Tag Archives: Bernie Sanders

Obama’s Fiscal Commission Prepares to Carve Its Turkey

The dread report of the White House’s National Commission on Fiscal Responsibility and Reform is due out this week.  One of the Commission’s co-chairs, the putative Democrat and consummate wheeler-dealer Erskine Bowles, has been up on the Hill flogging their plan to reduce the debt by cutting the country’s already skimpy programs for the old, the sick, and the poor. His partner, motor-mouth Republican Alan Simpson, continues his ranting and ravings against the greedy geezers who want to sink the entitlement-cutting ship before it’s launched. Both of them have taken to boo-hooing because no one appreciates all the work they are doing to save the nation from certain fiscal doom, and nobody is willing to pitch in to meet this noble goal.

Fiscal Commission's Plan: Starve the Old to Stuff the Rich

Personally, I’m still waiting to hear how Wall Street is going to pitch in and do its part–or the people with high six-figure incomes who claim they still aren’t rich enough to give up their tax cuts. Or, for that matter, Bowles and Simpson themselves, who retired on fat  pensions and don’t have a financial care in the world.  Since none of this is likely to happen any time soon, we’d better take a good hard look at what these sanctimonious old coots have come up with.

We already know a lot about what to expect from the Fiscal Commission Plan, since the co-chairs released their own preliminary proposals (as yet unapproved by the 18-member Commission) earlier this month. According to people with access to the Commission’s thinking, they seem to think their best bet is to achieve consensus on a proposal to change the way Social Security’s annual cost of living increases (COLAs) are calculated. What seems like a mere accounting adjustment would, in reality, severely affect benefits over time. The National Committee to Preserve Social Security and Medicare explains the impact of this scheme:

This proposal will affect current and future beneficiaries uniformly.  The impact would occur after benefits are initiated, with each COLA, as the yearly increase in benefits would be slightly lower than would have been the case without the change.  The impact would be greater with each successive COLA.  For example, the Social Security benefits paid to someone collecting benefits for 10 years would be about 3 percent lower, on average, if the chained-CPI was used for the COLA instead of the current CPI-W.  After 20 years this reduction would reach 6 percent and 9 percent after 30 years.

This is is bad enough–especially since old people’s cost of living increases faster than the national average because of exploding health care costs. But of course, there’s more, in the form of a plan that would raise the retirement age to 67 and eventually 69. Working until you drop dead or  literally are forced out of the labor market is utilitarian nineteenth-century thinking. But at that time, at least there was an expanding need for workers in a burgeoning industrial capitalist economy. The one big profitable industry surviving in America today is so-called financial services, which consists of a small number of overpaid people passing money back and forth amongst themselves. They certainly don’t need any more workers, and if they do, they’ll get them in India. Vermont Senator Bernie Sanders said of the idea that it was not only “reprehensible,” but “also totally impractical. As they compete for jobs with 25-year-olds, many older workers will go unemployed and have virtually no income.”

There was no such ringing takedown of the plan, of course, from Senate Majority Leader Harry Reid, whose mealy-mouthed statement tells us what we can expect from our Democratic Senate. “I thank the leaders of the bipartisan debt commission for their work,” Reid said. “While I don’t agree with every one of their recommendations, what they have provided is a starting point for this important discussion. I look forward to the full commission’s recommendations and to working with my colleagues on both sides of the aisle to address this important issue.”

Nancy Pelosi had somewhat stronger words, calling the preliminary proposals “simply unacceptable”–but then, she’s nothing but the soon-to-be-ex-Speaker of the House. In fact, co-chair Simpson has been predicting, with something close to glee, the “bloodbath” that’s likely to ensue next spring, when the new Republican House refuses to extend the debt limit and threatens to send the nation into default “unless we give ’em a piece of meat, real meat, off of this package.”

When all is said and done, there’s pretty much no way this so-called debate will end up without most of us, old and young alike, getting screwed. An already stingy program that ought to be expanded to cover elders as their numbers grow instead  is going  to be reduced, and the only question is how and by how much. It makes no sense, but it may well have political traction because the pols can sell it as an attack on rich grannies–“the greediest generation” as Simpson calls the old–while the young are hoodwinked into thinking it’s good for them. And since its full effect will take  years to be felt, the current crop of opportunistic politicians will be long gone into splendid retirement by the time these young people realize how wrong they are. Alan Simpson was frank about this fact in the Washington Post on Friday, using another one of his nauseatingly folksy metaphors:

 It takes six to eight years to pass a major piece of legislation. . . . On a piece of legislation that you know is going to go somewhere someday, you want to get a horse on the track. That might be not much. Then the next session you want to put a blanket on the horse. Nobody’s paying attention then. Then you put some silks on the horse. Then you clean the outfield and the infield. And then you put a jockey on the horse in the sixth year, and you can win it. Because the toughest part is to do the initial thing, and so it’s usually so watered down, it’s just gum, you could gum it. Then you begin to build it the next year, the next year and then you get it done. That’s what I see.

