Saturday, May 5, 2012

The Crisis of Student Debt in America

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It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way. ~ Charles Dickens

We are in a time of crisis, a time of austerity, a time the where poor are getting poorer and the rich are getting richer at a faster pace than at any other time in recent US history. We have gone from having a well-functioning economy to a real unemployment rate of 14.5% [1]. During all of this, the situation has greatly affected college students, who are taking on massive debt just to further their education. With student debt at over $1 trillion, an examination is underway of how we have gotten into this scenario and how we can get our way out of it.

The situation began in 1964 when Lyndon B. Johnson established a task force to examine the role of federal government in student aid, headed by John W. Gardener. The taskforce firmly believed that cost shouldn’t be a barrier in attaining a college education and to this end they concerned themselves with how lack of funds contributed to students being unable to attend college. Gardener


focused on a study which revealed that one out of six students who took the National Merit Scholarship test in high school did not attend college. Of the students who did not attend college and who had families who could contribute only $300 or less to their education, about 75 percent of the men and 55 percent of the women indicated that they would have attended college if they had had more money available. [2] (emphasis added)

Upon seeing this information, Johnson was shocked as he viewed the situation as a loss in human capital. This drove him to sign the the Higher Education Opportunity Act of 1965 into law. The bill included the recommendations put forth by the Gardener taskforce that the federal government should aid student in their journey to attain a higher education by providing loans, remedial classes, and grants to college-aspiring students as well as special programs and projects for low-income students who have an interest in attending college. This allowed for low-income and middle-class students who have an opportunity to go to college.

There was an uphill battle, though, as the American Bank Association was against the loan guarantee provision. The ABA was mainly concerned about possible government encroachment in their business, arguing that “the federal government could not replicate the working relationships that locally-owned financial institutions had with state and private non-profit guarantee programs” and “the federal government would end up taking over the industry because there would be little incentive for the state and private non-profit agencies to establish their own programs.” [3] To solve this problem, the Johnson administration met with the ABA and worked to “[assure] the bankers the loans would pay them back handsomely over time because they were investing in young people who would become their best customers in the future,” [4] as well as telling the banks that the government would be the ultimate loan guarantor if there was no one else available. Thus, with the banks placated, the bill could be passed.

There were several reauthorizations of the Higher Education Opportunity Act, but one of the most important reauthorizations was in 1972. In the 1972 bill, there were several new programs created, yet one of the most important ones was the Basic Educational Opportunity Grant which sends “a payment directly from the federal government to undergraduate students based on their financial need,” yet this act also “tied institutional aid to the number of students receiving federal student aid at the given institution.” [5] Tying institutional aid in this manner only served to increase costs. According to the Bennett hypothesis, first proposed in the 1980s by Secretary of Education William J. Bennett, colleges absorb federal student aid by increasing tuition costs. (This was proven in a paper done by two economics professors at the University of Oregon. [6]) While these increases in tuition were not seen in the 1970s, they began to be felt substantially during the 1980s, thus causing students to increase their debt levels. However there was another factor involved that led to student debt increase: President Ronald Reagan.

During the presidency of Ronald Reagan, he launched a massive attack on federal student aid. Reagan’s budget included a proposal that would

cut deeply into the two major student assistance programs, the Pell grants and the Guaranteed Student Loans, to reduce sharply or eliminate a series of categorical programs in higher education, and to eliminate a group of social or economic programs which either directly or indirectly affect higher education. With rare exception, every college campus would be affected by the proposed cuts beginning in academic year 1981-82. [7] (emphasis added)

In cutting these student assistance programs, Reagan went against the spirit of the 1965 Higher Educational Opportunity Act, in which the main goal was to ensure that a college education was both accessible and affordable. In addition to this, he was effectively targeting low-income and middle class people who needed that assistance in order to afford a college education. Congress attempted to enact amendments to the Higher Education bill that would allow for both programs to continue until 1985 and expanded programs such as Guaranteed Student Loans to middle-class families.

Yet, there were complaints from the Reagan administration, specifically Secretary of Education Terrence Bell, that the expanding such programs “had the potential for eroding the traditional roles of the student and the family in the financing of educational costs” [8] and that the Guaranteed Student Loans program was actually an entitlement program as its costs couldn’t be constricted without Congressional approval. Rather than actually allow students greater access to education, the Reagan administration was able to pass a plan that would gut federal student aid assistance by cutting the amount of aid per Pell Grant from $1,900 to $1,750, limiting Guaranteed Student Loans to remaining need, and eliminating the in-school interest subsidy and the subsidy to lenders on Parent Loans.

This decrease in federal aid only served to disenfranchise millions of potential college students from attaining an education. Student debt also increased. A survey done by the College Scholarship Service and National Association of Student Financial Aid Administrators showed that “those students at public institutions who borrow will graduate with an average debt of $6,685, while their counterparts at private colleges and universities will assume $8,950 in debt on average.”

This decrease in aid hit minority students quite hard as in 1987 there was a seven percent decline in college enrollment for Native Americans and eleven percent for blacks. Many minority groups depended on grants and scholarships to go to college, but now their only option was to borrow money or just not go at all. This would have a major ripple effect as
“Many studies have shown that one of the most important factors influencing the decision to go to college is parental educational level” and that “If today’s minority high school graduates choose not to participate in further education, out of concern for loan burdens or for other reasons, their children may not be as likely to go to college as the next generation of white and Asian students.” [9] This would only serve to further increase educational- and with it economic- disparities between races.

The situation did not get any better in the next decade as the median student loan debt more than doubled in a 10 year period, increasing from $4,000 in 1990 to about $11,000 in 1999. [10] It was to become even worse with the passing of the Higher Education Amendments of 1998, which stated that student loans could no longer be forgiven under bankruptcy. Thus, if one found themselves in bankruptcy, but had student loans, they would be in debt bondage until the loans were paid. In such a situation, the only possible out is to default on one’s student loans, however, that would not only worsen your credit but your entire financial life can potentially be destroyed as if you default

  • Your entire loan balance will be due in full, immediately.
  • Collection fees can be added to your outstanding balance.
  • Up to 15% of your paychecks can be taken.
  • Your Social Security, disability income, and state and federal tax refunds can be seized.
  • You will lose eligibility for federal aid, including Pell grants.
  • You will lose deferment or forbearance options.
  • Outstanding fees and unpaid interest can be capitalized (added) onto your principal balance. [11]

Thus, by the very circumstances, a situation of ‘damned if you do, damned if you don’t’ is created and students are put into de facto debt slavery.

This brings us to our current situation where student debt nationwide is over $1 trillion. Student debt can potentially turn into a major problem by threatening economic growth due to the fact that people are defaulting on their student loans as they cannot find jobs. A recent article came out from the Associated Press which stated that 53% of college graduates are either unemployed or underemployed and that when “underemployment [is taken] into consideration, the job prospects for bachelor's degree holders fell last year to the lowest level in more than a decade.” [12] This is an even further economic threat when one realizes that the current level of student is unsustainable and that there will be major ripple effects on the economy when this house of cards comes crashing down.

