Steven Hill2013-06-19T09:22:52-04:00Steven Hillhttp://www.huffingtonpost.com/author/index.php?author=steven-hillCopyright 2008, HuffingtonPost.com, Inc.HuffingtonPost Blogger Feed for Steven HillGood old fashioned elbow grease.The EU Should Give Britain the Boottag:www.huffingtonpost.com,2011:/theblog//3.9543332011-09-12T19:00:00-04:002011-11-12T05:12:02-05:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/From leading Europe into the disaster of the Iraq war, a banking and financial collapse and now foot-dragging on financial reform, the UK has been more destructive than Greece.
Few countries need a reality check as much as Britain. Leading British political figures are rattling their sabres and demanding that the UK withdraw from the EU. And a recent poll showed that 50% of the British public want out as well. But, looking at Britannia's performance in recent years, a case can be made that the EU shouldn't wait for Britain to leave: it should kick Britain out instead. The UK has been more destructive to Europe than has Greece. Let's look at the record.
Iraq war
No country did more to lead Europe into the disaster of the Iraq war than the UK, led by then Prime Minister Tony BLiar. The loss of life and military reputation were not the only casualties: there were also the loss of government integrity and the shattering of European unity. And it drained the public coffers besides, leading to more debt and the Cameron government's austerity measures. Way to go, UK.
Financial disaster
Right behind the United States, the UK's banks and collapsed housing market led the world to the brink of global Armageddon. Along with their American counterparts, British hedge funds and banks such as Barclays, HSBC and RBS unleashed financial cluster bombs known as derivatives, credit default swaps and other exotic investment vehicles that blew up in the world's face. The UK bears major responsibility for turning banks away from their social mission and into gambling casinos. Touché, UK!
Killer of financial reform
Not content with contributing to economic disaster once, the UK has been one of the worst foot-draggers when it comes to reforming the financial sector to ensure that disaster doesn't strike a second time. This has taken many forms, including trying to limit the powers of the newly launched EU supervising body charged with monitoring the financial industry, and fighting an EU watchdog that would keep an eye on the activities of the chancellory and treasury ministers (it will do this for other European member states as well). Considering how well those UK offices have functioned in recent years, this commonsense proposal should be welcomed by any sane person. But British leaders apparently want no oversight or accountability.
Indeed, recently, treasury minister David Gauke said the UK would not even support plans for the creation of a publicly owned European credit-rating agency to replace the corrupt, private, US-based ones. These are the same rating agencies that gave AAA ratings to mortgage-backed securities that they knew were filled with garbage loans. They gave AAA ratings to Lehman Brothers, Bear Stearns, Enron and other failing companies right until the end, because they are paid by the same entities they are rating. And now the rating agencies keep destabilising certain eurozone countries with downgrade after downgrade, ignoring many solid economic fundamentals. Yet Gauke wants to block Europe from creating an alternative to this corrupt system. Go, Team Cameron!
Economic sick man of Europe
Struggling under the heel of David Cameron's austerity measures, the British economy remains in a nosedive. Cameron's policies have not only failed to revive the economy but also contributed to widespread looting and arson by a distressed population of young people, just like in France in 2005. Good show, Britannia!
Return to Charles Dicken's Britain
Reacting to the stricken economy, the Cameron government wants to turn back the clock on European-style social capitalism. Steve Hilton, Mr Cameron's strategy director, has proposed the abolition of maternity leave and all consumer rights legislation, which would put Britain at odds with EU norms. He also has suggested that the UK should ignore EU labour rules on the length of the working week and temporary workers. Poor houses for Britain, here we come.
Opposition to the EU speaking rights at the UN
On the one hand, British leaders have rightly criticised the EU for its chronic disunity on foreign policy. Europe is still trying to answer that famous Henry Kissinger question, "Who do I call if I want to call Europe?" So when the EU high representative for foreign affairs, Lady Ashton (a fellow Brit), moved to secure speaking rights for the EU at the United Nations, did the British government support this effort? Not at all. Instead, foreign secretary William Hague did everything possible to obstruct the bid. Wrong way, UK!
Since the rise of Reagan-Thatcherism in the 1980s, an Anglo-American economic philosophy has dominated the global economy. This "Washington consensus", as it was sometimes called, often featured snide, sarcastic lectures to "socialist" France, Germany and Sweden about how to produce economic growth. Yet all of those countries are now doing better than both the UK and the US. The UK-US economic axis was so blind to its own shortcomings that it led to disastrous results for the global economy and their domestic economies.
So has failing so miserably resulted in a bit of British humility? On the contrary. Instead, well-heeled lobbyists have joined forces with the nationalists to work the parliamentary back rooms to kill or water down any kind of reform that would harm the goose that laid the lead egg. British leaders are willing to risk another economic collapse in order to coddle the favoured financial industry, and at the same time those leaders are further stoking euroscepticism with a sneer.
Certainly the UK has given many positive benefits to the world - the Magna Carta, representative democracy, an Enlightenment sense that the human condition can be improved, and heroic perseverance during two world wars. But that was years ago. What has the UK contributed lately?
No, Britain is becoming the type of partner that Europe can do without - a long-faded empire with a failing track record, and a nation of whiners and complainers besides. Especially as so many EU decisions are made by consensus, having bratty Britain constantly sulking in the corner will only obstruct any forward move.
Enough is enough. Instead of Greece, the EU should evict Britain, saying: "Here's your rebate - now get out!" Let the UK go it alone with its "special relationship" with the US, and the Brits will see how special they really are to the Americans. Or Britain can be an island unto itself, secure in the knowledge that it is heading for mediocrity - all by itself.
But a better course would be for petulant Britain to drop the attitude, admit its mistakes, humbly roll up its sleeves and re-engage with this European project, which is so crucial to the future of this 21st-century world.
]]>Was Rahm Right About Progressives?tag:www.huffingtonpost.com,2011:/theblog//3.8535872011-05-08T03:29:00-04:002011-07-07T05:12:01-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/ said that progressives are "fucking retarded." Lately I've begun to think he was correct -- though not for the same reasons as Emanuel, who thought that progressives held unrealistic expectations for his boss, President Barack Obama. Progressives are chumps because they had those expectations for Obama to begin with, and poured so many of their hopes and aspirations -- not to mention dollars -- into electing him.
Sure, Obama was way better than his opponent John McCain, though it was always questionable -- and still is -- whether Obama was going to be better than Hillary Clinton. But the course of progressives' "relationship" with Obama -- from infatuation to letdown to spurned -- shows a bewildering level of "drink the Kool Aid" naiveté on the part of some otherwise sharp people. How could this have happened? Are there lessons to be learned for the future?
During the presidential campaign, while Obama deployed the lofty rhetoric and vision in his speeches that became his stock in trade, some of us were pointing out that there was nothing in this former state senator and then-U.S. Senator's unremarkable record that indicated he was a strong or reliable progressive. Sometimes he had progressive tendencies, other times not. A friend of mine from Chicago who had Obama as a law professor presciently predicted that an Obama administration would be characterized by "ruthless pragmatism," not progressive idealism.
But many progressives believed, quite fervently, that in the course of finding that ruthless pragmatism, Obama would cleverly figure out how to lean strongly progressive. There was always a nod and a wink coming from the Obama movement that seemed to say, "Don't worry, he's more progressive than he's revealing. That's what you have to do to get elected president in the United States." When some of us continued to express doubts, these Panglosses got upset. Very upset. "It's time to get on board," they said. And I felt like Bongo, the one-eared rabbit in Matt Groening's Life in Hell cartoon, shut up and gagged in a detention room.
How can so many brilliant people have fallen for so much hokum? That question is not an easy one to answer. Perhaps at some point Arianna Huffington, Robert Kuttner, Michael Moore and other left-ish pundits will engage in a bit of self-criticism and enlighten us as to how they were hoodwinked so easily. Because here's my fear: Progressives don't seem to be learning from their mistakes. Right before Obama's inauguration, Huffington wrote, "Now, more than ever, we must mine the most underutilized resource available to us: ourselves... It is not just the Bush Years that should be over on January 20, but also the expectation that a knight in shining armor will ride into town and save us while we cheer from the sidelines. Even if the knight is brilliant, charismatic and inspiring. It's up to us -- We the People."
Yet that's exactly what so many did -- they invested their hopes and aspirations, their passion, activism and money, in a shining knight for whom there was scant evidence of his progressivism or legislative accomplishments. Was it their desperation to see the GOP run out of town and the Bush legacy overturned? And the Clintons too? Was it their desire to see an African American elected president? Kuttner, author of Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency and co-founder of The American Prospect, wrote about a friend who said, "I so wanted to be supportive of a great progressive president this time instead of being back in opposition."
So does the despondency of the struggle explain progressives' massive miscalculation? How do they account for the stunning failure of their leadership? It is time for some major self-criticism within the progressive movement, especially among its leadership. At the very least, we should note how the "netroots" failure to keep its knight galloping in the right direction shows the stark limitations of a movement that does not have a strong enough ground component.
New rules
Yet a progressive future is not only contingent on a genuine grassroots movement. Structural political reforms are needed for that movement to transmit change through government at all levels. We would never have had this latest meltdown of our economic system if our political system had not melted down first. The two-party system is sclerotic. As Obama's presidency shows, more than ever, there is no room for progressives at the table of highest political power. The reason for this is that the rules of the game that elect our representatives actually hurt progressives.
A truly democratic electoral (and thus political) system would include:
• Public financing of campaigns.
• Free media time for campaigns.
• Universal/automatic voter registration.
• Direct election of the president (abolition of the electoral college).
• Instant runoff voting to allow voters to express their true preferences and prevent spoilers.
• Proportional representation (allowing more than two parties).
Together these measures would serve to both expand the electorate and broaden representation in our legislatures.
What progressives should learn from the last three years is that the current electoral rules don't allow them to earn and own their place at the table; instead progressives have to wait to be invited there by their Democratic gatekeepers. And those gatekeepers are plainly happy to accept your votes and money -- but that's all.
The European Greens are the best example of what progressives could accomplish with a real democracy. With proportional representation, public financing of campaigns, free media time for campaigns and universal voter registration, the Greens are able to consistently win their own representation in the legislatures even though they often don't break 10 percent of the popular vote. Nevertheless, they get their fair share of seats, and are present in the legislature and in the media and in the important debates of their time.
Through this very presence, the Greens have managed to push the political spectrum in their direction to the point where even the conservative parties in Europe today are "greener" than the U.S. Democratic Party. Despite some alarming right-wing swings in the U.K. and France, the European political spectrum is where American progressives would love to be. That's because Europeans have real and functioning democracies, and not the half-baked version that Americans suffer with today.
At the very least, we can thank Obama for drawing the lines in the sand so clearly and starkly. At this point, any progressive leader who does not pursue political reform relentlessly is a faux leader, and she or he should get off the stage and hand over the microphone to someone else. It's time for a change of leadership in the progressive movement to those who understand these harsh realities. Because the only thing worse than the steep upward climb ahead is when certain leaders take us up the wrong dead-end trail. Unfortunately, that's what just happened.
If progressives can't figure this out and get started on the tough hard slog of political reform, I can only conclude that, truly, Rahm Emanuel was right.
Steven Hill is a political writer who is the author, most recently, of "Europe's Promise: Why the European Way is the Best Hope in an Insecure Age" and "10 Steps to Repair American Democracy." Visit his website at www.Steven-Hill.com
]]>An Open Letter to U.S. Senator Dianne Feinstein About Her Position on the Filibustertag:www.huffingtonpost.com,2011:/theblog//3.8311892011-03-04T14:31:15-05:002011-05-25T18:35:25-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
Thank you for your response* to my letter, but I completely disagree with your position. The filibuster is anti-majoritarian, as is the US Senate itself. Senator Feinstein, you and Sen Boxer represent 38 million Californians while the two Senators from Wyoming represent a half a million people. Thus, each individual from Wyoming has much greater representation than a Californian; if the US Senate was a department store, you and Sen Boxer would be waiting on 75 times more customers than the Wyoming Senators.
It can hardly be a coincidence that for every dollar in federal taxes we Californians send to Washington DC we only receive back about 75 cents. Where does the other 25 cents go? To states like Wyoming, as well as to Alaska, the Dakotas, and other low population conservative states. It's clear that this over representation of low population states has the effect of favoring conservative states and hurting populous "blue" states like California, Illinois and New York.
