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2014 > USA > Economy (II)
Wall Street’s Revenge
Dodd-Frank Damaged in the Budget Bill
DEC. 14, 2014
The New York Times
The Opinion Pages | Op-Ed Columnist
On Wall Street, 2010 was the year of “Obama rage,” in which
financial tycoons went ballistic over the president’s suggestion that some
bankers helped cause the financial crisis. They were also, of course, angry
about the Dodd-Frank financial reform, which placed some limits on their
wheeling and dealing.
The Masters of the Universe, it turns out, are a bunch of whiners. But they’re
whiners with war chests, and now they’ve bought themselves a Congress.
Before I get to specifics, a word about the changing politics of high finance.
Most interest groups have stable political loyalties. For example, the coal
industry always gives the vast bulk of its political contributions to
Republicans, while teachers’ unions do the same for Democrats. You might have
expected Wall Street to favor the G.O.P., which is always eager to cut taxes on
the rich. In fact, however, the securities and investment industry — perhaps
affected by New York’s social liberalism, perhaps recognizing the tendency of
stocks to do much better when Democrats hold the White House — has historically
split its support more or less equally between the two parties.
But that all changed with the onset of Obama rage. Wall Street overwhelmingly
backed Mitt Romney in 2012, and invested heavily in Republicans once again this
year. And the first payoff to that investment has already been realized. Last
week Congress passed a bill to maintain funding for the U.S. government into
next year, and included in that bill was a rollback of one provision of the 2010
financial reform.
In itself, this rollback is significant but not a fatal blow to reform. But it’s
utterly indefensible. The incoming congressional majority has revealed its
agenda — and it’s all about rewarding bad actors.
So, about that provision. One of the goals of financial reform was to stop banks
from taking big risks with depositors’ money. Why? Well, bank deposits are
insured against loss, and this creates a well-known problem of “moral hazard”:
If banks are free to gamble, they can play a game of heads we win, tails the
taxpayers lose. That’s what happened after savings-and-loan institutions were
deregulated in the 1980s, and promptly ran wild.
Dodd-Frank tried to limit this kind of moral hazard in various ways, including a
rule barring insured institutions from dealing in exotic securities, the kind
that played such a big role in the financial crisis. And that’s the rule that
has just been rolled back.
Now, this isn’t the death of financial reform. In fact, I’d argue that
regulating insured banks is something of a sideshow, since the 2008 crisis was
brought on mainly by uninsured institutions like Lehman Brothers and A.I.G. The
really important parts of reform involve consumer protection and the enhanced
ability of regulators both to police the actions of “systemically important”
financial institutions (which needn’t be conventional banks) and to take such
institutions into receivership at times of crisis.
But what Congress did is still outrageous — and both sides of the ideological
divide should agree. After all, even if you believe (in defiance of the lessons
of history) that financial institutions can be trusted to police themselves,
even if you believe the grotesquely false narrative that bleeding-heart liberals
caused the financial crisis by pressuring banks to lend to poor people,
especially minority borrowers, you should be against letting Wall Street play
games with government-guaranteed funds. What just went down isn’t about
free-market economics; it’s pure crony capitalism.
And sure enough, Citigroup literally wrote the deregulation language that was
inserted into the funding bill.
Again, in itself last week’s action wasn’t decisive. But it was clearly the
first skirmish in a war to roll back much if not all of the financial reform.
And if you want to know who stands where in this coming war, follow the money:
Wall Street is giving mainly to Republicans for a reason.
It’s true that most of the political headlines these past few days have been
about Democratic division, with Senator Elizabeth Warren urging rejection of a
funding bill the White House wanted passed. But this was mainly a divide about
tactics, with few Democrats actually believing that undoing Dodd-Frank is a good
idea.
Meanwhile, it’s hard to find Republicans expressing major reservations about
undoing reform. You sometimes hear claims that the Tea Party is as opposed to
bailing out bankers as it is to aiding the poor, but there’s no sign that this
alleged hostility to Wall Street is having any influence at all on Republican
priorities.
So the people who brought the economy to its knees are seeking the chance to do
it all over again. And they have powerful allies, who are doing all they can to
make Wall Street’s dream come true.
A version of this op-ed appears in print on December 15, 2014, on page A27 of
the New York edition with the headline:
Wall Street’s Revenge.