In order to deal with the situation, there are some in Washington who favor rewriting bankruptcy laws as to allow for a return for student debt to be cleared in bankruptcy, however, this would only apply to private student loans, thus the student would still be on the hook for any federal loans owed. Yet, allowing federal loans to be absolved in bankruptcy is quite a thorny issue as taxpayers would have to pick up the tab. Once again, just as in 1965, the American Bankers Association is against such a proposal “saying it would tempt students to rack up big debt that they won't repay [and that] ‘The bankruptcy system would be opened to abuse.’” [13] It will be interesting to see whether or not the government can once again placate the banks.

The only way to get out of this mess is forgiving loans. There is already some support in Congress as bill H.R. 4170 also known as The Student Loan Forgiveness Act is currently being proposed. The bill would fully forgive the loans of those who have been making payment for the past decade or will be able to do so in the coming years. It also “caps interest rates on federal student loans at 3.4 percent and enables existing borrowers to break free from crushing fees by converting many private loans into federal loans.” Such a bill would free students from debt slavery and “would give Americans greater purchasing power, helping to jumpstart our economy and create jobs.” [14]

This is what needs to be done in order to aid getting our economy back on track. If the government can spend over $1 trillion on wars and billions to bailout corrupt banks, hopefully they can spare a couple billion to bailout America’s college graduates.

The alternative is to have the student debt bubble explode in our faces and the economy slump into even more dire straits and banks tighten up the flow of credit.

America now has a choice before it concerning its young people: they can either set them free, aiding in economic regrowth or risk shattering the economic recovery and mantain their children in the shackles of debt slavery.

Notes

1: Portal Seven, Unemployment Rate U-6, http://portalseven.com/employment/unemployment_rate_u6.jsp
2 TG Research and Analytical Services, Higher Education Opportunity Act, http://www.tgslc.org/pdf/hea_history.pdf (November 2005)
3: Ibid
4: Ibid
5: Thomas R. Wolanin, “Federal Policy Making in Higher Education,” American Association of University Professors 61:4 (1975), 309
6: Larry D. Singell, Jr., Joe A. Stone, “For Whom the Pell Tolls: The Response of University Tuition to Federal Grants-in-Aid,” University of Oregon, September 2005 (
http://web.archive.org/web/20081011160038/http://darkwing.uoregon.edu/~lsingell/Pell_Bennett.pdf )
7: Alfred D. Sumberg, “The Reagan Budget: Attacks on Student Assistance,” American Association of University Professors 67:2 (1981), 102
8: Sumberg, 103
9: Kathryn Mohrman, “Unintended Consequences of Federal Aid Student Policies,” The Brookings Review 5:4 (1987) 24, 26
10: Department of Education, Student Loans Overview: Fiscal Year 2012 Budget Request.
http://www2.ed.gov/about/overview/budget/budget12/justifications/s-loansoverview.pdf, pg 19
11: American Student Assistance, Default Consequences,
http://www.asa.org/in-default/consequences/default.aspx
12: Hope Yen, “Half of recent college grads underemployed or jobless, analysis says,” Associated Press, April 23, 2012 (
http://www.cleveland.com/business/index.ssf/2012/04/half_of_recent_college_grads_u.html )
13: Josh Mitchell, “Trying to Shed Student Debt,” Wall Street Journal, April 27, 2012 (
http://online.wsj.com/article/SB10001424052702303978104577364120264435092.html?mod=WSJ_WSJ_US_News_5 )
14: Hansen Clarke, “Trillion Dollar Crisis: The Case for Student Loan Forgiveness,” Huffington Post, April, 25, 2012 (
http://www.huffingtonpost.com/rep-hansen-clarke/student-loan-forgiveness_b_1454241.html )

There Are 100 Million Working Age Americans That Do Not Have Jobs

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The unemployment crisis in America is much worse than you are being told. Did you know that there are 100 million working age Americans that do not get up in the morning and go to work? No wonder why it seems like there are so many people that do not have jobs! According to the federal government, there are 12.6 million working age Americans that are considered to be "officially" unemployed, but there are another 87.8 million working age Americans that are not working either. The federal government considers those Americans to be "not in the labor force" so they are not included in the unemployment rate. In fact, this is one of the key ways that the government manipulates the unemployment numbers. The Obama administration would have us believe that the unemployment rate is going down and that that since the start of the last recession about as many Americans have left the labor force as we saw during the entire decades of the 1980s and 1990s combined. Of course that is a bunch of nonsense, but that is what the Obama administration would have us believe. The truth is that the percentage of working age Americans that are employed is just about the same right now as it was two years ago. It was incredibly difficult to get a job back then and it is incredibly difficult to get a job right now. So don't believe the hype that things are getting much better. If you still do have a good job, you might want to hold on to it tightly, because there is not much hope that things are going to improve significantly any time soon.

The first chart that I have posted below shows the total number of "officially" unemployed workers in America. According to the Federal Reserve, that number is currently 12,673,000. This chart makes it look like the employment picture in America is getting significantly better....

But if you dig deeper into the numbers you quickly see that this is not true. A lot of those workers that were formerly classified as "unemployed" have now been moved into the "not in labor force" category. Since the start of the last recession, the number of Americans not in the labor force has risen by more than 8 million according to the Obama administration. The total number of working age Americans not in the labor force now stands at 87,897,000....

So when you add 12,673,000 and 87,897,000, you get a total of 100,570,000 working age Americans that do not have jobs.

Yes, there are certainly millions upon millions of working age Americans that do not have jobs and that do not want jobs.

But you have to be delusional to believe that there are nearly 88 million working age Americans that do not have jobs and that do not want jobs.

The Obama administration tells us that the labor force participation rate is now the lowest it has been since 1984. But back then, a very large percentage of women were staying home and raising families. The percentage of stay at home mothers has declined steadily since then.

So the truth is that the employment statistics that we are being fed are not portraying an accurate picture of what is really going on.

As a CNN article recently explained, there are millions of Americans that say that they would like to have a job even though they have not been "actively" looking for one in the past four weeks. If those people were included in the unemployment rate, it would immediately shoot up to around 11 percent....

About six million people claim they want a job, even though they haven't looked for one in the last four weeks. If they were to all start applying for work again, the unemployment rate would suddenly shoot up above 11%.

If you want a much more accurate picture of what is really happening to the employment situation in America, the key is to look at the employment to population ratio. As I have written about previously, the percentage of working age Americans that have jobs is not increasing.

Let's take a look at the employment to population ratio for the last six years for the month of March....

March 2007: 63.3%

March 2008: 62.7%

March 2009: 59.9%

March 2010: 58.5%

March 2011: 58.5%

March 2012: 58.5%

The percentage of the working age population that had jobs fell rapidly during the recession and it has stayed very low since then.

When Barack Obama tells you that "America is going back to work" he is lying to you.

The cold, hard reality of the matter is that there are millions of hard working Americans that have been sitting at home for years hoping that a new job will come along.