You and Sen. Boxer clearly punch "below your weight," in terms of influence in the Senate, and this under-representation goes a long way toward explaining why. Despite the damage this is doing to our state, you and Senator Boxer say nothing about this unequal arrangement. Why is that?
That's why equal representation in the Senate was opposed by many of the leading Founders of our country, including James Madison and Alexander Hamilton, as an infringement on majority rule. Over representation of low population states in the Senate perpetuated slavery for decades; resolutions to abolish slavery passed numerous times in the US House only to die in the Senate. In Pres. Obama's first two years in office, nearly five hundred bills on important issues like global warming, the BP oil spill, food safety, funding for the U.S. Postal Service, job security for wounded veterans, vision care for children, a bill to improve absentee ballot voting, screening for diabetes and more were passed by the House only to die in the Senate.
In addition, the Senate is hardly a mirror of our society. As you well know, there are only 17 women out of 100 and a handful of racial minority Senators, including no African Americans. Two hundred years after our founding, the Senate is still an elite body of white men! How can this be? Surely when you look around the chamber before an important vote, it must strike you that this elite club is hardly representative of America today, but rather reflective of America in the 18th and 19th centuries. How could that not affect the policy that comes out of the Senate?
Here is how horrible the situation has become: today, in order to pass any legislation in the Senate, it is necessary to garner support from 60 out of 100 Senators (instead of 51 out of 100), and even more absurdly the 41 Senators who wage the filibuster like a club only represent a third of the nation. In other words, Senators representing a third of Americans are able to block what Senators representing two-thirds of Americans want. The Senate has become paralyzed by the worst form of minority rule.
Indeed, the Senate has become a sclerotic, unrepresentative, elite club, like Britain's House of Lords, that is severely retarding the ability of our country to move forward. The Senate is hardly the "world's greatest deliberative body," as you Senators like to call yourselves, instead it is a policy graveyard where badly needed legislation goes to die. I would think you would be outraged at what has happened to the upper chamber in which you sit, and would be doing your utmost to sound the alarm. The fact that you have not is clear evidence that, unfortunately, you have become part of the problem. It's Animal Farm time in the United States Senate.
Regards,
Steven Hill
author: "10 Steps to Repair American Democracy"
www.10Steps.net
* -----Original Message-----
From: senator@feinstein.senate.gov
Sent: Mar 3, 2011 5:51 PM
To: shill@igc.org
Subject: U.S. Senator Dianne Feinstein responding to your message
Dear Mr. Hill:
Thank you for contacting me concerning the use of filibusters in the United States Senate. I appreciate hearing from you and welcome the opportunity to respond.
The filibuster is a long-standing Senate practice that allows a Senator unlimited time to speak on the floor of the Senate. Current Senate rules allow for three-fifths of the Senate to vote to invoke cloture to limit consideration of a bill or nomination and break a "procedural filibuster." By providing the minority in the Senate an instrument for extending debate on nominations and bills, the filibuster can serve a vital role in protecting the rights of the minority and encouraging the majority to seek compromise.
In the long history of the Senate, the filibuster has been an important tool for both parties when in the minority. For example, in December 21, 2005, Democrats in the Senate, using a procedural filibuster, blocked an amendment to a defense reauthorization bill which would have allowed oil drilling in the Arctic National Wildlife Refuge (ANWR), some of our nation's most precious wilderness.
I share your concerns over the recent, unprecedented increase in the use of the filibuster. Debate is at the heart of a deliberate body like the Senate; however, in the 111th Congress, legislative action was subjected to extraordinary levels of obstruction by the minority party. According to the Congressional Research Service, the Senate voted on cloture on a motion to proceed 64 times during the last two Congresses. To be clear, this means that the minority party was obstructing even debating legislation.
You may be interested to know that the Senate has considered a number of bills in the 112th Congress to reform the filibuster process and cut down on the use of delay tactics. S.Res. 29, which was introduced by Senator Mark Udall (D-CO), will waive the reading of an amendment if the amendment has been submitted at least 72 hours before the motion and is available in print or electronic form. The Senate also passed S.Res. 28, introduced by Senator Ron Wyden (D-OR), to address the practice of secret holds. Secret holds are an informal device which permit a single Senator or any number of Senators to stop floor consideration of measures that are available to be scheduled by the Senate. This new rule will require any Senator objecting to proceeding to a bill or nomination to publicly disclose the objection within two days of the senate being in session.
Minority Leader Mitch McConnell (R-KY) and Majority Leader Harry Reid (D-NV) also entered into an informal agreement in which Senator McConnell agreed to reduce the use of the filibuster by the minority and in return, Senator Reid agreed to allow more amendments from the minority to be considered on the Senate floor.
Be assured that I share your concerns on the unprecedented use of the filibuster, but I believe that Congress must be cautious about any dramatic changes to the rules. The filibuster serves an integral role in protecting the rights of the minority, which can change from one Congress to the next. Please know that I appreciate your thoughts on this matter and will keep your comments in mind should the Senate further consider the use of the filibuster.
Once again, thank you for writing to me. If you have any additional questions or comments, please feel free to contact my Washington, D.C. office at (202) 224-3841. Best regards.
Sincerely yours,
Dianne Feinstein
United States Senator
]]>The China Superpower Hoaxtag:www.huffingtonpost.com,2011:/theblog//3.8211362011-02-10T09:20:08-05:002011-05-25T18:30:24-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
Certainly China is big -- 1.3 billion people big, a fifth of the global population. As Forbes' columnist John Lee has written, China has long been the place for the world's biggest anything: the Great Wall, the 2008 Olympics, Tiananmen Square, the South China Mall in Dongguan, dams, consumption of cement and production of automobiles; most recently, China even had the world's biggest traffic jam -- an incredible 60 miles long -- which lasted a month and during which drivers were stuck in their cars for days at a time.
The world has never see anything like mega-nations the size of China (or India for that matter), and no one even knows if populations of this magnitude ultimately are sustainable. China's voracious need to supply its population and avoid the social explosions that have plagued its history has made it one of the world's largest consumers of natural resources, especially timber and energy, extracted from places like Africa, Southeast Asia and South America. With such large appetites, China has the ability to drive global markets, and, consequently, has become the new frontier where "get rich quick" investors and Western businesses go panning for gold by speculating in some hot Chinese start-up.
Unfortunately, the hype ignores a starker reality -- that China is barely holding it together. Contrarian voices like Hu Ping, the chief editor of Beijing Spring, a pro-human rights and democracy journal, try to humanize the conventional wisdom of economic statistics and facts that obscure reality. "With China portrayed in the news every day as an economic and political powerhouse, the rest of the world, at least those parts that treasure freedom and peace, should pay attention to the real China," says Hu.
The Paradox of China
To understand the "real" China, it is necessary to see it through the double lens of its paradoxical condition as both a major economy and a still-developing country. China is filled with contradictions and serious challenges. When I visited China in August and September of 2008, after the Olympics, the country that I saw, whether in Shanghai, Beijing or the rural areas, was a long, long way from being a global leader in any meaningful sense. Two hundred million people out of a working population of nearly 800 million are migrants, chafing at their lowly status and rotten wages.
Inequality is rampant. Returning from the rural areas -- where the vast majority of Chinese still live -- to cities is like a form of time travel, moving from feudal conditions where plowing is still done by water buffalo to a land of impressively jutting skyscrapers. Corruption is epidemic, whether in banks, the legal system or the political leadership at national, provincial and local levels, causing an estimated annual economic loss of approximately 15 percent of GDP, according to economist Hu Angang.
Even China's much-touted economic power has been misunderstood. Recently it was announced around the world that China had surpassed Japan to become the second-largest national economy. But compared to the United States and Europe, China is still an economic mini-me. Europe's gross domestic product is $17.5 trillion, according to the latest IMF figures, while the U.S.
figure is $14.8 trillion and China's is $5.4 trillion (by Europe, I mean the EU 27 plus Norway, Switzerland and Iceland).
Beyond economic output, more than three-fifths of China's overall exports and nearly all its high-tech exports are made by non-Chinese, foreign companies. Foreign companies take advantage of low Chinese wages to reprocess imports of semi-manufactured goods that are then shipped to Europe and the U.S. China remains, in essence, a subcontractor to the West, says Will Hutton, British political analyst and author of an influential book on China, "The Writing on the Wall." Despite China's export success, there are few great Chinese brands or companies. China needs to build them, says Hutton, but doing that in a one-party authoritarian state, where the party second-guesses business strategy for ideological and political ends, is impossible."
Because of China's climate of corruption and authoritarian secrecy, even the volume of industrial output has been questioned. Some doubt China's numbers and official reports. Investment guru James Chanos, who rose to prominence when he predicted the Enron meltdown (and pocketed a billion dollars shorting Enron stock), is shorting China now.
Says Chanos, "China is cooking its books. State-run companies are buying fleets of cars and storing them in parking lots and warehouses" to pump up state-mandated production figures. As evidence of this, experts point out that while car sales have been rising by a huge 20 percent per month, auto fuel usage seems to be rising by only 3-5 percent per month. Chanos also says China is plagued by an ominously growing real estate bubble in high-rise buildings, offices and condos. Much of China's high growth originally came from decades-long heavy investment in infrastructure, but increasingly it has been coming from construction. Chanos estimates that 50 percent to 60 percent of China's GDP now comes from alarming levels of overbuilding, virtually none of which is affordable to the average Chinese. "This is not affordable housing for the middle class; this is high-end condos in major urban areas and high-end office buildings, which no one is buying," says Chanos.
China is on this "treadmill to hell," he says, because so much of its GDP growth comes from construction which can't be sustained. If China were to slow down the construction industry, its GDP growth would go negative very quickly.
"That's not going to happen, because in China people are rewarded at almost every level of government for making their economic growth numbers. The easiest way to do that is put up another building. They're really hooked on this sort of heroin of real estate development to keep the numbers going," Chanos says.
Sino enthusiasts are betting that China's rulers, whom they see as having been competent stewards of a growing economy for decades, have the means to slowly let the air out of the bubble and avert disaster. But with entire building complexes--urban forests of office and condo high-rises--standing empty in China, Chanos and others are predicting a housing market crash like the one that occurred in the United States.
Walking an Environmental Tightrope Without a Net
The only thing cloudier than China's economic model is the sky over its major cities, so choked with smog that some days you can't see the high-rises a few blocks away. During the run-up to the 2008 Olympics in Beijing, many were concerned that athletes wouldn't be able to breathe the foul air. To try to clear the air, the government instituted an odd-even auto policy, i.e. cars with license plates ending in an even number could drive one day, odd numbers the next. People in Beijing told me that the skies had not been so clear in decades (and they were greatly chagrined when the authorities eventually reverted to the previous laissez-faire policy, resulting in unprecedented traffic jams that make India's look tame by comparison).
Four hundred thousand Chinese die every year of respiratory diseases caused by pollution. About 500 million rural Chinese -- equivalent to the population of the entire European Union -- still do not have access to safe drinking water. Acid rain, caused by sulfur dioxide emissions that belch from smokestacks of power plants, is endemic, with the state-run China Daily reporting that in Guangdong province -- China's most prosperous region, and also its most industrialized -- 53 percent of total rainfall in 2008 was acid rain.
Food scares, such as industrial toxins mixed into milk powder, pet food and cough syrup, have been frequent, and there have been instances of exported toys bearing lead paint and drywall containing highly toxic sulfur compounds that made brand-new homes in the U.S. and elsewhere unlivable.
These consumer dangers are additional manifestations of the amoral, corrupt, robber-baron business practices that have been unleashed in China. The 2008 earthquakes in western Sichuan province, which resulted in the collapse of more than 7,000 schoolrooms and thousands of deaths among schoolchildren, disproportionately impacted the poor who lived in areas where corruption had resulted in shoddy construction practices. The suicide rate among the elderly in rural areas is four to five times higher than the world average because 90 percent of the elderly have no retirement pension, even as there is a growing shortage of nursing home services, and so many elderly choose to quietly end their lives on a barren hillside or in a forest to avoid being a burden to their children. For all these reasons and more, China is plagued by 70,000 protests per year, many of them more like riots and quite violent (including occasional bombings), and had 300,000 labor disputes in 2006 alone, nearly double the number reported in 2001.
