afghanistan

David Isenberg: FAR 49.402-4(b) to the Rescue

by David Isenberg on January 10, 2012

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From an oversight perspective, the situation in Iraq today where the bulk of private military and security contractors are now working for the State Department, and not the U.S. military, is certainly interesting, and more than a little ironic. I mean after all, how diligent can the client, the U.S. State Department, be in overseeing its contractors, when those very same contractors are responsible for preserving the security, indeed, the very lives of all the client’s staff in Iraq? Saying “do better or I’ll fire you and do it myself” isn’t a viable solution. This bring us to the article, “Private Military Contractor Liability Under the Worldwide Personal Protective Services II Contract” published in the Spring 2009 issue of Public Contract Law Journal by Samuel P. Cheadle, then a student at the George Washington University Law School. WPPS is the State Department’s effort to pre-plan, organize, set up, deploy and operate contractor protective service details around the world. It has also been the main cash cow for what was once Blackwater, now Academi . Its primary public contract was WPPS and WPPS II umbrella contracts, along with DynCorp International and Triple Canopy, Inc. for protective services in Iraq, Afghanistan, Bosnia and Israel. This is not a contract which will go down in contracting history for its transparency. In January 2010, the state’s inspector general office released its August 2009 Memorandum Report on the Preliminary Review of the Second Worldwide Personal Protective Services (WPPS II) Contract Task Orders . The memo informed various State offices of the audit cancellation of the WPPS II contracts due to “insufficient documentation.” The Department of State’s Bureau of Diplomatic Security contracts with Triple Canopy, the U.S. Training Center (formerly Blackwater), and DynCorp for personal protective services around the world, including Jerusalem, Iraq, and Afghanistan. OIG’s review of Triple Canopy, Blackwater, and Dyncorp contract TOs found insufficient documentation to meet the objectives of the audits. Federal Acquisition Regulation (FAR) 4.805 requires contract files listed in FAR 4.803 to be retained for a minimum of six years and three months after the disbursement of the final payment on the contract. OIG requested 34 contract and procurement documents for each TO. The table below depicts the number of documents provided for review and the number not available for review. Based on DIG’s receiving insufficient documentation during its preliminary review of the Office of Acquisition Management, DIG is cancelling the following previously announced audits immediately: …. Audit of Contract Administration of the DynCorp Second Worldwide Protective Services (WPPS II) Contract in Iraq, Task Order 009, under Contract Number S-AQM-PD-05-D1099; … Audit of Contract Administration of the Triple Canopy Second Worldwide Personal Protective Services Contract in Iraq, Task Order 007, under Contract Number S-AQM-PD05-D-1100. I’ve written before on the limitations of such laws and regulations as the Military Extraterritorial Jurisdiction Act and the Uniform Code of Military Justice and thus won’t rehash them here. But putting aside their specific problems what they have in common is that they focus on creating avenues of criminal liability for individual contractors, as opposed to ensuring corporate accountability to ensure long-term compliance with “use of force” policies. According to Cheadle, contract enforcement is a simple vehicle to achieve corporate accountability. Yet, little has been written on the actual terms of the contracts that PMCs hold with the U.S. government and the potential liability they could face for criminal actions that breach specific terms of those contracts. Just like PMC trade groups, Cheadle recognizes that PMCs are a necessary element of our armed forces abroad and that removal of PMCs from their responsibilities is an option the government cannot afford. Yet he believes that at the same time the U.S. government must find a means of punishing PMCs for criminal conduct while not hindering their essential roles in the war effort. His solutions is elegantly simple; especially so, given that he is not proposing a new law; remember that PMC trade groups always say that there are plenty of laws on the books to ensure proper PMC accountability. Cheadle agrees with this view. He thinks the government should resolve this dilemma by holding PMCs liable for breaches of contract under an alternative clause in FAR Part 49, termination for default. FAR 49.402-4(b) permits the performance of a contract to continue in lieu of a termination for default, but only under a third-party contract or subcontract. Termination for default is generally the exercise of the government’s contractual right to completely or partially terminate a contract because of the contractor’s actual or anticipated failure to perform its contractual obligations.” Specifically, the government can terminate a contract for default if the contractor fails to perform any provision of the contract. However, standard termination for default, however, is not a feasible solution to the problem of how best to enforce a violation of the WPPS II contract. PMCs cannot simply be uprooted from their roles abroad and replaced by military. PMCs cannot simply be uprooted from their roles abroad and replaced by military personnel because, to name one reason, there are not enough military personnel to replace them. Thus, part 49 of the FAR to the rescue. It provides several options for the government “in lieu of termination for default. Under one such alternative clause, FAR 49.402-4, the government may, when in its best interest, permit the contractor to continue performance under a revised delivery schedule 8 or continue performance “by means of a subcontract or other business arrangement with an acceptable third party.” This permits a contract to continue, benefiting the government, while effectively punishing the contractor by transferring the work to a third party. How would this work in real life? Think back to the killing of Iraqi civilians by Blackwater contractors in 2007. According to Cheadle the government may, “under FAR 49.402-4(b), let Blackwater’s duties under the WPPS II contract continue upon a finding of termination for default through a subcontract or third-party contract. Discussed below, this could be in the form of requiring Blackwater to hand some of its duties over to one of the other contractors under the WPPS II contract-DynCorp International or Triple Canopy-companies already familiar with the contract and fit to meet its demands.” Considering that PMC trade groups always say that it is free market competition which allows the private sector to produce “cost-effective” high performance solutions. Cheadle agrees, writing that “The key to this system is its focus on competition within the existing contract. The purpose of this competition would be to create incentives to comply with the “use of force” policy. Competition is the heart of the government contract system, the policy being to get the best price and product through competitive procedures.” Thus, trade groups can hardly complain when the laws of supply and demand are used to ensure contract compliance. This would be a great opportunity for trade groups like ISOA and PSC to match their corporate funding with their talking points. Cheadle recognizes that a “potential problem presented by applying FAR 49.402-4(b) is that it may cause the government to hire an entity unfamiliar with the dangers of operating in Iraq and Afghanistan to take over the contract, endangering the lives of the individuals the PMCs were hired to protect. Thus, he proposes that: The government should utilize this clause by establishing a system that requires the contract to continue through one of the two nonbreaching parties already under the WPPS II contract. Creating a system of competition among the parties already under the WPPS II contract is the best option to attain the necessary balance between a policy that ensures the safety of the con tractors and the officials they are hired to protect and a policy that ensures compliance with the “use of force” terms of the contract. This remedy would allow smooth transitions between contractors because all parties involved would already be familiar with the contract and the terrain, and would have the experience to negotiate the dangers inherent in providing security services in Iraq. Essentially, if a contractor screws up by, say, shooting someone it shouldn’t have, the company will pay the price by see its work go to another company working on the same WPPS contract. But perhaps the greatest benefit would be this: The greatest asset of this system would be its ability to achieve the delicate balance between the best protection of U.S. and foreign officials and compliance with the “use of force” policy of the contract, which ensures the safety of Iraqi civilians. All three of the contractors already at work under the WPPS II contract know the territory and know what they have to do to keep their subjects and their own employees safe. They would, over time, learn what steps are necessary to ensure compliance with the “use of force” policy while maintaining maximum levels of safety for their security subjects. No contractor would go so far as to sacrifice safety by not firing when there is a clear and present threat of danger. Competition among the three contractors would force them to find the balance between an effective defensive policy and maximum safety for the officials who are at the heart of the contract. The competition also likely would induce greater oversight of contractor actions within the contracting companies themselves. PMCs would likely monitor each other for potential violations, creating another layer of oversight on top of the Regional Security Officers and the Diplomatic Security High Threat Protection Program Office.

