New CFS Report Exposes Devastating Impact of Monsanto Practices on U.S. Farmers  Today, one week before the Supreme Court hears arguments in Bowman v. Monsanto Co., the Center for Food Safety (CFS) and Save our Seeds (SOS) launched our new report, Seed Giants vs. U.S. Farmers.The report investigates how the current seed patent regime has led to a radical shift to consolidation and control of global seed supply and how these patents have abetted corporations, such as Monsanto, to sue U.S. farmers for alleged seed patent infringement. Seed Giants vs. U.S. Farmers also examines broader socio-economic consequences of the present patent system including links to loss of seed innovation, rising seed prices, reduction of independent scientific inquiry, and environmental issues. Among the report’s discoveries are several alarming statistics:
While agrichemical corporations also claim that their patented seeds are leading to environmental improvements, the report notes that upward of 26 percent more chemicals per acre were used on GE crops than on non-GE crops, according to USDA data. At the launch of the report via teleconference today, experts from the Center for Food Safety and Save our Seeds were joined by Mr. Vernon Hugh Bowman, the 75-year-old Indiana soybean farmer who, next week, will come up against Monsanto in the Supreme Court Case. When asked about the numerous comparisons being drawn between his case and the story of David and Goliath, Mr. Bowman responded, “I really don’t consider it as David and Goliath. I don’t think of it in those terms. I think of it in terms of right and wrong.” In December of 2012, the Center for Food Safety and Save Our Seeds submitted an amicus brief to the Supreme Court on behalf of Mr. Bowman, which supports the right of farmers to re-plant saved seed. Arguments in the case are scheduled for February 19th. Download the report here: http://www. |
Tuesday, February 12, 2013
Monsanto Monopolizes Corn, Soy, Courts
Saturday, February 9, 2013
Break Up Too Big To Fail Banks
Washington Post Columnist George Will wants to break up the big banks? (photo: AP)
Time to Break Up the Big Banks
09 February 13
George Will? Yes, today we bring you a story from George Will. It may never happen again, but today he is right. SMG/RSN
ith his chronically gravelly voice and relentlessly liberal agenda, Sherrod Brown seems to have stepped out of "Les Miserables," hoarse from singing revolutionary anthems at the barricades. Today, Ohio's senior senator has a project worthy of Victor Hugo - and of conservatives' support. He wants to break up the biggest banks.
He would advocate this even if he thought such banks would never have a crisis sufficient to threaten the financial system. He believes they are unhealthy for the financial system even when they are healthy. This is because there is a silent subsidy - an unfair competitive advantage relative to community banks - inherent in being deemed by the government, implicitly but clearly, too big to fail.
The Senate has unanimously passed a bill offered by Brown and Sen. David Vitter, a Louisiana Republican, directing the Government Accountability Office to study whether banks with more than $500?billion in assets acquire an "economic benefit" because of their dangerous scale. Is their debt priced favorably because, being TBTF, they are considered especially creditworthy? Brown believes the 20 largest banks pay less when borrowing - 50 to 80 basis points less - than community banks must pay.
In a sense, TBTF began under Ronald Reagan with the 1984 rescue of Continental Illinois, then the seventh-largest bank. In 2011, the four biggest U.S. banks (JPMorgan Chase, Bank of America, Citigroup and Wells Fargo) had 40 percent of all federally insured deposits. Today, the 5,500 community banks have 12 percent of the banking industry's assets. The 12 banks with $250?billion to $2.3?trillion in assets total 69?percent. The 20 largest banks' assets total 84.5?percent of the nation's gross domestic product.
Such banks have become bigger, relative to the economy, since the financial crisis began, and they are not the only economic entities to do so. Last year, the Economist reported that in the past 15 years the combined assets of the 50 largest U.S. companies had risen from around 70 percent of GDP to around 130 percent. And banks are not the only entities designated TBTF because they are "systemically important." General Motors supposedly required a bailout because a chain of parts suppliers might have failed with it.
