Welcome to this week in economic outrage. Every day there are thousands of economic horror stories where one just shakes their head in disbelief at the incessant injustice. To combat the information overload, we give you a financial follies reader's digest and how those in power could care less about any of it.
The Great Middle Class Wipe Out
A flurry of studies confirms what most of America already knows. The American middle class has been shuntered, destroyed, wiped out and no more. Corruption and corporations have murdered the American dream and drove a huge pink slip through the heart of working America. The Associated Press sponsored a study which shows 80% of Americans have experienced poverty in their lifetimes.
Four out of 5 U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream.
Survey data exclusive to The Associated Press points to an increasingly globalized U.S. economy, the widening gap between rich and poor and loss of good-paying manufacturing jobs as reasons for the trend.
It seems the Associated Press gathered their statistics from a variety of sources, some of which will be unpublished for a year. Other studies back up the shocking news, unless of course one is within the beltway, where denial is a way of life. We overviewed the latest Census data on poverty earlier in this post.
The Huffington Post managed to trace some of AP's sources and gives a few more statistics:
For the first time since 1975, the number of white single-mother households living in poverty with children surpassed or equaled black ones in the past decade, spurred by job losses and faster rates of out-of-wedlock births among whites. White single-mother families in poverty stood at nearly 1.5 million in 2011, comparable to the number for blacks. Hispanic single-mother families in poverty trailed at 1.2 million.
Since 2000, the poverty rate among working-class whites has grown faster than among working-class nonwhites, rising 3 percentage points to 11 percent as the recession took a bigger toll among lower-wage workers. Still, poverty among working-class nonwhites remains higher, at 23 percent.
Larry Summers for Dog Catcher
Horror of horrors would be to have Larry Summers for chair of the Federal Reserve. Naked Capitalism spells out why in no uncertain terms.
I’ve been gobsmacked to see that not only is Larry Summers on various short lists of candidates to become the next Fed chairman, but that Summers is also supposedly closing in on the favorite, Janet Yellen.
In early 2012, Summers was lobbying hard to become the head of the World Bank and didn’t get the nod. The fact that he is now under consideration for a bigger job should set alarm bells off. While Paul Krugman weighs in on both, concluding that Yellen would be the better pick, he’s still far kinder to Summers than the Harvard economist deserves.
The big problem with Summers is not his record on deregulation (although that’s bad enough) or his foot-in-mouth remarks about women in math, or for suggesting that African countries would make for good toxic waste dumps. No, it’s his appalling record the one time he was in a leadership position, as president of Harvard. Summers was unquestionably the worst leader in Harvard’s history.
Dead Farmers Get Government Payments
More government in action. This site overviews how the GAO found dead farmers are getting payments from the USDA.
Deceased farmers may have received more than $30 million from three Agriculture Department programs in recent years, the Government Accountability Office says.
The bulk of these payments were crop insurance from the USDA's Risk Management Agency.
Facebook, Amazon and Google Don't Pay Taxes in Israel Either
Think just America is getting stiffed by corporations on taxes? Not so says World Crunch.
Israel's online economy rings up hundreds of millions of dollars every year. Yet, global Internet giants like Google, Facebook, Yahoo!, Amazon and eBay are exempt from paying taxes in the country.
For eBay and Amazon, the case is clear: Israelis are importing physical products (books, shoes, clothes) from abroad using the websites. As for Google, Facebook, Yahoo!, or even Microsoft, the situation is not as simple. These companies market to Israeli businesses virtual advertisement space aimed at Israeli consumers -- which raises the question of why they don't pay taxes in Israel.
The ads are distributed by the search engine or across an advertisement network powered by the Internet giants, built on millions of other websites that are not present in the search engine. The combined yearly advertising budget of Google and Facebook in Israel is estimated to be at about 1.5 billion Israeli shekels, or half a billion dollars, which is not subject to the VAT sales tax.
Obama's Amazon Economy
The President of the United States will be speaking about rebuilding America's middle class from the depths of an Amazon warehouse in Tennessee. His message and the site from which he'll deliver it are dissonant, given Amazon's prominence as a massive importer and employer of temporary workers, two truths that make it harder than ever to find a middle class job in this country.
But in many ways, this is an Amazon-driven economy. Want a new TV? Click here and it can arrive at your doorstep in a day. Just charge it to your card. But would you like a good job? Wait in line. Been unemployed for a while? Wait even longer.
Americans have fantastic, otherworldly tech gadgets to play with at home but 70,000 structurally deficient, real-world bridges over which we drive every day. Last year we could tweet news instantly about Hurricane Sandy's effects on New York City but we could not find any Made-in-America electrical transformers to supply power to those in need. As taxpayers we have financed breathtaking research that has led to extraordinary devices like MP3 players, but good luck finding one that's made in America today.
While the consumption slice of our economy is doing better, the productive sector is barely treading water. And it should be no surprise; this is exactly the way our economic policy is skewed today.
President Obama said he was going to change all that. But he hasn't.
Howard Dean Comes Clean
Howard Dean came out and said Obamacare's cost fixing won't work.