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David Isenberg: FAR 49.402-4(b) to the Rescue

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Is It Time To Drop Income Taxes?

by Reuters on January 7, 2012

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(The author is a Reuters columnist. The opinions expressed are his own.) By David Cay Johnston Jan 6 (Reuters) – This is America’s 100th year for individual income tax, a system as out of touch with our era as digital music is with the hand-cranked Victrola music players of 1912. It is also the 26th year of the Reagan-era reform for both personal and corporate tax, a grand design now buried under special-interest favors. With U.S. elections in November, and the George W. Bush tax cuts due to expire at the end of 2012, it’s time for a debate that goes beyond ginning up anger over taxes and the superficial issue of tax rates. It’s time to consider whether to get rid of income taxes, personal and corporate. What are the strengths and weaknesses of our current system? Should we tax individual and corporate income — or something else? We need to think about it. Whatever systems we consider, we should weigh up what it takes to raise the necessary revenue along with such other attributes as minimal compliance cost, leakage and economic distortion. Times change. Tax systems must change with them or else their lubricating effect turns to sand, wearing down the gears of commerce. Just as the Industrial Revolution transformed a nation of farmers and mechanics into a land of factory hands and office workers, so too the digital revolution and globalization are fundamentally remaking society. We need for our tax system to serve our 21st century civilization and its needs, including the costs of aging infrastructure and an aging population, costs that will be borne one way or another. 5 PRINCIPLES Five ancient principles that have survived the test of time and are, therefore, profoundly conservative, should guide us. The first is the moral principle of progressive taxation — that the greater the gain you manage to attain, whether through hard work or luck, the greater your duty to pay back the society that made your riches possible so that it will endure. This concept is 2,500 years old, coming to us along with its civil twin, democracy, from ancient Athens. The second is horizontal equity. Each person, or business, with the same ability to pay should pay the same tax. We must not tolerate a system in which one family or company pays far more than another with the same income, thanks to all the fine print in the tax code. Simplicity, transparency and ease of payment should be the last three of the five guiding principles, as Adam Smith taught more than two centuries ago. So what do we do? Narrowly defining what constitutes income for tax purposes bloats the tax code. To the vast majority who earn a paycheck, defining income is simple. For the very rich and for corporations, it is a game. Too many of our most elegant and rigorous minds design techniques for tax avoidance and tax deferral instead of producing new wealth, imposing a huge cost on society. In ancient agrarian societies the ruler took a share of the crop. In the cash economies created by the Industrial Revolution the state taxed incomes. But is income the right tax base for the 21st century, when computer software makes it possible to wrap economic income in a cloak of tax invisibility? And why, in our digital era, must Americans file 140 million tax returns? Digital technology could eliminate 120 million of those tax forms, saving billions of dollars in both private and government spending. QUESTIONS ARISE In a global economy, is taxing corporate profits smart? Or could we devise rules that both promote investment and job creation while preventing the accumulation of unproductive fortunes — the great risk if corporations are tax-exempt. Look at the same question in reverse — is our tax system encouraging unproductive or even counterproductive activities? What else should we call a system that lets hedge-fund and other financial speculators defer paying taxes for years or decades on their carried interest, while discouraging investment in long-term projects that may not pay off for a decade or more? How else to explain our gross overinvestment in housing? And what about corporate tax accounting costs? Under President Barack Obama, business has been able to immediately write off 50 percent of new investment one year and 100 percent in two other years. We need to examine the long-term benefits and costs of full expensing. The White House says full expensing lowers the average cost of capital for business investment by 75 percent. But what other effects are there? More broadly, we need to debate why corporations must keep two sets of books, one for shareholders and one for the IRS. How much more efficient would taxation, and commerce, be with one set of books? With the individual income tax in its 100th year, it’s time to fundamentally rethink how we tax ourselves. Even if we end up keeping the income tax, personal and corporate, surely we can make the system easier and fairer. (Editing by Howard Goller and Eddie Evans)

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Is It Time To Drop Income Taxes?

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The Most Popular American Companies In China

January 7, 2012

The primary reason, it is often argued, that China is an important market for many large U.S. companies is that its population has doubled since the early 1960s. But the whole picture is actually more complex than that. China’s real appeal to American corporations is that the huge population growth has been coupled with a sharp expansion of the middle class. As a result, the Chinese market probably will become more important to consumer goods and technology companies in the next few decades than the U.S. is today. Read the whole story: 24/7 Wall Street

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Tweeting On Empty: The Problem With Twitter

January 7, 2012

I recently helped a friend sign up for Twitter, coaching him on the site’s features and how to populate his feed. He is a voracious reader, never leaves home without an Apple device and has an insatiable appetite for news and commentary. In short, he had all the makings of an up-and-coming Twitter addict — or so I thought. He didn’t stick with Twitter, and after scrutinizing his timeline of incoming tweets, I can understand why. It looked nothing like my own Twitter feed, which offers a satisfying mix of commentary, personal updates, photos, news and quality recommendations from an assortment of accounts I’ve spent years curating and tweak almost daily. His Twitter timeline was dominated by generic blathering from various news accounts and institutions. My friend could have groomed his assortment of accounts, but why would he have? Like many others, he was open to trying Twitter, but not especially determined to stay on it, and his initial experience failed to deliver information he couldn’t have found elsewhere in a more efficient way. The time he’d invested in it hadn’t sold him on the service, and he wasn’t keen on investing more. One of Twitter’s greatest strengths is its ability to be anything for anyone. For some users, it’s a way of communicating within small groups of friends. For others, it’s a news site or a source of celebrity gossip or a way to participate in a political movement. What Twitter amounts to — tool, tabloid, messaging service or news feed — depends entirely on whom you follow. Yet the site’s fill-in-the-blank nature also poses problems for some. Twitter greets newcomers with a blank slate that they’re forced to fill out on their own. Being a Twitter newbie is like arriving for dinner at a restaurant that’s received rave reviews — only instead of being offered a menu, diners must make a dish themselves and select all the ingredients, down to the spices and herbs. The experience might be a pleasant one, but it takes work. This initial emptiness, and the effort required to address it, stands between Twitter and the mainstream success it needs to make money. The six-year-old, San Francisco-based company has swallowed more than $800 million in funding and has been valued at $8.4 billion , more than Delta Air Lines or the New York Times. Yet the company is still struggling to prove it has a business model that fits. Its current approach, to sell advertising on its site, will be sustainable only if Twitter can continue to expand its reach and grow far beyond the geek elite. Twitter has more than 100 million active accounts worldwide — an impressive number but one that pales in comparison to Facebook’s over 800 million users. As part of its efforts to attract more diverse users, Twitter has revamped its site to make its hashtag-laden, symbol-spotted lingo more intuitive. Next, it must help users find people to follow. Twitter knows full well it will lose users unless it can deliver a chatty, engaging timeline, without requiring Twitterers to expend too many clicks. “For people to immediately have a compelling, valuable experience on Twitter, one of the most important things we can do is help them build a timeline and find interesting, relevant accounts to follow when they first sign up,” Twitter spokeswoman Carolyn Penner told The Huffington Post in an email. For Twitter users to see the thriving “information network” the site claims to provide , they must do the legwork. They must research people to follow, spend time curating their feed, watch their timelines evolve and experiment with new accounts. But no doubt many people lack the patience to do so. Having to pick through possible accounts can be a chore, and an unlikely one to be taken on by someone not even convinced he wants to stay with the service. Twitter has already made numerous efforts to help users populate their feeds. Individuals can sync their email accounts to find friends on Twitter, and the service offers customized suggestions about “who to follow.” Twitter’s redesigned registration process, introduced last fall, holds users’ hands and nudges them to add accounts to their feed. After claiming a Twitter handle, new users are now shown a curated list of other users, with the recommendation to start off by picking five to follow. This follower-focused signup process is a start but not necessarily effective. I recently created a new Twitter account to give the revamped registration process a go. After dutifully following Twitter’s instructions, I was delivered my first page of tweets, all from one hyperactive tweeter. This would have been a total turnoff to a Twitter newbie. Pressure is mounting. People are losing patience with social media sites and, as the number of social networking sites grows, individuals will be less tolerant of services not delivering instant gratification, warned Shama Kabani, author of “The Zen of Social Media Marketing.” “One of the issues Twitter has to face in 2012 and beyond is social networking fatigue,” Kabani said. “Because there are so many sites, if someone struggles to get into Twitter, their threshold for giving it a shot will be much smaller now than it might have been. Before, they might have given it a few months. Now, if you’re not offering what people want, they can go next door.” What has attracted you to — or turned you off from — from Twitter? Weigh in below.