But this just means that the pernicious practice of socializing losses while keeping profits private is not quarantined in the financial sector.
To see why TBTF also can mean TBTM - too big to manage - read "What's Inside America's Banks?" in the January/February issue of the Atlantic. Frank Partnoy and Jesse Eisinger argue that banks are not only bigger but also "more opaque than ever." And regulations partake of the opacity: The landmark Glass-Steagall Act of 1933, separating commercial banking from investment banking, was 37 pages long; the 848 pages of the 2010 Dodd-Frank law may eventually be supplemented by 30 times that many pages of rules. The "Volcker rule" banning banks from speculating with federally insured deposits is 298 pages long.
There is no convincing consensus about a correlation between a bank's size and supposed efficiencies of scale, and any efficiencies must be weighed against management inefficiencies associated with complexity and opacity. Thirty or so years ago, Brown says, seven of the world's 10 largest banks were Japanese, which was not an advantage sufficient to prevent Japan's descent into prolonged stagnation. And he says that when Standard Oil was broken up in 1911, the parts of it became, cumulatively, more valuable than the unified corporation had been.
Brown is fond of the maxim that "banking should be boring." He suspects that within the organizational sprawl of the biggest banks, there is too much excitement. Clever people with the high spirits and adrenaline addictions of fighter pilots continue to develop exotic financial instruments and transactions unknown even in other parts of the sprawl. He is undecided about whether the proper metric for identifying a bank as "too big" should be if its assets are a certain percentage of GDP - he suggests 2 percent to 4 percent - or simply the size of its assets (Richard Fisher, president of the Federal Reserve Bank of Dallas, has suggested $100 billion).
By breaking up the biggest banks, conservatives will not be putting asunder what the free market has joined together. Government nurtured these behemoths by weaving an improvident safety net and by practicing crony capitalism. Dismantling them would be a blow against government that has become too big not to fail. Aux barricades!
Friday, February 8, 2013
Obama's Suit Against AAA Junk Raters
Why the Government’s Lawsuit Against Standard & Poor’s Matters
Before we begin, let’s take a moment to ponder the absurdity of a system in which
a) for-profit corporations are allowed to call themselves “agencies”;
b) the government – that is, us – gives these for-profit companies given trillion-dollar influence over the financial system; and
c) they’re paid by the financial institutions whose work they’re rating – institutions who will take their business elsewhere if their products aren’t rated highly .
We gave these “agencies” all this power, along with a huge financial incentive to rate garbage as if it were roses. Then we, in the form of government regulators, looked the other way. And now we’re shocked – shocked! – that these for-profit companies were behaving … well, like for-profit companies.
There’s an extremely strong case for fraud in the government’s new lawsuit against Standard & Poor’s. The lawsuit says that Standard & Poor’s lied to the SEC in order to be certified as a credit rating agency, and that it lied to investors about the objectivity and thoroughness of its reviews. It also alleges that S&P knew that some of the mortgage-backed securities it rated “AAA” were, in fact, lousy investments, and did it to keep the bank’s business.
Body of Evidence
There’s a lot of compelling evidence in the lawsuit. Much of it is taken from the Senate’s Permanent Subcommittee on Investigations, chaired by Sen. Carl Levin, which we reviewed in detail in “The Rating Game” and “Poor Standards.”
One email exchange shows that an analyst was pressured by S&P to improve a rating for their “customer,” and when the analyst offered a somewhat higher score he was “I don’t think that will be enough to satisfy them.” When another analyst asked to look at some files for a review,which is the standard way of doing things, he was told that his request was “TOTALLY UNREASONABLE!”
S&P isn’t just ethically challenged. It’s also lousy at what it does. When it downgraded US debt in 2011, for example, the Treasury Department found a $2 trillion error in S&P’s calculations. S&P simply deleted the error from their report, then wrote up a completely different rational for their downgrade – one that relied on unmeasurable and intangible considerations. To the trained eye that suggests they’d already picked a number and they were now making up reasons to justify it.
