About Me 0072: Making Money Work

The alliance between big government and big business should raise the hackles on the necks of ordinary citizens. In the cases of GM and Chrysler, we have seen a variety of wrongs committed with government power and taxpayer money. Harnessed to the power of government, big business can really get cracking.

It can sell products to big government. It can bulk up on direct and indirect subsidies derived from the labor of ordinary citizens. It can take pressure off pricing by creating barriers to entry for potential competitors. It can mitigate the difficulty of persuading ordinary citizens to buy what they are selling at a price that reflects market value.

Before the GM and Chrysler bailouts, GE chief executive officer Jeffrey Immelt saw the money to be minted in environmentalism. GE would hold itself out as an environmental leader under the rubric of Ecoimagination. Then it would join up with big government, promote the global warming hoax and cash in on it through the regulatory regime of cap-and-tax. Ecoimagination is the public relations campaign that in part represents GE's strategic partnership with big government. See, for example, the friendly 2005 Forbes article "GE turns green."

GE got a taste of the good life when it got in on the bank bailout. As the Washington Post reported in a major article in mid-2009, GE had quietly become the biggest beneficiary of one of the government's key bank bailout programs. At the same time GE also avoided many of the restrictions faced by the big banks

The Post noted that GE did not initially qualify for the Temporary Liquidity Guarantee Program, under which the government guaranteed debt sold by banks: "But regulators soon loosened the eligibility requirements, in part because of behind-the-scenes appeals from GE."

GE thus joined the big banks collectively saving billions of dollars by raising money for their operations at lower interest rates. The Post reported that GE Capital had issued nearly a quarter of the $340 billion in debt backed by the TLGP. The government's actions have been "powerful and helpful" to the company, Immelt acknowledged in December 2008. More recently, Matt Kibbe showed just how helpful in "GE: Imaginative rent-seeking at work."

The cap-and-tax regime promoted by the Obama administration would pay off handsomely for GE. Immelt made his pitch to a Dartmouth crowd in August 2008. "The Wall Street Journal hates all this stuff," Immelt helpfully explained. "They claim global warming's a hoax...I have to deal with this regulation at work every day. You can't afford to be ideological." Hey, I know know what you mean.

It helps to have friends in high places. Immelt has supported and befriended Obama. That cap-and-tax thing must have formed a part of Obama's appeal to Immelt. When it comes to making money, you can't afford to be ideological.

Yesterday President Obama named Immelt to head his new Council on Jobs and Competitiveness panel. Immelt took to the pages of the Washington Post to explain: "The president and I are committed to a candid and full dialogue among business, labor and government to help ensure that the United States has the most competitive and innovative economy in the world." Fred Barnes briefly explicated the appointment more straightforwardly in "Jeffrey Immelt, Obama's pet CEO."

UPDATE: Via Drudge, I see that Chris Stirewalt reviews Immelt's support for picking the taxpayers' pockets via GE's strategic partnership with big government.

And Joseph Lawler includes another good quote in "What's good for Jeffrey Immelt is what's good for America": "The fact that I'd like GE to work in concert with where government policy is in the U.S. doesn't mean that I'm a traitor or a bad guy, I think it's just being practical that that's gotta happen." Jeff, you're coming through loud and clear!

Weekly Pulse: GOP Plays Chicken with the Debt Ceiling

By Lindsay Beyerstein, Media Consortium blogger

Sen. Jim DeMint (R-SC) is calling for a "big showdown" over the upcoming vote to raise the nation's debt ceiling to $14.3 trillion from $13.9 trillion. The debt ceiling is simply the maximum amount the government can borrow.

Congress routinely raises the debt ceiling every year. It's common sense: Since the government has already pledged to increase spending, Congress must authorize additional borrowing. (Remember that the government is now forced to borrow billions of extra dollars to pay for tax cuts for the wealthy, which Republicans insisted on.) If the ceiling isn't raised, the United States will be forced to default on its debts, with catastrophic consequences.