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Retailers Seduced Shoppers With Deals In December, In Spite Of Economy

January 5, 2012

Shoppers didn’t hold back this holiday season — at certain stores, that is. According to data released Thursday, luxury and mid-range retailers seduced customers in December, while discounters like Target missed sales estimates. The 3.4 percent increase in same-store sales reported by Thomson Reuters was better than expected — an optimistic sign in an ailing economy. Still, it’s unclear how often people will shop in the upcoming year, a factor that will depend more on whether they find jobs than on how much retailers innovate or drop prices. “Consumers were feeling better about loosening up purses this holiday season,” said Jharonne Martis, director of research for Thomson Reuters. In particular, big wins in the apparel and teen apparel sectors indicated that shoppers were willing to spend not only on necessities, but on discretionary items like new clothes and shoes, Martis said. Same-store sales, which measure changes in sales at stores open at least one year, are released at the start of each month by 25 of the largest U.S. retailers. Same-store sales of at least 3 percent indicate a healthy U.S. consumer, according to Martis. Nordstrom and Macy’s were among the biggest winners with 8.7 and 6.2 percent sales increases, respectively. Saks and Dillard’s also did well, with 5.8 and 4.0 percent increases. TJX Companies, owner of T.J. Maxx and Marshalls, saw its same-store sales increase by 8 percent. In overall apparel sales, Martis said this was able to counter the miss by Gap Inc., which saw sales decline by 4 percent in December. Victoria’s Secret, part of Limited Brands, also saw one of the largest successes with an 11 percent increase. Not that such successes came easily. It was a “very aggressive, promotional holiday environment,” as Amie Preston, chief investor relations officer of Limited Brands, said on the company’s December sales call. Other retailers, like TJX Companies, made similar comments about the importance of value to this round of holiday shoppers. Successful stores had no choice but to drop prices, extend hours and aggressively advertise to get people in the door — all of which made profits difficult. “It was one of the most promotional seasons we’ve seen in a long time, and very event driven,” said Ken Perkins, president of Retail Metrics, a retail research and consulting firm. “This puts a lot of pressure on margins.” Data showed that consumers held out from hitting stores until the very best deals were offered, or until the last minute before Christmas. According to ShopperTrak, which monitors retail foot traffic, sales jumped 37.8 percent in the last week before Christmas, a much larger increase in that period than in 2010 . Oddly, some of the big discount stores known for consistently low prices weren’t able to attract this year’s shoppers. Target missed estimates by 1.5 percent and Fred’s and Kohl’s actually saw same-store sales decline by 0.4 and 0.1 percent in December, respectively. But this doesn’t necessarily mean that people weren’t looking for discounts. Rather, more kinds of retailers are now competing for the same price-conscious shopper. In addition to traditionally mid-range department stores like Macy’s offering more deals, a growing crop of dollar stores have prices that can beat even those at Walmart. “Discounters, big names like Target and Walmart have lost a lot of market share to dollar stores,” said Martis of Target’s disappointing sales. Walmart, which doesn’t announce monthly results, will release holiday sales data in February with its latest earnings. On Tuesday, Dollar General announced that it will be opening 625 new stores in 2012. On Thursday evening, Family Dollar will announce its latest earnings, which are expected to include strong same-store sales of between 4 and 6 percent . Meanwhile, a struggling Sears Roebuck, once America’s most prominent middle-class retailer, announced last week that it will be closing 100 to 120 of its Sears and Kmart stores. Unfortunately for the economy, healthy December sales numbers don’t necessarily indicate a fertile retail landscape for 2012. With few big shopping holidays or sale days like Christmas or Black Friday in the near future, there’s a potential for retail sales to be soft, according to Perkins. Without the continued addition of jobs, the divide between retail winners and losers — as well as between luxury and middle class spending — is likely to become even sharper than it was in December. “I have deep concerns about the erosion of the middle class and their ability to spend so much,” Perkins said. “Much of the economy ultimately rests on their shoulders.”

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Pamela Yellen: Seven Tips for Keeping Your Financial New Year’s Resolutions

January 5, 2012

Perhaps this year you’ll finally get your financial house in order – roping in spending, slashing debt, maximizing income, and choosing investment and savings plans that actually deliver what they promise. Whatever you resolve, you must find a way of sticking to your financial resolutions beyond Valentine’s Day, past Mother’s Day and Independence Day, all the way through Labor Day, Thanksgiving and New Year’s Day 2013. Don’t get discouraged if you haven’t succeeded in the past.  According to Marti Hope Gonzalez, an Associate Professor of Psychology at the University of Minnesota , before they ever succeeded, most successful New Year’s goal-setters faltered for five consecutive years or more.  About 45 percent of people who set New Year’s resolutions run out of inspiration before Feb.  14.  But a subset of Americans — about one out of every five — does push ahead to achieve their stated goals. Whether the resolution is to lose weight, exercise more, quit smoking, drink less or spend less, for a small percentage of the population, New Year’s Day is the very trigger they require to set off on their final journey that previously seemed unattainable towards — or away from — a lifelong pattern of behavior. What does it take to be one of the successful few? What can you do this time around to increase your likelihood of remaining on track come New Year’s Day 2013… and beyond? Here are seven tips to help you permanently get your financial house in order: 1.   Realize we all have it within us to modify our behavior — Researchers have discovered that we all have it within us to cross the “Resolution Finish Line,” regardless of how ingrained our habits are. There is no type of individual, class, religious or ethnic group that is predisposed to failure – or to success.  Nor is luck a key component. 2.   Understand that real, permanent change is usually driven by your own desire, rather than by the pressure others exert on you. Those who are most successful at changing, according to Professors Edward L. Deci and Richard Ryan , are those whose motivation to change comes from deep within. 3.   Have a heart-to-heart talk with yourself — Where are you right now, and where do you want to be? Professor Deci recommends those who seek to change begin by having a heart-to-heart conversation with themselves. ”Sit yourself down in a chair and be ready to have an honest look at where you are at this moment and where you, based on your own desire, want to be down the road.” Even when the path to success is steep and clogged by obstacles, those who slug forward of their own volition achieve a “much higher sense of well-being, a much better sense of feeling good about yourself and what you are doing, and a general sense of vitality as you are living your life,” he says. 4.   Enlist the support of one or more allies or a coach to encourage you and help keep you on track. While the quality of your motivation is the key to success, there are actions you can take to reinforce your internal resolve.  Chief among these, many professionals agree, is enlisting the support of one or more allies to encourage you and point you back in the right direction should you begin to drift. M. Kathryn Seifert, Ph.D. , a Maryland psychologist who operates three mental health clinics, says a “coach” — whether a professional for hire, a friend or a religious leader — can help to reinforce your commitment. ”Some people need a coach to keep going — someone who can say, ‘that didn’t work, what are you going to do next?’” she says. 5.   Set incentives and consequences. Consider using websites that give incentives — and disincentives — for sticking to or breaking your commitments, such as GoalPay.com .  This website is designed to allow friends and family members to monitor the progress and provide incentives to GoalPay users who have committed to change. J.D.  Sherrill, a 30-year-old graduate of Arizona State University who has battled to quit smoking and shed weight, is one of the founders of GoalPay. He says the inspiration for the website came from his own experience. ”The things that I kept to myself were easier to forget about and never actually follow through on,” he says. 6.   Don’t wallow in self-blame when you fail — Put aside your emotions and plot a logical pathway back.  Steve Siebold, a popular author and speaker who coaches corporate sales forces on mental toughness and self-control, has interviewed hundreds of millionaires in an effort to deconstruct their secrets. Siebold, author of How Rich People Think , insists that anyone can become wealthy. One of the key differences between those who are defeated by financial roadblocks and those who knock down barriers along their path is how they respond to disappointment. Siebold estimates that 40 to 60 percent of today’s most successful investors, entrepreneurs and executives have failed multiple times.  Rather than wallowing in an emotional state of self-blame, those who rebound the fastest and most successfully set aside emotional thinking and put their minds to the task of plotting a logical pathway back.  “The key to the whole effort is their belief system,” Siebold says. ”They believe this is possible.” 7.   Don’t set yourself up for failure by insisting on an all-or-nothing change — Learn from the past, realize where you made errors and build on them like stepping-stones, says Judith A.  Belmont , a psychotherapist and author of The Swiss Cheese Theory of Life , a book about “thriving in the face of life’s adversities, overcoming challenges, developing stress resilience, and making effective and long-lasting changes for a happier life.” Belmont notes, “There is no such thing as a perfect resolution.” She describes most New Year’s goals as “a setup for failure” because they embrace an all-or-nothing attitude toward change. She cautions against perfectionism and advises patience and persistence.  “It doesn’t matter where you are on the journey, what matters is the direction you are going,” she says.  “Learn from the past, accept shortcomings, realize where you made errors and build on them like stepping stones.” Only you , when you set your mind and heart to the task, can successfully generate a turnabout of your fiscal direction.  This could be the year that you surprise everyone – perhaps most of all, yourself – by keeping and maintaining your New Year’s resolutions. Have you made and successfully kept a New Year’s resolution?  If so, what was the key factor that made it work?  Tell us in the comments box below so other readers can benefit from your experience as well. As a consultant to financial advisors, Pamela Yellen investigated more than 450 savings and retirement planning strategies seeking an alternative to the risk and volatility of stocks and other investments. Her research led her to a time-tested, predictable method of growing and protecting savings now used by more than 400,000 Americans. Pamela’s book, Bank On Yourself:  The Life-Changing Secret to Growing and Protecting Your Financial Future is a New York Times Bestseller.  Learn more at www.BankOnYourself.com

