One of my favorite bumper stickers is: “Unions: The folks who brought you the weekend.” And it’s true. In this country, we can thank labor unions for a lot of the things we take for granted today in our jobs. Before labor unions, there was no redress for employees who were working long days in unsafe conditions. Upton Sinclair’s 1906 novel The Jungle was supposed to be about the horrible working conditions that slaughterhouse employees had to endure, but as Sinclair famously said, “I aimed at the public’s heart, and by accident hit its stomach.” The Jungle is famous not for its exposure of deplorable working conditions, but for its graphic depiction of unsafe food preparation.

It wasn’t until 1935 that Congress passed the National Labor Relations Act, which affirmed government support of unions, collective bargaining, and placing restrictions on what employers could do. At the turn of the century, businesses viewed unions with a combination of suspicion and disgust. Unionizing was socialism, and socialism was antithetical to the United States and its tradition of capitalism. Eventually, though, the country grew up and realized that the employer-employee relationship was hideously skewed in favor of the employer. In an industrialized economy — that is, an economy where people work for others instead of themselves — employers have tremendous power to enhance or destroy the lives of employees by hiring or firing them. And because an employee is a single person, he has little recourse when faced with the considerable power of an entire company.

Enter the union, the job of which is to leverage the power of all the workers in a firm against the firm, should it become necessary. Unions today enter into legally-binding agreements with firms. These agreements specify things like benefits and wage rates. When a union agreement is about to expire, it needs to be renewed. At this time, the union and the management each tries to re-negotiate the contract to get the best deal. If the two sides don’t come to an agreement by the time the contract expires, then the union members go on strike. They will refuse to work without a contract specifying exactly what their benefits will be.

But you’ve got to have a union first. According to Robert Reich, formerly Secretary of Labor in the Clinton administration and now a professor of public policy at the University of California, Berkeley, 1/3 of working Americans belonged to a union in 1955. In 2009, only 8% of workers belong to a union. Part of this trend has to do with the loss of manufacturing jobs in the United States. But even this doesn’t entirely explain the decline in unionization: Toyota, the most profitable auto manufacturer in the world, is a non-union shop. Its workers are not unionized, but they have good wages and benefits. Toyota is a benevolent employer. Wal-Mart is quite the opposite. Its workers make a little above minimum wage and they largely have no benefits. Wal-Mart is famously and virulently opposed to unions, engaging in practices that, if pursued by the National Labor Relations Board (NLRB), would probably be prosecutable in court. Wal-Mart has closed entire stores rather than suffer the possibility of unionization. We cannot always rely on the benevolency of employers in order to get good wages and benefits — hence the existence of unions and a national framework that supports them.

I have written before about the current process of unionization, as have other Demockracy writers, and I will not go into it here. Again, we come around to the Employee Free Choice Act (EFCA), which would augment the current system of union creation. Again, I have before explained how it would work. In my previous pieces, I came out against EFCA because it does not have a secret ballot. How, I said, can we get an accurate assessment of whether or not people want to unionize without a secret ballot? I neglected another factor: employer pressure between the initial petition and the actual election. During this period, which usually lasts between 30 and 60 days, employers dramatically increase pressure on employers not to form a union. This pressure can vary from the benign (”workshops” in which union-busters explain to employees why unions are actually bad for them) to the criminal (openly threatening employees with termination if they join unions). Starbucks was found guility of the latter when it fired some employees at a Manhattan store who tried to unionize.

It is this pressure period that causes the disparity we see between the numbers in the initial petitions and the actual elections. An apocryphal 1989 AFL-CIO organizing document declares that, according to its statistics, 75% of employees at a firm need to sign the intitial petition in order to get 51% in the final election. There has not been a study (that I have access to!) that examines the causality of this phenomenon. It could be attributed to peer pressure; that is, when employees’ names are visible, employees will say they want to unionize, even when they don’t. In the privacy of the secret ballot, they are free to vote against the union. But there is another possibility: that employees really do want to unionize, but after two months of propaganda and open threats, employees decide that they don’t want to unionize, after all, due to the possibility of losing their jobs. We have no way of knowing what employees truly want, since there is no test we have that is free from bias, whether from the employer or other employees.

Even though it’s illegal for an employer to fire — or even threaten to fire — an employee for unionizing, it happens routinely. As is pointed out in this sourcebook on EFCA from the UC Berkeley Center for Labor Research and Education, employers treat NLRB fines (the punishment for violating labor law) as just another operating cost. They will gladly fire employees and then pay the fines, since, in the long-term, paying the fines is cheaper than dealing with a union. Fortunately, one of EFCA’s provisions is to increase the penalties for violating labor law, but even then, the fines are still not so large that the world’s large anti-union companies — Wal-Mart, Starbucks, and Whole Foods among them — cannot write those fines off as operating costs and call it a day.

The only way to forestall those threats is to allow union creation immediately, which is the point of EFCA. It assumes that the initial petition is the gold standard for union desirability and declares that, if a majority of employees state on the petition that they want to unionize, then a union is immediately formed. This way, employer interference in the unionizing process is minimized.