A billion here or there is one thing. But a trillion? That’s just plain sloppy. As long as that kind of workmanship is driving our financial system, this lawsuit is important. Here are five takeaways from this action:
1. Ratings agencies are very important – and very broken.
Ratings agencies are given enormous responsibility and enormous power. Some investments are required by law to invest in only “AAA” financial products. Others, like many pension funds, have made the decision to stick to these (supposedly) safe investments exclusively.
S&P and other ratings agencies took banks’ money in return for rating their mortgage-backed securities “AAA.” Many of those securities were a form of organized fraud that was perpetrated on investors. These securities were such an easy way to earn money that they drove the housing bubble: Banks didn’t want to know if a borrower was a bad risk, because they could just bundle the loan with a lot of other equally doubtful ones and sell them all off to unwary investors.
That’s a guaranteed way to make money – for a while – as long as the rating agencies were guaranteed to give these worthless investments a “AAA” rating. And they were. That places the rating agencies at the heart of the financial crisis, the recession, and all the loss that resulted from those events.
That’s as important, and as broken, as it gets.
2. The naysayers are wrong. There’s a very strong case against S & P.
S & P’s attorney, Floyd Abrams, took to the court of public opinion to defend his client on CNBC. Abrams argued that everybody believed these mortgage-backed securities were good, including Treasury Secretary Hank Paulson and the Federal Reserve.
But Standard & Poor’s sells a technical service. It isn’t paid all that money to repeat the conventional wisdom. And yet, within a year Standard & Poor’s was forced to downgrade many of these “AAA” investments to junk status. Apparently one of their key lines of defense will be: We weren’t crooked, just incompetent.
Besides, it isn’t true that “everybody” believed these investments were strong. Did Standard & Poor’s conduct any research into the work of the many economists who publicly said there was a housing bubble, as it continued to give these investments a “AAA” rating? I think we know the answer to that one.
The “incompetence” defense also fails to address the many emails and internal documents showing that sales, not accuracy, was the organization’s prime concern.
Abrams flirts with, but doesn’t embrace, the right-wing argument that this lawsuit is driven by revenge against S&P for downgrading the Federal debt. But that downgrade didn’t weaken the government’s ability to get cost-free loans, so there was no harm. And that was two years ago, which would make this a very delayed act of revenge.
Abrams and S&P are also trying to defend its actions on First Amendment grounds, claiming that they’re journalists. Other agencies have tried this defense. But journalists aren’t “agencies.” They’re not given the authority to rate something, with billion-dollar implications. If these agencies were journalists, they’d have no product to sell.
A skeptical piece about the lawsuit from Peter J. Henning and Steven M. Davidoff in the New York Times also misses the mark. They write:
“The government will have to prove that ratings were in fact faulty, and published intentionally so as to deceive investors in the securities. In response, S.& P. could simply argue that the company was just as blinded by the financial crisis as anyone else, and that questionable e-mails are simply the work of lower-level employees who were not involved in the decision-making.”
This is Abrams’ “nobody saw it coming” argument. But that’s not what the government is alleging. The lawsuit shows that S & P claimed to have internal quality control standards, objectivity, and rigid methodology, that it made those claims in order to make money – and that it knew these claims weren’t true.
The issue isn’t whether S&P was as “blinded” as everyone else. The issue is whether it lied when it claimed to have better vision.
3. Political pressure works.
This lawsuit might never have been filed if it had not been for the hard work of Sen. Levin’s Subcommittee.
And it might not have been filed, or the government might have settled for a smaller fine, if there hadn’t been so much public demand for a tougher stand against those who brought down the economy.
Finally, there’s a case where the government wouldn’t settle for peanuts. That’s a pleasant surprise. It also shows that political pressure – whether from elected officials or the public at large – works.
4. Civil cases are important.
Republican Senator Charles Grassley, who has made some surprisingly good stands on banking issues, was dismissive because this is a civil suit and not a criminal prosecution. But this suit is already important, because it’s brought many important facts to the public’s attention. And it’s put the agencies on notice that there will be consequences for putting profits over performance.