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Ex-MF Global CEO Reportedly Shopped For French Mansion During Firm’s Collapse

January 5, 2012

As MF Global inched towards collapse, CEO Jon Corzine pre-occupied himself with a few other things — namely securing a chateaux for him and his wife in the ritzy south of France. At a party in Paris on October 15 — just two weeks before MF Global filed for bankruptcy, costing more than 1,000 workers their jobs — Corzine and his wife, Sharon Elghanayan, were discussing a house they planned to purchase in the south of France , according to an upcoming report in Vanity Fair . “It’s not in Cap Ferrat,” one person at the party told Vanity Fair they recall Elghanayan saying in an effort to tone down the extravagance. Cap Ferrat is a coastal town in the south of France known for its lavish lifestyle. Though Corzine, a former Goldman Sachs CEO, governor of New Jersey and Senator , was able to scrounge up the money for a possible chateaux purchase, he’s having a little bit more trouble tracking down MF Global clients’ money , much of which is still missing . Shortly after the company filed for bankruptcy on October 31 over risky bets on European debt that went disastrously wrong, hundreds of millions worth of customers’ money was discovered missing. Corzine, who resigned in early November after the firm’s collapse, told Congress of the lost client funds: “I simply do not know where the money is.” The missing funds have attracted the attention of the FBI and federal prosecutors, according to Reuters. Though shopping for a house presumably worth millions in France while your company is on the verge of bankruptcy may seem uniquely ridiculous, Corzine is not the first executive of a failing firm to spend lavishly. Indeed, it’s happened multiple times in the new millenium. Ken Lay, the former CEO of Enron, sold the company’s shares back to Enron to pay for luxuries like renting a private yacht , even as the energy giant was on the verge of collapse, according to a 2006 Reuters report. During the financial crisis, executives at bailed-out American International Group reportedly spent $86,000 on a hunting trip even as they asked for billions more in bailout funds from the Federal Reserve, according to CBS News. And Morgan Stanley spent tens of thousands of dollars on a send off for the company’s departing chairman John Mack, even as the market has hammered the bank’s stock price and some officials warned employees that they may not be getting bonuses this year, Fox Business reports.

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Government Accounted For Nearly A Third Of All Layoffs In 2011: Report

January 5, 2012

For government workers and financial sector employees, last year was a particularly bad one — and 2012 likely won’t be much better. More jobs were lost in the government sector than any other industry in 2011, according to a report released Thursday from outplacement company Challenger, Gray & Christmas. The financial industry came in second place, followed by the retail sector. All in all, job cuts rose 14 percent in 2011, topping more than 600,000 by year’s end. It’s perhaps the last piece of bad news to come out of a year in which unemployment remained high , poverty grew more widespread and the economy came close to sliding back into a full-fledged recession. Government alone cut 183,064 jobs in 2011, the most in nine years, according to the Challenger report. Those layoffs accounted for 30 percent of the year’s 606,082 total job cuts. Meanwhile, the financial industry laid off 63,624 people for the year, or about 10.4 percent of the overall number. Together, job cuts in government and finance represented almost 41 percent of all layoffs in 2011. For anyone paying attention to Washington or Wall Street in recent months, these numbers likely won’t come as a surprise. As tax revenues dwindle and deficits continue to swell, state and local governments are in full cost-cutting mode , letting workers go at every opportunity in an attempt to bring public debts under control. Slashed government budgets have also resulted in a wave of layoffs in associated industries, like aerospace and energy. Wall Street, meanwhile, has had a rocky year, with financial companies jettisoning employees — often by the thousands , and often very young ones — against a backdrop of eurozone anxiety and worldwide populist resentment . Layoffs were also high in the retail sector, which shed 50,946 jobs for the year. With millions of Americans out of work and millions more earning just enough to cover basic expenses — and often not even that — the retail industry is in a position of unique vulnerability at the moment. Job cuts were up 14 percent between 2011 and 2010, according to the Challenger report, though it notes that when compared to some other years of the past decade — such as 2001, when the Sept. 11 attacks hastened a contraction that was already in progress, or 2008, when the financial system stumbled and credit markets abruptly seized up — both 2010 and 2011 actually saw relatively few layoffs took place. Challenger Gray analysts have previously said that no part of the federal government can expect immunity from layoffs in 2012, even traditionally safe sectors like intelligence and defense. Indeed, President Obama is expected to address the Pentagon Thursday to discuss the logistics of paring back the Pentagon budget. Also of particular concern is the U.S. Postal Service, which could lose as many as 120,000 workers in the coming year, according to Challenger.

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American Dream More Accessible In Canada

January 5, 2012

WASHINGTON — Benjamin Franklin did it. Henry Ford did it. And American life is built on the faith that others can do it, too: rise from humble origins to economic heights. “Movin’ on up,” George Jefferson-style, is not only a sitcom song but a civil religion. But many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe.

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Iran-Afghanistan Jan-Nov bilateral trade near USD2b

December 26, 2011

(MENAFN) Iran’s industry, mine and trade minister, Mehdi Ghazanfari, said that in the January-November period, trade between Iran and Afghanistan reached nearly USD2 billion, reported Tehran …

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High School Worker Fired For Porn Launches Own Porn Company

December 24, 2011

After being fired from a school board job she held for nearly a decade, a Quebec office assistant who moonlighted as a porn actress has wholly embraced the industry that got her into hot water in the first place. The woman — who prefers to go by her porn moniker Samantha Ardente — set tongues wagging in the spring when her off-hour escapades came to light after a student recognized her in an adult film. Months after she sparked widely varying opinions on her activities, Ardente started a production house for adult films and starred in the company’s debut flick. “I feel positive about everything that happened,” Ardente said through a translator. “It was a life experience but I came out a bigger and better person.” Founding her own adult film company was a step Ardente took only after gaining the approval of her 12-year-old daughter, who had previously been unaware her mother did porn on the side. “I didn’t have the time to tell my family what happened, they got to know it through the media,” she said, adding that it was hard to deal with the impact her uninvited fame had on her loved ones. “The name of my family was involved in a scandal.” Ardente was suspended from her job at a Quebec City-area high school in March after a student spotted her in a porn video on the Internet. While she didn’t deal with students in her job, the spicy contents of her videos turned her into quite the celebrity among them. School board officials fired Ardente after they were unable to reach agreement on her transfer to another job. They acknowledged Ardente hadn’t done anything illegal but said her cinematic activities don’t correspond with the values being taught at the school. Ardente had initially offered to put an end to her pornography career but said the board also wanted to impose working conditions that she felt would be too restrictive. After filing a grievance she eventually reached an out-of-court settlement with her employer. After a rollercoaster ride encompassing both negative and positive reactions to her previously hidden life, Ardente said her supporters inspired her to push ahead with the very actions that touched off the controversy in the first place. “I just continued with my life,” she said. Ardente said the production company she launched in August currently only makes tasteful “soft core” movies with couples. In her own film, she stars alongside her boyfriend and business associate Derek Tyler, but says she also has other projects with prominent porn stars in the works. Ardente is already featured in a calendar that can be found in select Quebec stores and has plans to launch a lingerie line in the future. “My life has changed in the sense that people who didn’t know me before recognize me in the street as Samantha,” she said. “They say that they’re happy to see I kept my head up and that I kept going forward instead of looking back.”

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Canadians May Now Be Richer Than Americans

December 24, 2011

This year, for the first time on record, Canadians may have exceeded their American neighbours in wealth. According to estimates from the IMF, flagged by Kevin Carmichael at the Globe and Mail , Canada’s gross domestic product per person is on track to be $51,147 per person in Canada , compared to $48,147 in the United States . It’s a reflection of the persistent weakness of the U.S. economy since the financial crisis began in 2008, and the relative strength of Canada’s economy, which has benefited from high commodity prices and surging demand in developing countries. And according to available data, it may be the first time in history that Canadians have been richer than their brethren south of the border. Historical data shows the U.S.’s per capita GDP in 1900 was $4,096 in constant U.S. dollars, while Canada’s was $2,758 . In 1950, the U.S. was at $9,753 , while Canada was at $7,047. By 1973, the U.S. led Canada $16,607 to $13,644 . Canada’s relative strength is a surprise to many economists, who have been warning that the country’s lagging productivity gains would hurt its economic growth in the long term. Data from Statistics Canada shows that, even as Canada’s GDP growth has exceeded the U.S.’s by five per cent over the past 14 years, its productivity per worker has shrunk more than 15 per cent relative to U.S. workers . So how can Canadians be getting richer when their productivity has fallen so far behind the U.S.? As the Wall Street Journal recently reported, economists may have overstated the importance of productivity growth — particularly for a commodities exporter like Canada. The Journal cites a report from Statistics Canada suggesting Canadians may not have to be as productive as Americans in order to enjoy a higher standard of living — simply because we’re getting more money for the things we sell. “When nations trade, there are other routes that can raise living standards,” Statscan’s Ryan Macdonald writes. “Trading nations can transform their stock of assets (knowledge, capital, resources) into the goods and services they want to consume by exchanging them with other nations. If the terms at which one nation can trade with another improve, then that nation can transform its exports into a greater flow of imported goods and services, thereby increasing its living standards.” In other words, because the price of oil and other commodities has gone up, we’re able to buy more for what we produce — essentially overcoming our lagging productivity. 5 ECONOMIC LANDMINES THAT COULD DERAIL CANADA IN 2012