Contrary to anti-EFCA propaganda, the legislation does not “eliminate” the secret ballot. If a union petition garners greater than 30% but less than 50% of employees’ approval, then the secret ballot process is initiated. EFCA does only what makes sense: namely, if at least half of the employees in a firm support a union, then the union is created. The in-between time is often useful only for anti-union employers, who will use the time either to persuade or to threaten.

So, I’ve totally changed my opinion of EFCA. All else equal, making union formation easier is not a bad thing.

No taxation with representation! Wait, what?

The events are being billed as “grassroots,” meaning they formed spontaneously and were organized by the people who are attending them. The opposite of “grassroots” is “astroturf,” a movement that is designed to appear as though it is spontaneous — to give it greater credibility — but is in fact organized and planned by The Usual Suspects: think tanks, high-level political pundits, and lobbyists. It’s also a credit to how out of touch these same strategic planners are with contemporary culture that they use “tea-bag” as a verb, blissfully unaware of the kind of laughter it engenders among those of us in the know. (Parents, ask your kids.)

Yes, these Tea Parties are just such an event. Republicans have become the party of “no way, no how” in the explicit sense that they both do not want Democrats to have their way, but neither do Republicans have an alternate plan of attack. Two weeks ago, they unveiled their own “budget proposal,” which was full of grandiose talk but very, very short on actual numbers. These faux-organic “tea parties” are only the latest in Republicans’ embrace of what the online community calls FUD, which stands for Fear, Uncertainty, and Doubt. FUD is a marketing technique (what else?!) used to make consumers think nasty things about the competitor’s product. FUD almost never comes with verifiable evidence; rather, it is couched in vague, shadowy terms, coupled with equally veiled threats. Microsoft used it two years ago when it publicly claimed that the open-source (and often free) operating system Linux infringed on hundreds of its patents — but never mentioned a single one of those patents by name. Microsoft’s aim was to make IT executives wet their pants with the implicit threat of litigation against any company who might employ Linux instead of Windows. Of course, it was an empty implicit threat, but that didn’t stop Microsoft from digging to the bottom of their bag of dirty tricks to try.

So, too, is it with Republicans. And amidst the tea-bagging, their only response to a cogent plan that will hopefully bring the economy back and provide much-needed renovation to long-neglected public works is … drumroll, please: tax cuts for the wealthy! And not just the wealthy, but the super wealthy. The kinds of people who actually look like Rich Uncle Pennybags (that’s the official name of the Monopoly guy; look how much you’re learning today!). Senator John Kyl of Arizona would like to destroy the estate tax, which will be on vacation during 2010 (expect a lot of wealthy old people to “die” suddenly!) and then return in 2011 to its pre-2001 enforcement levels; namely, a $1 million exemption and a 55% tax rate for everything above that. Sen. Kyl’s plan is to increase the exemption to $10 million and decrease the non-exempt tax rate to 35%. Kyl has billed this as a way to stimulate the economy, since wealthy people will be able to invest in the economy with the additional money they’ll get to keep. Or something.

In this regard, Kyl is either willfully stupid or believes the rest of us to be willfully stupid. In no way will de-clawing the estate tax “trickle down” to the rest of us. The millions and millions of dollars upon which taxes must be paid at the time of inheritance are not located in Scrooge McDuck’s money bin; they’re locked in real estate, which will remain in the family for generations to come.  That means no sale. And that means no trickling. (And, to debunk the “double taxation” bromide that is frequently put forth to criticize the estate tax, if the real property has been in the family for generations, that means it’s never been sold, and if it’s never been sold, it’s never been taxed. At all. The same goes for financial securities like stocks and bonds.) By some estimates, the government will lose $65 billion in tax revenue over 10 years if Kyl’s dreams were to come true. Balanced against that would be the financial gain of one hundred people. Yes, 100 people throughout the entire country would benefit from Kyl’s proposal. Out of 300 million, 100 people — that’s fewer than the number who audition for American Idol – would personally benefit from this legislation. And they are 100 of the super-richest people in the country. Pity them and their billions of never-taxed dollars, locked away in swaths of property.

That’s just one example. Here’s another: the highest marginal tax rate, which Republicans insist must be lowered, lest “small businesses” and entrepreneurs pack up their suitcases and haul off to Ireland so they can take advantage of the tax breaks there. This in spite of the fact that, under President Reagan (who is Hercules, Jesus, and Steven Seagal combined into a bacon-wrapped taco shell), the highest marginal tax rate was 50%, and that it was 91% under President Eisenhower. From 1993 to 2000, arguably one of the longest periods of unrestrained growth in this country, the highest marginal tax rate was 39.6%, and we ended the fiscal year 2000 with a $128 billion government surplus. Are you still laughing, Laffer?