Young men and women I met in the cities had fled the Third World conditions in their farming villages only to accept the yoke of working in sweatshop factories or as bar waitresses, earning just enough to afford a bedroom shared with three others, four to a tiny room, two to a bed. Disposable income was practically nil and life was hard. Education is not a way out for most, since it is not free at any level and university is much too expensive for most young people to afford. The only hope they nurtured was that their country would one day be more affluent and some of that wealth would trickle down their way, as according to the Confucian virtues of "sacrifice" drilled into them by the ruling Communist Party. Recent strikes at factories producing products for Western corporations like Apple, Honda and others have managed to exact sizable wage increases of about 20 percent. But for most Chinese, life is a grim struggle and will remain so for years to come. Walking around China, even with all its tourist charms and ancient curiosities, it is hard to envision a superpower taking shape, no matter how far one peers into the future.
There's Gold in Them China Hills
Welcome to China Inc., this ancient land where the entire country is run like a giant corporation. Certainly the land of "capitalist communism" -- an oddball combination, to be sure -- has made some impressive gains with its roaring economic growth rates and in lifting several hundred million people out of the abject poverty of the Mao years. Over the past 30 years, China has sustained nearly double-digit growth, a remarkable run which has produced a growing middle class of perhaps 200 million to 300 million people. But an important qualifier is that China started from a very low level of GDP. By 2009, China's per capita GDP still was only $3,600, compared with $46,000 in the United States. China's metrics indicate significant challenges for years to come, and considering all its other economic and environmental ills, its past record is no guarantee of future success. Prophecies of its global leadership are premature at best.
Beyond economic and ecological indicators, the hallmark of a great power is when other nations want to emulate you. What made the United States the great power of the post-World War II era was not just its military might but its promise of economic betterment and freedoms -- glamorized by Hollywood, the best public relations machine ever -- which caused people from all over the world to want to flock to our shores. The City on the Hill inspired people toward an ideal, however much America itself didn't always live up to that ideal. But no one is banging down doors to get into China, and only the poorest countries aim to be like the People's Republic.
China inspires curiosity with its ancient history and huge population, but not envy or emulation. That will not change anytime soon, and perhaps never unless China at some point opens up its political and economic system. The absolute unwillingness of Communist Party authorities to tolerate any public reflection, let alone protest, during the 20-year anniversary in June 2009 of the Tiananmen Square crackdown exposed their great fear of their own people, as well as the lack of confidence among China's rulers in either their system or themselves. It remains to be seen how much of a "new China" will continue to emerge, but all these horizons certainly provide a different view of China from the one typically given by the Sino enthusiasts.
Given this reality, why does China receive so many rave reviews while Japan and Europe--which actually do a far better job of providing for their people--are treated with scorn and derision? The answer seems to boil down to the fact that China's high-growth economy has become the place where corporations can realize the quickest return for their quarterly profit sheets. To many awestruck pundits, China represents the future, or at least the future of business success.
But it is also the case that China's über-growth has become an ideological weapon in the hands of free market fundamentalists and pro-growth zealots.The Chinese economy and its high growth engine is used to browbeat other countries viewed as growing insufficiently. Europe and Japan are proof that high growth is not necessary to create the highest living standards in the world, yet in an ideological battle between free market fundamentalists and everyone else, China is a useful propaganda tool.
But once you peel back the curtain, as Toto did in "The Wizard of Oz," the China reality doesn't live up to Wall Street's hype. In fact, the hype actually is damaging to China, as it causes members of the U.S. Congress to propose foolish ideas such as protectionist measures, when in reality China needs different forms of assistance -- especially technical assistance -- from Europe, the U.S. and other developed powers. The entire world has a stake in China succeeding, both economically and in greening its economy and reducing its carbon emissions. The prospect of China as a "failed state" is too terrible to contemplate.
China has come a long way, but it has a long, long way to go. It's anyone's bet whether China will sink or swim. So much for superpower status.
Published originally on Truthdig
]]>My Interview With Greek Prime Minister George Papandreou... From the Top of the Acropolistag:www.huffingtonpost.com,2011:/theblog//3.8200472011-02-08T12:01:13-05:002011-05-25T18:30:24-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
"It was clear that the previous government had not told the truth," said Mr. Kouvelis in a calm, even-tempered manner. He did not belabor it to score political points, but his overall message was sobering.
Indeed, the deficits were so big, he says, that Prime Minister Papandreou was forced to go to the European Union and tell them, "It's not just Greece that is on the line... Europe and the euro zone are on the line too," because it raised the unprecedented possibility of a eurozone member having to default on its debt. Moreover, much of that debt is held by banks in other European countries, so even though Greece's economy is only two percent of the overall E.U. economy, there was the chance of other dominoes falling, or as it has been called, "contagion." And indeed, Papandreou was correct about that. The European Commission already had been providing money to Greece for development for many years, for infrastructure-building and other growth-encouraging projects, and so it was already heavily invested in Greece's welfare. Little did anyone realize then how much Greece's fellow eurozone members would be called upon to "invest" in their Aegean partner. Greece's plunge into near bankruptcy shattered the bonds of trust and agreement that had prevailed in the eurozone and by extension in the European Union.
Part of the rupture resulted from the fact that Greece's crisis was not just economic in origin. As Professor Takis Pappas from the University of Macedonia has written,
"The crisis has its origins in grave pathologies of [Greece's] political system over the last three decades, so recovery will require much more than wise economic management. It will in fact require the remaking of Greece's whole political and institutional system."
Specifically, all of Greece's major political parties had gotten into the habit of winning elections by giving away the candy store, providing subsidies and government jobs to their constituencies. What resulted was an uncompetitive economy with a huge percentage of government employees, a diminished private and manufacturing sector, and ballooning government deficits compounded by huge numbers of people from all income levels who didn't pay their taxes. That had become the Greek "development model," much like a declining manufacturing sector combined with a financial industry on steroids and a housing bubble had become the U.S. development model. In both countries their unsustainable ways came crashing down. Now, with its economy in ruins, could Greece figure out how to do things differently? That's what I was interested in assessing from those I was interviewing -- did they have a plan to fundamentally change Greece? Or were they looking to band aid over this latest crisis, as so many previous governments had done?
I asked a question to the Deputy Minister. "Given that economic experts are saying that Greece needs to increase its exports, and make its economy more competitive, what does Greece have now or what will it have in the future, that the world wants to buy?" (a similar question could be legitimately asked to the Obama administration).
In response he said that Greece was looking to focus development in the following areas: high quality tours and culture (which makes sense, Greece's peerless historical and cultural attractions had long been a big money maker for the country); renewable energy and green development (taking advantage of copious amounts of sun and wind); and shipping (a longtime core Greek industry). But perhaps most interestingly Mr. Kouvelis discoursed at length about the advantages of Greece's "geographical position." By that he meant that Greece's location would allow it to play a key role as a gateway between the west and the east, between Europe and the Arab world. He talked about Greece being a regional hub for the Balkan countries and Turkey's fast growing economy, and using that position to attract foreign direct investment.
It sounded plausible, even convincing. But one of the people with me, Alec Mally, was a former long time American employee of the U.S. embassy in Greece. He expressed skepticism. "This is not the first time that the Greek government has proposed regional projects like this, and being a regional hub," he said. "But in the past those plans didn't work because of so much bureaucracy and corruption. How will it be different this time?"
That's a key question. The large-scale patronage that I referred to earlier, besides causing a large and ineffective state, also has been responsible for a paralyzed bureaucracy. And the corruption had become so widespread that a Brookings Institute study showed that patronage, bribery and other corruption costs Greece 8 percent of its GDP per annum. Another study by Transparency International showed that in 2009 the Greeks had paid an average of about $1800 in bribes for such services as speeding up the obtaining of a driver's license or building permits, getting admitted to public hospitals, or manipulating tax returns.
What about it, Mr. Deputy Minister? Can you reverse these trends?
The Deputy Minister made the case that the linchpin for changing Greece fundamentally was "getting people off the public payroll and on the private sector payroll." This in turn would shrink the size of government and the slice of the budget so dependent on patronage, i.e. handing out jobs to bought-off constituencies. Coming from a high-ranking member of the PASOK government, this was a statement worthy of attention. PASOK is the socialist party of Greece begun by the current prime minister's father who was probably more responsible than any other figure in fashioning the patronage state. This was Nixon going to China, to have PASOK tackling this issue.
"Now we have a fast-track program," said Deputy Minister Kouvelis, trying to sound convincing. "The current crisis has given us more momentum for making the changes that need to happen." As proof, he reported that for the first time ever this Greek government took the first survey of government employees to find out how many they had. "Previous governments did not even know how many public employees were on the payroll." They found that there are 760,000 public employees, or 18 percent of the overall workforce (compared to the United States where about 9 percent of the workforce of 155 million workers is public employees).
Deputy Minister Kouvelis also talked about how, as a way of further reducing costs, they are consolidating government in significant ways. For example, there used to be 1050 municipalities, with a lot of overlapping jobs and positions. Now there are 335 municipalities, and a lot of the overlapping jobs have been abolished. My Greek sources who attended this interview with me were nodding their heads in approval over the depth in his responses.
I asked him a question that I think doesn't get enough attention (and that I wrote about in a previous blog post), namely the downsides of having so much of the economy based on an informal sector of family and social networks. That also lends itself to barter and covert exchanges of money, which easily heads in the direction of graft and corruption; that in turn makes it difficult for the government to count things, to know how much its revenues and expense are. "Do you have a plan for bringing that under control?"
He reframed this into a discourse about the "family welfare system," which sounds warm and fuzzy and was starting to look like an evasion. But he recovered nicely, saying
"The 'gray economy' is a problem, but grandmothers taking care of their grandchildren is good. How do we get rid of the downsides of the gray economy without getting rid of the social aspects that we believe are good? That's what we are grappling with."
In sum, he said that the E.U. partnership is getting better, as everyone has been making compromises to find solutions. At the moment, he is feeling hopeful about the current situation. "We are safe from a crash of the global economy. And we are ready to build a new future for Greece as part of a strong Europe."
My interview with Prime Minister Papandreou. The next day I interviewed Prime Minister Papandreou. Prime ministers are generally pretty busy people, especially when you are the prime minister of a country in the middle of a historic crisis in which much of the capitalist world seems to believe that your tiny nation could be a domino that brings down the rest of them. So I was not surprised when the PM's press office told me in response to my initial request, "We will have to wait until just a day or so beforehand to decide, depending on his schedule and any late-breaking situations." The day before I was informed that "unfortunately his day is turning out to be quite busy, back to back meetings. The best we can offer you is a telephone interview, at approximately 15:00 (3 pm)." I immediately accepted, but it put me in a bit of a quandary: that afternoon was the only time I had left to climb to the top of the Acropolis, one of the most revered classical sites in all of Greece, and explore it before leaving Athens the following day. What a choice, the prime minister or the Acropolis? Then I thought, What the heck, I can take the PM's call from the top of the Acropolis... assuming there is cell phone reception up there, since it's located on a 500 foot tall mount in the center of Athens!
The Acropolis of Athens is the best known of its kind in the world. Although there are many other acropolises in Greece, this is the only one know as THE Acropolis. The Acropolis in its current form was constructed under the leadership of Pericles during the Golden Age of Athens. It sits on a flat-topped bluff jutting above the city, with a surface area of about 3 hectares. Its archaeological remains are vast and iconic, and one of Greece and the world's most famous tourist attractions. Indeed, the Acropolis was formally proclaimed as the pre-eminent monument on the European Cultural Heritage list of monuments in March 2007.
The climb to the top of the Acropolis proceeds along a winding, gently sloping trail. Along the slope are the remains of two different ancient theaters built into the sides of the hill. Here, some of Athens' leading dramatists like Sophocles, Aeschylus and Aristophanes premiered their most recent plays. Climbing through the skeletal remains of ancient Greek architecture is sobering... a chance to reflect on the rise and fall of civilizations, on the plate tectonics of human affairs that grinds up the past and deposits it in the future, transformed into little more than dust and a few artifacts of a time long gone.