And a civil suit seems like the right place to start. We’ve certainly hammered the Justice Department time and time again over its refusal to bring criminal cases against Wall Street bankers. That was, and is, outrageous. But the burden of proof’s a little different here. What makes the lack of banker prosecutions so outrageous is the fact that the banks have paid hundreds of billions in fines for fraud — then committed the same kinds of fraud again.
Those settlements have created an enormous body of evidence regarding bankers’ crimes. That’s not true in this case. Not does this lawsuit preclude criminal cases in the future. Hopefully they’ll be coming.
5. We need to dismantle the entire “credit ratings agency” system.
In the end, however, the real lesson is this: The entire system of “credit rating agencies” is broken. The Franken Amendment, which initially took away the most egregious salesmanship in the process, was downgraded to a requirement that the SEC conduct a study into rating agencies and make recommendations.
The SEC study found a lot of flaws, but the SEC has yet to take action. Instead the proposed set of regulations required by Dodd-Frank is being slow-walked to death.
That means nothing’s really changed: Credit rating agencies are still paid by the ultra-wealthy institutions they rate. Agency employees still have a revolving-door relationship with the banks, and so do the people who supervise the agencies.
Until the profit motive is removed from the agency process, the system will remain broken. In the meantime this lawsuit is at least a hopeful sign, and a step in the right direction.
Sunday, February 3, 2013
Exxon Record Profits, Drivers Pay Record Prices
Exxon, Chevron Made $71 Billion Profit in 2012
as Consumers Pay Record Gas Prices
By Rebecca Leber, ThinkProgress
02 February 13
hile 2012 might not be a banner year for Big Oil profits, it wasn't a bad one either. With just BP left to announce 2012 earnings, Big Oil earned well over $100 billion in profits last year, while the companies benefit from continued taxpayer subsidies. Average gas prices also hit a record high last year, showing how a drilling boom may help oil companies' profit margins, but not consumers' wallets.
ExxonMobil - now the most valuable company in the world, passing Apple -earned $45 billion profit in 2012, a 9 percent jump over 2011. Meanwhile, Chevron earned $26.2 billion for the year. In the final three months of the year, the companies earned $9.95 billion and $7.2 billion respectively.
Here are the highlights of how Exxon and Chevron spend their earnings:
ExxonMobil
Exxon received $600 million annual tax breaks. In 2011, Exxon paid just 13 percent in taxes. The company paid no taxes to the U.S. federal government in 2009, despite 45.2 billion record profits. It paid $15 billion in taxes, but none in federal income tax.Exxon's oil production was down 6 percent from 2011.In fourth quarter, Exxon bought back $5.3 billion of its stock, which enriches the largest shareholders and executives of the company.Exxon's federal campaign contributions totaled $2.77 million for the 2012 cycle, sending 89 percent to Republicans.The company spent $12.97 million lobbying in 2012 to protect low tax rates and block pollution controls and safeguards for public health.Exxon CEO Rex Tillerson received $24.7 million total compensation.Exxon is moving ahead with a project to develop the tar sands in Canada.
Chevron:
In October, Chevron made the single-largest corporate donation in history. Chevron dropped $2.5 million with the Congressional Leadership Fund super PAC toelect House Republicans.
The bulk of Chevron's federal contributions came from the super PAC donation, for a total of $3.87 million for the 2012 cycle. 85 percent went to Republicans.
Chevron spent $9.55 million lobbying Congress in 2012, according to the Center for Responsive Politics.
Chevron paid 19 percent U.S. taxes last year (half of the top corporate tax rate of 35 percent), and received an estimated $700 million in annual tax breaks last year.
Chevron was fined $1 million for a refinery fire that sent 15,000 Richmond, California residents to the hospital. Though the company faces $10 million in medical expenses, Chevron earns it back in a couple of hours.