And so, on go the great masses of “grassroots” conservatism, led by their Fearless Leaders as much as they ever were. The fact remains that the Republicans are now, more than ever, the party of pointless obstructionism, perfectly ready to block any Democratic proposal — no matter how it may help the country — without putting forward a viable counter-proposal, all in the name of politics. By obstructing Democrats’ plans, they can, in 2010, point to a lack of progress on the Democrats’ part and say, “See? They did nothing for you in the time they were in office!” They expect voters’ memories to be so short. But isn’t that the card they’ve always played: the Ignorant of Spades? Their success has lain in their hope beyond hope that “working-class” Americans believe every word of what Bill O’Reilly and Rush Limbaugh say, and praying that those same Americans don’t look out the window and see that those words are the opposite of reality; namely, that the Republicans have been tea-bagging them for years.

Its official name is the Employee Free Choice Act and it would amend the National Labor Act of 1935 to essentially make union organization much easier for workers. The legislation would allow workers to form a union if a majority signs pro-union cards and would forgo the current practice of secret ballot elections. Other provisions would impose binding arbitration when employers and unions fail to reach a contract after 120 days and would substantially increase fines on employers who jeopardize union activities.

Proponents of the plan are many Democrats and large unions (including AFL-CIO and SEIU) who say that the current restrictions for unions put their members’ rights at a disadvantage. Many advocates for the change in the law, such as the union coalition Change to Win, say that private voting encourages intimidation and coercion of companies’ employees who wish to unionize. The act would also encourage a speedier and more thorough process in contract disputes and would triple the damages imposed against companies who do not adhere to union standards.

There are many opponents of this measure—both corporate and political—who view this legislation as an ends-to-justify the means type of regulation. The Chamber of Commerce has been very outspoken in its disapproval of the Act and notes that it could disenfranchise both parties (employers and workers) in the long run.  Under the proposed new rules, union organizers would be under no obligation to notify their employers that they are going to launch a union drive.  In addition, the “card check” policy would abolish secret-ballot elections even if many workers wish to have them. Also, in the instance that the companies and the newly formed unions fail to reach an agreement within a limited time frame, a federal government arbitrator must step in to mediate the contract so that a deal is reached—even if the outcome is not ideal for either party.

On Tuesday, Arlen Specter (R-Pennsylvania) said he would oppose the union “card-check” measure and, without his support, the legislation would likely fail in the Senate. Noting that he may very well be the “deciding vote,” Specter, who was the only Republican to vote for cloture in the previous Congress, says he is against the Act because it “will result in further job losses.” Wal-Mart, Starbucks, Costco, and several other large corporations agree. (It should be noted that Specter faces a stiff primary challenge from his right flank in 2010.) Whole Foods CEO John Mackey told the Washington Post on Sunday that the binding arbitration clause is “not the way we normally do things in the United States” and that allowing workers to organize without a secret ballot “violates a bedrock principle of American democracy.”

While corporations certainly are justified to feel threatened by this Act, ultimately, the workers are the ones who should receive some long overdue benefits. While Specter may consider the legislation a possible hindrance to labor and Mackey even deems it un-American, the rebuttal should be what is more beneficial to the labor movement than empowering workers and what is more American than appealing to the government for the rights of its citizens? According to Change to Win, low-wage workers only earn 83 cents on the dollar of what they were earning 35 years ago. What’s more is that Pennsylvania State University’s Poverty in America Project concludes that “in 2003, almost 25% of the nation’s counties had low per-capita incomes below one half the national average or less, high unemployment, low labor force participation rates, and a high dependency on government transfer payments-all measures of economic distress.” Most of these counties are located in areas with a relatively low levels of union penetration, such as the Deep South.

According to MSNBC, the vote on the EFCA might get pushed back to 2011 and  the Obama administration will be “quietly” happy since they support it but don’t really have the energy to fight for it at the moment. However, if this bill does come to vote and fails in the Senate, then compromised legislation will undoubtedly be pushed through that could do more harm than good for both employers and employees. To avoid that from happening, corporations worried about the Employee Free Choice Act should reach out to their employees and hold forums where both parties can speak their minds and try to understand each other’s positions. One of the reasons this issue has become a Congressional matter is because many large companies have at times failed to look out for the interests of their workers and put fiscal profits ahead of human capital. If these large corporations truly want to temper these regulations, then they must have an open dialogue with their employees and offer some solutions such as health care, transportation vouchers, child care benefits, higher wages, organizational tranparency, and more employee input into the decision-making processes of the organization. The only way to curb workers’ desire to unionize is to provide similar financial and non-financial benefits under a corporate business model. And, with low-wage workers who are unionized ultimately earning an average of 44% more than their non-union counterparts, even in these hard economic times it going to be a hard bargain to sell non-represented workers anything short of that improvement.

There are some exceptions (for instance, if the cost of American raw materials will increase the overall cost of the project by 25 percent, the party purchasing the materials can apply for a waiver) but the real significance of this clause is that it sets a very negative and narrow tone on the global economic crisis. Even President Obama stated in an ABC interview that this stipulation was “a potential source of trade wars” and John Bruton, the EU ambassador to the US, cited it as a “dangerous precedent.” Although the provision does state that it “shall be applied in a manner consistent with United States obligations under international agreements” it still forces many companies, such as the struggling Caterpillar, to spend more of their fiscal resources on raw materials instead of preserving jobs or raising wages. Also, given the fact that 37 percent of all manufactured goods sold in America are not made here, this stipulation seems hard-lined and, at some level, woefully misguided.

