News digest / Catching up on news (09.07.2014)

Here's more good stuff from my mailing list that I didn't have time to re-post on TILIS:

"Russia sees a military solution in Ukraine even if the West doesn’t." By Editorial Board, September 5, 2014, Washington Post. URL: http://wapo.st/Yj13ir  

"To recline your seat or not? Stop arguing. Capitalism already won this stupid war." By Oliver Burkeman, September 3, 2014, Guardian. URL:http://gu.com/p/4x9fj  

"The Senate Republicans’ foolish fight over ambassadors." By David Ignatius, Septmeber 2, 2014, Washington Post. URL: http://wapo.st/1w4aflz

"A second Sunni Awakening?" By Fareed Zakaria, September 2, 2014, Washington Post. URL: http://wapo.st/1lz1QpE

"Putin's Trap: Why Ukraine Should Withdraw from Russian-Held Donbas." By Alexander J. Motyl, September 1, 2014, Foreign Affairs. URL:http://www.foreignaffairs.com/articles/141946/alexander-j-motyl/putins-trap  -- A CONTROVERSIAL POINT OF VIEW; BUT IF THIS PAINFUL OUTCOME IS TO HAPPEN ANYWAY, SHOULDN'T UKRAINE TAKE THE INITIATIVE?

"Why does Putin wage war with Ukraine?" By Boris Nemtsov, September 1, 2014, Kyiv Post. URL: http://www.kyivpost.com/opinion/op-ed/why-does-putin-wage-war-on-ukraine-362884.html

"Labor Day: The Beginning of a Breakthrough." By Robert Kuttner, August 31, 2014, Huffington Post. URL: http://huff.to/1Chs0SW

"We need to tell the truth about what Russia is doing in Ukraine."  By Wesley Clark, August 31, 2014, Guardian. URL: http://gu.com/p/4x6hh

"A Market Basket of dignity." By E.J. Dionne, August 31, 2014, Washington Post. URL: http://wapo.st/1owAqLW  -- AT LEAST ONE CEO NOW GETS IT; I GUESS WE JUST HAVE TO FIRE THEM ALL SO THEY WILL UNDERSTAND

"Russian nationalism and the logic of the Kremlin's actions on Ukraine." By Henry E. Hale, August 29, 2014, Guardian. URL: http://gu.com/p/4x5tq  -- REMEMBER, IN UKRAINE NATIONALISM IS CALLED 'FASCISM'; IN RUSSIA IT'S PATRIOTISM

"Why Russia Wants the Federalization of Ukraine." By Alexander Motyl, August 28, 2014, Huffington Post. URL: http://huff.to/1tH7Uxu

"NC Pension Deal: How Wall Street Ends Up Getting Cash Meant for Main Street." By David Sirota, August 26, 2014, International Business Times. URL:http://www.ibtimes.com/nc-pension-deal-how-wall-street-ends-getting-cash-meant-main-street-1669174

"Subverting the Inversions: More Thoughts on Ending the Corporate Income Tax." By Dean Baker, August 26, 2014, CEPR. URL:http://www.cepr.net/index.php/blogs/beat-the-press/subverting-the-inversions-more-thoughts-on-ending-the-corporate-tax

"Donetsk POW March: When Is A Parade A War Crime?" By Carl Schreck, August 25, 2014, RFE/RL. URL: http://www.rferl.org/content/ukraine-pow-march-war-crime/26548667.html  -- OF COURSE IT'S A WAR CRIME BUT FAT CHANCE IT'LL BE PROSECUTED

"Hawks Crying Wolf." By Paul Krugman, August 22, 2014, New York Times. URL: http://huff.to/1BJIHpT  -- I BELIEVE THAT 'CHICKEN LITTLE' IS THE MORE APT FAIRY TALE HERE.