With Royal Dutch Shell and ConocoPhillips reporting $35 billion in combined profit in 2012, BP is the last company left to announce its profits for the year.
End of Capitalism
The Endgame of Capitalism
he board game "Monopoly" was originally invented in the early 20th century to warn players of the dangers of free market capitalism. The original title was "The Landlord Game," made to show how property owners exploit their tenants with exorbitant rent. The game eventually evolved to include rules that let players charge higher rent if they owned all the railroads or the utility companies. But the endgame scenario of Monopoly is a lot like the endgame of capitalism that we're witnessing today - no matter how the game starts, the wealth will eventually accumulate in the hands of one player, while the other players have to sell off their property to pay their debt to the owner and, eventually, lose everything they have.
The Dow recently closed above 14,000, the highest it's ever been since October of 2007. While the financial pundits on CNBC would use this figure to have us believe the economy is bouncing back better than ever, the only ones sharing in the benefit of a healthy market are the wealthy investor class and corporations that have been insulated from the effects of the recession that still continues for the rest of us. The influx of high-frequency trading that now makes up half of all trading signifies the change of using the market as a vehicle for making long-term investments to manipulating it for short-term profit.
The market's latest high numbers are due to corporations turning out record profits quarter after quarter, having grown profits by 171 percent under Obama's watch. Most of those profits have come about by companies cutting costs by shifting jobs overseas, where they can pay a Chinese worker a fraction of what they would pay an American worker to do the same job. News has also broken about Fortune 500 companies like Chevron, Bank of America, AT&T and IBM using inmate labor at private prisons, meaning they can slap a "Made in the USA" sticker on a product made by someone working for slave wages. The influx of immigrants looking for work thanks to free trade agreements like NAFTA, has led to the inevitable exploitation of immigrant labor which will continue as long as US immigration policy punishes the exploited rather than the companies exploiting them. And these record corporate profits also have right-wing governors and state legislatures to thank for union-busting right-to-work laws that really only exist as a vehicle for businesses to pay workers less money for the same work, and for Republicans to erode a major fundraising base for their opposition.
The rest of the uptick in corporate profits can be attributed to a lax tax code that allows companies to book profits made in the United States in overseas tax havens. There's an estimated $2.3 trillion in US corporate profits booked in overseas accounts. Apple alone stashes $1 billion a week in overseas accounts to dodge corporate taxes. That's equivalent to over 4 million full-time minimum-wage jobs, every week. The share of US tax revenue from corporations has gone from 6% of GDP in the 1950s to just 1% today.
The executives of these companies make out like bandits, as they use their increased profits to buy their own company's stock, which makes the stock price go up, making the stock options owned by the executives more valuable. And with dividends taxed at a much lower rate than actual work (20% vs. 35%), the tax revenue needed to keep society functioning continues to dwindle as the investor class accumulates greater wealth than ever before. The six Waltons who own Wal-Mart own as much wealth as the bottom 40% of Americans.
Some financial analysts say this market surge is just a rally, destined to drop as Congress expects to wrangle with the deficit in May, including a possible downgrade of our credit rating. But the fact is, our deficit would disappear if we had a small sales taxon all Wall Street financial transactions, taxed capital gains at the same rate as by-God-hard-work and overhauled our tax code in favor of one that would do away with the loopholes that allow big corporations to offshore their billions in American profits. However, even that could get worse, as Obama has shown willingness to talk about aterritorial tax code that would effectively allow corporations to pay a 0% tax rate on their profits all over the world, including the US.
In a recent Daily Show appearance, Al Gore made a half-hearted attempt at explaining the idea of "sustainable capitalism" to Jon Stewart. But even Gore's description of capitalism as the only economic system that works sounded incredibly outdated to those of us who weren't millionaire media moguls or TV personalities. We're witnessing the endgame of capitalism, where a few wealthy individuals and corporations have accumulated most of the wealth while the rest of us are left to fight for the scraps. And it looks a lot like the endgame of Monopoly, where every player is selling off their house and foreclosing their property to pay the one player who already has everything. And when the Monopoly game has gone that far, the only thing left to do is flip the board over, scatter all of the winner's winnings, and try playing something else that everyone can enjoy.