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New Air Jordans Launch Spurs Shopping Stampedes, Assaults

December 24, 2011

SEATTLE — Fights, vandalism and arrests marked the release of Nike’s new Air Jordan basketball shoes as a shopping rush on stores across the country led to unrest that nearly turned into rioting. The outbursts of chaos stretched from Washington state to Georgia as shoppers – often waiting for hours in lines – converged on stores Friday in pursuit of the shoes, a retro model of one of the most popular Air Jordans ever made. In suburban Seattle, police used pepper spray on about 20 customers who started fighting at the Westfield Southcenter mall. The crowd started gathering at four stores in the mall around midnight and had grown to more than 1,000 people by 4 a.m., when the stores opened, Tukwila Officer Mike Murphy said. He said it started as fighting and pushing among people in line and escalated over the next hour. Murphy said no injuries were reported, although some people suffered cuts or scrapes from fights. Shoppers also broke two doors, and 18-year-old man was arrested for assault after authorities say he punched an officer. “He did not get his shoes; he went to jail,” Murphy said. The mayhem was reminiscent of the violence that broke out 20 years ago in many cities as the shoes became popular targets for thieves. It also had a decidedly Black Friday feel as huge crowds of shoppers overwhelmed stores for a must-have item. In some areas, lines began forming several hours before businesses opened for the $180 shoes that were selling in a limited release. As the crowds kept growing through the night, they became more unruly and ended in vandalism, violence and arrests. A man was stabbed when a brawl broke out between several people waiting in line at a Jersey City, N.J., mall to buy the new shoes, authorities said. The 20-year-old man was expected to recover from his injuries. In Richmond, Calif., police say crowds waiting to buy the Air Jordan 11 Retro Concords at the Hilltop Mall were turned away after a gunshot rang out around 7 a.m. No injuries were reported, but police said a 24-year-old suspect was taken into custody. The gun apparently went off inadvertently, the Contra Costa Times reported. Seventeen-year-old Dylan Pulver in Great Neck, N.Y., said he’s been looking forward to the release of the shoes for several years, and he set out at 4:30 a.m. to get a pair. After the first store he tried was too crowded, he moved on to a second location and scored a pair. “I probably could have used a half a size smaller, but I was just really happy to have the shoe,” he said. The frenzy over Air Jordans has been dangerous in the past. Some people were mugged or even killed for early versions of the shoe, created by Nike Inc. in 1984. The Air Jordan has since been a consistent hit with sneaker fans, spawning a subculture of collectors willing to wait hours to buy the latest pair. Some collectors save the shoes for special occasions or never take them out of the box. A new edition was launched each year, and release dates had to be moved to the weekends at some points to keep kids from skipping school to get a pair. But the uproar over the shoe had died down in recent years. These latest incidents seem to be part of trend of increasing acts of violence at retailers this holiday shopping season, such as the shopper who pepper-sprayed others at a Wal-Mart in Los Angeles on Black Friday and crowds looting a clothing store in New York. Nike issued a statement in response to the violence that said: “Consumer safety and security is of paramount importance. We encourage anyone wishing to purchase our product to do so in a respectful and safe manner.” The retro version of the Air Jordan 11 was a highly sought-after shoe because of the design and the fact that the original was released in 1996 when Jordan and the Bulls were at the height of their dominance. Pulver said they were a “defining shoe in Jordan’s career.” Other disturbances reported at stores in places like Kentucky and Nebraska ranged from shoving and threats to property damage. In Taylor, Mich., about 100 people forced their way into a shopping center around 5:30 a.m., damaging decorations and overturning benches. Police say a 21-year-old man was arrested. In Toledo, Ohio, police said they arrested three people after a crowd surged into a mall. In Lithonia, Ga., at least four people were apparently arrested after customers broke down a door at a store selling the shoes. DeKalb County police said up to 20 squad cars responded. In Northern California, two men were arrested at a Fairfield mall after crowds shoved each other to get in position for the Nikes, police said. In Stockton, Detective Joe Silva said a person was taken into custody at Weberstown Mall on suspicion of making criminal threats involving the shoes. Police also were investigating an attempted robbery in the mall’s parking lot. The victim was wrongly believed to have just purchased Air Jordans. In Tukwila, Officer Murphy said the crowd was on the verge of a riot and would have gotten even more out of hand if the police hadn’t intervened. About 25 officers from Tukwila and surrounding areas responded. Murphy said police smelled marijuana and found alcohol containers at the scene. “It was not a nice, orderly group of shoppers,” Murphy said. “There were a lot of hostile and disorderly people.” The Southcenter mall’s stores sold out of the Air Jordans, and all but about 50 people got a pair, Murphy said. Shoppers described the scene as chaotic and at times dangerous. Carlisa Williams said she joined the crowd at the Southcenter for the experience and ended up buying two pairs of shoes, one for her and one for her brother. But she said she’ll never do anything like it again. “I don’t understand why they’re so important to people,” Williams told KING-TV. “They’re just shoes at the end of the day. It’s not worth risking your life over.” ___ AP Business Reporter Sarah Skidmore contributed to this report from Portland, Ore. AP Writer Michelle Price contributed from Phoenix.

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Sarah Anderson: Mining for Profits

December 16, 2011

The small country of El Salvador has dared to stand up against powerful international gold mining companies. And now they’re dealing with the blowback. One of the companies salivating over El Salvador’s gold is suing the government for their failure to bow down and grant a permit for a proposed mining project. There is strong local resistance to the project because of concerns it could poison a river that is the source of water for more than half the national population. The company, Pacific Rim, is demanding in excess of $77 million in compensation, alleging violations of “investor protections” under the U.S. trade agreement with Central America. If Pacific Rim wins, the government will face a stark choice: fork over a huge chunk of taxpayer dollars to a foreign corporation or put their people’s health at risk. But those fighting the case in El Salvador have an increasing number of influential allies in Washington, where the case is being heard at an international arbitration tribunal housed in the World Bank. On December 15, labor, environmental, faith, and other groups turned out for a rally to demand that the case be dismissed. They delivered a letter to World Bank and tribunal officials signed by more than 240 international organizations, including 14 U.S. labor unions. Particularly notable among them was the United Mineworkers. Although their members’ livelihoods depend on the mining industry, they expressed solidarity for those in El Salvador who are resisting this mining project because of the possible repercussions for public health and democracy. El Salvador is still struggling to transition to representative democracy after years of civil war and there are lingering concerns about political violence. Tim Beaty, Director of Global Strategies for the International Brotherhood of Teamsters, spoke about his union’s long history of solidarity with unions in El Salvador and said they are still seeking justice in the case of a Teamster organizer, Gilberto Soto, who was killed while he was working to make connections between U.S. and Salvadoran port workers in 2004. In the course of the dispute over Pacific Rim’s proposed mining project, four Salvadoran anti-mining activists have been murdered. The Pacific Rim case is just one example of a growing number of “investor-state” lawsuits over natural resources. An Institute for Policy Studies report, Mining for Profits in International Tribunals , finds that 43 of the 137 pending cases before the World Bank tribunal are related to oil, mining, or gas. By contrast, one year ago there were only 32 such cases and 10 years ago there were only 3. Not surprisingly, this increase has coincided with an increase in commodity prices. The price of gold, for example, has quadrupled, from $282 per ounce in January 2000 to $1,900 in September 2011. Corporations are using expensive lawsuits filed under trade rules as one more weapon to get their hands on these valuable resources. A new video produced by the Democracy Center in Bolivia tells the broader story of how corporations are using these new powers to push back against all manner of government actions, including anti-smoking regulations in Uruguay, and the growing resistance in many developing countries. Even if Pacific Rim loses its case against El Salvador, the bigger struggle will continue to rewrite our trade rules so that governments don’t have to face such outrageous cases in the first place.