"If this is real religion, then you can count me as an atheist." By Giles Fraser, August 22, 2014, Guardian. URL: http://gu.com/p/4xx22  -- TAKE NOTE, CONSERVATIVE XENOPHOBES: MODERATE MUSLIMS ARE SPEAKING OUT

"Never an excuse for shooting unarmed suspects, former police chief says." By Joseph D. McNamara, August 19, 2014, Reuters. URL:http://www.reuters.com/article/2014/08/19/idUS212937500020140819  -- IT WORKED IN THIS MISSOURI TOWN, AND GEE, ALL THROUGHOUT GREAT BRITAIN WHERE POLICE AREN'T EVEN ARMED!

Kuttner: It's not just Detroit

We bailed out the auto industry in 2008 and it was a roaring success, saving at least 1 million jobs.  We bailed out New York City in 1975 and it was well worth it. We shouldn't let Detroit go under either.

BTW, while Michigan Governor Rick Snyder is ready to let Detroit go down the tubes and cancel its pension commitments, he can somehow find at least $285 million to buy the Detroit Red Wings a new arena.  Snyder calls it a "catalyst project," and "something that is important to all of us."  As if paying city workers and rebuilding crumbling city infrastructure is not important to all Detroiters?  

This is the economic Bizarro world that conservative politicians live in, where sports socialism and bank payoffs are just dandy, yet they can't find the money to pay (already reduced) pensions as prescribed in the state's constitution.   

We Are All Detroit

By Robert Kuttner

August 11, 2013 | Huffington Post

Do you think the damage from the pending bankruptcy of the city of Detroit will be limited to Detroit? Think again.

Detroit is partly the victim of economic trends far beyond its control, the downsizing and outsourcing of the auto industry and the collapse of the sub-prime bubble, to name just two. And yes, the city has suffered from corrupt and inept local government. But leaving Detroit to a bankruptcy process that favors investment bankers over local pensioners will neither provide a fair outcome nor contain the damage.

In the past two weeks, other Michigan cities and counties, including Saginaw and Battle Creek, have had to postpone bond issues, as the damage from the Detroit bankruptcy spills over. Michigan Governor Rick Snyder, who hoped to whack both public employees and the heavily Democratic city of Detroit by promoting bankruptcy, could end up shooting himself and his state in the foot.

Those who hope to use the pain of cities to undermine public employee pensions are playing with fire. One of the striking government failures of the era since the collapse of 2008 is that the federal government has done so little to help municipalities whose revenues were doubly hit by the subprime collapse and the recession itself. In the absence of aid, we can expect a prolonged era of dwindling services and scapegoated public workers and retirees.

It is a travesty that the federal government and the Michigan state government are not sending Detroit a lifeline. Other cities and states stand to lose both public services and pension benefits as this trend spreads. Chicago, which just suffered three levels of bond-downgrading, looks to be next.

Some background: In 1975, New York City very nearly went bankrupt. It faced a financial crisis and was unable to roll over maturing bonds. When Mayor Abe Beame appealed to Washington for help, President Ford initially refused, prompting the famous headline in the New York Daily News, "Ford to City: Drop Dead."

But that was a different era and in the end, Ford did approve $2.3 billion in federal loans. The New York State government, through a hastily legislated Municipal Assistance Corporation, agreed to refinance the city's debt, subjecting it to a rigorous supervision process. The Big Apple avoided bankruptcy, its economy recovered -- and New York is now home to the wildly profitable financial industry that is destroying Detroit in order to protect bankers.

In contrast to President Ford and New York's then Democratic governor Hugh Carey, Michigan's Republican governor Rick Snyder was happy to collude with Wall Street by embracing a bankruptcy proceeding rigged in favor of investment banks. And President Obama, who successfully sponsored a recapitalizing of the auto industry, is staying far away from Detroit this time.

These policies are short-sighted as well as cruel. If you think about it, many of Detroit's citizens are getting screwed both as debtors and as creditors. With the city having lost tax revenues in the housing collapse and property values at rock bottom, most homeowners with mortgages -- debtors -- can't qualify for refinancing. But many of the same people are also creditors, the city owes them pensions.

In principle, a bankruptcy proceeding is a system for fairly allocating claims when a debtor can't service all of its debts. The Michigan state constitution guarantees that Detroit pensioners will be paid what they are owed. Even Michigan's Republican attorney general, Bill Schuette,agrees that the constitutional protection is binding.