Back in 2007, approximately 10 percent of all unemployed Americans had been out of work for one year or longer.

Today, that figure is above 30 percent.

The average duration of unemployment in the United States today is about three times as long as it was back in the year 2000.

And according to a recent Wall Street Journal article, the number of announced job cuts is actually rising again....

Also, announced jobs cuts rose 7.1% in April, according to Challenger, Gray & Christmas, to 40,599 — and up 11.2% from last April — another bit of evidence that the jobs market isn’t doing well.

Economic conditions in the United States have been steadily getting worse for quite a while, but that is not the only reason for our employment problems.

There are two other trends that I want to briefly mention.

1) A lot of jobs that used to be very labor intensive are now being replaced by technology. Thanks to robotics, automation and computers, a lot of big companies simply do not need as many workers these days. Those are jobs that are never going to come back.

2) As labor has become a global commodity, millions upon millions of U.S. jobs have been sent overseas. Today, you are not just competing for a job with your neighbors. You are also competing with workers on the other side of the globe. Unfortunately, it is legal to pay slave labor wages in many of those countries. By sending our jobs out of the country, big corporations can also avoid a whole host of rules, regulations, taxes and benefit payments that they would be facing if they hired American workers.

So U.S. workers are at a massive competitive disadvantage. Why should a big corporation pay 10 or 20 times more for an American worker when they can pad their profits by exploiting cheap foreign labor?

The sad truth is that the value that the marketplace puts on the labor of the average American worker is continually decreasing.

This is making it much more difficult to find a job and it is keeping wages down.

In the old days, pretty much any man that was a hard worker and that really wanted a good job could go out and get one.

But now all of that has changed. Back in 1950, more than 80 percent of all men in the United States had jobs. Today, less than 65 percent of all men in the United States have jobs.

And sadly, the vast majority of the jobs that are being lost are good jobs. As I wrote about the other day, 95 percent of the jobs lost during the recession were middle class jobs.

So how are middle class families making it these days?

Many of them are going into tremendous amounts of debt. As a recent CNN article detailed, the average debt load being carried by those of us in the bottom 95 percent of all income earners has risen dramatically over the past several decades....

In 1983, the bottom 95% had 62 cents of debt for every dollar they earned, according to research by two International Monetary Fund economists. But by 2007, the ratio had soared to $1.48 of debt for every $1 in earnings.

Unfortunately, many American families are absolutely maxed out at this point. According to one recent survey, approximately one-third of all Americans are currently paying their bills late.

If your goal is to live a middle class lifestyle, you need to realize that the entire way that the game is being played is changing.

In the old days, you could start out with a company as a young person and stay with that company until you retired. If you worked hard and you were loyal, there was a really good chance that the company would recognize that and be loyal to you too.

These days, most companies are absolutely heartless when it comes to their workers. The good job that you have today could be gone tomorrow. Workers are increasingly being viewed as "liabilities", and there is a good chance that the moment you become "expendable" to your company you will be kicked out on the street.

That is one reason why I am encouraging people to consider starting their own businesses. If you work for someone else, your security can be taken away from you at any moment. But if you work for yourself, you aren't going to get fired.

Unfortunately, tough economic times are coming and things are not going to be easy no matter what road you take. It will be imperative to work harder than ever, to stay flexible, and to never, ever give up.

***UPDATE***

Since the monthly jobs numbers were released on Friday I thought I would update this article to reflect the latest figures.

The federal government has announced that the unemployment rate has declined to 8.1 percent.

That certainly sounds like good news.

But knowing better, I immediately went and checked how the employment to population ratio had changed.

Well, it turns out that the employment to population ratio has fallen once again.

That means that a smaller percentage of working age Americans had jobs in April than in March.

The following are the figures for the past three months....

February 2012: 58.6%

March 2012: 58.5%

April 2012: 58.4%

If the percentage of people that have jobs is going down, then how can they claim that things are getting better?

The following are the two Federal Reserve charts posted above after they have been updated with the new numbers. These charts are very revealing.

1) There are now 12,500,000 workers that are "officially" considered to be unemployed....

2) There are now 88,419,000 Americans that are considered to be "not in the labor force". Please note that this number rose by 522,000 in just a single month!....

Okay, so now let's do the same math that we did before.

12,500,000 unemployed workers plus 88,419,000 Americans that are "not in the labor force" equals 100,919,000 working age Americans that do not have jobs.

That number just continues to climb at a very rapid pace.

When is the mainstream media going to start telling us the truth?

A Teen With A Job Becomes A Rarity In US Economy

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Nick Gentry will be able to celebrate two major accomplishments this month: He’s graduating from high school and, after a very long job search, he has landed his first job.

That Gentry, 18, will be collecting a paycheck makes him a rarity in today's working world.

Only about 25 percent of 16- to 19-year-olds currently are working, a drop of 10 percentage points from just five years ago, according to the Bureau of Labor Statistics.

The percentage of teenagers who have jobs, expressed as the ratio of employment to population, hovered between 40 and 50 percent for much of the 1980s and 1990s. The percentage began dropping about a decade ago, but the declines have been especially steep since the beginning of the Great Recession in late 2007.

With summer approaching and the job market showing signs of improvement, teens could have a better shot at getting hired than they have had in years. But it could take many more years for teens to resume working at pre-recession levels.

The April employment report, due out Friday, will offer more clues into how things will look in the coming months.

Part of the issue is that fewer teens either want to work or think they can get a job. The labor force participation rate, which measures both teens who are working and those actively seeking work, also has fallen sharply since 2000.

The White House pledged on Wednesday to help lower-income youth find summer jobs in a move likely to appeal to younger voters crucial to President Barack Obama's re-election campaign.

The initiative is in partnership with the cities of Philadelphia, Chicago and San Francisco and is meant to add 110,000 jobs, internships and mentorships to the 180,000 summer work opportunities for 16-24 year olds that Obama has promised to create for 2012.

Still, most teens are facing a job market in which there are fewer positions to be had. What’s more, many believe the jobs that are available are increasingly going to adults who are desperate enough to take a job that might once have gone to a teenager.

Gentry, who lives in Murfreesboro, Tenn., said he’s applied for jobs on and off over the past two years.

He finally got a break this spring when his mother, Brenda Gentry, helped him land a part-time job doing yard work for the company where she works in accounting.

“It was pretty exciting, finally getting one,” Nick said.

He plans to use his paycheck for car expenses and other incidentals and says he’s looking forward to not having to ask his mom for money.

“It’ll feel a lot better …because she works real hard to give us what we have,” he said.

Brenda Gentry’s other son, Wes Kirk, hasn’t been so lucky. Kirk, 16, said he’s applied at retail stores and fast food places, always trying to follow up in person with the manager. But so far, he hasn’t been able to get a break.

“I’ve had them say they’re interested, but no one’s ever called me in for an interview,” he said.

Who does, and doesn’t, work
The job market is unquestionably difficult for all teens, but experts say it’s especially hard for those who may need the money most: Teens from poor families and families in which a parent is out of work.