Moreover, the other underlying and more significant impact of this “Buy American” policy is this: If American companies are forced to purchase domestic raw goods for the public works projects, then what is stopping other countries from enacting the same jingoistic economic policies? This economic crisis is a global one and if every country decides to enforce a “buy me first” approach, this crisis will get far worse before it gets better. Not long after Congress announced its plan, major international news outlets such as Japan Today, Canada’s CBC NEWS, and China’s Xinhua criticized the measure. The International Herald and Tribune also noted that the United State’s protectionist policy could incite a backlash in which other nations stipulate a Don’t-Buy-American policy on foreign goods.

Although I understand Congress’s desire to promote the construction of new roads and bridges, green technology, and car manufacturing while supporting what little domestic manufacturing industry we have left, the reality is that (a) we don’t produce enough of these materials to support the sweeping projects they want to see enacted, and (b) even if we did, we may be shooting ourselves in the foot, so to speak, if we don’t work to stimulate other nations’ struggling economies in the process of stimulating our own. Maybe this approach would be acceptable, or even relevant, if this were just an ordinary American recession. But we are in the midst of a global crisis, and our economy will not get better if everyone else’s is suffering.

I believe a smarter and more fitting approach would have been a “Make American” initiative. Not an ultimatum like the “Buy American” provision, but a tax-break incentive encouragement for either domestic companies to expand their production of vital goods or for foreign ones to locate some of their operations in the United States. In both scenarios, there would be job creation and more spending. Instead of forcing companies to purchase domestic raw materials, encourage them to make products that can be purchased here or abroad. In Louis Uchitelle’s article on this issue for the New York Times last week, he cited the example of mass transit—while the stimulus bill calls for the expansion of mass transit, there are no US companies that manufacture the train cars necessary for that expansion. Now these projects will have to rely on American steel, iron, and manufactured goods while they also negotiate their express need for a specific foreign good they cannot get domestically. Wouldn’t it be nice (and much cheaper for taxpayers) to let cities purchase some raw materials from China or India and let the United States encourage these more specialized industries to move some of their operations here since we will be purchasing such a high volume of these products?

Of course, America will never return to its manufacturing hey day, and I’m not suggesting that domestic production will solve all our economic woes. But by encouraging a responsible, inviting economic policy, we could perhaps not only pave the way for global economic recovery, but also mend some broken foreign policy fences we need to repair from the past administration. Yet, despite the demands of this myopic economic policy, I hope that the Obama administration can find other ways to encourage growth domestically and promote more foreign investment in America’s future without ostracizing our trade partners and fellow economically struggling nations.

The House that T.A.R.P. built?

Now, annoying as the practice may be to some sports fans, naming rights deals have become pretty routine these days. San Diego fans, for instance, have to go to Petco Park to see the Padres and for two years the Houston Astros played at Enron Field (and no, it wasn’t renamed Felons Field, it’s Minute Maid Park now.) But what separates this deal from the routine, of course, is just how famously short of cash Citigroup is. So short that the Bush Administration ponied up $25 billion of taxpayer money to bail the bank out last October followed by another $20 billion in November. All of this while the bank released a plan to drop 52,000 employees – the nation’s largest layoff announcement in fifteen years – on top of a lay off of 17,000 earlier in the year.

So now that it’s become a ward of the state, does Citigroup have any plans to reconsider its spending priorities and save the $40 million for something maybe more central to its corporate mission like, say, banking? Not on your life. Eric Eve, Citigroup’s senior VP of global community relations assures us that the Citi Field deal “is a smart business decision,” and while acknowledging that “these are trying times for everyone,” he remained enthusiastic about being “able to see all of the nonprofit that we’re going to be able to bring to this field and enjoy these games” and “build and strengthen community relationships.”

The Congressmen saw it differently. Noting that the Treasury Department “forced Citigroup corporate executives to give up their private jet,” Kucinich suggested that it “also demand that Citigroup cancel its $400 million advertisement at the Mets field and instead begin to repay their debt to the taxpayers.”

If every cloud really does have a silver lining, then maybe a silvery glint in the current recession, depression, or whatever we wind up calling the situation is that in times like this it suddenly becomes much easier to recognize the fact that is we the people who are the ultimate source of corporate wealth. And with that recognition comes the idea that we ought to have some say in how corporate executives use that wealth. A year ago, the idea of limiting executive compensation was wild eyed radicalism; today it merits but a passing headline.

There aren’t a lot of corporations that have provided a stronger case for limiting executive compensation than Citigroup. According to the New York Times, when the bank brought Vikram Pandit on as its chief executive earlier in 2008, his total compensation package amounted “to at least $216 million.” The bank’s compensation committee explained its generosity as “recognizing that difficult economic conditions make rewarding key talent especially important.” (The Herald Tribune also noted that Robert Rubin, Treasury Secretary under Clinton and adviser to Obama, “had been paid $17.3 million [by Citigroup] in 2006 and collected more than $150 million in the last eight years.”)