The entrance to the Acropolis is a monumental gateway called the Propylaea. It's imposing and impressive, or rather the Greek government has done an impressive job of rebuilding it. Using one's imagination, one can see how these structures were meant to convey grandeur and power, circa 500 B.C.
The highlight of the Acropolis is the most famous, most photographed, most recognized and most admired ruin in the world -- the Parthenon, or Temple of Athena Parthenos (Athena the Virgin). The Parthenon dominates the Athens skyline, and can be seen from practically every point in the city; I could see it from my hotel balcony in the Plaka district, day or night, since the Parthenon is brightly lit at night and radiates over the city like a second full moon. Myth, religion and war are all embodied at this site, and in its heyday it housed the city's treasures and showcased a gold and ivory statue of Athena Parthenos. It is renowned as an example of Classical Greek architecture, with its famous distinctive columns, eight on each of its shorter sides, and 17 columns on two longer sides. The history of the Parthenon is the history of Greece itself: built between 447 and 438 B.C., in the 5th century A.D. transformed into a Christian church, before becoming a mosque under Turkish rule in the 1460s. The building was attacked and almost destroyed in 1687 during a siege of the Acropolis by the Venetians to remove the Turks. A British nobleman named Thomas Bruce (otherwise known as Lord Elgin) caused more damage when he looted it in the 19th century, selling much of its contents to the British Museum. The Parthenon underwent restoration in the late 19th and 20th centuries and today is considered one of the most important symbols of ancient Greece, having been named a UNESCO World Heritage Site in 1987.
I was standing right in front of this magnificent building, admiring its history and architecture when, at 15:20 (3:20 pm), 20 minutes later than scheduled, I received a call and a distant voice said: "Please hold for the Prime Minister."
A few moments later a second, softer voice was on the phone, saying "This is George Papandreou." His understated voice didn't have to say it, but it was immediately and implicitly clear to me, that this was the latest scion of one of the two families that had dominated Greek politics for decades. He had been educated -- 'groomed' is the more accurate word -- for this slot as a leader, attending the world's best schools and living much of his life abroad, including in the United States, rubbing elbows with the young elites of the world. He had grown up in a rarefied world that few could enter or understand, and it is said that his English is better than his Greek. Certainly his voice on the other end of the phone spoke better English than many of my relatives.
I started my end of the conversation by greeting him and explaining that I was, at that very moment, at the top of the Acropolis, perched in front of the Parthenon. "Somehow it seems very appropriate that I should greet you from here," I said. He got a chuckle out of that, he appreciated the coincidence, and he was friendly and easy to banter with. But we soon got down to business.
"Your government is under enormous pressure, Mr. Prime Minister, do you think you can retain the support of the Greek people? Will you be able to hold on?" I asked him.
He responded by heaping great praise on his fellow Greeks.
"I am amazed at the support we are seeing in such difficult circumstances. Keep in mind that right now we are living through the worst of it, people are experiencing the cutbacks but none of the benefits that won't come until later. And of course people are protesting, that's understandable. But even some of the protesters are telling me, 'Keep going, keep going, we know that Greece needs to change.' So everyone is in this incredibly difficult position, afraid to go forward but knowing we have to. I am really proud of my fellow Greeks, and so far I feel they are supporting my team and what we are trying to do."
Opinion polls as well as a recent local election confirm that the prime minister's party, PASOK, is enjoying support as well as a sizable 14 point lead over its main opponent; Papandreou himself retains fairly high ratings. But that flowed naturally into a rather obvious question: What exactly are you doing to rectify the situation? This part of the conversation repeated some of the same ground I went over with his Deputy Minister, Spyros Kouvelis. He stated some of the same themes about rooting out corruption. He spoke about how, shortly after coming to power in October 2009, he was obliged to admit that the Greek public sector suffered from "systemic corruption," and identified cracking down on it as necessary for reducing the country's public debt.
But he also talked about his visions for Greece's future, reiterating some of the same themes as Deputy Minister Kouvelis, i.e. Greece as a regional hub, boosting their green economy and green tech. "For example," he said, "The prime minister of Turkey is coming this weekend to participate in a regional conference on global warming and green economy. We are trying to position Greece as major players in this region for those issues."
He also said that Greece's position as a regional hub is perfectly located to attract foreign direct investment. "Chinese investors are here in Athens next weekend, and they are extremely interested in investing in our shipping and other industries where we are well-positioned to expand in the private sector if we can find sufficient investment capital."
Suddenly, much to my chagrin, our phone connection went dead. Cell phone reception at the top of the Acropolis was spotty, and I had been pacing to and fro among the ruins and tourists, so perhaps that contributed to losing reception. But fortunately he called right back and we resumed our conversation.
I asked him a question about the Greek military. "Greece spends the highest percent of GDP on its military of all European nations, about 3.6 percent (the U.S. spends at least 4 percent, but other European countries spend less than half that amount as a percent of GDP). Given the crisis, given the budget deficit, doesn't it make sense to reduce that spending?"
He was cagey on that one. Precisely because of its location as a crossroads between east and west, Greece has been involved in numerous military conflicts over the centuries; in the last century Greece was invaded by the Nazis and the Ottomans/Turks, with the military itself becoming a powerful special interest during periods of dictatorship within Greece. So reducing military spending taps into a lot of historical baggage. And ongoing fear of Turkey's army has led Greece to become the European Union's biggest military spender as a share of GDP. But last May, during a visit to Athens Turkish premier Recep Tayyip Erdogan said the neighbors and strategic rivals should work to cut military spending. And naturally matching cuts from Turkey would help Greece make the reduction in military expenditures. It seems like this is on the track to becoming a reality at some point, but PM Papandreou was not about to make any major announcements or commitments to me over the phone. He discoursed a long version of "We are looking into that."
He asked me how things looked in the United States, and I told him it varied from place to place, but that some parts of the country had been hit really hard. In California, where I live, the state government had to issue IOUs in 2009 to pay its bills and prevent default. State and local governments have been slashing social programs and government jobs, while many communities have been swamped by foreclosed homes. A recent study found that 25 percent of Californians have no health insurance, and California has a higher unemployment rate than Greece. While both Greece and California are in major belt-tightening mode, at least in Greece all families and individuals still have access to healthcare and a long menu of other supports that Europe is known for. But in California, even before the crisis millions had no health care, and now more have lost their jobs and their health insurance, with little in the way of a support net which further reduces consumer spending and weakens the economy. The Greek economy is only about 2 percent of Europe's economy compared to California's economy, which is about 14 percent of the United States, truly" too big to fail."
On top of that, for a couple of decades for every dollar in federal taxes that Californians have sent to Washington DC, they have only received back about 70 cents. Where did the other 30 cents go? To states like Alaska, Wyoming and other low-population, conservative "red" states who complain about big government and taxes even as they are heavily subsidized by large "blue" states like California and Illinois. Yet when the Golden State requested assistance from the Obama administration, the subsidized states complained vociferously and the White House rejected the request, forcing California to issue IOUs. I pointed out the irony: in the U.S., which has the laws and precendent for the federal govt to act as a financial backstop and bail out states that get into financial trouble, the federal govt refused to use that power; but in the European Union, which has no history, tradition or even laws to allow some member states to bail out another, they had figured out how to do just that.
He appreciate the irony, and concluded with a rather remarkable statement, a "glass half full" kind of statement that may not be fully shared by his fellow European leaders.
"Greece has given Europe the opportunity to fix a defect in the euro zone, that is the fact that we did not have a fiscal union. Now steps have been taken to begin that process. And there is more solidarity from nation to nation, and that is a good thing. That has been Greece's gift to Europe."
That sounded familiar and a moment later I learned why: PM Papandreou told me he had quoted from one of my articles saying the same thing, in a speech he gave to an audience at the Foreign Policy Association in New York City (read the speech here).
I concluded by telling him that I have been impressed with the steps his government had taken not only to deal with an extremely difficult situation handed to him by his predecessor, but also to reinvent Greece from the inside out. We both agreed there was a long way to go. At that point our connection went bad again, but the conversation had come to a natural conclusion, and he didn't call back.
]]>Reconsidering Japan, Reconsidering Paul Krugmantag:www.huffingtonpost.com,2010:/theblog//3.7861982010-11-19T16:13:07-05:002011-05-25T18:15:22-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/New York Times is doing a series on Japan that it describes as an examination of "the effects on Japanese society of two decades of economic stagnation and declining prices." Reading the series is about as cheery a task as rubbernecking at a car wreck on I-95. But unfortunately the Times series simply repeats the "conventional wisdom" about Japan put out by the same economic experts who missed an $8 trillion housing bubble in the United States, and in fact have been wrong on most of the big economic issues over the past two decades.
Look at it this way: In the midst of the Great Recession, the United States is suffering through nearly 10% unemployment and 50 million people without health insurance. A new report has found over 14% of Americans living below the poverty line, including 20% of children and 23% of seniors, the highest since President Lyndon Johnson's War on Poverty. That's in addition to declining prospects for the middle class, and a general increase in economic insecurity.
How, then, should we regard a country that has 5% unemployment, healthcare for all its people, the lowest income inequality and is one of the world's leading exporters? This country also scores high on life expectancy, low on infant mortality, is at the top in literacy, and is low on crime, incarceration, homicides, mental illness and drug abuse. It also has a low rate of carbon emissions, doing its part to reduce global warming. In all these categories, this particular country beats both the U.S. and China by a country mile.
Doesn't that sound like a country from which Americans might learn a thing or two about how to get out of the mud hole in which we are stuck?
Not if that place is Japan. During and before the current economic crisis, few countries have been vilified as an economic basket case as much as the Land of the Rising Sun. Google "Japan and its economy" and you will get numerous hits about Japan's allegedly sclerotic economy, its zombie banks, its deflation and slow economic growth. This malaise has even been called "Japan syndrome", sounding like a disease to warn policymakers, as in "you don't want to end up like Japan."
No one has been more influential in defining this narrative than New York Times columnist and Nobel Prize-winning economist Paul Krugman. Throughout the 1990s, and still occasionally today, Krugman has skewered Japan's economy and leaders. In the late 1990s, Krugman wrote a series of gloom-and-doom articles, complete with equations, theories and titles like "Japan's Trap" and "Setting Sun", bluntly stating: "The state of Japan is a scandal, an outrage, a reproach. It is operating far below its productive capacity, simply because its consumers and investors do not spend enough."
Krugman was commenting on Japan's so-called "lost decade" of the 1990s, when the Japanese economy was considered sluggish and underperforming. But let's look at some of the Japanese metrics during that time. Throughout the 1990s the Japanese unemployment rate was -- ready for this? -- about three percent. Not 30, that's 3. About half the US unemployment rate at the time. During that allegedly "lost decade," the Japanese also had universal healthcare, less inequality, the highest life expectancy, and low rates of infant mortality, crime and incarceration. Americans should be so lucky as to experience a Japanese-style lost decade.
Reopening the case of Japan raises some important questions. How do economists such as Krugman decide what to value and prioritize, or what to measure? What is an economy for? To produce the prosperity, security and services that people need? Or to satisfy economists and their equations, theories and models? For too many economic Cassandras, if their spreadsheet columns don't add up, if the surplus nations don't balance the deficit nations and the supply doesn't meet the demand, then disaster surely awaits.
Krugman has gone on the attack again recently, this time in a debate over fiscal stimulus vs. deficit reduction as a strategy toward economic recovery. As a stimulus hawk, he has written that the Germans -- one of the few economic bright spots in a struggling global economy -- "seem to be getting their talking points from the collected speeches of Herbert Hoover." He is criticizing Germany for the same thing he criticizes Japan -- not spending or consuming enough to stimulate its economy.
But what exactly are the Germans or Japanese supposed to buy more of? Surely Krugman has visited both countries, and it's plainly evident that neither are lacking in any material goods or modern trinkets to speak of. Americans are the only ones who seem to think they need three refrigerators, four televisions and a car for everyone in the household. Too many economists have yet to figure out that it is this consumer-driven economic model that has crashed and burned.
Japan's economy has been and remains successful. So is Germany's. Unlike the trickle down U.S. economy, Japan and Germany have reached an economic steady state in which they don't need roaring growth rates to provide for their people, and here's why: they are better at sharing the wealth produced by their economies to foster a more broadly shared prosperity among their populaces.