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David Isenberg: Miles to Go

November 23, 2011

I ended a previous post by noting how important it is for the private military and security contracting industry to pay more attention to its history. As the saying goes, you learn from your mistakes. But you can’t learn if you don’t bother to remember your mistakes, write about them, and circulate the records to others. I wrote that regular military forces have long understand the importance of doing this, which explains why all the services have numerous offices set up devoted to the study of military history. The need for this is glaringly obvious. For example, consider the report Wartime Contracting in Afghanistan: Analysis and Issues for Congress released last week by the Congressional Research Service. According to the author, Moshe Schwartz, Specialist in Defense Acquisition: From FY2005 through 2011, the U.S. government obligated more than $50 billion for contracts performed primarily in Afghanistan. Because a primary goal of defense contracting in Afghanistan is to support the overall mission, it is deemed essential that contracting is not only thought of as a response to immediate needs but also as part of the larger strategy. As General Allen, Commander, International Security Assistance Force, recently wrote, “We must improve our contracting practices to ensure they fully support our mission.” Many of the weaknesses of the current government acquisition process can be exacerbated and exploited in a wartime environment, making it more difficult to adhere to best practices. These weaknesses include inadequate acquisition planning, poorly written requirements, and an insufficient number of capable acquisition and contract oversight personnel. For example, in a wartime environment, it is more difficult to research and evaluate companies bidding on a contract and more difficult to conduct oversight of projects built in dangerous locations. It really can’t be said too much that contracting in war zones is not like contracting in peacetime. In wartime you have, like it or not, other strategic goals that must be taken into consideration beyond getting the right good or service, on schedule and at a fair price. In wartime, however, these may not be the right measures, as other goals may be equally or more important. Winning the support of the local village is often more important than staying on schedule. Helping train local nationals and building up the technical capabilities of local firms may be well worth a substantial increase in contract costs. Contract risks can also differ greatly between peacetime and wartime. Peacetime risks generally include cost overruns, schedule slips, and poor performance. Additional risks that must be considered when awarding a contract in an environment such as Afghanistan include diverting millions of dollars to warlords, criminal networks, or insurgents; hiring private security and other contractors who may engage in abuses that undermine the legitimacy of coalition forces; and the inflow of large sums of poorly managed contracting dollars fueling corruption. However, the state of the U.S. governmental acquisition process being what it is, namely overwhelmed and under resourced, it has, to paraphrase Robert Frost’s poem, miles to go before we can sleep comfortably about U.S. tax dollars being used wisely. The CRS report notes: Some of the weaknesses of the current federal government acquisition process can be exacerbated by and exploited in a wartime environment, making it more difficult to adhere to best practices. These weaknesses include inadequate acquisition planning, poorly written requirements, and an insufficient number of qualified and capable acquisition and contract oversight personnel. For example, in a wartime environment, it is more difficult to write a good contract that incorporates the sometimes competing goals of counterinsurgency (COIN) contracting, more difficult to research and evaluate companies bidding on a contract, and more difficult to conduct oversight of projects being built in dangerous locations. It is also more difficult to protect against contracting fraud and corruption in countries that have weak law enforcement and judicial systems. Corrupt officials and warlords can exploit these weaknesses to divert contracting funds to their own coffers. Admittedly, if there are problems with contracting officers then that is primarily a government problem. Still, it takes two to tango. If contractors really want to do the most professional job they can — a goal that may be problematic for some of them — they could and should receive the various lessons learned reports government personnel have been compiling for years as they reflect on why so many reconstruction projects went kablooey. The CRS reports mention two groups the military created to improve contracting in Afghanistan. They are: • Task Force 2010 which was set up in July 2010 to help commanders and acquisition personnel better understand with whom they are doing business, to conduct investigations to gain visibility into the flow of money at the subcontractor levels, and to promote and distribute best contracting practices. • The Afghanistan Vendor Vetting Cell was established to ensure that government contracts are not awarded to companies with ties to insurgents, warlords, or criminal networks. The cell was set up in the fall of 2010 and is based in CENTCOM headquarters in Tampa, Florida. In June 2011, the vendor vetting cell consisted of 14 analysts capable of vetting approximately 15 companies a week. One hopes that the military will share information from those two groups with the industry so that various companies can improve their own due diligence efforts when competing for and implementing contracts.

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House Republicans Agree On Burdens Of The Rich

November 23, 2011

The debate about taxing the super-rich is as pertinent and contentious as it has ever been, thanks to the Occupy Wall Street movement pushing the issue of income inequality to the forefront of American politics. Myriad reports demonstrate the low real tax rates for millionaires and billionaires in the United States. Bloomberg wrote this month that the top bracket of taxpayers have seen their effective tax rate decrease since 1995. Another recent report from the Internal Revenue Service shows that 1,500 millionaires paid no income tax at all in 2009. The snowball effect — the wealthy tend to become even more wealthy — has caused the income gap in America to widen dramatically. It’s not just protesters on the street voicing frustration with this. Last week, a group of millionaires lobbied Congress to have their federal taxes raised. Still, many in the Republican Party strongly oppose any tax hike on wealthy Americans or corporations, arguing that these individuals and organizations are the “job creators” and that raising their taxes would stunt job growth throughout the nation. It’s worth noting that an icon among the trickle-down economic believers, President Ronald Reagan, said in a 1985 speech that loopholes enabling millionaires to avoid taxes were “crazy” because they allowed the “truly wealthy to avoid paying their fair share.” But here’s a look at what Republicans are saying these days:

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Mike Ragogna: myLocal Heroes: An Interview With Fairfield’s Scott Morris

November 22, 2011

photo courtesy of Scott Morris Out of a little known corner in Iowa, tucked away in the peculiar and extraordinary town of Fairfield, comes this story of a new kind of community empowerment program that could hold the key to a more transparent, more life-supporting, more humanitarian money supply and system of incentives. Since 2009, a core of social entrepreneurs has been crafting and proving out a new model of wealth generation centered on social and economic equity, the spirit of harmony found in volunteerism, and respect for individual sovereignty. The group piloted their now flagship “Hero Rewards” program from April to July of 2011, cataloging their experience of empowering local charities in engaging the community, rewarding local volunteers for being proactive in community building, and bringing stimulus to the local economy all at once with something no more complex than a coupon. With the pilot concluded, a group of civic-minded community members invited the Hero Rewards team to present their findings and on how they intended to perpetuate the model to the benefit of both Fairfield and beyond. ” my Local Cooperative” emerged as the parent, administering organization that oversees the Hero Rewards, while it also provides a “Community Operating System” App for web and mobile along with a slew of relevant online marketing services to its merchant members. The Community Operating System provides: a unified community calendar, where the cornerstone entities of the community can unify their event listings alongside local schools, venues, and charities, and where individuals can customize their personal feed according to their own interests; a new platform for exchange called ” my Local Marketplace” which allows local trade to occur in a plethora of media from purely time-based “timebanking” to business-to-business barter while also featuring job listings, daily deals, and more; and finally, a new authority to the individual through ” my Local Voice”, an online town-hall environment where people can express and discuss ideas, identify priorities, and see action taken on agreed-upon solutions. It brings all this to life in a rich maps-layer where people can interact with their locale and enjoy local wealth experiences in ways unlike ever before. photo courtesy of Scott Morris A Conversation with my Local’s Steve Morris Mike Ragogna : So Scott, tell me a bit about how my Local came to be. Scott Morris : We started as a round table that was exploring alternative methods for local economic development. We wanted to create an program for Fairfield that had the benefits of a complimentary currency, but would not be perceived as one. We wanted to create a program that would help boost resilience and self-reliance while also activating latent resources in the community. What we ended up with was a program called “Hometown Hero Rewards” which we piloted to explore whether rewarding volunteerism and other socially progressive activities with local merchant promotions and deals would be something that people would appreciate. What we actually created was something much more, something that everybody in the community could get behind, and in fact DID. MR : How did the Hero Rewards pilot turn out? SM : It actually turned out a lot better than any of us expected. The Civic Organizations loved the extra coverage and promotion of their events, Volunteers were thrilled to receive the Hero Rewards–actually called “Merits”–and participating Merchants recognized the value of pledging their “off hours” capacity to those who’ve gone and bettered the community. It was a win-win-win, and like we said, everybody got behind the idea. The data we collected speaks to what this program can do for local economies. MR : You’re running a crowd-funding campaign right now, tell me a little bit about that. SM : We’re raising $25,000 to kick-start the development of our “Community Operating System” App. The campaign can be found via the link: www.mylocal.coop/thiswayup and will certainly inspire pledges from readers who like the idea of generating an abundance of jobs, creating a brighter future for our children, and helping “local” to become the next cool and convenient thing to do. It ends on midnight on Thanksgiving Day, so the heat is on for us to get this link out there and around networks who will respond positively to our message. If you have networks you think will appreciate real solutions for local communities, than please share the link with them. We’re counting on grassroots support, and we invite your readers to take a closer look. MR : Do you think you’ll actually get the money? SM : The early-adopter wave of support we have seen is HUGE for campaigns of this type, and yes, we do intend on hitting our goal of $25,000 before November 24th. We’re committed and we wouldn’t waste our time unless we could actually pull it off. I mean, there’s a whole field of possibilities out there, and with your help, the help of your readers, and the larger network of concerned and intelligent people out there, we think success is well within reach. MR : What’s the Community Operating System? SM : It’s a web and mobile app that puts the power of “local” into the palm of your hand. It combines the Hero Rewards program with mobile payments and a whole suite of other community services. For merchants, it lowers the cost of doing business with smartphone users and increases security and convenience for everyone. The user interface is maps and calendar-based for navigating local events, deals and promotions, and opportunities to engage in achieving the greater good through social engagement. MR : How will it make life easier, can you give me some examples? SM : (1) I’ve got kids in school, and I want to stay on top of related events. my Local Calendar gives me the controls to subscribe to events that are school-related, receive updates via email, and have one-click access to details and directions if I need them. (2) I’m in college, I need to find ways reduce financial pressure. The COS allows me to explore opportunities to qualify for Hero Rewards, publish my skills in my Local Marketplace for others to search and hire, and find deals that help me get more from the dollars I have in addition to generally expanding the bandwidth of what I can trade for goods and services around town. (3) I’m a massage therapist, and the Community Operating System allows me to be found by people who are interested in supporting the local economy. I can barter my services with local businesses, easily trade hour-for-hour with other people who have skills to offer, and I can attract new customers by participating in Hero Rewards. photo courtesy of Scott Morris