And just in case you thought it couldn’t get any worse, consider this warning from Allan Sloan, Fortune’s senior editor, who wrote an op-ed in the the Washington Post on Thanksgiving day:

[P]rivatizing Social Security, slaughtered when George W. Bush proposed it five years ago, seems about to rear its foul head again. You’d think that the stock market’s stomach-churning gyrations – two 50 percent-plus drops in just over a decade – would have shown conclusively the folly of retirees’ having to bet their eating money on the market. But you’d be wrong. Stocks have been rising the past 18 months, and you can bet that we’ll see a privatization push from newly elected congressmen and senators who made it a campaign issue.

Why is privatizing Social Security such a turkey? Because retirees shouldn’t have to depend on the market’s vagaries for survival money. More than half of married couples older than 65 and 72 percent of singles get more than half of their income from Social Security, according to the Social Security Administration. For 20 percent of 65-and-older couples and 41 percent of singles, Social Security is 90 percent or more of their income. That isn’t projected to change.

Arrayed against these grim prospects are a small group in Congress, led in the Senate by Bernie Sanders and Sheldon Whitehouse of Rhode Island, and in the House by Jan Schakowsky of Illinois. Says Shakowsky

Social Security has nothing to do with the deficit. Addressing the Social Security issue as part of the deficit question is like attacking Iraq to retaliate for the 9/11 attacks – there is simply no relationship between the two and attempting to conflate them does a grave disservice to America’s seniors. Taking money from Social Security retirees whose average total income is $18,000 per year and average benefit is $14,000 ($12,000 for women) is simply wrong. It places them at fiscal risk and hurts the economy because they will be unable to purchase the goods they need.  Americans in poll after poll have indicated their opposition to benefit cuts – particularly at a time when Wall Street bankers are making record bonuses.’

Schakwosky has her own plan, which will be an antidote to whatever the Fiscal Commission comes up with. But her ideas are unlikely to make any headway in the lame duck Congress or with the Democratic leadership, as they wait, already on bended knee, for the coming of the Republicans.

Health Insurers Rake in Mammoth Profits

Senator Bernie Sanders of Vermont reported today that the five largest health insurance companies posted $12.2 billion in profits last year, 56 percent more than 20008.

In a study of public records Health Care for America Now  found that WellPoint Inc., UnitedHealth Group, Cigna Corp., Aetna Inc. and Humana Inc. covered 2.7 million fewer people than they did the year before.  Some of the insurers actually cut the proportion of premiums that went to medical care and put more into salaries and profits. 

WellPoint’s profit margin of 7.2 percent was the highest of the five big insurers.  Anthem Blue Cross, a California subsidiary of WellPoint, has come under fire for jacking up premiums by as much as 39 percent this year on some individual health policies.

Bernie Sanders Wins Support for Community Health Centers

Bernie Sanders,who had warned he would vote against the Senate health care reform bill,now is supporting it. Along with the votes of  Sherrod Brown and Ben Nelson, Sander’s vote puts the Dems over the top and should assure passage. His reasoning in a statement released from the Senator’s ofice:

 A $10 billion investment in community health centers, expected to go to $14 billion when Congress completes work on health care reform legislation, was included in a final series of changes to the Senate bill unveiled today.The provision, which would provide primary care for 25 million more Americans, was requested by Sen. Bernie Sanders (I-Vt.). 

He said the additional resources will help bring about a revolution in primary health care in America and create new or expanded health centers in an additional 10,000 communities. The provision would also provide loan repayments and scholarships through the National Health Service Corps to create an additional 20,000 primary care doctors, dentists, nurse practitioners, physician assistants and mental health professionals.

Congress Reaches Its Credit Limit

Flanked by local residents who have wrenching stories of crippling debt, President Obama today staged an event in Albuquerque, New Mexico, to persuade Congress to pass the tougher credit card regulations now being hashed out in the Senate. While the push makes a welcome change from the government’s traditional reluctance to crack down on the industry, Congress is willing to go only so far. As some consumer groups have pointed out, the legislation remains riddled with loopholes for heavyweight banks.