“It’s the opposite of what everybody thinks,” said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University.

Sum said the disparity is partly because many kids get jobs through family and community connections such as parents, neighbors or relatives.

That can also have a ripple effect: The likelihood of working increases significantly once a teen has already held a job, according to his research.

Other research backs up that disparity. Algernon Austin, director of the race, ethnicity and the economy program at the Economic Policy Institute, last year analyzed 2009 data on teens who were not attending school.

He found that 16- to 19- year-olds from poor families, whose income was below the poverty line, were less likely to be working than teens whose families had more money. That was true regardless of race or ethnicity.

“In terms of need, it is backwards,” he said.

The analysis of teens living below the poverty level, just above the poverty level and in middle-class households also found that at every income level, white and Hispanic teens were more likely to be working than black teens.

Austin said low-income and minority teens may not have family connections and role models that can help them land a job. They also may face other obstacles, some as simple as not having access to a car or public transportation to get to work.

“It’s all sort of interconnected – (a) web of disadvantage that makes it difficult to find work,” he said.

‘Nothing like making your own money’
Dominique Plain Bull, 19, landed her first job late last year after her mom helped her connect with a family friend who is a retail store manager. She’s working part-time while attending a community college in Huntsville, Ala., full-time.

Dominique’s mother, Shannon, said she’s glad her daughter found a job and is learning the value of being a good, reliable worker. But she’s also happy that her daughter didn’t work in high school and was instead able to focus on sports and academics.

That’s something Shannon, 35, missed out on because she had Dominique when she was just 15 and started working when she was 16.

“I was kind of wanting her to be a kid, because I wasn’t given the opportunity to have my childhood,” she said.

It can be tiring to work and go to school, but Dominique said she likes her job – and her paycheck.

“There’s nothing like making your own money,” she said.

For some teens who are working, having an entry-level job has provided a valuable life lesson along with a paycheck: It’s taught them what they don’t want to do with the rest of their life.

Moses Goldfarb, 19, didn’t have much trouble landing a job stocking shelves at a grocery store in Seattle in 2009, when he was still in high school. He graduated in 2011 and decided not to go straight to college.

After a year of working, however, he says he regrets that decision and is looking forward to going to school next fall to study film and TV production. A turning point came when he took an unpaid internship last summer working on the television show “Portlandia.”

The hours were long and the pay nonexistent, but he loved going to work every day.

Now, he says, “I want to leave my grocery store and retail days behind me and move on to bigger and better things.”

Payroll Survey Signals U.S. Jobs Slowing as Orders Drop

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Companies in the U.S. added fewer workers last month, according to data from a private survey, pointing to a cooling in the job market, as the Commerce Department also reported a decline in factory orders in March.

Private employment increased by 119,000, the smallest gain in seven months, after rising by 201,000 in March, Roseland, New Jersey-based ADP Employer Services said. Orders to factories fell 1.5 percent following a 1.1 percent gain in February.

Stocks retreated as the smaller-than-projected advance in payrolls raised concerns government data in two days will show the world’s largest economy isn’t growing fast enough to reduce unemployment. A report yesterday showing manufacturing expanded in April at the fastest pace in almost a year helped send the Dow Jones Industrial Average to the highest level since 2007.

“Some slowing of job growth was expected,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Philadelphia. “As of now, the job market continues to expand, and we’re getting close to a self-sustaining recovery” where job growth supports wage gains, he said.

The Standard & Poor’s 500 Index fell 0.4 percent to 1,400.94 at 12:52 p.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 1.93 percent from 1.94 percent late yesterday.

The median forecast of economists surveyed by Bloomberg News called for a 170,000 increase for ADP. Projections ranged from 100,000 to 200,000, based on estimates of 37 economists.

Uncertain Predictor

Over the previous six reports, ADP has been an uncertain predictor of the Labor Department’s monthly estimate. It was closest in October, when ADP’s first estimate of private payrolls overstated the gain by 6,000, and least accurate in December, when it overestimated employment by 113,000.

The government’s report in two days is projected to show payrolls increased by about 160,000 in April after rising 120,000 a month earlier, according to the Bloomberg survey median. The March data raised concern the job market was cooling, mimicking a slowdown in early 2011 that was precipitated by a jump in fuel costs and disruptions caused by the earthquake and tsunami in Japan.

Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd., cut his April payroll estimate after the ADP data. Shepherdson, in an e-mail to clients in which he called the figures “disappointing,” lowered his forecast to 125,000 from 200,000.

Sticks to Forecast

Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, stuck to his projected 175,000 gain. In a note to clients, LaVorgna said that ADP uses figures on jobless claims to produce its estimate, meaning the jump in applications surrounding the Easter holiday probably cut into ADP’s estimate. LaVorgna forecast ADP would show a 125,000 increase.

Elsewhere, joblessness in the 17-nation euro area increased to 10.9 percent in March, the highest since April 1997, from 10.8 percent a month earlier. Separate data showed euro-region manufacturing contracted more than initially estimated last month and unemployment in Germany, the area’s biggest economy, unexpectedly climbed.

In China, a manufacturing index rose in April, signaling a rebound in the world’s second-biggest economy may help to offset constraints on global growth from austerity measures in Europe.

The U.S. economy expanded at a 2.2 percent annual rate in the first quarter after a 3 percent pace in the final three months of 2011, Commerce Department figures showed last week. Growth was led by the biggest gain in consumer spending in more than a year.

Expanding in Illinois

Growing demand is generating employment. Volkswagen AG’s U.S. financing arm said it will expand its Illinois office, adding about 150 new jobs through 2018, as the German automaker expands its American business. VW Credit Inc. on April 20 broke ground on a 30,000-square-foot expansion to about double the size of its facility in Libertyville, Illinois.

The Labor Department’s report on May 4 may also show the jobless rate probably held at 8.2 percent, economists in the survey predicted. Unemployment has exceeded 8 percent since February 2009, the longest stretch of such levels of unemployment since monthly records began in 1948.

The ADP report is based on data representing businesses with more than 21 million workers on payrolls. Macroeconomic Advisers LLC in St. Louis produces the data with ADP.

The Commerce Department’s report showed orders to U.S. factories were restrained by a pullback in demand for aircraft that overshadowed gains elsewhere.

Turbines, Appliances

Bookings fell 1.5 percent after a revised 1.1 percent gain in February, according to figures from the Commerce Department. Turbines and household appliances were among areas showing increases as demand for commercial planes dropped by 48 percent.

The report comes a day after purchasing managers said manufacturing expanded in April at the fastest pace since June as orders, production and employment picked up, indicating the slump in bookings may be short-lived. Exports and consumer spending on big-ticket items like automobiles may be making up for a cooling in business investment, which means factories will continue to support the expansion.

Orders “have been on a see-saw pattern over the past four months, largely because of big swings in civilian aircraft,” Steven Wood, president of Insight Economics LLC in Danville, California, said in a note to clients. “Despite this month’s decline, new orders have been on a rising trend,” he said. “The demand for manufactured goods is recovering moderately.”