Wall Street’s Revenge, NYT, 14.12.2014,
http://www.nytimes.com/2014/12/15/opinion/
paul-krugman-dodd-frank-damaged-by-the-budget-bill.html
A Global Economic Malaise
OCT. 9, 2014
The New York Times
The Opinion Pages | Editorial
By THE EDITORIAL BOARD
Large parts of the world seem to be on the verge of a recession.
In many countries in Europe, Asia and Latin America, economic growth has already
stalled.
Yet many finance ministers and central bankers who are meeting in Washington
this week are unwilling or ill prepared to respond. In Europe, for example,
officials from Germany continue to insist that countries that use the euro meet
restrictive fiscal rules, and they are trying to prevent the European Central
Bank from buying government bonds. Officials in Japan, meanwhile, have hurt that
economy by raising a sales tax too fast.
Some countries, including the United States and Britain, are growing modestly,
for now. But even these economies are not enjoying the kind of robust recovery
that creates millions of jobs for the unemployed. And growth in the United
States and Britain could slow down, too, if a lot of their major trading
partners in Europe and Asia fall into a recession.
The International Monetary Fund said this week that the world economy, much of
which never fully recovered from the financial crisis, would grow at 3.3 percent
in 2014, down from its April forecast of 3.7 percent. There is now a 38 percent
chance of a recession in the 18-country euro area in the next year, the fund
estimates.
There is a lot governments and central banks could do to avoid another
recession. For example, a recent I.M.F. report showed that increasing government
spending on public investments like roads, ports and railways can help stimulate
the economy immediately and for several more years. If done right, such spending
could generate benefits that more than offset the costs, particularly in
developing nations like Brazil and India, which suffer from high inflation in
part because of the high cost of transporting food and other goods on
traffic-clogged roads.
In Europe, German officials need to play a more constructive role by encouraging
the European Central Bank to buy government bonds to pump money into the economy
and lower interest rates. Such policies are certainly in Germany’s
self-interest, because its economy, which previously bucked the downtrend in the
rest of the eurozone, contracted in the second quarter and remains weak.
Other European countries, like Italy and Spain, need to do more to encourage
companies to invest and create jobs, in part by reforming laws that make it hard
for entrepreneurs to set up new businesses.
Earlier this year, the International Labor Organization estimated that there
were 202 million unemployed people in the world in 2013, up five million from
2012. The I.L.O. forecasts that the number will grow to more than 215 million by
2018 if political leaders and central bankers keep failing to revive their
economies.
A version of this editorial appears in print on October 10, 2014,
on page A26 of the New York edition with the headline: A Global Economic
Malaise.
A Global Economic Malaise, NYT, 9.10.2014,
http://www.nytimes.com/2014/10/10/opinion/a-global-economic-malaise.html
Those Lazy Jobless
SEPT. 21, 2014
The New York Times
The Opinion Pages | Op-Ed Columnist
Paul Krugman
Last week John Boehner, the speaker of the House, explained to an
audience at the American Enterprise Institute what’s holding back employment in
America: laziness. People, he said, have “this idea” that “I really don’t have
to work. I don’t really want to do this. I think I’d rather just sit around.”
Holy 47 percent, Batman!
It’s hardly the first time a prominent conservative has said something along
these lines. Ever since a financial crisis plunged us into recession it has been
a nonstop refrain on the right that the unemployed aren’t trying hard enough,
that they are taking it easy thanks to generous unemployment benefits, which are
constantly characterized as “paying people not to work.” And the urge to blame
the victims of a depressed economy has proved impervious to logic and evidence.
But it’s still amazing — and revealing — to hear this line being repeated now.
For the blame-the-victim crowd has gotten everything it wanted: Benefits,
especially for the long-term unemployed, have been slashed or eliminated. So now
we have rants against the bums on welfare when they aren’t bums — they never
were — and there’s no welfare. Why?
First things first: I don’t know how many people realize just how successful the
campaign against any kind of relief for those who can’t find jobs has been. But
it’s a striking picture. The job market has improved lately, but there are still
almost three million Americans who have been out of work for more than six
months, the usual maximum duration of unemployment insurance. That’s nearly
three times the pre-recession total. Yet extended benefits for the long-term
unemployed have been eliminated — and in some states the duration of benefits
has been slashed even further.
The result is that most of the unemployed have been cut off. Only 26 percent of
jobless Americans are receiving any kind of unemployment benefit, the lowest
level in many decades. The total value of unemployment benefits is less than
0.25 percent of G.D.P., half what it was in 2003, when the unemployment rate was
roughly the same as it is now. It’s not hyperbole to say that America has
abandoned its out-of-work citizens.