The Obama Administration’s $500,000 cap on executive compensation for bailed out companies is not retroactive, by the way, so a $20 million dollar a year naming deal may still seem like relatively small change for the top guys at Citigroup. Likewise, in the sporting world, it wouldn’t even match the annual salary the Mets’d have to pay for a top-of-the line hitter like Alex Rodriguez or Manny Ramirez. But for the rest of us, it’s still quite a bit of money. It’s four hundred $50,000-a-year jobs, for instance.  Citigroup employees who kept their $50,000-a-year jobs could probably afford to buy their kids tickets to see games at Citi Field instead of having to perhaps try to get them through the nonprofit organizations Citigroup looks forward to bringing to the ballpark and building relationships with.

The bottom line on all of this that a publicly subsidized corporation obviously has no business giving a sports franchise $400 million so that they can continue to pay athletes salaries as outrageous as the ones that corporate executives pay themselves. Of course, these salaries were just as absurd last year, but last year an argument that this type of splurging demonstrated that there was simply too much wealth in corporate coffers had no place in mainstream American political discussion. Things are different today.

Kucinich and Poe are not the first to try to buck the corporate naming wave. The entire city of San Francisco has already weighed in on the question. In 1996, the naming rights to the city’s Candlestick Park, home to the baseball Giants and football 49ers, were leased to a computer networking company called 3Com. However, when the contract expired in 2001, 3Com Park reverted to Candlestick and in 2004 four members of the city’s Board of Supervisors, led by Board President Matt Gonzalez, decided to try to keep this from happening again. They placed a proposition before the voters to declare that “the City-owned sports stadium located at Candlestick Point … is hereby named and shall be referred to as ‘Candlestick Park.’” This, they said in the city’s voting guide, would be “an opportunity to send a signal that San Francisco remains on the front lines against the increased corporatization and commercialization of everyday life.”

Gavin, showing some chest in Davos.

On election day, 55% of the city’s voters sided with them, but by this time, the administration of Mayor Gavin Newsom, who had narrowly defeated Gonzalez for that office the prior year, had already acquiesced to a deal in which the 49ers leased the name of the publicly owned stadium and split the proceeds with the city. The 49ers did not reveal the exact terms, but said the city would net more than $3 million a year. Newsom characterized arguments that the naming deal represented a corporate sellout as “extreme and absurd.”

So the will of the voters notwithstanding, the City by the Bay is now the proud owner of a stadium called, for the moment, Monster Park. Newsom is, not surprisingly, unrepentant about his course of action. In fact, in a year when even corporate chieftains like Citigroup’s Vikram Pandit thought it politic to stay away from the World Economic Forum in Davos, Switzerland, Newsom attended the international corporate lovefest for the third year in a row. But given what’s going on in Washington, Newsom, who is known to be contemplating a run for governor of California, and all of the other politicians still looking for love from the Fortune 500 might just want to reconsider just what kind of, um, monster they could be creating for themselves.

Yesterday, at a Democratic getaway (which cost $100,000, by the way), Obama defended the stimulus plan and even — what’s that — improvised:

When you start asking, “Well what is it that’s such a problem, that you’re seeing? Where’s all the waste in spending? Well, you know, you want to replace the federal fleet with hybrid cars.”

Well, why wouldn’t we want to do that? That creates jobs for people who make those cars. It saves the federal government energy, it saves the taxpayers energy.

Then you get the argument, “Well, this is not a stimulus bill, this is a spending bill.” What do you think a stimulus is?  That’s the whole point. No, seriously. That’s the point.

Republicans have been pushing more of the same: tax cuts, tax cuts, tax cuts. For businesses and for the wealthy. But businesses have shown that they have no tolerance for spending money right now. They’ll take a tax cut and save it rather than use it for new production, or investment, or to hire workers. The wealthy have all the necessities of life they need. Rather than spend a tax cut on a new car or a new house, they’ll save it. The marginal value of a 10% tax cut is greater for a poor person than it is for a wealthy person. The wealthy person doesn’t need another Rolls. The poor person needs to eat.

Part of the Republicans’ problem with the stimulus package is that it involves the government doing things beyond fighting wars. It’s a generalization to say that Republicans hate government, but certainly part of what it means to be conservative is wanting “less government.” Grover Norquist is, of course, the proprietor of wanting to make the government so small he could drown it in a bathtub, which is why the government was so mismanaged for so many years. It’s hard to do a job well when you don’t think that job is worth doing at all. Given the choice between action or inaction, conservatives have preferred inaction (except, of course, when action increases businesses’ profits, as when Congress voted to take up United Airlines’ pension plan). One conservative pundit last week (who may or may not be able to speak for all conservatives and may or many not also be an idiot) claimed that the government has never created jobs, that government can only destroy jobs. It’s like dealing with an economic al-Qaeda: Republicans don’t want to negotiate, they don’t want to be bipartisan. They want to get exactly what they want, in full. They’ve grown accustomed to that after eight years. (Democrats have the exact opposite problem: they’ll capitulate at the drop of a hat. They’ll volunteer to capitulate if no one has asked them. There’s even a picture of Harry Reid in the dictionary next to the word “pusillanimous.” Someone needs to tell the Democrats that Ronald Reagan stopped being the president a long time ago.)