Carl Gibson, 25, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. Carl and other US Uncut activists are featured in the documentary "We're Not Broke," which premiered at the 2012 Sundance Film Festival. He currently lives in Old Lyme, Connecticut. You can contact Carl at carl@rsnorg.org.
Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.
Saturday, February 2, 2013
Phone Union Builds 900 Buses for LA
CWA Workers to Build Up to 900 Los Angeles Buses
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CWAers at New Flyer will soon start manufacturing up to 900 environmentally-friendly compressed natural gas buses for Los Angeles, creating about 150 jobs at the Minnesota plant and 50 jobs at a new California service center.
"It's a big boost for us because we're in contract negotiations in three weeks," said John Desm, president of CWA Local 7304.
The $302.9 million contract from LA Metro -- finalized just last week -- was the result of a strong movement building campaign.
It all started last summer with Desm's work with CWA Legislative Director Shane Larson to pressure members of Congress to pass a new transportation bill. That bill freed up federal funding so cities could purchase new buses, and New Flyer put in a bid with LA Metro.
When Blue Green Alliance, a partnership between 14 of the country's largest unions and environmental organizations, heard through the grapevine that New Flyer was a finalist for the LA Metro contract, it immediately reached out to CWA Local 7304. Brian Lombardozzi, a senior policy analyst at the alliance, gathered material to paint a clear picture of what these manufacturing jobs in Minnesota meant for workers, but also the greater community. It was a great narrative: This contract could potentially create an extra third shift in production that would boost employment at the factory and give a big boost to the local economy. Los Angeles taxpayer dollars would go towards employing high-skilled, union workers working with cutting-edge technology.
CWA President Larry Cohen worked to get that information into the hands of Maria Elena Durazo, executive secretary-treasurer of the Los Angeles County Federation of Labor. And Durazo sent a letter to LA Metro supporting New Flyer's bid.
"We have heard from a representative group of workers form the New Flyer facility in Minnesota," she wrote. "According to these workers -- who we have encouraged to separately write to you -- the facility in Minnesota is completely unionized, provides good wages, benefits and excellent working conditions and provides ongoing training and career path opportunities for all their employees."
Desm began taking transit officials on tours of the factory in St. Cloud, Minn. At the same time, CWA, Los Angeles Alliance for a New Economy and AFL-CIO rallied workers for a flyer campaign and actions in California to raise awareness about New Flyer's bid.
"I thought, 'Wow, look at this network. We have people who we don't even know supporting us there,'" said Desm. "For me, it's an eye opener. Look at the power."
New Flyer is planning to start hiring workers for the St. Cloud manufacturing facility in April, and it's preparing to open a new service center in Los Angeles, which will employ another 50 workers. Under the contract, LA Metro has ordered 550 buses with an option for another 350 buses in the future.
"Everything is hand built. We practically build Lamborghinis -- in other words, no automation in our plant and everything is built here in America," said Desm. "You can't get more Build America than what we're doing right now."
Now the goal is use LA Metro and New Flyer as a model for other large transportation projects.
"Victories take a long time to get," said Lombardozzi, who has been working on getting transit agencies to buy domestic products and support good union jobs since 2010. "But hopefully we can build on this one get some more."
NO JOBS, NO RECOVERY
The Jobs Report, and Why the Recovery
Has Stalled
By Robert Reich, Robert Reich's Blog
01 February 13
e are in the most anemic recovery in modern history, yet our political leaders in Washington aren't doing squat about it.
In fact, apart from the Fed - which continues to hold interest rates down in the quixotic hope that banks will begin lending again to average people - the government is heading in exactly the wrong direction: raising taxes on the middle class, and cutting spending.