Strange to say, this outbreak of anti-compassionate conservatism hasn’t produced
a job surge. In fact, the whole proposition that cruelty is the key to
prosperity hasn’t been faring too well lately. Last week Nathan Deal, the
Republican governor of Georgia, complained that many states with Republican
governors have seen a rise in unemployment and suggested that the feds were
cooking the books. But maybe the right’s preferred policies don’t work?
That is, however, a topic for another column. My question for today is instead
one of psychology and politics: Why is there so much animus against the
unemployed, such a strong conviction that they’re getting away with something,
at a time when they’re actually being treated with unprecedented harshness?
Now, as anyone who has studied British policy during the Irish famine knows,
self-righteous cruelty toward the victims of disaster, especially when the
disaster goes on for an extended period, is common in history. Still,
Republicans haven’t always been like this. In the 1930s they denounced the New
Deal and called for free-market solutions — but when Alf Landon accepted the
1936 presidential nomination, he also emphasized the “plain duty” of “caring for
the unemployed until recovery is attained.” Can you imagine hearing anything
similar from today’s G.O.P.?
Is it race? That’s always a hypothesis worth considering in American politics.
It’s true that most of the unemployed are white, and they make up an even larger
share of those receiving unemployment benefits. But conservatives may not know
this, treating the unemployed as part of a vaguely defined, dark-skinned crowd
of “takers.”
My guess, however, is that it’s mainly about the closed information loop of the
modern right. In a nation where the Republican base gets what it thinks are
facts from Fox News and Rush Limbaugh, where the party’s elite gets what it
imagines to be policy analysis from the American Enterprise Institute or the
Heritage Foundation, the right lives in its own intellectual universe, aware of
neither the reality of unemployment nor what life is like for the jobless. You
might think that personal experience — almost everyone has acquaintances or
relatives who can’t find work — would still break through, but apparently not.
Whatever the explanation, Mr. Boehner was clearly saying what he and everyone
around him really thinks, what they say to each other when they don’t expect
others to hear. Some conservatives have been trying to reinvent their image,
professing sympathy for the less fortunate. But what their party really believes
is that if you’re poor or unemployed, it’s your own fault.
Charles M. Blow is off today.
A version of this op-ed appears in print on September 22, 2014, on page A25 of
the New York edition with the headline: Those Lazy Jobless.
Those Lazy Jobless, NYT, 21.9.2014,
http://www.nytimes.com/2014/09/22/opinion/paul-krugman-those-lazy-jobless.html
S. Truett Cathy, 93,
Chick-fil-A Owner, Dies
SEPT. 8, 2014
The New York Times
By KIM SEVERSON
When he introduced himself, S. Truett Cathy often played down his
job.
“I cook chicken for a living,” he would say.
And on the surface, that was true. Mr. Cathy, who died on Monday at 93, was by
all appearances a humble Christian man from Georgia with little education who
sold a simple sandwich: a breaded, boneless chicken breast on a soft, white,
buttered bun with nothing more than a couple of pickles for garnish.
But as the founder of the Chick-fil-A fast-food empire, he was also a
billionaire several times over and, as a conservative Christian who ran his
business according to his religious principles, he was at once a hero and a
symbol of intolerance. Many admired him for closing his outlets on Sundays and
speaking out against same-sex marriage. Others vilified his the chain as a
symbol of hate.
He died at his home in Clayton County, Ga., a Chick-fil-A spokesman said.
Rising to prominence between Robert Woodruff, who took over Coca-Cola in the
1930s, and Sam Walton, who began the Walmart chain with a small store in
Bentonville, Ark., in 1950, Mr. Cathy was one of a handful of Southern
entrepreneurs who in one lifetime took small, hometown companies to a global
level.
“He was really part of that generation that was our version of the Rockefellers
or Henry Ford,” said William Ferris, a director of the Center for the Study of
the American South at the University of North Carolina, Chapel Hill. “They moved
the South in ways that could have never been anticipated in their lifetime.”
Mr. Cathy’s company and its charitable arms have reached widely throughout the
South, helping the region’s economy and promoting the founder’s Baptist values.
The company required potential franchise operators, for example, to discuss
their marital status and their civic and church involvement.
Mr. Cathy said he closed his restaurants on Sundays so that his employees could
spend time with their families. But the policy was also a way to honor his
faith.
“It’s a silent witness to the Lord when people go into shopping malls, and
everyone is bustling, and you see that Chick-fil-A is closed,” he once told a
reporter for The Atlanta Journal-Constitution.