It’s true that, given enough time, the economy could probably fix itself (of course, John Maynard Keynes famously said that, in the long run, we’re all dead). But while we’re waiting for the free market to operate, people are getting laid off and losing their homes. Can we morally permit ourselves to let the economy remain in shambles for an unknown amount of time just to prove a point about capitalism? Of course not; it doesn’t make sense to do something just because it’s liberal or just because it’s conservative. We should do things because they work; Obama said as much in his inaugural address (though, admittedly, he was referring to more government versus less government).

Right now, the free market is broken. Consumers don’t want to spend at any price (and “any price” here means “any price that would be beneficial to the market”; certainly businesses could offer their goods for free, but that doesn’t exactly help us out of a recession). The cycle is supposed to work like this: a recession occurs, consumers stop spending, businesses lower their prices, consumers start spending again, business make more money, they start hiring people, consumers get employed again, business raise their prices, and we’re on our way back to 99-cent gas and Hummers at a 2-for-1 discount.

Our recession is working like this: consumers stop spending, businesses lower their prices, businesses lay more people off in order to save money, consumers stop spending even more as some of them get laid off, business revenue decreases, business lay more people off to save money, and so on. It’s a downward spiral that the market can’t correct. The market needs a fresh infusion of cash that just isn’t going to be coming any time soon.

Monetarism has failed. The discount rate — the interest rate that banks pay for short-term loans to other banks — is between 0% and 0.25%. It can’t go any lower, and banks still are reluctant to lend to other banks. This isn’t an issue strictly of price; it’s also one of psychology. Until businesses are ready to produce again, government must step in and fill the void to prevent the recession from getting any worse than it already is. Republicans criticize the size of the stimulus and bring up the issue of how we’re saddling future generations with this debt (these same people, by the way, were remarkably silent as the debt doubled under George W. Bush, Henry Hyde, Tom DeLay, and Bill Frist). They forget the other component of Keynesian economics: once the economy has recovered, the government must increase taxes and cut spending in order to pay back the money it borrowed. Let’s hope Congress doesn’t forget that part.

Update: Daily Kos has an interesting article analyzing media coverage of the stimulus bill. The Liberal Media, as it turns out, are not liberal at all. “Republican lawmakers outnumbered Democratic lawmakers 75 to 41 on cable news interviews.” In addition to Congressional Democrats themselves, cable news networks must be informed that Democrats won the election. Also, some of the Democrats who appeared on cable news networks were “Blue Dog” Democrats who side with Republicans on economic issues. And pretty much every other issue. Why are they Democrats, again?

But the big story with these new rules is that they won’t take effect until July 2010 – 18 months from now.

So with the economy where it is and with the credit markets being one of the main reasons, why isn’t the Office of Thrift Supervision being tougher on these companies? Why are these rules not being implemented immediately? Because the credit card companies don’t know how to run an honest business – so it’s going to take a while.

It took many years to build this House of Cards.

These corrupt practices by credit companies did not start back in 2005, but they were certainly perpetuated with the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). This law made it more difficult for consumers to file for Chapter 7 Bankruptcy- where all their debts were forgiven – so more would have to file for Chapter 13 Bankruptcy – where they would still have to pay back a portion of their debt. Not surprisingly, credit card companies spent more than $100 million lobbying for this law.

Make no mistake about it, despite its rosy name, the BAPCPA is not consumer-friendly; it assumes consumer abuse in more cases, provides more exceptions to discharge (forgiving all debts), and it allows credit companies to pursue collection without court permission. And if that wasn’t bad enough, what happens after a person finally does go bankrupt? The credit card companies are able to send them piles of credit card offers – all at high interest rates.

Many of these companies may claim they’re making these offers to help the consumer–to give them a chance to rebuild their credit. But more often than not, these consumers go right back into the cycle of debt – buying things they can’t afford and making token payments from time to time as their interest builds to an uncontrollable level–and the credit card companies know that. So really, the BAPCPA was just a way for credit card companies to make more money from newly-bankrupt individuals and not lose as much money from those who would have normally filed for Chapter 7 Bankruptcy.

A key lobbyist for the BAPCPA was the Delaware-based MBNA corporation, who donated to the campaigns of 15 key Democrats—including home-state Senator and Vice President-elect Joe Biden, earning him the nickname Senator Biden (D-MBNA). After months of lobbying, those 15 Democrats finally decided to sit down with their Republican friends and get the law passed. [MBNA has since been acquired by Bank of America.]

So when the Office of Thrift Supervision came out with these new laws, credit card companies didn’t know what to do. They aren’t used these new, consumer-friendly rules. They don’t know what it’s like to have the customer be the number-one priority.

And it all came crashing down.