But for the economic experts, apparently, it doesn't matter if people's needs are being met; what matters is whether their theories and equations balance. Similarly with the media like the New York Times, which has been getting it wrong for years -- they also missed an $8 trillion housing bubble, as well as weapons of mass destruction in Iraq (prompting the Times to issue an unprecedented mea culpa to their readers). In the same way, the Times and the rest of the media have been missing the real story about what is occurring in Japan and Europe.
As a result, there is a common sense aspect to this that gets lost amid the rhetoric and the headlines. Two lessons of our times are that economic bubbles eventually burst, and that the environmental consequences of unbridled growth in this age of global warming are severe. The world needs to figure out how advanced economies can provide for their people without having roaring growth rates driven by asset bubbles. If consumer-driven growth was the order of the day in the post-World War II era, going forward it is going to be steady-state economic growth -- growing not too fast, but not too slowly -- and learning to do more with less. Yet stimulus hawks like Krugman don't seem to get this; they want to crank the "growth machine" into full gear with huge government stimulus spending.
But the real game is no longer strictly about economic growth, it's also about sustainability. The era of U.S.-style trickle-down economies is over for wealthy countries because trickle-down is neither economically sound nor ecologically sustainable. The developed nations must lead the way towards a different path of development. This is not an easy challenge, yet it is the course that Japan and Germany have chosen. If the U.S. didn't have such a trickle-down economy that has produced so much inequality -- if it was, in fact, better at sharing its wealth -- perhaps it wouldn't need so much fiscal stimulus and growth.
At the recent G-20 meeting in Seoul, South Korea, German Chancellor Angela Merkel rebuffed President Barack Obama and Secretary of the Treasury Timothy Geithner's appeals to go back to the toxic economics of Wall Street capitalism. Said Merkel, "It is essential to return to a sustainable growth path." One cause of the crisis was that "we did not have sustainable growth. In many countries growth was built on debt and [speculative] bubbles."
Her finance minister, Wolfgang Schäuble, was even more blunt. He described American policy as "clueless" and said the American growth model is stuck in a deep crisis. "The USA lived off credit for too long, inflated its financial sector massively and neglected its industrial base." Catch the irony: Germany -- previously sneered at by U.S. pundits for its "weak and sclerotic" economy -- is lecturing America about how to grow our economy. Given Germany's 6.7% unemployment (compared to 9.6% in the US) and an impressive record at manufacturing things that the rest of the world wants to buy, the Obama administration as well as Paul Krugman should be listening attentively. Steven Hill is a political writer whose latest book is Europe's Promise: Why the European Way is the Best Hope in an Insecure Age (www.EuropesPromise.org). He is blogging about his recent 12-nation, 20-city speaking tour in Europe at "Dispatches from Europe" posted by the Washington Monthly website.
]]>Don't Cut Social Security, Double Ittag:www.huffingtonpost.com,2010:/theblog//3.7189882010-09-16T06:40:22-04:002011-05-25T17:40:20-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
But the New America Foundation recently released a study (that I authored) that concludes that neither position grapples with the reality of the utter breakdown of America's retirement system that is occurring. A completely new approach is needed, and the study proposes an increase in the Social Security payout to every American as a way of modernizing the U.S. economy and helping American businesses to become more competitive.
Here's the dilemma that the U.S. faces. Since WWII, retirement has been conceived as a "three-legged stool," with the three legs being Social Security, pensions, and personal savings centered around homeownership. But today most private sector employers have quit providing pensions, and state and local government's public pensions are drastically underfunded.
In addition, a collapsed housing and stock market, combined with increased inequality even before the Great Recession, have drastically reduced Americans' personal savings. In short, the "retirement stool" no longer is stable and secure, and suddenly Social Security, which always has been viewed as a supplement to private savings, is the only leg left for hundreds of millions of Americans.
Studies show that people in the bottom two income quartiles depend on Social Security for 84 percent of their retirement income, and even the second richest quartile depends on Social Security for 55 percent of its retirement income. Only the richest 25% of Americans don't rely heavily on Social Security.
But the real problem with Social Security is not, as its critics say, that it is underfunded. Contrary to gloomy predictions the program is on solid financial footing, with the Congressional Budget Office projecting that Social Security can pay all scheduled benefits out of its own tax revenue stream through at least 2037.
The bigger problem is that Social Security's payout is so meager, which is problematic since it has been thrust into this new role as a de facto national retirement plan. Currently it replaces only about 33 to 40 percent of a worker's average wage from the year prior to retirement (compared to Germany and France where it replaces 70 and 75 percent respectively). That is simply not enough money to live on when it is your primary -- perhaps your only -- source of retirement income.
Doubling Social Security's individual payout would cost about $650 billion annually for the 51 million Americans who receive benefits. Here are some ways to pay for it.
First, lift Social Security's payroll cap that favors the wealthy. Currently Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed. The net result is that poor, middle class, and even moderately upper middle class Americans are taxed 12.4 percent (split between employee and employer) on 100 percent of their income, but the wealthy pay a much lower percentage. A lawyer making $500,000 a year effectively pays only 2.5 percent, and millionaire bankers pay a paltry 1.2 percent.
Removing the income cap and making all income levels pay the same percentage - which is how Medicare works -- is a very popular reform. Polls show that most Americans think that if they pay Social Security tax on their full salary, others should too. Taxing all income brackets equally would raise about $377 billion, which is nearly sixty percent of the revenue needed to double the Social Security payout.
Second, with all Americans receiving Social Security Plus, employer-based pensions would be redundant so businesses no longer would need the substantial federal deductions they currently receive for providing employees' retirement plans. These deductions total a whopping $126 billion annually.
Those two alone would provide three-fourths of the revenue needed to double Social Security's payout.
Other possible revenue streams exist, such as reducing or eliminating other unfair deductions in the tax code which currently allow the top 20 percent of income earners to reap generous deductions that most low and moderate income Americans cannot enjoy. These include deductions for private retirement savings, homeownership, health care and education.
For example, only those individuals who have enough income to divert for savings or investment have the luxury of enjoying considerable tax deductions for their 401(k)s, IRAs and pensions. Similarly the homeownership deduction for mortgage interest only benefits people with sufficient income to buy a home. But the poor and working class rarely can take advantage of these since they don't make enough to itemize deductions.
While a certain number of moderate income Americans benefit from these, if we enacted Social Security Plus they would no longer need to rely on these deductions as vehicles for retirement savings. Instead of buying a home as part of their retirement plan -- which as we have seen is a risky investment -- they could put their money into Social Security Plus. In 2010 the mortgage interest deduction alone will amount to about $108 billion.
We also could devote an estate or inheritance tax to the Social Security trust fund for anyone with an estate of $3.5 million or more; we could make capital gains and unearned income subject to a Social Security contribution; or direct a small transaction fee levied on all stock market transactions into the Social Security trust fund. Still another possibility would be to use a flexible payroll tax, as Finland has done, in which payroll taxes are increased when the economy is going well and reduced when the country is hit by hard times. This counter-cyclical intervention acts as an automatic stabilizer to reduce the cost to employers of hiring workers during tough times, and during good times creating a buffer fund that would help finance an expansion of Social Security.
In short, numerous tax policy options exist to fund this, and any of them could be implemented in stages, targeting first those who are most in need. We also could allow active seniors who have not yet reached full retirement age to take a half-pension and work at half-time without losing their right to a full pension upon their retirement.
An expansion of Social Security -- one of the most successful, stable and popular social programs in American history, currently celebrating its 75th year -- not only would be good for America's retirees, it also would be good for the broader macro-economy. It would act as an "automatic stabilizer" during economic downturns, keeping money in retirees' pockets and stimulating consumer demand. Most economists agree that low and middle income people are more likely to spend an extra dollar on goods and services than are affluent individuals, because they put much less money aside.
Social Security Plus also would help American businesses trying to compete with foreign companies that don't have to provide pensions to their employees, since those countries already have generous national retirement plans. Benefits would be portable when changing from one job to another, so working Americans wouldn't be segregated into unequal classes based on whether their employer offers a pension. Every worker could contribute to her or his own retirement pension which would be directed into a Social Security Plus system with investments restricted to Treasuries, instead of handing it over to mutual or pension fund managers who gamble on the volatile stock market with future retirees' money (especially since there is no evidence that the typical fund manager can consistently beat the average return on Treasuries).
Social Security Plus' greater retirement security also would decrease health care costs stemming from having insufficient income to receive timely care for seniors. And it would be broadly fair, since even those higher income Americans who are having some of their tax deductions reduced would see part of it returned to them in the form of a greater Social Security payout.
In short, Social Security Plus would provide a stable, secure retirement for every American and contribute greatly toward a solid foundation from which to build a strong and vibrant 21st century U.S. economy.
Steven Hill is the author of the New America Foundation's report "Secure Retirement for All Americans" and also author of Europe's Promise: Why the European Way is the Best Hope in an Insecure Age published recently by University of California Press.
]]>New Study Identifies Revenues for Doubling of Social Security Payouttag:www.huffingtonpost.com,2010:/theblog//3.6870372010-08-18T19:25:40-04:002011-05-25T17:25:21-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/Next Social Contract Initiative of the New America Foundation has published a provocative new study by Steven Hill, a leading expert in comparative social policy. Noting that, in the wake of the Great Recession, most Americans are even more dependent on Social Security for most of their retirement income, Hill calls for reforms to strengthen and expand the program, including a proposal to DOUBLE the average pay-out, as well as viable ways to pay for this increase.
"New solutions are needed to provide retirement security to retiring Americans, now and in the future," says Hill. "An expansion of Social Security -- one of the most successful and popular programs in American history -- that converts it into a more robust retirement system would build upon the most stable components of the current system."
With the collapse of both private employer-provided pensions and homeownership and personal savings (especially in the aftermath of the Great Recession), Social Security becomes the primary leg of the fragile "three-legged stool" of retirement security for most Americans. Yet, despite Social Security's new role as a de facto national retirement plan, many budget deficit hawks are calling for cuts to it to decrease America's indebtedness. But that would only make things worse for retiring Americans, says Hill.
The real problem with Social Security is that its payout is so meager. It provides only a small fraction of the money needed for retirement, estimated to replace only about 33 to 40 percent of a worker's average wage from the year prior to retirement. So this study has identified three major revenue sources (plus some ancillary ones) for doubling the Social Security payout and proposes a new system called Social Security Plus. The three major revenue sources are:
First, lift Social Security's payroll cap. Currently Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed. The net result is that poor, middle class, and even moderately upper middle class Americans are taxed 12.4 percent (split between employee and employer) on 100 percent of their income, but the wealthiest Americans pay a much lower percentage. A lawyer making $500,000 a year effectively pays only 2.5 percent, and millionaire bankers pay a paltry 1.2 percent. Removing the income cap and making all income levels pay the same percentage -- which is how Medicare works -- would be a popular reform. Polls show most Americans think that if they pay Social Security tax on their full salary, others should too. Taxing all income brackets equally would raise about $377 billion, which is nearly sixty percent of the revenue needed to double the payout.
Second, eliminate the employer tax deduction for providing retirement. With all Americans receiving a more robust pension via Social Security Plus, employers would be freed from providing retirement for their employees. Since employer-based pensions would be made redundant by Social Security Plus, businesses no longer would need to receive the substantial federal deductions they currently accrue for providing employees' retirement plans. These deductions total an estimated $126 billion annually.
Third, reduce or eliminate other unfair deductions in the tax code that allow higher income people to reap generous deductions that low and moderate income Americans can't enjoy. These include deductions for private retirement savings, homeownership, health care and education. For example, individuals who have enough income to divert for savings or investment are allowed considerable tax deductions for their 401(k)s, IRAs and pensions.Similarly the homeownership deduction for mortgage interest only benefits people with sufficient income to buy a home. But low and moderate income Americans rarely can take advantage of these since they don't make enough to itemize deductions. Consequently, the majority of these benefits go to the top 20 percent of income earners; in 2010 the mortgage interest deduction alone will amount to about $108 billion.
These three revenue streams -- lifting the payroll cap, eliminating the employer tax deduction for providing retirement, and capping or eliminating various wealth deductions -- would raise 100 percent of the revenue needed for doubling the payout of Social Security Plus, which would cost an estimated $650 billion annually for the 51 million Americans who receive benefits. Since all three of these involve tax schemes that favor higher income Americans over poor, working-class and middle-class Americans, it is literally true that Tax Fairness = Retirement Security. Social Security Plus could be implemented in stages, targeting first those who are most in need.