Mr. Cathy’s beliefs underpinned the activities of the WinShape Foundation, a
charitable arm of his empire that provided for scholarships, camps and foster
care before branching out to support organizations that promoted traditional
marriage. The foundation gave millions of dollars toward their efforts to oppose
extending marriage rights to couples of the same sex.
Gay and lesbian activist groups and bloggers began investigating the
foundation’s donations, and the issue blew up in 2012 after his son, Dan, the
company president, gave a series of provocative interviews.
“As it relates to society in general, I think we are inviting God’s judgment on
our nation when we shake our fist at him and say, ‘We know better than you as to
what constitutes a marriage,’ ” Dan Cathy said.
Advocates of same-sex marriage initiated boycotts and campaigned to stop
franchises from opening in some cities and on some college campuses. Those who
supported the family’s views also rallied, flooding Chick-fil-A restaurants.
In response, the company said it would step back from the policy debate over
same-sex marriage and stop funding most of the groups that were at the center of
the storm. Mr. Cathy never wavered in his beliefs, however — a point mentioned
by politicians, celebrities and business leaders who commented on his death.
“In every facet of his life, Truett Cathy has exemplified the finest aspects of
his Christian faith,” former President Jimmy Carter said in a statement. “By his
example, he has been a blessing to countless people.”
Samuel Truett Cathy, one of seven children, was born on March 14, 1921, in
Eatonton, Ga., the hometown as well of the author Alice Walker and Joel Chandler
Harris, who wrote the Uncle Remus stories.
By 8, Truett, as he was called, was selling bottles of Coca-Cola in his front
yard. Six years later, the Depression drove his parents to move the family to a
public-housing project, the nation’s first, in downtown Atlanta.
A poor student, Mr. Cathy never went to college, but he developed a sharp
business acumen, which was supplemented by a strong work ethic he had learned
from his parents. He often said the only time he ever saw his mother with her
eyes closed was when she was in her coffin.
After he returned from the Army in World War II, he and his brother Ben opened a
diner in Hapeville, Ga., just south of Atlanta, in 1946. Many of his customers
worked at a nearby Ford plant. The squat shape of the building inspired the
name: the Dwarf Grill, later renamed to Dwarf House.
Chicken became a focus when Mr. Cathy started acquiring chicken breasts that had
been rejected by Delta Air Lines, because they were either too large or too
small for the airline’s food trays. Mr. Cathy began experimenting, frying
breaded chicken in a cast-iron pan with a lid, the way his mother used to.
He gave his sandwich its unusual name so that a nation just falling in love with
fast-food hamburgers might better understand his product: Chick-fil-A was meant
to suggest a chicken steak.
As malls came to the South, Mr. Cathy opened a Chick-fil-A at the Greenbriar
Mall in Atlanta. It was a pioneering effort to put fast food in shopping
centers.
By 2013, the privately held Chick-fil-A had more than 1,800 restaurants and
sales of more than $5 billion.
Mr. Cathy instructed his heirs, who run the company, that they may sell it but
must never take it public, because such a move could curtail the immense amount
of charitable giving the company engages in.
Mr. Cathy is survived by his wife of 65 years, Jeannette; three children, Dan
Cathy, Don Cathy and Trudy Cathy White; 18 grandchildren; and 19
great-grandchildren.
In the five books he wrote, Mr. Cathy often emphasized the importance of giving
over receiving and of treating others as you would like to be treated.
“We live in a changing world, but we need to be reminded that the important
things have not changed,” he said, “and the important things will not change if
we keep our priorities in proper order.”
Correction: September 8, 2014
An earlier version of this article misattributed a quote. Dan Cathy, Mr. Cathy’s
son and the president of the company, said, “As it relates to society in
general, I think we are inviting God’s judgment on our nation when we shake our
fist at Him and say, ‘We know better than you as to what constitutes a
marriage.’ ” It was not said by S. Truett Cathy.
Alan Blinder contributed reporting.
A version of this article appears in print on September 9, 2014, on page A22 of
the New York edition with the headline: S. Truett Cathy, 93, Chick-fil-A Owner,
Dies.