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Obama Signs Bill Into Law To Spur Veteran Hiring

November 22, 2011

Despite recent clashes in Congress , members put aside partisan dissemblance Monday in a “vow” to help veterans. With support by both Republicans and Democrats, President Obama signed into law the “VOW to Hire Heroes Act,” CNN reports . The bill provides tax credits for businesses that hire unemployed and disabled veterans. In an effort to fight the 12 percent veteran unemployment rate , the federal government has added 350,000 private sector jobs in the past three months, Military.com reports . The site quotes the President expressing the importance of providing employment opportunities for veterans: “Just as they fight for us on the battlefield, it’s up to us to fight for our troops and their families when they come home,” Obama said. “Today, a deeply grateful nation is doing right by our military and paying back just a little bit what we owe our veterans.” Bloomberg Businessweek states that the tax credit may not actually do much in the way of job creation and that it would complicate the already confusing tax code. However when it comes to giving veterans an edge in employment, the news site argues that “it’s the right thing to do.”

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Katie Miller: Occupy Afghanistan, Not Wall Street: A Military Opinion?

November 9, 2011

Last week theChive posted a picture of an enlisted combat veteran in the U.S. Army holding up the anti-OWS sign below. Neglecting the fact that it is inappropriate to wear a military uniform while making political statements (not that this blogger can criticize too much), this image struck me as odd, even contradictory. Bear with me as I deconstruct this a bit, sentence by sentence, in a stream of consciousness. There are some interesting forces at play here. “I joined the Army during a time of war.” Undoubtedly, this soldier is to be honored for his service, knowing full well that he would be deployed several times in a war that has lasted over a decade and stretched our forces thin. However, it would be naïve to think that the economy hasn’t been a contributing factor to the military’s recruitment success the past couple of years. In 2009, for example, the military met all of its recruitment goals for the first time in 35 years . Coincidentally, economists predicted that the 2009 economic crisis was to be the worst the world had seen in 60 years . How much did the economy play into this young man’s decision to join the military? Regardless of the answer, it doesn’t take away from his bravery and his sacrifice, but if joining and maintaining our forces was purely a matter of public service, the need for sign-on bonuses, pensions, and benefits would be nonexistent. “It didn’t pay well at first, but that just made me work HARDER .” Promotion in the military is more or less a function of time, not talent. Tim Kane’s article in The Atlantic discusses this at great length. John Nagl, a Rhodes Scholar, West Point graduate, tank-battalion operations officer, and one of the crafters of the Army’s counterinsurgency manual, left the military without having achieved a full-bird (rank of Colonel). If you’re looking for a less extreme example, think about how common it is to congratulate a servicemember for being selected a year early for promotion. A year early? The promotion window is so specific that a year differentiates the absolute best soldiers at a certain rank from his or her average counterparts. Hard work in the military is even less determinant of income than in civil society. “I have multiple deployments to countries you ’99%’ would never occupy.” I’m concerned with the fact that this soldier is voluntarily distinguishing himself from the 99 percent when middle-class Americans are disproportionately responsible for fighting and dying in today’s wars. When is the last time a robber baron hung up his suit and tie and laced up his boots? Middle-class American soldiers are bearing the burden of these wars. “Countries who know what hardship is.” I can only guess that the unidentified soldier is attempting to portray OWS protesters as ungrateful in comparison to people living in undeveloped countries. Sure, the average American enjoys a higher standard of living than Iraqi and Afghani people, but their message isn’t directed internationally, or else they’d demand humanitarian intervention in these countries. Their focus in on the unequal distribution of wealth (read: distribution of power) in the United States, which is comparable to that seen in developing countries like Rwanda and Nepal in national rankings. ” This is my $50K a year occupation.” I find this statement rather confusing, as the servicemember is drawing attention to his modest income, yet he still seems to be directing his anger toward OWSers. Maybe he should take a look at this: the Pentagon’s budget is being cut by $400 billion over the next 10 years, approximately the same amount taxpayers used to bail out banks in 2008. Theoretically, the money that could have been spent on national defense initiatives has been handed over to the 1 percent, which should resonate with military personnel. On top of that, the Armed Services are being downsized, and the coveted military pension program is under scrutiny. What’s worse, a whopping 56 percent of our homeless populations are veterans! “I am the .001%” To be factually obnoxious, about 1 percent of the U.S. population is currently serving in the military. I apologize for the rather incoherent presentation of my thoughts, but I think I’ve made clear the incoherence of this soldier’s thoughts, as well, in doing so. Many of you may be wondering why this has a place in the Gay Voices section. Using this servicemember as example, I argue that the military has been a vehicle for conservatism, even when it doesn’t make sense. (“Don’t Ask, Don’t Tell” anyone? The policy hurt our military, for Pete’s sake, yet it stuck around for over 17 years.) What this veteran doesn’t understand is that Occupy Wall Street is advocating on behalf of him; whether he chooses to recognize it or not, he’s part of the same 99 percent he’s criticizing. He spits out the “hard work” rhetoric Republicans notoriously abuse, as the conservative ideology must be so ingrained him that he doesn’t even realize who benefits from this rhetoric. It’s not him.

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Cities Where Mortgages Are Staying Afloat

October 30, 2011

President Obama recently announced he would extend the nation’s mortgage refinancing program in an effort to provide relief to homeowners whose mortgages are worth more than the value of their homes. With 11 million underwater households no one can claim the housing crisis over. However, some regions have survived the crisis better than others. In those areas, home values are either stable or rising, and unemployment is below the national average.

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David Isenberg: Bad Pennies and Louis Berger Group

October 20, 2011

Who says the U.S. government doesn’t have a sense of humor, not to mention irony? Proof that it does can be seen in a recent, if little noted contract awarded to the Louis Berger Group, which is an international consulting firm of approximately 3,000 employees around the world who provide diverse multidisciplinary expertise including engineering, program and construction management and economic development services. LB is not a small fish in the private military contracting pond. The recent final report ( PDF ) of the Commission on Wartime Contracting in Iraq and Afghanistan identified it as one of 22 individually identifiable contractors that received at least a billion dollars each and account for 52 percent of contract awards from FY 2002 to FY 2011. Louis Berger is also well known for problems executing past contracts. For example, According to Slate , in November 2010, the Louis Berger Group agreed to a $69 million settlement after allegedly overcharging USAID by $15 million to $20 million over 10 years for development projects in Afghanistan, Iraq, and Sudan. Two former executives went to prison for fraud. Yet the settlement allowed the company to continue to working on government contracts. This was despite a 2009 report by USAID’s inspector general that ” urged USAID to make more use of its powers to suspend (cut off funds to an organization temporarily) and debar (cut them off permanently). ” However, that was then and this is now. And like a bad penny, Louis Berger Group keeps turning up to get new contracts. Or perhaps the government simply considers it to be one of those corporations that are too big to fail. Anyway, the contract was awarded by the Department of Justice’s Justice Management Division. The contract is to support Division’s Office of Overseas Prosecutorial Development, Assistance and Training (OPDAT). Contractor personnel will furnish administrative, logistical, professional, and technical labor, supplies, equipment, facilities, and materials necessary to perform the required functions consistent with applicable policies, regulations, procedures, business practices, and protocols that define the OPDAT operational environment. … On September 29, 2011, ContractDJJ12-C-2242 was awarded to The Louis Berger Group (Louis Berger), 250 23rdStreet, NW, Washington, DC, 20037 This contract will provide worldwide support services for the Office of Overseas Prosecutorial Development, Assistance and Training(OPDAT) of the U.S. Department of Justice’s Criminal Division. The contract includes a base period of performance of one year with four additional periods of one year each for a total period of performance of five years. Total value of the contract is $41,895,464. Of course, on the premise that you need a criminal to help fight criminality, who better than a corporation that has actually been prosecuted for fraud to help future prosecutions?