The "debate" over Social Security mostly has been between those who say it is necessary to trim it back and others who want to maintain it as it is. No one has proposed expanding Social Security, much less a doubling of its payout. This study published by the New America Foundation makes a unique contribution to the ongoing debate because it shows that expanding Social Security is viable and indeed is the only way to provide retirement security to Americans going forward. There really is no other choice. A more robust retirement system already has been put in place by most advanced OECD countries. Social Security Plus would provide a stable, secure retirement for every American and contribute greatly to a solid foundation from which to build a strong and vibrant 21st century economy.
For interview requests, please contact Liz Wu at Wu@newamerica.net and (510) 295-9859 or Kate Brown at 202-213-7051 or brown@newamerica.net.
About the New America Foundation
The New America Foundation is a nonprofit, nonpartisan public policy institute that invests in new thinkers and new ideas to address the next generation of challenges facing the United States.
]]>Obama Needs an Energy Policy Like Europe's: Lessons From the Gulf of Mexicotag:www.huffingtonpost.com,2010:/theblog//3.6297852010-06-29T16:19:37-04:002011-05-25T16:55:19-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
By forging ahead with widespread implementation of innovative conservation practices, renewable energy technologies and fuel efficient transportation, Europe has managed to reduce its 'ecological footprint' to half that of the United States for the same standard of living. The average European emits half the carbon of an average American and uses far less electricity. It takes 40 percent more fuel for an American car to drive a mile than a European car.
How has Europe managed to achieve this? Through smart, strategic government policy, working closely with the private sector, to advance incentives and regulations that encourage the necessary behavior from consumers, households and businesses.
During the past decade, as the US has resorted to increasingly desperate strategies to secure more oil -- whether Middle East wars under Bush-Cheney or more offshore drilling under Obama -- the European landscape has been slowly transformed by new conservation and renewable energy technologies that look like something out of a sci-fi movie. Picture windmills, tidal turbines, and solar panels on rooftops, dotting the European landscape. Imagine large cylindrical 'sea snakes' bobbing in the ocean, transforming wave motion into electric power. Or vast solar arrays with tens of thousands of panels that have tracking technology to follow the sun, and 'smart' energy-efficient buildings that monitor the temperature and sunlight to open and close window panels and blinds automatically. Imagine harnessing the body warmth of 250,000 daily commuters to produce heat for a nearby office block. Or how about high-speed trains circling it all, linking major cities, whisking passengers in carbon-friendly efficiency. All of these inventions and more are becoming reality in Europe.
Windmills, Tides, and Solar Besides: The European Way of Energy
Europe leads the world in the production of wind power, and Germany leads Europe. All across rural Germany giant windmills line the landscape like rows of a new-fangled crop. Nationwide more than twenty thousand windmills generate 8 percent of the country's electricity, some 21,000 megawatts (MW) of power, enough to power ten million homes and save an estimated forty-two million tons of carbon dioxide. Germany has plans to build an additional thirty offshore wind farms in the North and Baltic seas. Britain, Spain, Portugal and Sweden also are investing heavily in wind power. Denmark already gets 20 percent of its total power from wind energy. The US has only a third of Europe's wind power.
Solar power also has surged in Europe, with photovoltaic capacity in the European Union growing at an annual rate of 70 percent in recent years. Other energy forms are being developed, including geothermal, biomass, and small-scale hydro. Harnessing the limitless power of the sea has long been the dream of science fiction, and it is becoming reality in Europe. Imagine taking a windmill and sinking it beneath the sea -- that, in effect, is what engineers have done a mile off the British coast. Like a field of windmills, these underwater 'seamills' create the possibility of grids of undersea turbines producing thousands of megawatts of carbon-free power.
Portugal is the first country to pioneer an eye-popping new technology known as a 'sea snake' or 'energy eel'. Sea snakes are 100 meter-long floating cylinders that bob semi-submerged in the waves and convert wave motion to power that is then fed into underwater cables and brought to land. Portugal is planning a grid of 30 sea snake segments producing 20 megawatts of power, saving some 30 million tons of carbon emissions. Twenty-five of these grids could power a city the size of Lisbon.
Each country is deploying different technologies and acting as a laboratory for the others. Some countries have set ambitious goals: Sweden already generates 40 percent of its energy needs from renewables. In 2007, Germany generated 14 percent of its electricity from renewable energy, preventing 114 million tons of carbon emissions. Meanwhile the United States generates a paltry 6 percent of electricity from renewables.
Visionary Leadership and Policy
Renewable energy technologies have proliferated in Europe as a result of several factors, the most important of which has been government support, including financial incentives. In Germany, wind and solar power have benefited from laws and feed-in tariffs that require energy companies to pay wind and solar producers three to four times more per kilowatt than the amount paid for power produced from conventional sources. That has created a fertile business climate and economies of scale for renewable technologies to take off. The German government also has spurred demand by establishing a '100,000 rooftops program', which provided low-interest credits for homebuyers of solar systems. Other countries, such as Britain, Denmark, Portugal, and Spain, have followed suit.
Europe's economy has received a boost as a result of massive investment in the renewable energy sector. Hundreds of thousands of new jobs have been created, and as Germany and other countries have gained in technological expertise, they have begun exporting to markets all over the world, including to China and the United States. Europe's green industry is realizing enormous gains and showing that sound environmental policy does not have to be pitted against the economy.
Conservation -- The Best Renewable of All
While Europe's renewable energy sector is leading the world, most European advances have been more mundane -- just better ways of boosting conservation through greater energy efficiency, better mass transportation, and the incorporation of 'green' principles into everything from building design to urban planning to flushing toilets. Virtually all the experts agree: in the short term, the cheapest, easiest, and fastest way to reduce carbon emissions and tackle many of the world's energy shortages is through energy conservation via widespread use of existing technology.
Europe has become a leader in using green building design and construction practices, including for large commercial buildings as well as residential. Buildings are estimated to account for 50 percent of total energy use in newer cities and more than 70 percent in older urban areas. So widespread use of existing technologies offers the promise of large efficiency gains in heating buildings.
Lighting alone accounts for 10 to 15 percent of domestic, and 25 to 30 percent of commercial, power use, making motion sensors and low wattage bulbs important tools in the battle to reduce energy use. The EU has approved the phasing out of incandescent bulbs by 2012, and estimates say that will reduce the EU's carbon emissions by 25 million tons a year.
Europe also has been pioneering what is known as 'cogeneration,' or 'combined heat and power' (CHP) systems. In conventional electricity generation, only about 35 percent of the fuel is converted into electricity while 65 percent is lost as wasted heat that is belched up the smokestack of the power plant. But cogeneration recaptures the heat and recycles it, achieving an efficiency of up to 90 percent. Denmark is leading the world in warming buildings with cogeneration methods. Hundreds of thousands of Danish homes and other buildings are warmed by surplus heat transported in insulated pipes from power plants. Recycled energy from cogeneration amounts to over 50 percent of all energy used in Denmark today; it makes up nearly 40 percent of all energy used in the Netherlands and Finland, and 20 percent in Germany, Poland, and Portugal, but only 8 percent in the United States. The average Dane now uses half as much electricity per year as the average American.
Since the mid-1990s, all new construction in Europe has had to meet basic requirements for design efficiency, making green architecture an everyday reality. Europe has pioneered the use of natural lighting, cogeneration, solar power, fuel cells, advanced ventilation, motion sensors to switch off lights and control fans, special glass that allows daylight in but keeps heat and ultraviolet rays out and minimizes heat loss in winter, and much more. There's nothing like this effort on the American landscape, where only a handful of buildings voluntarily submit to green-friendly LEED design specs. Consequently, the average US building uses roughly a third more energy than its German counterpart. Improving energy efficiency in buildings would translate to a 25 percent reduction in America's carbon emissions.
Revolution on Wheels
In the transportation sector, Europe has gone both high and low tech. It is leading in the development of mass public transit, high-speed trains, and fuel-efficient autos (including the use of non-petroleum powered vehicles such as electric plug-in and hydrogen-fuelled cars); but also in encouraging no-carbon forms of transportation such as bicycling and walking through the creation of thousands of kilometres of bike and pedestrian paths crisscrossing the continent.
Europe's automobiles have engines that are about half the size of America's, requiring a lot less fuel than a gas guzzling American vehicle. The fuel standard of European vehicles is set to rise to fifty miles per gallon by 2012, but the Obama administration's new nationwide standards mandate an average of only 35.5 mpg by 2016. Even China has reached that by now.
And comparing Europe's trains with those in the US is like comparing a professional major league team with one in the minors. Europe has built an impressive network of routes for high-speed trains that crisscross the continent, with even more in the works funded by $27.5 billion earmarked by the EU. But the US really has no high-speed train lines to speak of, and Obama has allocated only $8 billion for construction. That's too bad because trains emit only a third of the carbon per passenger compared to air travel.
For all these reasons, while the United States has seen a 21 percent increase in oil consumption since 1980, most European countries have seen significant drops. Denmark and Sweden's oil consumption declined by a third, Germany's by 20 percent, France's by 14 percent, and Italy's by 13 percent. If the United States were to match the fuel economy achievements of Europe, US demand for oil would be cut by 1.5 billion barrels of oil per year, nearly 20 percent of consumption, a huge amount given that the US consumes about a quarter of the world's total.
Europe's New Energy (R)evolution
Perhaps no single horizon better illustrates Europe's technological advances and capacity for innovation, combined with political will and future-thinking, than its leadership in pushing the world toward a new era of renewable energy, conservation, and low greenhouse gas economies. Certainly, Europe has its energy challenges, many of them stemming from the instability of Middle East oil, Russian sabre-rattling over natural gas, and the lack of a continent-wide energy grid. But for the most part Europeans have discovered what a previous generation of American leaders once knew: investment in infrastructure pays dividends in multiple ways that pave the way for the future.
Every day that the massive black plume off the Louisiana coast sprays into the sea is a reminder of how much the United States has failed to transition to a modern energy regime. Given the stakes over global warming, Europe has emerged as 'the indispensable nation,' while the United States, the largest per capita polluter in the world, continues to fiddle as the earth burns.
Steven Hill is author of the recently published 'Europe's Promise: Why the European Way is the Best Hope in an Insecure Age' (www.EuropesPromise.org). Visit his website at www.Steven-Hill.org. ]]>What the Doomsayers Haven't Been Telling You about Greecetag:www.huffingtonpost.com,2010:/theblog//3.5448602010-04-20T14:53:04-04:002011-05-25T16:15:25-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/the Greek debt crisis!
By now of course everyone knows that Greece is in really tough shape, right? Practically at the cliff's edge, ready to collapse? All the gloom and doomers like Simon Johnson and others have been telling us this for two months, not only in the mainstream media but right here on Huffington Post. So it must be true. But before we pronounce it so, let's take a quick pop quiz:
Which country has less inequality, Greece or the United States?
Which country has lower rates of infant mortality, Greece or the United States?
Which country has greater age longevity and more affordable university education? Which country has a lower homicide rate and about one-tenth the number of people in prison, Greece or the United States?
Which country has a lower rate of teenage births and lower rates of drug use? Which country emits far fewer carbon emissions per capita?
Which country has affordable, universal health care for all its people, and pays about half as much money per person to receive it -- Greece or the United States?
Surprisingly, the answer to all those questions is: Greece. Certainly Greece is going through a difficult spot in its long history, but how difficult depends on how you measure it. In some very important ways Greece is doing better than the United States (which also is saddled with enormous government deficits, as is virtually every country in the world, due to stimulus spending designed to jumpstart national economies after the global collapse).
Why then is gloom and doom all we hear about Greece, 24-7? A good part of the reason is ideological. With U.S. government deficits soaring, conservatives from the Tea Partiers to Fox News to Senate Republicans are sounding the alarm about a return to "big government." Recently former GOP presidential candidate Rudy Giuliani even stated that President Obama was moving the US towards -- gasp -- European socialism.