The IPAB is essentially a health-care rationing body. By setting doctor reimbursement rates for Medicare and determining which procedures and drugs will be covered and at what price, the IPAB will be able to stop certain treatments its members do not favor by simply setting rates to levels where no doctor or hospital will perform them.
There does have to be control of costs in our health-care system. However, rate setting—the essential mechanism of the IPAB—has a 40-year track record of failure. What ends up happening in these schemes (which many states including my home state of Vermont have implemented with virtually no long-term effect on costs) is that patients and physicians get aggravated because bureaucrats in either the private or public sector are making medical decisions without knowing the patients. Most important, once again, these kinds of schemes do not control costs. The medical system simply becomes more bureaucratic.
The nonpartisan Congressional Budget Office has indicated that the IPAB, in its current form, won't save a single dime before 2021.
Obama Caves on Deferred Corporate Taxes
Obama is supposedly offering a compromise on corporate taxes. Yet specifics are lacking. Expect more cuts coming to Seniors on social security and Medicare. Both Obama and the House agree on screwing Seniors so thank God, they cannot pass anything.
Obama’s new plan recycles several of his previous proposals on corporate tax reform.
The White House plan to lower the corporate tax rate from 35 percent — among the highest in the developed world — to 28 percent was first rolled out by Treasury in 2012, as was the idea of pushing the effective rate to 25 percent for manufacturers.
The White House is also proposing to allow small businesses to write off as much as $1 million in investments, and calling on Congress to sign off on new infrastructure spending, aid to community colleges and investment in manufacturing hubs.
To pay for the new spending, Obama proposed a one-time “transition fee” on the hundreds of billions of dollars that companies are currently holding or earning overseas.
“The point is, if Washington spent as much time and energy these past two years figuring out how to grow the economy and the middle class as it spent manufacturing crises in pursuit of a cut-at-all-costs approach to deficits, we’d be much better off,” Obama said in Chattanooga.
The White House did not detail exactly how the one-time transition fee would be structured, or how much new spending it sought. House Ways and Means Committee Chairman Dave Camp (R-Mich.) has proposed a tax on offshore income as part of a plan to shift to a tax system that shields most of the income that corporations keep abroad from U.S. taxation.
Doubling McDonalds worker salaries would only raise the price of a Big Mac by 68¢:
If McDonald’s workers were paid the $15 they’re demanding, the cost of a Big Mac would go up 68 cents, from its current price of $3.99 to $4.67.
A Big Mac meal would cost $6.66 rather than $5.69, and the chain’s famous Dollar Menu would go for $1.17.
CFPB Getting Active?
The Consumer Financial Protection Bureau is using Dodd-Frank to go over Dole Foods for abusive mortgage practices.
As the financial overhaul known as the Dodd-Frank Act turns three this week, the law’s most controversial creation, the Consumer Financial Protection Bureau, is for the first time cracking down on mortgage lenders for encouraging loan officers to put borrowers in high-cost loans.
The agency filed a federal lawsuit Tuesday against Castle & Cooke Mortgage LLC and its president, an accomplished rodeo performer who professes to be “a big fan” of new rules aimed at helping consumers.
It’s the first time the new consumer cop — a creation of Dodd-Frank that drew sharp opposition from the financial industry — has taken action against the practice, which was pervasive in the years leading up to the housing meltdown and then banned under Dodd-Frank.
Castle & Cooke, based in Utah, is a privately held, non-bank lender of the sort that largely escaped the federal government’s scrutiny before the financial crisis focused attention on abusive lending. Its president, Matthew Pineda, founded it in 2005 for eccentric fruit billionaire David Murdock.
JPMorgan Chase Manipulating Energy Markets
Supposedly there is a settlement in the works. No doubt a slap on the wrist.
The nation’s top energy regulator on Monday formally accused JPMorgan Chase of manipulating energy markets, foreshadowing a multimillion-dollar settlement that is expected as early as this week, according to people briefed on the matter.
The action by the Federal Energy Regulatory Commission is largely a formality ahead of the settlement — a deal that is expected to help JPMorgan avert a clash over accusations that the bank orchestrated trading strategies to turn inefficient power plants into profit centers,
Senate Probes Banks In your Supply Chain and Holding Your Commodities in Warehouses
The Senate is opening hearings on banks buying up warehouses storing commodities and getting into the global supply chain. No doubt nothing will happen until quantitative easing is over and there is no more money to be made in manipulating these markets.
Officials in Washington opened new fronts in a probe of bank dealings in aluminum, oil and other raw materials, signaling intensifying scrutiny of possible conflicts of interest across the financial markets.
The Senate Permanent Subcommittee on Investigations has sought information in recent months from J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, people familiar with the matter said. The panel, led by Sen. Carl Levin (D., Mich.), is known for the 2010 hearings it held in a probe of Wall Street's role in the housing bust. A spokeswoman for the senator declined to comment.
The inquiry is still at an informal stage, with the committee seeking information in questionnaire form about bank participation in commodities markets and potential conflicts, one person familiar with the probe said.
Separately, Securities and Exchange Commission Chairman Mary Jo White told Senate lawmakers Tuesday that the agency is examining whether there should be greater oversight of firms that store and trade physical commodities like aluminum and oil and is looking into possible disclosure issues.