S. Truett Cathy, 93, Chick-fil-A Owner, Dies,
NYT, 8.9.2014,
http://www.nytimes.com/2014/09/09/business/
s-truett-cathy-93-chick-fil-a-owner-dies.html
Jobs Stall and So Does the Economy
SEPT. 5, 2014
The New York Times
The Opinion Pages | Editorial
By THE EDITORIAL BOARD
The employment report for August suggests that any remaining hope
for an economic upsurge in the second half of 2014 is largely unrealistic. The
new data, which shows job creation down sharply last month, is consistent with
more of the same sluggish growth that has long been the norm. Plentiful jobs at
good pay — the critical underpinning of a strong economy — are still not in the
cards.
On average, the economy added 207,000 jobs a month from June through August,
exactly even with average monthly job growth over the past 12 months. That’s a
holding pattern, not acceleration. Similarly, the jobs report for August showed
flat wages, stagnant hours and elevated long-term unemployment, as has been the
case in previous reports.
The latest data also underscore how incremental improvements in labor conditions
have failed to undo the damage from the recession and the prolonged slow
recovery. For example, the share of adults in the labor force is no longer
declining, as it did in 2013, but it remains at levels last seen in 1978.
The recent unemployment rate, 6.1 percent, is down from the recession-era high
of 10 percent in 2009, but it is still higher than at similar points in
recoveries from other downturns going back to 1982. Worse, the unemployment rate
today would be 9.6 percent if it included the estimated 5.9 million jobless
people who would be working or looking for work if the job market were stronger.
The generally bleak monthly data are broadly in line with other data on income
and wealth released this week by the Federal Reserve. From 2010 to 2013, the Fed
found that average incomes dropped by 8 percent for the bottom 20 percent of
families and rose by 10 percent for the most affluent 10 percent. For everyone
in between, incomes fell or stagnated.
Wealth was also skewed. Overall it barely grew from 2010 to 2013. But it fell by
21 percent for the bottom 20 percent of families, to a mere $65,000 of net
worth, and rose by 2 percent, to $3.3 million, for the top 10 percent.
It is increasingly obvious that inequality of income and wealth are weighing on
economic growth — especially on job creation and pay raises — by concentrating
income and assets in the hands of a few who already have more than they can
spend.
The situation is not self-correcting. In fact, in the absence of government
policies to foster balance, it is self-reinforcing. The Fed should continue to
try to stimulate the economy with loose monetary policy. But only Congress can
put in place the broad new policies on taxes, labor standards and immigration
that will give all Americans a shot at a rising standard of living.
A version of this editorial appears in print on September 6, 2014, on page A20
of the New York edition with the headline: Jobs Stall and So Does the Economy.
Jobs Stall and So Does the Economy, NYT,
7.9.2014,
http://www.nytimes.com/2014/09/06/opinion/
jobs-stall-and-so-does-the-economy.html
Labor Today
Wages and Salaries Still Lag as Corporate Profits Surge
AUG. 31, 2014
The New York Times
The Opinion Pages | Editorial
By THE EDITORIAL BOARD
In the months before Labor Day last year, job growth was so slow
that economists said it would take until 2021 to replace the jobs that were lost
or never created in the recession and its aftermath.
The pace has picked up since then; at the current rate, missing jobs will be
recovered by 2018. Still, five years into an economic recovery that has been
notable for resurging corporate profits, the number and quality of jobs are
still lagging badly, as are wages and salaries.
In 2013, after-tax corporate profits as a share of the economy tied with their
highest level on record (in 1965), while labor compensation as a share of the
economy hit its lowest point since 1948. Wage growth since 1979 has not kept
pace with productivity growth, resulting in falling or flat wages for most
workers and big gains for corporate coffers, shareholders, executives and others
at the top of the income ladder.
Worse, the recent upturn in growth, even if sustained, will not necessarily lead
to markedly improved living standards for most workers.
That’s because the economy’s lopsidedness is not mainly the result of market
forces, but of the lack of policies to ensure broader prosperity. The imbalance
will not change without labor and economic reforms.
For instance, new research from the Economic Policy Institute shows that from
the first half of 2013 to the first half of 2014, hourly wages, adjusted for
inflation, fell for nearly everyone. An exception was a small gain for the
bottom 10 percent of wage earners, which was because of minimum-wage increases
in 13 states this year.
That’s clear evidence that raising the federal minimum wage, while only a first
step toward better pay, would have a powerful effect. A lift from the current
$7.25 an hour to the modest $10.10 called for by President Obama and Democrats
in Congress would put an estimated additional $35 billion in the pockets of
affected workers over a three-year phase-in period.
Unionization is also associated with higher wages and benefits, especially for
low-wage workers, which argues for greater legal enforcement of the right to
organize without retaliation.