For conservatives like Giuliani, Glenn Beck and others, "Europe" is a code word for "big government", "high taxes" and more recently "big deficits." When they bash Europe they are really taking aim at government in the United States. All this talk of Greece -- a small country that makes up only 2% of Europe's economy -- is being used to attack the Obama administration and its stimulus spending and budget deficits. "The U.S. will end up like Greece!" has become one of the conservatives' rallying cries.
A second ideological front is glimpsed when you realize that most of the analysts and reporters are looking at this, not from the point of view of everyday Greeks, but from that of the bankers and bonds traders, and the investment class in general. The Electronic Investor Herd is skittish that they might not get paid back the money they have loaned to Greece. And most of the reportage on Greece's situation comes from media outlets owned by corporations that reflect the commercial interests of its owners.
But from the average Greek person's perspective, it matters little if Greece defaults on its debt or instead manages to roll over that debt at a high interest rate. Either way, Greece is going to have to enact austerity measures, and that will be a hardship for its people. Greece has been living beyond its means, rolling up deficit after deficit, and the bill has come due. In a country where many are able to retire at the age of 50 or 55, while the Germans are raising their retirement age to 67, this is not terribly surprising.
Even with Portugal's economy (which is smaller than Greece's) possibly added to the mix, this crisis has been manageable for the European Union. It's not as if Europe is the only place suffering the aftershocks of the global economic earthquake that shook the world in 2008. California makes up 14% of the American economy, truly too big to fail, and had to issue IOUs to pay its bills and prevent default. California has been slashing social programs and government jobs, and is being swamped by foreclosed homes. So why are we are hearing more about Greece than California?
Because Greece has more rattled the investor class and the slavish corporate media that reflects its interests.
What's more surprising is how much progressive media outlets also have echoed this simplistic "bad Greece" storyline. Whether on NPR, the Huffington Post, or various European news outlets, many commentators have unleashed Greece-bashing tirades that have fed into the hysteria. Prominent among them has been Simon Johnson, a MIT professor and former International Monetary Fund economist who has departed from his usually balanced and insightful analyses to become increasingly shrill with over-the-top gloom and doom predictions. Nuance has been lost because, hey, it's more dramatic and attention-grabbing to report on a car wreck, right?
So Greece makes for a convenient punching bag for those who either wish to score ideological points or draw our interest with scare stories. But if there's any hope of ever having a more progressive government in the United States we have to unwind this "government is evil" conversation. So it's disappointing that progressive media outlets like the Huffington Post and certain authors are unwittingly enabling this conservative narrative. It is instructive to realize that Greece is just the latest episode in this longstanding, American-led Europe-bashing. Here is a sampling of the numerous gloom and doom headlines that have appeared in U.S. media outlets in recent years, trumpeting the imminent collapse of Europe:
"The End of Europe"; "Europe Isn't Working"; "Will Europe Ever Work?"; "What's Wrong with Europe"; "The Decline and Fall Of Europe"; "Old Europe Unprepared for New Battles"; "Western Europe Is Cursed"; "Reforms in Europe Needed"; "Is Europe Dying?"; "The Rise of the Fortress Continent"; "The Decline of France"; "Political Crisis Paralyzing Europe"; "Europe's Long Vacation Is Ending"; "Why America Outpaces Europe"; and "Europe Turns Back the Clock."
These alarming headlines appeared from 2003 until late 2006, when--surprise, surprise--it was discovered that the European economy actually was surging past the U.S. economy. In fact, an article published in the international version of Newsweek on November 20, 2006, blared the headline "The Great Job Machine: Despite Its Laggard Reputation, Europe Continues to Grow Faster, and Create More Jobs, than America"--yet that story never appeared in the domestic version of Newsweek.
Just as the media misreported weapons of mass destruction and completely missed an $8 trillion housing bubble, it frequently misreports Europe. The ideologically-slanted U.S. media continue to shield Americans from injections of reality that are badly needed to understand their country's relative standing in the world. Even the reporting on street protests in Greece has been tinged with alarmist depictions calculated to scare Americans about Europe. I believe it's a good sign that the Greeks are fighting to preserve their social contract from the maraudings of the banks, the bonds traders and their previous terrible governments that indebted them and then hid it with the help of Goldman Sachs. What I find truly worrying is that Californians, as well as their fellow Americans, are taking all of this lying down. There seems to be little fight in the American people, despite the lost ground.
And if there is little fight left in that Spirit of 1776, and on top of that Americans don't value government very much, they are never going to push for the adoption of better policies in which a smart and progressive government plays its suitable role, defined via the rough and tumble of politics.
]]>Happy Tax Day: Are Americans Getting Their Money's Worth?tag:www.huffingtonpost.com,2010:/theblog//3.5399692010-04-16T15:21:00-04:002011-05-25T16:10:21-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
Europe frequently plays the punching bag role during these moments because there is a perception that the poor Europeans are overtaxed serfs. But a closer look reveals that this is a myth that prevents Americans from understanding the vast shortcomings of our own system.
A few years ago, an American acquaintance of mine who lives in Sweden told me that, quite by chance, he and his Swedish wife were in New York City and ended up sharing a limousine to the theater district with a southern U.S. Senator and his wife. This senator, a conservative, anti-tax Democrat, asked my acquaintance about Sweden and swaggeringly commented about "all those taxes the Swedes pay." To which this American replied, "The problem with Americans and their taxes is that we get nothing for them." He then went on to tell the senator about the comprehensive level of services and benefits that Swedes receive.
"If Americans knew what Swedes receive for their taxes, we would probably riot," he told the senator. The rest of the ride to the theater district was unsurprisingly quiet.
The fact is, in return for their taxes, Europeans are receiving a generous support system for families and individuals for which Americans must pay exorbitantly, out-of-pocket, if we are to receive it at all. That includes quality health care for every single person, the average cost of which is about half of what Americans pay, even as various studies show that Europeans achieve better health results.
But that's not all. In return for their taxes, Europeans also are receiving affordable child care, a decent retirement pension, free or inexpensive university education, job retraining, paid sick leave, paid parental leave, ample vacations, affordable housing, senior care, efficient mass transportation and more. In order to receive the same level of benefits as Europeans, most Americans fork out a ton of money in out-of-pocket payments, in addition to our taxes.
For example, while 47 million Americans don't have any health insurance at all, many who do are paying escalating premiums and deductibles. Indeed, Anthem Blue Cross announced that its premiums will increase by up to 40 percent. But Europeans receive health care in return for a modest amount deducted from their paychecks.
Friends have told me they are saving nearly a hundred thousand dollars for their children's college education, and most young Americans graduate with tens of thousands of dollars of debt. But European children attend for free or nearly so (depending on the country).
Child care in the U.S. costs over $12,000 annually for a family with two children, but in Europe it cost about one-sixth that amount, and the quality is far superior. Millions of Americans are stuffing as much as possible into their IRAs and 401(k)s because Social Security provides only about half the retirement income needed. But the more generous European retirement system provides about 75-85 percent (depending on the country) of retirement income. Either way, you pay.
Americans' private spending on old-age care is nearly three times higher per capita than in Europe because Americans must self-finance a significant share of their own senior care. Sixty million American workers have no paid sick leave, millions more have no paid parental leave following a birth, and so must self-finance their own time off. But Europeans receive all this in exchange for their taxes.
Income taxes in Europe are certainly high for some people, but the highest rates are paid only by those in the highest income brackets. Many middle class and low income Europeans don't necessarily pay an income tax rate any higher than what many Americans pay. And Americans also tend to pay more in local and state taxes, as well as in property taxes. Americans also pay hidden taxes, such as $300 billion annually in federal tax breaks to businesses that provide health benefits to their employees.
When you sum up the total balance sheet, it turns out that Americans pay out just as much as Europeans -- but we receive a lot less for our money.
Unfortunately these sorts of complexities are not calculated into simplistic analyses like Forbes' annual Tax Misery Index, a "study" which shows European nations as the most tax miserable and the low-tax United States as happy as a clam -- right down there on the list next to Indonesia, Malaysia and the Philippines.
But Forbes only adds up income tax, social security, sales tax or VAT and a few other minor fees. A thorough analysis would need to create a ledger in which all the supports and services Europeans receive are listed on one side and the amount of taxes and any out-of-pocket expenses they pay are listed on the other; and then do a similar analysis for Americans, listing what Americans pay in taxes as well as out-of-pocket expenses for those same services. That kind of analysis is much more illuminating.
In this economically competitive age, increasingly these kinds of supports and services are necessary to ensure healthy, happy and productive families and workers. Europeans have them but most Americans do not, unless you pay a ton out of pocket. Or unless you are a member of Congress, who of course provide European-level support for themselves and their families.
That's something to keep in mind on April 15. Happy Tax Day.
Steven Hill is the author of the recently published "Europe's Promise: Why the European Way is the Best Hope in an Insecure Age" and director of the Political Reform Program for the New America Foundation.
]]>The Silver Lining of the Greek Debt Crisistag:www.huffingtonpost.com,2010:/theblog//3.5295322010-04-07T20:53:31-04:002011-05-25T16:05:22-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/New York Times to National Public Radio has joined the chorus of gloom and doom. But what all these experts have failed to notice is that Greece's debt crisis may turn out to be one of the best things to have happened to the European Union.
In the post-World War II era Europe has always evolved and adapted -- and ironically grown more unified-in response to a crisis. And as crises go, the Greek one has been manageable. The Greek economy is only about 2% of Europe's economy, compared with, for example, California's, which is about 14% of the U.S. economy. California, which had to issue IOUs to cover its debts and is slashing jobs and social programs at state and local levels, is literally "too big to fail" since its own weaknesses threaten the national recovery. So it's fortunate that Greece's situation is comparably small and manageable.
While the amount of a Greek bailout would be relatively small -- far less than that for AIG or Citigroup -- Greece's situation has acted as a wakeup call to the rest of Europe. And that wake-up call has resulted in proposed reforms in a number of neglected areas that, if passed, will lead to sensible financial regulation and transparency -- as well as strengthen European unity.
The first of these proposed reforms is in financial re-regulation. The news that con artists at Goldman Sachs had helped Greece hide its massive deficits has spurred Europe to finally move forward with a crackdown on hedge funds, derivatives and credit default swaps. Europe first proposed such regulations a year ago during the G-20 meeting, but U.S. Treasury Secretary Timothy Geithner dithered. Now it appears that Europe won't wait while America drags its feet. Greece has pushed the E.U. to its limit.
Greece's profligacy, as well as that of other euro zone members, was enabled by a lack of transparency that allowed Greece to submit falsified finance reports without getting caught. Ironically, in 2005 there was an effort by the European Commission to equip the E.U.'s statistics agency, Eurostat, with the right to audit figures submitted by member states. That recommendation was rebuffed because finance ministers did not want anyone looking over their shoulders. Now that proposal has been resubmitted to member states -- and it is expected to pass.
Finally the euro has been an enormous political success in that it has bound together former combatants from two world wars into "peace and prosperity" partnerships. But it always has lacked an important component that has benefited the U.S. When a euro member gets into financial straits there is no mechanism for a backstop that can bail out the troubled member, like the American federal government can do for any of its 50 states (though when California requested assistance from the Obama administration, the White House said "nein," causing California to issue its IOUs).
But now it appears that this "structural crack," as former U.S. Federal Reserve Chairman Paul Volcker has called it, will be addressed. The European Commission has proposed a European Monetary Fund that would provide the euro zone a sort of finance ministry that could tackle the default of a member state, or force a country to cut its deficit before it got out of hand.
This idea of surrendering a measure of financial sovereignty would never have occurred had the Greek crisis not arisen. Now, as a result, "There is a clear sense of determination to act," says Amadeu Altafaj, spokesman for the E.U. Economic and Monetary Affairs Commission.
So rather than meaning the end of the euro or the E.U., as some doom-and-gloomers have predicted, the crisis may have the opposite effect. To what degree that ultimately holds true is hard to say, but the E.U. member states certainly have swum too far across the stream to turn back now. While the current situation is messy and noisy, the E.U. often has evolved in reaction to a crisis. During each crisis Eurosceptics have predicted the imminent demise of Europe, and each time they have been proved wrong. Indeed, when the euro was first launched many predicted it would fall flat on its face.
Crystal ball gazers would do well to remember that "old Europe" in the form of the European Union is young. Its current configuration of 27 nations and 500 million people dates only from 2004; the Lisbon Treaty was ratified just last year, and the Maastricht Treaty establishing the E.U. was signed in 1992. It took the U.S. about 90 years from the formation of its first government in 1790--and a bloody civil war--to congeal from a collection of regions into a nation.