Job Cuts Increase 7.1% in April

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Planned job cuts increased by 7.1 percent to 40,559 in April from March, the latest job cut report released by outplacement firm Challenger, Gray & Christmas showed on Thursday.

From the same month a year ago, job cuts were up 11.2 percent and so far this year the number of job cuts has increased by 9.8 percent to 183,653.

But despite the year-on-year increase, the monthly average in the first four months of this year is below the 12-month average of last year, the report pointed out.

April’s job cuts were led by the education sector, with a total of 9,027 planned cuts, up 142 percent from March as school districts continue to be under pressure to cut costs amid massive state and local budget deficits. But the pace of downsizing in the sector fell 32 percent from a year ago, the report added.

Consumer products companies have been the main job cutters for the year, having announced 20,134 planned job cuts through April, 257 percent more than the cuts announced by this point last year.

“Even at its best, job creation is falling well short of what is needed to make a substantial dent in unemployment,” John Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement.

“While some would like to attribute the lack of hiring to uncertainty and regulatory roadblocks, the fact is that demand for goods and services simply has not reached a level that warrants accelerated hiring,” Challenger added.

He added that state and local governments, as well as the federal government, were still “in cost-cutting mode,” consumer spending remained soft and although business spending was improving, it was not nearly enough to make up for the shortfall in consumer and government spending.

The Poor are Getting Poorer. Is It Time to Raise the Minimum Wage?

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One of the harshest realities of America's slow economic recovery -- and there are many -- is the fact in spite of modest job growth, pay for workers is falling. Year over year, average inflation adjusted wages have dropped by 0.6 percent for all private sector employees. They're down a full 1 percent for non-supervisors -- your retail salespeople, your shop floor factory workers, your cashiers. In other words, even as the overall employment picture has improved in fits and starts, the working poor are getting poorer.

Some believe this is a sign of the recovery's weakness, and today the National Employment Law Project used it as a rallying point to call for a higher minimum wage. According to their analysis, which is current through the beginning of 2011, while the bulk of job losses during the recession affected medium wage earners, such as paralegals and nurses, most of the hiring post-recession has been for low-paid service work. Middle class jobs, they argue, have been replaced with poverty wage jobs.

I read the situation we're in a bit differently, but not much more optimistically. As I've written before, part of the reason real wages are dropping now is that, counterintuitively, they rose during recession, as shown in the graph below from the Bureau of Labor Statistics, which tracks hourly earnings of all private sector, non-supervisory employees. Note the sudden spike that began in late 2008, as the financial world melted down. Pay had been stagnating for years. Why did it shoot up when the economy went haywire? As NELP's own findings show, it's not because companies handed pink slips to a disproportionate number of poorly paid workers. Quite the opposite. Instead, it appears that many of those who were lucky enough to keep their jobs received small pay hikes (yes, econo-nerds, I am talking about nominal wages), despite the fact that inflation plunged into negative territory. That combination gave a significant bump to inflation-adjusted wages at a time when employers could least afford it.

BLS_Real_Wages_Non_Supervisory.PNG

In short, the labor market got warped. Now it's straightening out. This might be good for job creation, since companies should theoretically be more willing to hire workers if they're cheaper to pay.

But here's the alarming part. All of this might simply mean that the same forces that caused wages to stagnate before the recession will make them stagnate after the recession. It's just another sign that income inequality is here to stay, unless something radical changes that will give working class families a larger slice of the pie. Will raising the minimum wage do that? It might help on the margins, certainly for the 3.8 million workers who earn it. (I'm not one of those who believes that a higher minimum wage actually kills jobs. This great, short Slate piece from 2004 explains why.) But the vast majority of American workers won't see much benefit from it. Rather, fixing the wage problem means we need to think about the fundamental problems skewing income growth towards the top, from spiraling CEO pay to tax policy.

Falling wages are taking us back to where we were before the recession. For many workers, that's not a good place. And there aren't any easy ways out of it.

Russia 'Retains Right' To Pre-Emptive Strike On Missile Shield

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Russia is ready for a pre-emptive strike on European missile defense systems if the US refuses dialogue, stated Russia’s senior military official. Washington has responded by saying it doesn’t rule out giving Russia legally binding guarantees on AMB.

Russia is ready for a pre-emptive strike on European missile defense systems if the US refuses dialogue, stated Russia’s senior military official. Washington has responded by saying it doesn’t rule out giving Russia legally binding guarantees on AMB.

“Russia is constantly speaking about guarantees of ABM systems not targeting it, but we think we need to come to cooperation. We provide guarantees after we start cooperating,” Ellen Tauscher, US Special Envoy for Strategic Stability and Missile Defense, told reporters at the end of the first day of the Moscow ABM conference.

Earlier on Thursday Russia’s Chief of General Staff Nikolay Makarov stated that Russia might consider a pre-emptive strike an option in certain circumstances.

“Considering the destabilizing nature of the [American] ABM system, namely the creation of an illusion of inflicting a disarming [nuclear] strike with impunity, a decision on pre-emptive deployment of assault weapons could be taken when the situation gets harder,” Makarov said.

Among other measures, Russia has already promised to deploy short-range Iskander missiles in the Kaliningrad Region if NATO fails to reach agreement with it on missile defense.

After Makarov`s remarks, the NATO delegation present at the conference hastened to take issue with the Russian general, saying that the ABM system would never target Russia.

Russia is concerned that the ultimate aim of America’s global ABM shield is the gradual diminution of the effectiveness of Russia’s nuclear arsenal. Moscow says no country possesses any militarily significant quantity of nukes to pose a vital nuclear threat to the US other than Russia.

Vice chairman of the Polish foreign affairs committee Tadeusz Iwinski told RT a pre-emptive strike on Poland represented the “worst case scenario.”

Speaking as a representative of the Polish opposition, Iwinski, said an agreement between Russia and the United States was vital for his country’s security. He further claimed that US Undersecretary of State Ellen Tauscher “was ready to offer guarantees” that the ABM system“was not going to be against Russia.”

Political analyst Vladimir Orlov thinks that missile threats against Europe, which the shield is supposedly designed to counter, are “very much exaggerated.”

“Missile threats by those countries which Americans and Europeans claim develop long-range missiles, it is just not credible. Europe should not feel vulnerable and the issue is that Russia instead of Europe now feels vulnerable,” he asserted.

Moscow's proposition to develop a joint-European missile defense system has been turned down.

Political analyst Jan Tamas believes the generation of leaders in the Eastern European countries that want to join the US-led AMD system are still thinking in the terms of the Cold War. “They still have negative feelings towards Russia and are also partly afraid of Russia. They take this participation in the system as a sort of guarantee for their security,” he told RT.

They don’t realize that this is not a guarantee but that it would actually make them a target.”

Also, the Obama administration refused to give cast-iron guarantees that the new ABM is not going to be deployed against Russia.