Similarly, stronger enforcement of both labor laws and antitrust laws is needed
to ensure against wage theft. Once assumed to be mainly an issue of unpaid
overtime or other wage violations, wage theft became a white-collar issue this
year, when it was revealed that collusion among the biggest companies in Silicon
Valley had suppressed the pay of software engineers by an estimated $3 billion.
The pay of middle-income workers has also been diminished. Decades of
outsourcing government jobs to the private sector has undercut public
employment, once a mainstay of middle-class life, even as evidence has mounted
that outsourcing often does not save money or improve services. What’s needed is
a systematic review of government contracts with the private sector and a
willingness to end those that are counterproductive.
Another threat to middle-class wages is rampant misclassification — of employees
as independent contractors and of workers as supervisors — a tactic that
employers use to deny pay and benefits that would otherwise be due. In a
promising development, a federal appellate court recently ruled that drivers for
FedEx in California are employees, not independent contractors, an example of
the courts stepping in when the other branches of government have let an
injustice persist.
There has been progress since last Labor Day. Mr. Obama has signed executive
orders to improve the pay and working conditions of employees of federal
contractors. The Labor Department is revising rules on overtime pay; simply
updating them for inflation would make millions of additional workers eligible
for time-and-a-half for overtime.
What is still lacking, however, is a full-employment agenda that regards labor,
not corporations, as the center of the economy — a change that would be a
reversal of the priorities of the last 35 years.
A version of this editorial appears in print on September 1,
2014, on page A16 of the New York edition with the headline: Labor Today.
Labor Today, NYT, 31.8.2014,
http://www.nytimes.com/2014/09/01/opinion/
wages-and-salaries-still-lag-as-corporate-profits-surge.html
The Expanding World
of Poverty Capitalism
AUG. 26, 2014
The New York Times
The Opinion Pages | Contributing Op-Ed Writer
In Orange County, Calif., the probation department’s “supervised
electronic confinement program,” which monitors the movements of low-risk
offenders, has been outsourced to a private company, Sentinel Offender Services.
The company, by its own account, oversees case management, including breath
alcohol and drug-testing services, “all at no cost to county taxpayers.”
Sentinel makes its money by getting the offenders on probation to pay for the
company’s services. Charges can range from $35 to $100 a month.
The company boasts of having contracts with more than 200 government agencies,
and it takes pride in the “development of offender funded programs where any of
our services can be provided at no cost to the agency.”
Sentinel is a part of the expanding universe of poverty capitalism. In this
unique sector of the economy, costs of essential government services are shifted
to the poor.
In terms of food, housing and other essentials, the cost of being poor has
always been exorbitant. Landlords, grocery stores and other commercial
enterprises have all found ways to profit from those at the bottom of the
ladder.
The recent drive toward privatization of government functions has turned
traditional public services into profit-making enterprises as well.
In addition to probation, municipal court systems are also turning collections
over to a national network of companies like Sentinel that profit from service
charges imposed on the men and women who are under court order to pay fees and
fines, including traffic tickets (with the fees being sums tacked on by the
court to fund administrative services).
When they cannot pay these assessed fees and fines – plus collection charges
imposed by the private companies — offenders can be sent to jail. There are many
documented cases in which courts have imprisoned those who failed to keep up
with their combined fines, fees and service charges.
“These companies are bill collectors, but they are given the authority to say to
someone that if he doesn’t pay, he is going to jail,” John B. Long, a lawyer in
Augusta, Ga. active in defending the poor, told Ethan Bronner of The Times.
A February 2014 report by Human Rights Watch on private offender services found
that “more than 1,000 courts in several US states delegate tremendous coercive
power to companies that are often subject to little meaningful oversight or
regulation. In many cases, the only reason people are put on probation is
because they need time to pay off fines and court costs linked to minor crimes.
In some of these cases, probation companies act more like abusive debt
collectors than probation officers, charging the debtors for their services.”
Human Rights Watch also found that in Georgia in 2012, in “a state of less than
10 million people, 648 courts assigned more than 250,000 cases to private
probation companies.” The report notes that “there is virtually no transparency
about the revenues of private probation companies” since “practically all of the
industry’s firms are privately held and not subject to the disclosure
requirements that bind publicly traded companies. No state requires probation
companies to report their revenues, or by logical extension the amount of money
they collect for themselves from probationers.”
Human Rights Watch goes on to provide an account given by a private probation
officer in Georgia: “I always try and negotiate with the families. Once they
know you are serious they come up with some money. That’s how you have to be.