But the most recent changes (2005) in the federal bankruptcy law, lobbied for by Wall Street, put bankers in line ahead of pensioners. As attorney, author and debt expert Ellen Brown explains, this special-interest provision gives credit default swaps held by banks priority over other forms of debt. So banks that speculated in Detroit's debt stand to get paid ahead of ordinary bondholders and pensioners.

As Brown writes:

Derivative claims are considered "secured" because the players must post collateral to play. They get not just priority but "super-priority" in bankruptcy, meaning they go first before all others, a deal pushed through by Wall Street in the Bankruptcy Reform Act of 2005. Meanwhile, the municipal workers, whose pensions are theoretically protected under the Michigan Constitution, are classified as "unsecured" claimants who will get the scraps after the secured creditors put in their claims. The banking casino, it seems, trumps even the state constitution. The banks win and the workers lose once again.

The average pension owed to Detroit municipal workers, incidentally, is just $1,900 a month, and only 4 percent of Detroit's general revenues go to pensions. According to AFSCME President Lee Saunders, Detroit's non-uniformed public workers have already had pensions cut by 40 percent.

As we saw in the Wisconsin assault on collective bargaining for public employees and most recently in the San Francisco area BART strike, all public workers are losing public sympathy because wages, pension and health benefits have declined even faster in the private sector, leaving regular people to conclude that government employees have it too good. In fact, a study by pension expert Alicia Munnell finds that average state and local employee pensions are well below level needed to maintain living standards in retirement. Wall Street must be chortling, as ordinary workers blame civil servants rather than bankers.

But the assault on public workers and pensioners will continue to spread until citizens generally start appreciating that the culprit is not "over paid" public employees but a banker-dominated system that undermines decent living standards for public and private workers alike.

Dems must fight any 'grand bargain' (aka austerity)

As Bill Black notes, it can only be Obama's "vanity" making him promise a "grand bargain" on spending and tax cuts if he is re-elected.  In fact, we are now in a classic period of debt-deflation, the only answer to which is more public spending.

Sadly, it sounds like Obama has swallowed the Republican Kool-Aid that we're facing a fiscal "crisis," and that something must be done now to dismantle or privatize Social Security, Medicare, SNAP and a host of federal agencies, or else somebody's grandchildren will have to pay higher taxes.  

(In fact, the CBO estimates that the Budget Control Act that the Right so desperately wanted will turn about 4.4 percent projected GDP growth in 2013 into a recession in 1H 2013 with measly 0.5 percent GDP growth for the year. Much like what is happening in Europe: see below).  

In other words, Obama seems to have embraced austerity, even though the U.S., which partially embraced fiscal stimulus, has been growing consistently since July 2009 (albeit slowly), and partly because of the stimulus and not despite it.  By contrast, the EU is sadly realizing that austerity has been self-defeating: in the EU, debt-to-GDP ratios are growing; GDP is shrinking; and unemployment is growing.

If you still don't understand how that could be so, read this:

Why is [the EU's] fiscal consolidation so much more damaging now? Under normal circumstances a tightening in fiscal policy would also lead to a relaxation in monetary policy. However, with interest rates already at exceptionally low levels, this is unlikely or infeasible. Moreover, during a downturn, when unemployment is high and job security low, a greater percentage of households and firms are likely to find themselves liquidity constrained. Finally, with all countries consolidating simultaneously, output in each country is reduced not just by fiscal consolidation domestically, but by that in other countries, because of trade. In the EU, such spillover effects are likely to be large.

[...] The result of coordinated fiscal consolidation is a rise in the debt-GDP ratio of approximately five percentage points.  

P.S. - This makes 2001 posts to my blog, all-time, not counting the shit I deleted. So cue Strauss's Sunrise!:  "Buuum-buuum-buuuuuuuuuuum BUM-BUM! Boom-boom boom-boom boom-boom boom-boom boom-boom boom-boom boom!"