Bruce Gagnon from the 'Global Network Against Weapons and Nuclear Power in Space' think tank told RT the lack of guarantees reflects the US intention "to continue surrounding Russia and China with these so-called missile defense systems.”

Saying Iran has no missiles capable of hitting the United States, Gagnon says the system is aimed at Russia because it has “the world’s largest supply of natural gas.” He further argues “the Pentagon’s primary job today is to serve as a resource extraction service on behalf of corporate globalization.”

'Heading towards a dead end'


The Russian Defense Ministry has organized a representational international conference called “Missile Defense Factor in Establishing New Security Environment” on May 3-4 in Moscow to correlate positions of many interested states on the burning issue of missile defense.

Over 200 experts from military departments of 50 countries, including 28 NATO states, have gathered in the Russian capital to share opinions.

Opening the conference, Russian Defense Minister Anatoly Serdyukov stated that so far no mutually-acceptable solution to the issue of ABM has been found.

“The situation is practically heading towards a dead end,” acknowledged Servdyukov.

At the same time, the Russian president sent an address to the conference, sharing hope that a solution can be found.

“I believe we can find a formula which could help us avoid the division into those who win and those who lose,” President Medvedev insists.

The conference consists of several working groups. Russia’s Ministry of Defense is going to present a computer model of how the American ABM in Europe is going to influence Russia’s forces of nuclear containment.

Besides Russia and NATO member countries, experts from China, South Korea, Japan and CSTO (Collective Security Treaty Organization) member states will participate in the Moscow conference.

As a goodwill gesture, Russia wants to make an excursion for the delegates to the heart of Moscow’s A-135 ABM system near the Russian capital.

No official documents are going to be signed as a result of the ABM conference in Moscow.

Secret Hidden In US-Afghan Deal - Pact Won't End War - Or SOF Night Raids

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The optics surrounding the Barack Obama administration's "Enduring Strategic Partnership" agreement with Afghanistan and the Memorandums of Understanding accompanying it emphasise transition to Afghan responsibility and an end to U.S. war.

But the only substantive agreement reached between the U.S. and Afghanistan - well hidden in the agreements - has been to allow powerful U.S. Special Operations Forces (SOF) to continue to carry out the unilateral night raids on private homes that are universally hated in the Pashtun zones of Afghanistan.

The presentation of the new agreement on a surprise trip by President Obama to Afghanistan, with a prime time presidential address and repeated briefings for the press, allows Obama to go into a tight presidential election campaign on a platform of ending an unpopular U.S. war in Afghanistan.

It also allows President Hamid Karzai to claim he has gotten control over the SOF night raids while getting a 10-year commitment of U.S. economic support.

But the actual text of the agreement and of the Memorandum of Understanding (MOU) on night raids included in it by reference will not end the U.S. war in Afghanistan, nor will they give Karzai control over night raids.

The Obama administration's success in obscuring those facts is the real story behind the ostensible story of the agreement.

Obama's decisions on how many U.S. troops will remain in Afghanistan in 2014 and beyond and what their mission will be will only be made in a "Bilateral Security Agreement" still to be negotiated. Although the senior officials did not provide any specific information about those negotiations in their briefings for news media, the Strategic Partnership text specifies that they are to begin the signing of the present agreement "with the goal of concluding within one year".

That means Obama does not have to announce any decisions about stationing of U.S. forces in Afghanistan before the 2012 presidential election, allowing him to emphasise that he is getting out of Afghanistan and sidestep the question of a long-term commitment of troops in Afghanistan.

The Bilateral Security Agreement will supersede the 2003 "Status of Forces" agreement with Afghanistan, according to the text. That agreement gives U.S. troops in Afghanistan immunity from prosecution and imposes no limitations on U.S. forces in regard to military bases or operations.

Last month's Memorandum of Understanding (MOU) on night raids was forced on the United States by Karzai's repeated threat to refuse to sign a partnership agreement unless the United States gave his government control over any raids on people's homes. Karzai's insistence on ending U.S. unilateral night raids and detention of Afghans had held up the agreement on Strategic Partnership for months.

But Karzai's demand put him in direct conflict with the interests of one of the most influential elements of the U.S. military: the SOF. Under Gen. Stanley A. McChrystal and Gen. David Petraeus, U.S. war strategy in Afghanistan came to depend heavily on the purported effectiveness of night raids carried out by SOF units in weakening the Taliban insurgency.

CENTCOM officials refused to go along with ending the night raids or giving the Afghan government control over them, as IPS reported last February.

The two sides tried for weeks to craft an agreement that Karzai could cite as meeting his demand but that would actually change very little.

In the end, however, it was Karzai who had to give in. What was done to disguise that fact represents a new level of ingenuity in misrepresenting the actual significance of an international agreement involving U.S. military operations.

The MOU was covered by cable news as a sea change in the conduct of military operations. CNN, for example, called it a "landmark deal" that "affords Afghan authorities an effective veto over controversial special operations raids."

But a closer reading of the text of the MOU as well as comments on by U.S. military officials indicate that it represents little, if any, substantive change from the status quo.

The agreement was negotiated between the U.S. military command in Kabul and Afghan Ministry of Defence, and lawyers for the U.S. military introduced a key provision that fundamentally changed the significance of the rest of the text.

In the first paragraph under the definition of terms, the MOU says, "For the purpose of this Memorandum of Understanding (MoU), special operations are operations approved by the Afghan Operational Coordination Group (OCG) and conducted by Afghan Forces with support from U.S. Forces in accordance with Afghan laws."

That carefully crafted sentence means that the only night raids covered by the MOU are those that the SOF commander responsible for U.S. night raids decides to bring to the Afghan government. Those raids carried out by U.S. units without consultation with the Afghan government fall outside the MOU.

Coverage of the MOU by major news media suggesting that the participation of U.S. SOF units would depend on the Afghan government simply ignored that provision in the text.

But Pentagon spokesman John Kirby told reporters flatly Apr. 9 that Karzai would not have a veto over night raids. "It's not about the U.S. ceding responsibility to the Afghans," he said.

Kirby would not comment on whether those SOF units which operated independently of Afghan units would be affected by the MOU, thus confirming by implication that they would not.

Kirby explained that the agreement had merely "codified" what had already been done since December 2011, which was that Afghan Special Forces were in the lead on most night raids. That meant that they would undertake searches within the compound.

The U.S. forces have continued, however, to capture or kill Afghans in those raids.

The disparity between the reality of the agreement and the optics created by administration press briefings recalls Obama's declarations in 2009 and 2010 on the withdrawal of U.S. combat troops from Iraq and an end to the U.S. war there, and the reality that combat units remained in Iraq and continued to fight long after the Sep. 1, 2010 deadline Obama he had set for withdrawal had passed.

Fifty-eight U.S. servicemen were killed in Iraq after that deadline in 2010 and 2011.

But there is a fundamental difference between the two exercises in shaping media coverage and public perceptions: the Iraq withdrawal agreement of 2008 made it politically difficult, if not impossible, for the Iraqi government to keep U.S. troops in Iraq beyond 2011.

