the industry faces its own “Napster-ization.” Newspaper readership is declining as millions of readers drop their subscriptions in favor of reading the news free on the Internet or getting the same stories re-posted at “aggregator” sites that pay nothing for the content.

The proud New York Times has been forced to go hat in hand to Mexican billionaire wheeler-dealer Carlos Slim Helu to borrow $250 million at a stunning 14 percent interest rate. Other newspapers, including the Washington Post, have been shedding senior staff in waves of buyouts and layoffs.

In the next year, there could be a surge of shuttered newspapers and others teetering on bankruptcy, including such important regional papers as the Minneapolis Star Tribune, the Seattle Post-Intelligencer and the Rocky Mountain News. Even the strongest papers are likely to survive only in a much reduced form, with fewer reporters and bureaus.

Some critics may feel that the MSM brought this fate down on itself by betraying its responsibility to inform the American people as fully and fairly as possible. There may even be a sense of schadenfreude, the German word for deriving pleasure from someone else’s misfortune.

But there also should be alarm bells going off among American progressives and liberals. As the MSM declines, the right-wing media is likely to grow even more powerful.

As we’ve argued for years at, the only long-term answer is for concerned Americans, who truly care about a thriving democratic Republic, to invest substantially in honest media, to build an infrastructure that employs brave reporters who will dig out the important news and subject it to thoughtful analysis.

Today’s troubling media trends make that undertaking all the more imperative.

US Increases Militarization at Canadian Border

Unmanned drone prowls over the lonely prairie