They have to see that this person is not getting out unless they pay something.
I’m just looking for some good faith money, really. I got one guy I let out of
jail today and I got three or four more sitting there right now.”
Collection companies and the services they offer appeal to politicians and
public officials for a number of reasons: they cut government costs, reducing
the need to raise taxes; they shift the burden onto offenders, who have little
political influence, in part because many of them have lost the right to vote;
and it pleases taxpayers who believe that the enforcement of punishment —
however obtained — is a crucial dimension to the administration of justice.
As N.P.R. reported in May, services that “were once free, including those that
are constitutionally required,” are now frequently billed to offenders: the cost
of a public defender, room and board when jailed, probation and parole
supervision, electronic monitoring devices, arrest warrants, drug and alcohol
testing, and D.N.A. sampling. This can go to extraordinary lengths: in
Washington state, N.P.R. found, offenders even “get charged a fee for a jury
trial — with a 12-person jury costing $250, twice the fee for a six-person
jury.”
This new system of offender-funded law enforcement creates a vicious circle: The
poorer the defendants are, the longer it will take them to pay off the fines,
fees and charges; the more debt they accumulate, the longer they will remain on
probation or in jail; and the more likely they are to be unemployable and to
become recidivists.
And that’s not all. The more commercialized fee collection and probation
services get, the more the costs of these services are inflicted on the poor,
and the more resentful of the police specifically and of law enforcement
generally the poor become. At the same time, judicial systems are themselves in
a vise. Judges, who in many locales must run for re-election, are under intense
pressure from taxpayers to cut administrative costs while maintaining the
efficacy of the judiciary.
The National Center for State Courts recently issued a guide noting that while
the collection of fines and costs is “important for reasons of revenue,” even
more important is the maintenance of “the integrity of the courts.”
In dealing with more serious crimes involving substantial sentences, the rising
costs of maintaining and building new prison facilities has prompted many state
governments, and even the federal government, to turn to the private prison
industry.
This industry, which began to grow in the early 1980s, now faces significant
problems. As incarceration rates drop, and as some states adopt more lenient
sentencing practices, the industry is struggling to find new ways to fill vacant
cells.
Take the Corrections Corporation of America, which is listed on the New York
Stock Exchange and reported revenues of $1.69 billion in 2013. The firm
describes itself as “the nation’s largest owner of privatized correctional and
detention facilities and one of the largest prison operators in the United
States behind only the federal government and three states.”
In its 2013 annual report, C.C.A. was clear about the problems facing the
company: “under a per diem rate structure, a decrease in our occupancy rates
could cause a decrease in revenue and profitability. For the past three years,
occupancy rates have been steadily declining in C.C.A. facilities, from 90
percent in 2011, to 88 percent in 2012 and 85 percent in 2013.”
These numbers reflect the brutal math underlying profit margins in private
prisons. The “revenue per compensated man-day” for each inmate rose by 35 cents
from $60.22 in 2012 to $60.57 in 2013. But expenses “per compensated man-day”
rose by 70 cents from $42.04 to $42.74, for a net decline in operating income
for each inmate from $18.18 a day to $17.83.
In combination with declining occupancy rates, the result was a dip in total
revenue from $1.72 billion in 2012 to $1.69 billion in 2013.
The founders of C.C.A. include Tom Beasley, a former chairman of the Tennessee
Republican Party. One of its early investors was Honey Alexander, who is married
to Senator Lamar Alexander, Republican of Tennessee. Alexander, according to the
Sunlight Foundation, has received in excess of $63,000 from C.C.A. employees and
the company PAC since his election to the Senate in 2002.
Poverty capitalism and government policy are now working on their own and in
tandem to shift costs to those least equipped to pay and in particular to the
least politically influential segment of the poor: criminal defendants and those
delinquent in paying fines.
Last year, Ferguson, Mo., the site of recent protests over the shooting of
Michael Brown, used escalating municipal court fines to pay 20.2 percent of the
city’s $12.75 million budget. Just two years earlier, municipal court fines had
accounted for only 12.3 percent of the city’s revenues.
What should be done to interrupt the dangerous feedback loop between low-level
crime and extortionate punishment? First, local governments should bring private
sector collection charges, court-imposed administrative fees and the dollar
amount of traffic fines (which often double and triple when they go unpaid) into
line with the economic resources of poor offenders. But larger reforms are
needed and those will not come about unless the poor begin to exercise their
latent political power. In many ways, everything is working against them. But
the public outpouring spurred by the shooting of Michael Brown provides an
indication of a possible path to the future. It was, after all, just 50 years
ago — not too distant in historical terms — that collective action and social
solidarity produced tangible results.