Bad credit card debt may be the next big crisis looming on the economic horizon, many financial analysts say. Credit card debt in the United States now totals more than $960 billion, with default rates nearing 10 percent for some lenders. Many of the biggest credit card lenders are the same institutions that have only escaped collapse thanks to massive infusions of government bailout funds. Most of that money was used to help banks recover from their losses in the mortgage meltdown, and won’t cover additional shortfalls if credit card defaults reach the record-breaking highs that some experts project. According to Bloomberg, defaults could wipe out 40 to 50 percent of the annual profits of American Express, Bank of America, and JPMorgan, and cause further losses for Citigroup.

In response, lenders are squeezing what they can from those borrowers who are still trying to pay their debts—cutting back on credit limits, jacking up interest rates, and shortening the time to pay bills. By drafting legislation that won’t take effect until 2010, Congress has simply encouraged banks to accelerate their predatory lending practices before the bill comes due. 

But the legislation has bigger problems than timing. The Federal Reserve will be responsible for writing the rules to put the legislation into practice. Not only has the Fed turned a deaf ear to consumer problems for years, stringent credit card regulation goes against its institutional interest. The Fed’s main job is to pump-prime and oversee banks. Why should the bankers who run the Fed strip their client banks of credit card profits when those banks already need billions from taxpayers to stay afloat?

Once written, the new rules will be enforced by the utterly supine Office of the Comptroller of the Currency in the Treasury Department. This unit has rarely imposed public penalties on big banks, although it has managed to fend off critics by claiming that it hands out penalties in private. Whether it actually does so, and what kind of penalties it enforces, remains anyone’s guess.

A more effective alternative to this inherently flawed plan would be to hand regulatory power to a financial products safety commission, a concept advocated by Harvard professor Elizabeth Warren, a longtime critic of the credit card industry who is running the bailout oversight board. “The Federal Reserve, the Office of the Comptroller of the Currency, and other financial regulatory institutions are not currently charged to protect consumer safety,” Warren explained to me in 2007. “The primary responsibility of the regulatory agencies is to assure the profitability of the banks and other lending institutions, not to protect consumers from deceptive and unsafe products.”

Sen. Richard Durbin (D-Ill.) and Rep. Bill Delahunt (D-Mass.) are sponsoring legislation to set up this type of commission. But although they’ve won the backing of senators Ted Kennedy (D-Mass.) and Charles Schumer (D-N.Y.), plus outside support from more than 50 consumer, labor, and civil rights groups, the proposal undoubtedly faces an uphill struggle.
The same is true of legislation that would ban excessive interest rates, or usury. A proposal to cap interest rates at 15 percent, and 18 percent in emergencies, failed in the Senate on Wednesday, winning just 33 votes. “Credit unions have been under [such a] law for 30 years which says the maximum rate is 15 percent except under unusual circumstances, in which case it goes up by 3 percent,” said Sen. Bernie Sanders (D-Vt.), one of the measure’s cosponsors. “We want to do for private banks what we have been doing with credit unions.” Laws against usury were common in many states until they were essentially abolished by a banking-law loophole in the early 1980s. “The problem with instituting a new usury law is politics,” Warren said. “The credit industry hires a lot more lobbyists than the consumer advocacy groups, and the creditors have been almost uniformly opposed to any usury laws.”

In fact, the industry’s clout has repeatedly stymied efforts to prevent lenders from gouging consumers. In 2005, Congress passed bankruptcy legislation with the support of 18 Democratic senators, many of them targets of generous support from the banking industry. The law made it far more difficult for anyone to clear debt by declaring bankruptcy. Ed Mierzwinski of US PIRG notes that after the law passed, companies began to deploy some of their most noxious practices more frequently. These included the so-called universal default, in which credit card companies raised cardholders’ rates not only if they paid their own bills late, but if they paid any bill late.

Rep. Carolyn Maloney (D-N.Y.) tried to remedy the situation with a Credit Cardholders’ Bill of Rights Act. But the legislation got watered down before it was passed by the House in April. The Senate version of the credit card bill being shepherded through the banking committee by its chair, Sen. Christopher Dodd (D-Conn.), is considered slightly stronger, for two main reasons. First, it only permits credit card companies to raise rates on existing balances when a cardholder’s payment is 60 days late, whereas the House bill specifies 30 days. (Consumer groups say that during the economic downturn, some 10 million people have been paying their credit card bills late in the first month, while in 60 days the number of overdue payments drops off dramatically.) Second, the Senate bill states that those cardholders whose rates have been raised due to late payments must be given a means to return to a fair interest rate if they make timely payments for six months. Both bills would restrict universal default (though language banning  ti altogether was diluted in bipartisan negotiations), limit banks’ ability to hike interest rates on existing balances, and call for simpler disclosure of terms.