In the case of Afghanistan, however, the agreements just signed impose no such constraints on the U.S. military. And although Obama is touting a policy of ending U.S. war in Afghanistan, the U.S. military and the Pentagon have public said they expect to maintain thousands of SOF troops in Afghanistan for many years after 2014.

Obama had hoped to lure the Taliban leadership into peace talks that would make it easier to sell the idea that he is getting out of Afghanistan while continuing the war. But the Taliban didn't cooperate.

Obama's Kabul speech could not threaten that U.S. SOF units will continue to hunt them down in their homes until they agree to make peace with Karzai. That would have given away the secret still hidden in the U.S.-Afghan "Enduring Strategic Partnership" agreement.

But Obama must assume that the Taliban understand what the U.S. public does not: U.S. night raids will continue well beyond 2014, despite the fact that they ensure enduring hatred of U.S. and NATO troops.

America's Top Prison Corporation: A Study in Predatory Capitalism and Cronyism

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Last week I wrote about the private prison company The GEO Group and how allowing private businesses to operate prisons can affect our justice system, our laws and the fate of our prison population. This week, I will tackle the largest private prison company, the Corrections Corporation of America (CCA) and its unprecedented proposal to buy prisons from money-strapped states, as well as how CCA has gamed the system with trips through the revolving door, self-dealing and influence peddling.

Just to set the stage as to how large the prison population is in the United States: our prison population is the highest in the world; one out of 100 US residents are in prison. This number has grown dramatically since 1990, due to tighter crime laws and longer sentences. According to the American Civil Liberties Union (ACLU), "Between 1970 and 2005, the number of people incarcerated in the United States grew by 700 percent. Today, the United States incarcerates approximately 2.3 million people."

The private prison population has also been exploding. From the ACLU:

Even compared to this breathtaking rate of overall growth in incarceration, the rate of expansion of for-profit imprisonment far outpaced the field, accounting for a disproportionate increase in the number of people locked up. In 1980, private adult prisons did not exist on American soil, but by 1990 private prison companies had established a firm foothold, boasting 67 for-profit facilities and an average daily population of roughly 7,000 prisoners. During the next twenty years (from 1990 to 2009) the number of people incarcerated in private prisons increased by more than 1600%, growing from approximately 7,000 to approximately 129,000 inmates.

The largest private prison company, CCA, realized that this was going to be a lucrative market and decided to take their marketing and private takeover strategy one step further. In January of this year, they sent a letter to 48 states, many of them strapped for cash, and offered to buy the state prisons and enter a 20-year-plus contract with the states to house their prisoners. This was done under the persistent ruse that private prisons can be run cheaper than state prisons, even though most of the studies prove otherwise.

CCA has a $250 million fund ready to buy prisons from desperate or conservative states who are trying to find anything in the short term to ease their cash flow or privatize as much of the state's functions as possible before the next election.

The Huffington Post received in February a copy of the letter that CCA sent to these 48 states. CCA lays out the stark terms by which the states can get short-term money by selling their prisons:

We want to build on that success and provide our existing or prospective government partners with access to the same opportunity as they manage challenging corrections budgets. Interested parties would execute the sale to CCA and enter into a long-term management contract of 20 years or more.

Physical requirements for facilities that would be eligible for purchase by the fund would include:

  • A minimum rated occupancy of 1,000 beds;
  • A structure age of no more than 25 years;
  • A designation that the structure is suitable for immediate occupation or is alreadyoccupied by an inmate population; and
  • An assurance by the agency partner that the agency has sufficient inmatepopulation to maintain a minimum 90 percent occupancy rate over the term of the contract.

So, the state that surrenders their prisons to this arrangement would have to guarantee a 90 percent rate, even if the crime rate drops or there are fewer prisoners because mandatory sentences or three-strike laws are changed, or even if there is a drop in crime due to the decriminalization of certain drugs.

CCA realizes that the prison population may shrink due to a falling crime rate and warns of that problem in their 2010 annual report:

The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through the decriminalization of certain activities that are currently proscribed by our criminal laws. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them. Legislation has been proposed in numerous jurisdictions that could lower minimum sentences for some non-violent crimes and make more inmates eligible for early release based on good behavior. Also, sentencing alternatives under consideration could put some offenders on probation with electronic monitoring who would otherwise be incarcerated. Similarly, reductions in crime rates or resources dedicated to prevent and enforce crime could lead to reductions in arrests, convictions and sentences requiring incarceration at correctional facilities.

If this language sounds familiar, it is very similar to the language that The GEO Group put in their annual report, which I quoted in last week's article. Like GEO, CCA knows that it may lose market share if our society gets better and we stop imprisoning so many of our citizens.

But the enterprising CCA believes that it has found a way to panic states to sell their prisons in these desperate fiscal times and then lease them back to the states while maintaining a monopoly for 20 years. The old management contracts that private prison companies have with state-owned prisons can be re-competed, but with this ownership arrangement, CCA would be in the driver's seat, and the states would not have the choice to opt out of CCA prisons unless they built new prisons.

According to The Huffington Post, CCA had a company earnings call last year to explain how, despite these dire fiscal times, the company could make money:

"We continue to believe we are very well-positioned in a market that, despite the economic pressures faced by our customers, has provided healthy financial performance,"Corrections Corporation chief executive Damon Hininger said in the company earnings call last November. "Indeed, it is because of these pressures, which lead to severe capital constraints and the need to avoid increasing their pension liabilities, that we believe our value proposition to customers is getting stronger."

CCA based this new marketing strategy on the success it had with Ohio. Late last year, the state of Ohio agreed to sell their Lake Erie Correctional Facility to CCA for around $72 million and even promised to pay CCA for a 90 percent inmate rate even if the inmate population drops below 90 percent. Perhaps CCA's sales pitch had a more favorable audience in Ohio because the current head of Ohio's Department of Corrections, Gary C. Mohr, was formerly a managing director at CCA. Now Ohio will have to honor a contract of 20 years or more and be on the hook to pay CCA for a 90 percent inmate rate, even if crime goes down and they can't fill the prisons. CCA now has a monopoly on that prison.

Based on my knowledge of government contractors and the promises of saving money through privatization, Ohio will not come out on the good side of this deal. CCA has to make a profit, and they will find a way to do it. What will Ohio be able to do about it? Build a new public prison and cancel a contract with CCA that most likely will have a large cancellation fee? Unlikely. One can only hope that cooler heads will prevail in other states and they will not panic and get locked into a 20-year mess with this company.

CCA has also been a member of the American Legislative Exchange Council (ALEC), the free market nonprofit that has been making cookie-cutter laws to advance many conservative social and political goals. Although CCA left the council in 2010, according to The Arizona Republic: "for the past few decades, a CCA executive has been a member of the council's [task force that] produced more than 85 model bills and resolutions that required tougher criminal sentencing, expanded immigration enforcement and promoted prison privatization.... CCA's senior director of business development was the private sector chair of the task force in the mid to late 90's when it produced a series of model bills promoting tough-on-crime measures that would send more people to prison for a longer time."