The Expanding World of Poverty Capitalism,
NYT, 26.8.2014,
http://www.nytimes.com/2014/08/27/opinion/
thomas-edsall-the-expanding-world-of-poverty-capitalism.html
Job Market Shows New Gains,
but Pace Eases
AUG. 1, 2014
The New York Times
By DIONNE SEARCEY
The economy continued to advance at a sturdy pace in July,
creating 209,000 jobs and adding to a string of positive economic news in recent
weeks that suggested it was gaining strength after years of lackluster growth
following the recession.
Last month’s job gains were lower than in recent months and less than Wall
Street had expected, helping to calm fears that the economy was about to
accelerate to a point where the Federal Reserve might decide to start raising
interest rates earlier than anticipated.
The new numbers were the sixth straight month in a row of job gains of more than
200,000, the healthiest pace of job creation over that length of time since
2006.
The Labor Department said Friday that unemployment increased to 6.2 percent.
Economists had been expecting the unemployment rate to hold steady at 6.1
percent. Many economists viewed the slight rise in unemployment as a modestly
positive sign, in part because more people reported that they were looking for
work., suggesting that many of them were starting to see greater job
opportunities.
On the jobs numbers, the consensus among economists was an expectation of about
230,000 new jobs. The July figure was well below the revised 298,000 surge
reported in June.
“This report is consistent with a moderation in economic growth in the second
half of the year,” said Dean Maki, chief United States economist at Barclays.
“This is a labor market that is growing solidly, just not quite as fast as in
prior months.”
General optimism about the economy was supported on Wednesday when the Commerce
Department, in its initial estimate of the economy’s overall output for April,
May and June, reported that the gross domestic product grew at a seasonally
adjusted annual rate of 4 percent for the quarter, surpassing expectations,
rebounding from a 2.1 percent decline during the harsh winter quarter.
But in July wages barely moved, inching up by just a penny and leaving them only
2 percent higher than a year ago, according to the Labor Department. That news
contrasted with a report Thursday that American labor costs recorded their
biggest gain since the third quarter of 2008. The Employment Cost Index report
found that labor costs jumped 0.7 percent, up sharply from the 0.3 percent rate
for the first quarter. The 0.5 percent average for the first half, though, was
not far from the underlying trend over the previous year.
The fears on Wall Street that wages might be set to accelerate contributed to a
market sell-off on Thursday, as some investors expressed concerns that an
increasingly tight labor market might force the Federal Reserve to raise
interest rates sooner than expected because of fears of higher inflation. On
Friday morning, after the jobs report, Wall Street stabilized.
The numbers reported Friday showed that retail employment figures were higher
for July, up by 27,000 jobs, and for the two previous months after revisions.
Jack Kleinhenz, chief economist for the National Retail Federation, said the
news was encouraging but that “no one can guarantee smooth sailing,” adding that
“choppy growth among business lines will continue.”
Manufacturing added 28,000 jobs last month but the Alliance for American
Manufacturing said the sector has recovered only 30 percent of the jobs lost
during the recession. “There are many obstacles that stand in the way of a true
resurgence: a paucity of investment in our infrastructure, high trade deficits
and currency manipulation by countries like China and Japan,” the alliance said
in a news release.
Friday’s report seemed to seal the notion that the economy had yet to burst free
of its straitjacket.
Members of the Federal Reserve on Wednesday emerged from a two-day meeting to
acknowledge that growth had rebounded, but stressed concern about the jobs
market, saying conditions were below the level that most officials at the
central bank considered healthy.
The labor force participation rate rose slightly in July to 62.9 percent. But
Joshua Shapiro, chief United States economist for MFR, said in a note to clients
that the historically low rate of participation was still troubling because some
of the youngest workers were dropping out of the job force.
“The participation rate is at lows not seen since 1978,” Mr. Shapiro said, “and
therefore conditions in the labor market are certainly worse than indicated by
the reported steep drop we have been seeing in the unemployment rate.”
Correction: August 1, 2014
A headline on an earlier version of this article referred incorrectly to the
unemployment rate. It is 6.2%, not 6.1%.
Job Market Shows New Gains, but Pace Eases,
NYT,
1.8.2014,
http://www.nytimes.com/2014/08/02/business/
jobs-numbers-for-july-released-by-labor-department.html
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