The Bureau of Labor Statistics reported Friday that American employers added only 157,000 jobs in January. That's fewer than they added in December (196,000 jobs, as revised by the Bureau of Labor Statistics). The overall unemployment rate remains stuck at 7.9 percent, just about where it's been since September.
The share of people of working age either who are working or looking for jobs also remains dismal - close to a 30-year low. (Yes, older boomers are retiring, but the major cause for this near-record low is simply the lack of jobs.)
And the long-term unemployed, about 40 percent of all jobless workers, remain trapped. Most have few if any job prospects, and their unemployment benefits have run out, or will run out shortly.
Close to 20 million Americans remain unemployed or underemployed.
It would be one thing if we didn't know what to do about all this. But we do know. It's not rocket science.
The only reason for employers to hire more workers is if they have more customers. But American employers have not had enough customers to justify much new hiring.
There are essentially two sources of customers: individual consumers, and the government. (Forget exports for now; Europe is contracting, Japan is a basket case, China is slowing, and the rest of the world is in economic limbo.)
American consumers - whose purchases constitute about 70 percent of all economic activity - still can't buy much, and their purchasing power is declining. The median wage continues to drop, adjusted for inflation. Most can't borrow because they don't have a credit record sufficient to allow them to borrow much.
And now their Social Security taxes have increased, leaving the typical worker with about $1,000 less this year than last.
The Conference Board reported last Tuesday consumer confidence in January fell its lowest level in more than a year. The last time consumers were this glum was October 2011, when there was widespread talk of a double-dip recession.
The only people doing well are at the top - but they save a large part of what they earn instead of spending it.
Overall personal income soared by 8 percent in the final three months of 2012 compared to an increase of just over 2 percent in the third quarter, but this income didn't go into the pockets of the middle class. It went into the pockets of people at the top.
Wages and salaries grew a measly six-tenths of one percent.
Most of the rise in personal income in the last quarter was from companies rushing to pay dividends before taxes were hiked in 2013, and from an upturn in personal interest income. Both these sources of income went mostly to the well-to-do.
This explains why consumer spending is dropping. The Commerce Department said Thursday consumers' spending rose 0.2 percent last month. That's slower than the 0.4 percent increase in November.
So if we can't rely on consumers to stoke the economy, what about government? No chance. Government spending is dropping, too.
The major reason the economy contracted between the start of October and end of December 2012 was a major reduction in government spending in the fourth quarter.
Government spending has declined in nine of the last ten quarters, but it took a precipitous drop in the last quarter. This was mainly because military spending fell 22.2 percent. That's the largest fall-off since 1972 (mainly due to reduced spending on the war in Afghanistan, and worries by military contractors about further pending cuts). State and local spending also continued to fall.
Personally, I'm glad we're spending less on the military. It's the most bloated part of the government. Major cuts are long overdue. But the military is America's only major jobs program. Cutting the military without increasing spending on roads, bridges, schools, and everything else we need to do simply means fewer jobs.
What's ahead? More of the same. So what possible reason do we have to suspect the recovery will pick up speed? None.
Don't count on consumer spending. Wages and benefits continue to drop for most people, adjusted for inflation. States are hiking sales taxes, which will hit the middle class and the poor hardest. Deficit hawks in Washington are contemplating additional tax hikes on the middle class.
Housing prices are stabilizing, thankfully. But one out of five homeowners is still underwater, and the ranks of people renting rather than owning are rising. Health-care costs are also rising for most people in the form of higher co-payments, deductibles, and premiums.
Don't count on government, either. Government spending continues to head downward. The White House has already agreed to major spending cuts, some to go into effect this year. Coming showdowns over the next fiscal cliff, appropriations to fund government operations, and the debt ceiling will likely result in more cuts.
More jobs and faster growth should be the most important objectives now. With them, everything else will be easier to achieve - protection against climate change, immigration reform, long-term budget reform. Without them, everything will be harder.
Yet we're moving in the opposite direction - following Europe's sorry example of failed austerity economics.
Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
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