Still, credit card companies shouldn’t exactly be shaking in their shoes. The law that Congress ultimately produces will certainly leave the big banks plenty of room to make money from the same consumers whose taxes are bailing them out. As Bernie Sanders put it, “They are taking money we give them and charging us 30 percent interest rates.”

The Bailout We Owe to the Developing World

One outcome of the G-20 meeting (as I wrote yesterday) was an agreement to earmark as much as $1 trillion for developing countries, where the economic crisis is having a life-threatening impact. This figure is in line with what the United Nations estimates is needed to “buffer the blows of the global downturn on the most vulnerable.” 

In fact, $1 trillion is the least the rich countries owe to the poor, considering the chaos and suffering our own economic policies and practices have brought upon them. In part, the additional hardships now being experienced by the developing nations result from the recession trickling down in a way that wealth never seems to do. But there’s more to the story than this.

Some of the heightened suffering in the developing world can be traced back to the Clinton and Bush administrations, when a series of legislative and regulatory changes paved the way for rampant speculation on the commodities market. What happened next is explained in a report by the Minneapolis-based Institute for Agriculture and Trade Policy (IATP), the most comprehensive source of information on this subject.

Wall Street went to work and bundled together groups of commodities futures–everything from oil to copper to basic staples like corn, wheat, rice, and soybeans–into commodity index funds, similar to what you find in the mutual fund business. The subsequent explosion of buying and selling by a handful of Wall Street firms (led by Goldman Sachs and AIG) ran the prices of different commodities up and down with little relation to any actual market or to the so-called laws of supply and demand. (James Galbraith describes the process in detail here.) 

In the five years leading up to the recession, commodity index speculation increased by 1900 percent. In this way, Wall Street not only pushed the price of oil through the roof, but directly caused skyrocketing food prices and food shortages around the world. In short, the IATP report concludes:

U.S. government deregulatory steps opened the door for large financial services speculators to make huge “bets” that destabilized the structure of agriculture commodity markets. According to the United Nations, global food prices rose an estimated 85 percent between April 2007 and April 2008. Prices rose for wheat (60 percent), corn (30 percent) and soybeans (40 percent) beyond what could be explained by supply, demand and other fundamental factors, according to the report.

For people in the poorest countries, these changes sometimes meant the difference between subsistence and starvation: In 2007, according to the UN Food and Agricultural Organization (FAO), an “estimated 75 million people were added to the 850 million already defined as under-nourished and food insecure.”

In view of all this, the United States and the other wealthy nations that dominate the world economy owe the developing world more than a bailout. (Such a bailout would, in any case, constitute  a fraction of what we’re giving to the banks–the very institutions that increased world hunger for the sake of profits). We also owe them a reformed global financial system that will prevent such travesties from happening again.

But it doesn’t look like those reforms will be happening any time soon. Bills to regulate commodities exchanges have been floated in both houses of Congress, but according to the IATP, they are progressing slowly and leave a lot to be desired. President Obama’s nominee to the Commodity Futures Trading Commission, Gary Gensler, is a former Goldman Sachs executive who, while working in Clinton’s Treasury Department, backed the very deregulatory moves that allowed commodity speculation to run wild in the first place (as exposed in Mother Jones last year). Senator Bernie Sanders is seeking to block Gensler’s nomination for this reason.

And on the international level, as IATP pointed out in the runup to the G-20, regulation of commodities exchanges was a subject conspicuously absent from the meeting’s agenda—despite its potential life-and-death impact on food and energy security worldwide.

This absence is part of a larger problem, as described in a new report from the Congressional Research Service, which finds that “There seems to be no international architecture capable of coping with and preventing global [financial] crises from erupting.” The report, made public today on FAS’s Secrecy News blog, concludes:

The financial space above nations basically is anarchic with no supranational authority with firm oversight, regulatory, and enforcement powers. There are international norms and guidelines, but most are voluntary, and countries are slow to incorporate them into domestic law. As such, the system operates largely on trust and confidence and by hedging financial bets.

In other words, despite any incremental progress made at the G-20 meeting, what we have is more or less a global version of the Alan Greenspan doctrine, which proclaims that all will be well if we leave the financial markets, and the large institutions that dominate them, to voluntarily “police themselves.” And we all know how well that turned out.