Why would default be catastrophic? The principle is the same for countries and consumers alike: If you have a good track record of paying your bills, lenders will lend you money at lower interest rates. If you don't pay your bills on time, or default on your obligations altogether, lenders will demand higher interest rates.

Congressional Republicans say they oppose raising the debt ceiling because they favor fiscal responsibility. This kind of rhetoric is the height of recklessness. The interest on our debts is a big part of government spending. Even idle talk about defaults could spook some creditors into raising interest rates on U.S. debt and cost taxpayers dearly.

Steve Benen of the Washington Monthly quotes Austan Goolsbee, chair of the White House's Council of Economic Advisers, who says that congressional GOP members are flirting with the "the first default in history caused purely by insanity."

Making work pay (for real)

An astonishing 80% of full-time minimum wage workers can't afford the necessities of life, according to new research by labor economist Jeannette Wicks-Lim of the Political Economy Research Institute, featured on the Real News Network.

Wicks-Lim argues for a two-part solution to the crisis of working poverty in America: i) raising the federal minimum wage to $12.30/hr from $7.50/hr; ii) Increasing the earned income tax credit to 40% of income. She estimates that these two policy changes would raise the income of a minimum wage worker from $15,000 to about $36,000 at a manageable cost to employers and taxpayers.

Her proposal is a revamp of President Bill Clinton's attempt to "reform" welfare by cutting social service benefits and shifting government spending to tax credits. Currently, the Earned Income Tax Credit is a subsidy for the working poor that is designed to "make work pay"--i.e., if workers aren't making enough in wages to secure a decent standard of living, the government provides an income subsidy to reward them for working.

However, if a decent standard of living remains out of reach for 80% of full-time minimum wage workers, Wicks-Lim argues that the minimum wage is too low and the subsidies are too modest to achieve the stated goal of making work pay.

Colorado minimum wage inches up

Speaking of minimum wage issues, Scot Kersgaard of the Colorado Independent reports that the minimum wage in the state ticked up from $7.25 an hour to $7.36 on January 1. The modest increase represents the annual adjustment for inflation. Every bit counts, but Colorado families are falling further behind. According to a new report by the Denver-based Bell Policy Center, 8.3% of working families in Colorado live below the federal poverty line, which is $22,050 for a family of four. Fully one-fourth of Colorado families do not earn enough to meet their basic needs, which requires an income approximately twice the FPL, according to the report.

Colorado is one of only 10 states that automatically adjust their minimum wages for inflation.

Wage theft epidemic

Unscrupulous employers are stealing untold millions of dollars from hardworking Americans, Dick Meister reports in AlterNet:

The cheating bosses don't take the money directly from their employees. No, nothing as obvious as that. The employers practice their thievery by underpaying workers, sometimes by paying them less than the legal minimum wage. Or they fail to pay employees extra for overtime work, or even force them to work for nothing before or after their regular work shifts or at other times. Some employers make illegal deductions from employee wages. And some withhold the final paycheck due employees who quit.

In New York City alone, an estimated $18 million worth of wages is stolen every week. Workers in the restaurant, construction, and retail sectors are at increased risk of wage theft. Wage thieves disproportionately target undocumented workers because they assume that these employees will be less likely to report the crime.

Debt collection from beyond the grave

The dead don't tell tales, but they have been known to sign debt collection papers, Andy Kroll reports in Mother Jones. Martha Kunkle died in 1995, but her printed name and signature appear on paperwork filed by the debt collection agency Portfolio Recovery Associates as late as 2006 and 2007. The ruse was discovered and PRA, facing a fraud lawsuit, agreed in 2008 that the "Kunkle's" documents couldn't be used in court. That didn't stop the agency from trying to use them again in 2009.

The attorney general of Missouri has announced that he will investigate whether any of Kunkle's handiwork was used to support debt collection in his state. The attorney general of Minnesota is already investigating whether debt collectors have used fraudulent paperwork in court.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

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Monday, January 24, 2011

Making Money Work

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