You see, most businesses have a simple business model–create a product, sell the product, and serve the customer. All of the top businesses in the world follow this model with any variations being specific to their own industry. But these credit card companies, they created a product – loaned money – and sold the product – charged interest – but they forgot about their customers. They targeted many individuals who were not good risks. They charged 29.9 percent interest rates, similar to what mafia loan sharks charge on a monthly compounded basis. They increased interest rates without informing consumers and without reason. They paid their executives an insane amount of money (Some 2007 earnings: David Nelms, Discover, $21.8 million; Ken Chenault, American Express, $53.2 million; Rich D. Fairbank, Capital One, $37.4 million; Ken Lewis, Bank of America, $99.8 million). Simply put, they were greedy, manipulative, and deceptive.

The credit card industry needs some time to get everything in order. It takes a long time to tear down decades worth of greed, replace the foundation, rebuild every aspect, and work back into the once-filled niche. The House of Cards has fallen, and those responsible will be under our protection for 18 more months. I wish the same could be said for consumers.

“It’s insanity,” said Libertarian Party spokesperson Andrew Davis in a newsletter released Wednesday. “It’s insane that we keep going back to the taxpayers to bailout struggling corporations who, for lack of good management and sound business practices, have become unprofitable. Who in Congress is standing up for the taxpayers?”

When talks began a month ago about bailing out the struggling auto industry, I initially felt a little better about bailing them out than, say, bailing out the financial industry. In my mind, both the financial industry and the auto industry were greedy and stupid. All they wanted was more money, and they didn’t care about any negative repercussions of getting a lot of it.  However, also in my mind was the feeling that while the financial industry was mostly greedy with a good helping of stupid, the auto industry was mostly stupid with a good helping of greedy–and for some reason, I was more sympathetic to the mostly stupid.

Should we really bail out the people who are responsible for this?

Like many individuals, the auto industry had the mindset–sometimes referred to as path dependency–that if it has worked in the past, why wouldn’t it keep working? So, they kept building bigger cars that got fewer miles per gallon. Then, when gas prices skyrocketed, people started buying smaller, more fuel-efficient cars. This left American automakers–who had been building half-ton trucks and wide-load Hummers–with lots full of beasts they couldn’t sell.

Production went down, sales went down, and now they’re nigh unto hopeless. Some may want to blame the American people–who wanted these gas-guzzling mammoths, especially when gas was so cheap–and say that auto makers were going where the market was. Perhaps if things had stayed where they were–with gas prices and demand and such–they would have kept doing well. But when it comes down to it, automakers were being ignorant to the reality of the situation–that people would eventually want cars that ran on alternative fuels. A lack of long-term strategic thinking left the industry too vulnerable to sudden shocks in demand.

So what Detroit needs more than billions of dollars in bailout cash is some good leadership. As has been mentioned by others, the big three automakers need a complete restructuring–not an influx of money. All of the CEOs with their private jets and their fancy suits need to be standing in the unemployment line while new, fresh, smart leaders take the reigns to save the industry.

A government bailout–the very kind these aforementioned Republicans are resisting–doesn’t allow for that to happen and undermines the principles of the American free market economy. You see, the idea of capitalism and free market-ism is that the general population should run the economy. They decide what they want to buy and whom they want to buy it from. Those organizations that make mistakes, sell bad products, or poison their customer will soon be out of business; while those individuals who make bad choices with their money–or lack of money–will soon be begging on the streets.  Every so often, in order to grow in the long run, the market must flush out its waste water. People need to suffer the consequences of their bad decisions or they’ll never learn to do it differently the next time.

Should we add bankruptcy to this list?

But bailouts turn the government into some sort of indulgent parent: “Oh you don’t have money for that? Here let Mom and Dad pay for it. Just promise to pay us back.” And as we all know, when someone has tons of bills to pay, the last people on the list to pay back are always the parents. Just like the $700 billion bailout of the financial industry, an auto industry bailout is not letting capitalism happen. When the government steps in instead of letting the greedy go bankrupt and the stupid go further into debt, that’s not capitalism.

There’s a natural ebb and flow of the economy (this time it’s, admittedly, a large ebb and/or flow). But let people learn from others’ mistakes. Let us be able to look back on this 20 years from now and realize what went wrong and the negative consequences of those actions. Without letting these companies fail, we will create moral hazard. In other words, there will be no incentive in the future to perform better , because, no worries, the government will just bail you out!

But even if the auto bailout does pass, let’s hope that’s the first step and not the last. Money doesn’t solve everything. The only way the money will do any good is if real, radical change takes place from top to bottom. There needs to be an industry-wide shakeup, and new leadership needs to step in, step up, or step out. There needs to be accountability.

The irony of our financial crisis is that we are being asked by our leaders to do the very thing that got us here in the first place: consume. Especially with it being the Christmas season, the time when many retailers get most of their revenue. They need our money in order to stay in business, but we don’t want to give it to them.

And with good reason.

Consumption has been the United States’ mantra for a long time. Today’s sad story about a Wal-Mart employee trampled to death in New York should serve as a poetic reminder that consumption can be deadly. I mean, we already knew it was deadly in the countries where our stuff is made. Working conditions in industrial cities in China are deplorable, equivalent to the turn-of-the-century textile mills and meatpacking plants that we know today only by reading Sister Carrie and The Jungle. It’s worse in African countries where wars are started by diamond companies so that they can get cheap diamonds to sell at huge profits to Western men whom they’ve convinced to spend 25% of their salary on an engagement ring. It’s rare, though, for the pain and suffering caused by American consumerism to occur here on our shores.