In the post-World War II era Europe has proved remarkably resilient. The E.U.'s brand of social capitalism has generated tremendous wealth, contrary to the skeptics' claims. It has more Fortune 500 companies than the United States and China combined, as well as more small businesses creating two thirds of European jobs, compared to only half in the US. The E.U.'s economy produces about a third of the world's total, nearly as large as that of the U.S. and China together.
Yet at the same time the Europeans have figured out how to harness this capitalist engine to create a more broadly shared prosperity. Indeed, while both Greece and California are in major belt-tightening mode, at least in Greece all families and individuals still have access to health care and a long menu of other supports that Europe is known for. But in California a recent study found that nearly a quarter of the state's 37 million people have no health insurance, not to mention any other support net, which only further reduces consumer spending and weakens the economy. (The recent passage of Obama's health care legislation will have a minor impact in the short term since its major provisions don't go into effect until 2014).
It seems unlikely that the latest crisis caused by Greece's excesses will unravel this remarkable invention known as the European Union. Indeed, the crisis seems to be spurring Europe to fine-tune its vision and its institutions, making it even stronger.
Steven Hill is author of the recently published Europe's Promise: Why the European Way is the Best Hope in an Insecure Age and director of the Political Reform Program at the New America Foundation.
]]>Economic Aftershocks in Greece and Californiatag:www.huffingtonpost.com,2010:/theblog//3.4675932010-02-18T14:03:22-05:002011-05-25T15:35:18-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
The Greek aftershock has suddenly roiled the financial markets in recent weeks. With some $25 billion worth of loan payments coming due for which Greece will need to refinance, the bond markets became skittish that a Greek default may lead to a wave of other national defaults in Portugal and Spain, and drag down the euro itself (much like Lehman Brothers initiated the global financial industry's collapse).
But that seems unlikely. Greece's economy comprises only 2% of the overall European economy -- about the same magnitude as Indiana's in the United States. Greece's deficit to GDP ratio, while high at about 12.5%, is not that much higher than that of both the US and Japan, around 10.5%. True, Greece has a sizable accumulated debt over many years, estimated at about 110 percent of its GDP, but even the U.S. has a debt to GDP estimated at 94 percent and projected to break 100 percent by 2012. And Greece is embedded within the euro zone which actually has a fairly low deficit to GDP ratio by today's post-collapse standards, only 6%. So there is little doubt that Europe has the capacity to absorb Greece's troubles. This is a matter of investor confidence, not economic fundamentals.
But California by comparison makes up 14% of the US economy, about the same magnitude as Germany's economy in Europe, truly "too big to fail." Yet when California threatened to default on its loan obligations last summer and Governor Arnold Schwarzenegger asked for a federal bailout, the Obama administration flatly rejected it. That caused California to have to issue IOUs as a way to pay its bills, and its bond rating plummeted.
California's situation in some ways is more worrisome than Greece's. Having a state that is one-seventh of the national economy in dire straits is a threat to the nation's economic recovery. It is analogous to having Germany struggling instead of Greece, striking at the heart of Europe. California has been shaken by widespread layoffs and furloughs -- the city of Los Angeles just laid off 1,000 more workers -- and core social programs have been slashed. Millions of low income children have lost access to meal programs, and community clinics have been closed. Almost three million low income adults have lost important benefits such as dental care, psychological services and mammograms.
In addition, while both California and Greece are in major belt tightening mode, at least in Greece all families and individuals still have access to health care and a long menu of other social supports that Europe is known for. In California, even before the crisis millions had no health care, and now more have lost their jobs and their health insurance. Unemployment compensation is miserly, as is the overall safety net, which impacts consumer spending and further weakens the economy.
But California and the U.S. do have one advantage over Greece and the European Union. Certainly Europe has the capacity to handle this crisis -- its economy is nearly as large as the U.S. and China combined -- but that's only if its big euro zone economies, Germany and France, are willing to lead. While the American federal government is used to playing the role of financial backstop for the states, making loans and other guarantees to weaker EU members is a new role for Germany or France to play.
The Germans and French are about to get a real dose of what "union" means. They didn't realize that the euro came with a hidden obligation for them to bail out the Greeks and perhaps others during tougher economic times. So far they have agreed to stand behind Greece in return for new restrictions on government spending, but this crisis is going to test their union.
Will this mean the end of the EU, or the euro, as some doom-and-gloomers are predicting? Quite the contrary, says Tommaso Padoa Schioppa, former Italian Minister of Economy and Finance who is considered one of the founders of the euro. He said in a recent interview that the Greece situation "confirms the necessity and role of the euro in a very clear way." The crisis, he says, will bind the EU closer and ultimately strengthen it as all sides recommit to this union-in-progress. The EU member states have swum too far across that stream to turn back now.
While the current situation is messy, the EU often has evolved and changed in reaction to a crisis. After each crisis the partner nations come up with new informal rules and agreements to patch up things and move on. And then every 15 years or so they take all the previous agreements and put them into a treaty, i.e. Maastricht, Lisbon, etc. Everyone has their crystal balls out, trying to divine Europe's future. Indeed, when the euro first was launched, they predicted it would fall flat on its face. But the Euroskeptics have predicted the end of Europe before, and got it all wrong.
]]>Great Speech, Mr. President: But Are You Ready to Deliver?tag:www.huffingtonpost.com,2010:/theblog//3.4397862010-01-28T01:31:46-05:002011-05-25T15:20:23-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
But at this point Obama has more of a credibility gap than anything else. The big question facing him is: can you deliver, Mr. President? Can you cobble together the 60 votes you need in the filibuster-gone-wild Senate to pass major legislation? Whether through sweet talking conservative Democrats and a few Republicans, or twisting their arms, or horse trading or cajoling, or log rolling and pork barreling, or legally bribing them, or threatening to un-elect them -- by any means necessary -- is this president ready to use all the many legal tools of persuasion that a president possesses?
I have said all along that this president needs to channel his inner LBJ. Lyndon Johnson was willing to twist arms and step on toes of his narrowly tribal colleagues in the South. He knew how to stare down some of his former Senate associates, calling them into his office, rolling up his sleeves, poking them in the chest and getting nose to nose, eyeball to eyeball. He could curse, bully and hound like a red neck thug when he needed to. But he could sweet-talk and horse-trade too.
It wasn't pretty, but it sure was effective. LBJ got the job done with a multi-pronged attack, using all the instruments at his disposal for the battle, and also having a clear compass on what could be bargained away while still maintaining his objectives. And what resulted was the greatest civil rights legislation since the abolition of slavery -- The Civil Rights Act of 1964 and the Voting Rights Act of 1965 -- that significantly reduced discrimination and started America down a path that ultimately led to the election of the first black president. And LBJ won REPUBLICAN votes for that historic legislation.
Obama needs to let the Blue Dog Democrats like Senators Max Baucus, Ben Nelson and Kent Conrad know who is in charge. He needs to tell Lieberman to get on board, or he'll be stripped of his committee chair and re-assigned to the Sub-committee on Toxic Waste. Besides channeling his internal LBJ, if necessary Obama needs to tear a page from the playbook of two other southerners who knew how to put on the brass knuckles. Former GOP operatives Karl Rove and Tom Delay made it clear that any Republican representatives who crossed their agenda would face a well-funded conservative opponent in their next party primary. That sent a shiver through the ranks, and the back benchers fell in line.
Whatever happened to the Internet presidency, and Team Obama's ongoing mobilization of the huge contact lists they had stockpiled with the names of the millions of people who had participated in his campaign? That was supposed to be Obama's army, ready to pressure foot-dragging Democratic senators. Yet we have seen little of that kind of mobilization, and none of it specifically targeted at certain legislators.
Well it's a campaign year and it's not too late to let that genie out of the bottle. Obama should tell any Democratic foot-draggers that if they don't get with the program, he will un-elect them and put in Democrats more in tune with his priorities. Let the two GOP Senators from blue state Maine know the same thing. Obama could convincingly threaten to fund candidates to run against uncooperative Senators in the Democratic primary, and to campaign on behalf of his slate of candidates. It would reshape the Democratic Party in a way that it badly needs, even if it resulted in a few less seats. But it might just result in getting some top legislation passed in the sclerotic Senate, despite its ridiculous 60 vote threshold.
Call it the "audacity of governing." It's time for battle. If Obama cares about the country as much as he says, and believes in his ideas as much as he professes, he will pull out all the tools at his disposal. It is past time for him to show a quality that the nation has not seen in him since the presidential election.
So, great speech Mr. President. Now: are you ready to deliver?
]]>State of Obama: Is "Obama fatigue" Setting In?tag:www.huffingtonpost.com,2010:/theblog//3.4387632010-01-27T13:09:19-05:002011-05-25T15:20:23-04:00Steven Hillhttp://www.huffingtonpost.com/steven-hill/
My family and friends run the gamut of the political spectrum, so they form my own little focus group. The moderates and conservatives are both Republican and Democrat, and most of them actually voted for Obama, convinced by the candidate's soaring rhetoric and his elderly opponent John McCain's creaky appearance that the first black president in American history should be given a chance. Yet when Obama's face came on the tube, every one of them reacted negatively.
Some shook their heads, kind of smirking. Others were more visceral in their grimaces and body language. They voiced the usual conservative talking points about "big government takeover," but they also complained about the bailout of wealthy bank executives and auto companies while "the little guy" suffered.
Some agreed that financial re-regulation was necessary, not only over the conservative punching bags of Fannie and Freddie Mac but also reinstatement of Glass-Steagall-type restrictions between investment and commercial banks. "Make banking boring again," one said. I even detected an openness among some to try liberal health care solutions like the public option.
Interestingly, when I pointed out that the Congressional Republicans seem dead set on opposing anything Obama does, most of them agreed. But they were interested in results, not excuses. And the man they had voted for to solve the nation's problems was bogged down in the swamp of Washington DC. "We elected him to figure this out," said one. "He hasn't figured out anything, and the country is going downhill."
The reaction of the liberals in the family was even more surprising. Most of them were even more visceral in their disgust with Obama than the conservatives. Having been ecstatic when Obama was voted in, having felt themselves part of a historical wave that had elected what they thought was a transformative figure like Franklin Roosevelt, now they were deeply suspicious.
"I can't believe a word he says," said one. "He completely duped us. On the campaign trail he showed us one face, and now as president another."
Interestingly, they were upset over some of the same things as the conservatives, such as the bailout of the banks, lack of strong financial re-regulation proposals, and the inability to solve the health care problem.
When I pointed out the complexity of the problems he had inherited, including a collapsing economy and a Congress beholden to special interests like health insurance companies, they acknowledged those challenges but didn't cut Obama any slack. When I pointed out that he needs votes from 60 out of 100 Senators to get anything done -- meaning that the 40 Republican senators representing only a third of the nation, joined by a single conservative Democrat or independent, can halt everything -- they were impatient.
"Whatever happened to the Internet presidency, where he was going to mobilize Obama's army to pressure foot-dragging Democratic senators?" said one liberal friend. "Personally, I don't think he really cares about the public option, or many other things he said on the campaign trail. He lets the wealthy set the agenda, all these politicians are the same."
Remarkably, many of the complaints between the liberals and conservatives were not all that different. They seemed to share common ground in that they wanted solutions to the country's many challenges. What none of them had patience for was the gripping sense that the country is stalled.
Despite all of Obama's soaring oratory about pulling together as a nation to solve deep economic, health care, and global warming crises, they all felt Obama is not delivering. Whether his inabilities are related to personal shortcomings or the defects of America's antiquated political system, they were not much interested. All they were interested in was results. And a year into his presidency, Obama was failing to produce much of those.
So when seeing Obama on their TV screens, nearly every one of them shook their heads, grimaced, snorted or chuckled, and then quickly changed the channel. I don't recall George W. Bush reaching this point in his presidency until near the end of his first term. If that's a bellwether, then Obama is in trouble. His post-election mandate is gone, his 60 votes in the Senate are gone, and what's left is the tough slog ahead of modest accomplishments. Unfortunately, the country needs much more than that. Fasten your seatbelts, we are in for a long ride.