If CCA is successful in buying prisons in other states, those ALEC-based bills should help ensure a 90 percent prison rate for years to come.

Many CCA officials have gone through the revolving door between CCA and state and federal government positions to ensure that the company has influence in all levels of government. Alex Friedmann of the Private Corrections Institute has kept a list of CCA officials who have have kept the revolving door spinning occupying positions of influence within and outside of government.

Here is a list that Friedmann compiled for this column:

Some notable CCA officials who came from the public sector:

  • Board chairman and former CEO John D. Ferguson is a former Tennessee Commissioner of Finance and Administration.
  • Board member Donna M. Alvarado was a deputy assistant to the US Secretary of Defense, counsel for the US Senate Judiciary Committee's Subcommittee on Immigration and Refugee Policy, and staff member of the US House of Representatives Select Committee on Narcotics Abuse and Control.
  • Board member Dennis DeConcini is a former US senator from Arizona.
  • Board member Thurgood Marshall Jr. was cabinet secretary to President Clinton and director of legislative affairs and deputy counsel to Vice President Al Gore.
  • Chief Development Officer Tony L. Grande is a former Tennessee commissioner of economic and community Development.
  • Chief corrections officer Harley G. Lappin is a former director of the federal Bureau of Prisons (BOP) (he resigned from the BOP shortly after being arrested for driving under the influence).
  • Vice President of Facility operations Unit 3 Steven Conry is a former New York Department of Corrections warden and assistant divisional chief.
  • Vice President of Partnership Development Natasha Metcalf is a former commissioner for the Tennessee Department of Human Services.
  • Senior Vice President J. Michael Quinlan is a former director of the BOP. (He was sued by a BOP employee who claimed Quinlan had sexually harassed him in a hotel room; the case settled confidentially).
  • Vice President of Partnership relations Brad Regens, served as director of fiscal policy for the Arizona House of Representatives.
  • Vice President of Health Services Herb Spiwak served as regional administrator for the California Department of Corrections.
  • Vice President of Facility Operations Unit 1 Ron Thompson spent 31 years with the BOP, including as an assistant director.
  • Vice President of Partnership Relations Bart VerHulst is a former chief of staff for former US senator Bill Frist from Tennessee.

The most disappointing name to see on this list is that of Thurgood Marshall Jr., son of the iconic Supreme Court Justice Thurgood Marshall. According to his biography on the CCA web site, Marshall has joined other groups that promote social justice. "He serves on the American Bar Association Election Law Committee and serves as a board member of the National Fish & Wildlife Foundation, the National Womens Law Center and the Supreme Court Historical Society, and serves on the Ethics Oversight Committee of the United States Olympic Committee." However, Marshall is also a partner in the DC law firm of Bingham McCutchen LLP, advising government contractors, "with communications, political and legal strategies" (read: lobbying and influence peddling).

Considering that his father's work on the Supreme Court concentrated on civil rights and the rights of criminals, it is ironic that Marshall is making good money on the board of directors of the largest private prison company in America. I contacted Marshall to hear his reasons for serving on the board of this company in light of its history of poor treatment of prisoners, but he referred me to CCA's public relations manager, who informed me that Marshall was not available for an interview. For many examples of CCA's abuse of prisoners and of how it cuts corners to increase profits, see the ACLU's Banking on Bondage report and the Private Corrections Institute's web site.

CCA has also garnered success by throwing around plenty of lobbying money in the past few years to help its private-prison concept get a toehold around the country. According to The Arizona Republic:

CCA has spent about $17.6 million lobbying Congress and federal agencies over the past decade, according to records compiled by the Center for Responsive Politics, a nonpartisan organization that tracks the effect of money on U.S. politics. The agencies include the Department of Homeland Security and its Immigration and Customs Enforcement division, which contract with private operators such as CCA for immigration-detention centers.

So, is anyone making a dent in CCA's blitz on privatizing as many prisons as possible, or in its notorious lack of care and abuse of its prisoners? Many groups such as the ACLU have been doing reports and urging reform, but Friedmann, who is with Prison Legal News as well as the Private Corrections Institute, is making a bold stand next week at CCA's board meeting in Nashville.

Friedmann, who served ten years in prison and was released in 1999, spent six of those years in a CCA-run prison, so he has firsthand knowledge (albeit with a bias) of CCA's mode of operations. Since his release, he has amassed an impressive amount of information on all private prison companies, but has decided to make a stand on CCA. When I interviewed him for this column, he told me his bold plan to try to make CCA accountable to their stockholders. In his words:

In 2010, I purchased additional shares that gave me a $2,000 stake in the company and held the shares for one year, which qualified me to introduce a shareholder resolution. I did so for the first time in November 2011. My resolution would require CCA to issue biannual reports concerning its efforts to reduce prisoner rape and sexual abuse at its facilities, as well as data for all such incidents during each reporting period.

The resolution is currently pending and will be considered at CCA's annual meeting on May 10 in Nashville, Tennessee, where I reside. CCA filed an objection with the SEC to have the resolution excluded; I retained pro bono counsel to respond, and the SEC ruled in my favor earlier this year.

CCA then included a lengthy objection in their proxy statement urging shareholders to vote against my resolution. I drafted a formal solicitation statement in support of the resolution, filed it with the SEC, and, using SEC rules, required CCA to distribute my statement to around 4,600 shareholders (at my expense).

Meanwhile, I began contacting organizations involved in socially responsible investing, as well as proxy advisory services (Glass Lewis, ISS Governance, etcetera) and institutional CCA shareholders that own over 200,000 shares - such as Wells Fargo, General Electric, Vanguard, Lazard, etcetera. The reception from corporations that own CCA stock has mostly been chilly.

Recently, ISS and another advisory firm, ProxyTell, issued recommendations to vote for my resolution, while Glass-Lewis recommended against. CCA has taken the unusual step of issuing a supplemental proxy statement, again urging shareholders to vote against the resolution.

The entire CCA board of directors, including Marshall, have advised the stockholders to vote against Friedmann's resolution before the annual meeting on May 10.

The Guardian, a British-based newspaper, picked up on Friedmann's battle to force this resolution at the annual meeting and outlined CCA's history of problems of sexual abuse in their prisons.

Friedmann is trying to make a dent in CCA's overwhelming influence and power. He is heading a petition at Change.org to urge CCA's stockholders and management to pass his resolution to help curb rape and sexual abuse at CCA prisons.

CCA and the other private prison companies have made a great effort to lobby and influence beleaguered state governments to increase the number of private prisons in this country. Next week, I will examine how these companies are working on and with the federal government on another potential growth area for the prison population - immigrants who are imprisoned while waiting for deportation. CCA, The GEO Group and other private prison companies are working that system to gain even more of a private-prison foothold in the lucrative sector of federal immigrant detention facilities. I will also explore possible suggestions for reining in the private prison industry from preying on our state and federal governments and our prisoners.

If you are interested in learning more about Friedmann's petition effort, you can view the petition here.