Consumers are not so worried now about having the nicest house, the newest car, or the most stuff. They have bills to pay. President Bush’s stimulus idea of last year — to give taxpayers between $300 and $600 in free money — did nothing to help the economy. That’s probably because most people who received such a check didn’t do what they were supposed to with it. President Bush wanted them to go out and buy cars, refrigerators, computers, but consumers wisely decided to save it, or use it to pay their credit card bills. The time is nigh for rampant consumerism, fueled by an advertising industry designed to convince people that they need things that they really don’t. “Black Friday” deals this year were all the more enticing because retailers understand they won’t make that much money this year. Nevertheless, they want to get rid of whatever they can. Which entices consumers to spend, which means they’ll use credit, which means we’ll end up right back where we started.

John Kenneth Gailbraith, in The Affluent Society, bemoaned modern economics’ emphasis on production and output as the sole indicators of a healthy economy. These metrics tell us how well businesses and the wealthy are doing, but not much else. Even Simon Kuznets, the inventor of GDP — that most favored of the statistics that indicate economic health — thought that “the welfare of a nation can scarcely be inferred from a measurement of national income.” GDP (Gross Domestic Product) is the total output of all the goods and services produced by an economy. It can be calculated using the income method, or the expenditure method, with the latter preferred due to its simplicity. GDP is consumer spending plus government expenditures plus capital investment, plus net exports (exports minus imports). GDP places an emphasis on making stuff and spending money. Critics of GDP correctly note that it does not take into account volunteer activity, non-spending production (like that of housewives who don’t work), the black market, happiness, recycled goods, or the quality of goods and services being produced. Annual GDP growth in the United States is about 3%, but how much of that is fueled by cheap crap from overseas? The mantra is that any production is good production, but we have seen that not to be always the case.

And unrestrained production is not sustainable. I used to roll my eyes at phrases like “sustainability,” particularly due to the frequency with which I heard the phrase, due to living next to Berkeley. Maybe it’s the stuff they put in the water in Alameda County, but over the last few years, I’ve come to understand what sustainability means. It means growing a rate that can be sustained over a long period of time, not growing so much that resources are exhausted. If you’re wondering what to get this year for the people on your Christmas list who are hard to buy for, here’s two ideas: a DVD of Dr. Seuss’ The Lorax, a copy of Ishmael, and a copy of Ecotopia. (Even better, get all this from a used book store.)

Environmentalism, consumerism, national security — they’re all intimately related. They all depend on us changing our habits, buying less, and if we do buy things, buy recycled and re-used things, so that more resources are not needlessly spent. Consumption is the way to get us out of this financial crisis, but it’s also the way to get us right back into it.

Treasury Secretary–Tim Geithner, 48

Timothy Geithner

Geithner was the safe pick here. Geithner is currently the head of the New York Fed and was an instrumental player in the recent financial bailout.  Geithner lived abroad for much of his childhood and later attained degrees in international economics and East Asian studies. Prior to joining the New York Fed, Geithner had 14 years of experience working in the Treasury Department, including a stint as Under Secretary of the Treasury for International Affairs.  Geithner is also a long-time mentee of Larry Summers.

Chair of National Economic Council–Larry Summers, 53

Larry Summers

In this role,  Summers, the former Treasury Secretary under President Clinton, will serve as the chief economic policy adviser to the President.  Summers brings a wide depth of experience to this crucial position and is considered by many people to be the smartest man in rooms filled with geniuses. Summers, unfortunately brings some baggage to the room as well, which likely explains why he wasn’t named Treasury Secretary.  Obama seemed to play his cards right on this one. By his team first leaking that Geithner had been named Secretary of the Treasury, Summers’s appointment didn’t get much press.  The fact that Summers and Geithner will be both working together again in the Obama administration is a brilliant play.

Secretary of Commerce–Bill Richardson, 61

Bill Richardson

Reported runner up for Secretary of State and current governor of New Mexico, Bill Richardson becomes President-elect Obama’s first high profile Latino cabinet selection. Granted, this probably isn’t what Richardson had in mind at first, having already served in mid level cabinet positions in the Clinton administration. However, it is believed that in light of the current economic crisis, President-elect Obama will elevate the roles and responsibilities of the commerce secretary. Richardson brings a wealth of government experience and should have a real grasp on how Washington works.

Office of Management and Budget (OMB) Director–Peter Orszag, 39

Peter Orszag

Anyone who works on any government grants is probably all too familiar with the OMB approval process (ugh). However, the OMB does much more than this. The OMB is the largest office within the Executive Office of the President and serves a role in overseeing all federal agencies. Does that seem like a lot? It is. The OMB has over 500 employees. Orszag is well prepared for this position, previously having served as the director of the legislative branch’s equivalent of the OMB, the Congressional Budget Office (CBO). With the federal deficit and likely expansion of government programs over the next four years, Orszag will have his work cut out for him.