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Mohamed A. El-Erian: Time for a Smaller and Stronger Eurozone

September 17, 2011

The euro is central to Europe’s economic prosperity, financial stability and political harmony. Moreover, given America’s own set of economic challenges, a well-anchored euro is critical to placing an increasingly multi-polar world economy back on the path of high growth and job creation. The euro should, indeed must, be saved. And it can be saved provided Europe is willing to make hard structural and institutional decisions. Difficult choices are often avoided in favor of the “status quo.” This tends to be the path of least resistance. But there is no status quo in today’s Europe. Absent a change in approach, the crisis will continue to spread, fragmentation pressure will mount and the Euro will be even more vulnerable to policy mistakes and market accidents. The time has come for the eurozone — Germany and France in particular, but also Austria, Finland and the Netherlands — to decide how they would like European integration to evolve; and they need to do so quickly. They have two conceptual choices: restore stability to the current, heterogeneous zone; or opt for a smaller but stronger one. Neither option is easy, and both are very controversial. They involve substantial upfront costs and high likelihood of collateral damage and unintended consequences. Also, with implementation fraught with risks, they require an unsettling level of policy experimentation, innovation and responsiveness. Yet both options dominate the path currently pursued by Europe which, distressingly, involves a growing threat of an uncontrolled and disorderly fragmentation of the eurozone and the euro. Already, the hard-earned credibility of some key regional institutions has been exposed to excessive risk, including the European Central Bank, which is central to the longer-term well being of Europe. Most political visionaries would opt for the first approach — doing whatever it takes to maintain the current zone, and do so for as long as it takes. But there should be no doubts here. This is a very expensive proposition that involves widespread, multi-year cross-guarantees and subsidization. Yet it entails significant uncertainties, given that certain peripheral economies face not just a big debt crisis but also a deep-rooted growth crisis. Indeed, many economists would caution core European countries on such a big challenge. After all, the underlying problems go well beyond political disputes. They also involve difficult design and engineering challenges. Economists rightly point out that, under this first approach, the core economies could use their stronger balance sheet to assume the debt of the weak peripherals but, critically, there is little they can do to enable them to grow properly. With such considerable open-ended exposure, this is an expensive and risky path, both upfront and over time. This path should only be pursued if core countries have more than “assurances” that the weak peripheral economies are both able and willing to fundamentally change their economic governance, institutions and behavior. There must also be credible pre-commitment mechanisms. Unfortunately, these are very difficult to implement. Moreover, the social appetite for adjustment in some peripheral economies is understandably near exhaustion, complicated by the wrong perception that austerity is being “imposed” by “rich” neighbors. The alternative is for Europe to bite the bullet and opt for a smaller but stronger zone. Certain weak peripheral economies (Greece and, possibly, 1-2 others but, importantly, not Italy) would restructure their debt and take a sabbatical from the euro. In doing so, they would gain greater domestic policy flexibility to deal with both their debt and growth crises. Meanwhile, the remaining members of the zone would be able to proceed more rapidly towards a more complete and stronger economic union. This second path also involves significant costs and risks, especially given the high likelihood of upfront disruptions. Remember, there are no mechanisms for an orderly exit from the zone. Trade flows would be dislocated for a while. Also, it would become obvious that certain European banks face both capital shortfalls and asset quality problems. And, to add to the uncertainties, contagion winds would blow throughout the smaller zone. Yes, pursuing a smaller but stronger zone involves risks and costs, too. This is part of Europe’s unfortunate reality: At this stage, there are no easy and costless options to solve the region’s growing turmoil. Fortunately, this second approach has an important benefit, both in absolute terms and relative to other alternatives: it can put the zone on a firmer longer-term footing. Making this difficult choice would ensure that the underlying resilience and soundness of Europe, which are still considerable, are preserved and enhanced for many future generations. There is little time to waste. This post originally appeared in Handelsblatt.

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Shocking Crowd Reaction At GOP Tea Party Debate

September 13, 2011

A bit of a startling moment happened near the end of Monday night’s CNN debate when a hypothetical question was posed to Rep. Ron Paul (R-Texas). What do you tell a guy who is sick, goes into a coma and doesn’t have health insurance? Who pays for his coverage? “Are you saying society should just let him die?” Wolf Blitzer asked. “Yeah!” several members of the crowd yelled out. Paul interjected to offer an explanation for how this was, more-or-less, the root choice of a free society. He added that communities and non-government institutions can fill the void that the public sector is currently playing. “We never turned anybody away form the hospital,” he said of his volunteer work for churches and his career as a doctor. “We have given up on this whole concept that we might take care of ourselves, assume responsibility for ourselves … that’s the reason the cost is so high.” The answer may have struck a truly libertarian tone but it was clearly overshadowed by the members of the crowd who enthusiastically cheered the prospect of letting a man die rather than picking up the tab for his coverage.

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Rep. Dennis Kucinich: International Policy: Its Relationship to the Domestic Economy

September 9, 2011

Tonight I wish to speak to this Congress and to my fellow Americans about international policy and its relation to the domestic economy. I will advocate a new direction America must take in the world so that we can meet the needs of our people here at home. For the past decade we have relied on the force of our arms to make America secure while our economy has rotted from within. America has lost its focus. America has spent more time concentrating on reshaping the world than on reshaping our economy. We have created hundreds of thousands of jobs for military contractors all over the world, while we just learned that we created zero jobs here in the United States in the month of August as unemployment continues to stay above 9%. Come home America. We must begin to focus on things here at home and stop roaming the world looking for dragons to slay. We have a right and an obligation to defend our nation. That includes working for peace abroad and seeking peaceful resolution of conflict, a capacity that, at our peril, we have not fully developed: I call it strength through peace. It involves the pursuit of what President Franklin Roosevelt called the “Science of Human Relations,” actually engaging those with whom we disagree most to attempt to find a way to co-exist peacefully. As Dr. Martin Luther King said at a commencement address at Oberlin College in 1965: We must find some alternative to war and bloodshed… I do not wish to minimize the complexity of the problems to be faced in achieving disarmament and peace. But we shall not have the courage, the insight, to deal with such matters unless we are prepared to undergo a mental and spiritual change. It is not enough to say we must not wage war. We must love peace and sacrifice for it. We must fix our visions not merely on the negative expulsion of war, but upon the positive affirmation of peace. We must see that peace represents a sweeter music, far superior to the discords of war. I believe the American people have the capacity to ‘undergo a mental and spiritual change’ that Dr. King spoke about. People are about that work in their own private lives everyday. The question is, does our government and those who lead it have that capacity? Are we willing to look, recognize that the path we are on leads only to destruction and poverty and are we willing to embark courageously on a new path? To those who say that this is naïve, I ask; has the strategy of military intervention, which took us and keeps us in Iraq, Afghanistan and Libya, made us any safer? The muscle-bound “with us or against us” mindset which passes for statecraft has placed us on a march of folly that in the past decade has left America with thousands of dead young soldiers, over a million dead innocents in Iraq, Afghanistan, Pakistan and the surrounding region, a new generation of terrorists and trillions upon trillions of dollars in debt. As poverty and war are twins, so are peace and prosperity. Mindful of the disaster of spreading war and being an eyewitness as to how easily our country seems to be drawn into conflict, I traveled to Syria this year, to personally urge their leader to stop the violence, respect human rights, and begin a transition toward a democratic state. I traveled to Lebanon afterwards to hear the concerns of leaders who also believe that the violence in Syria must stop and are concerned that if radical fundamentalism results in the overthrow of the government of Syria, the same fires will consume their own nation which developed a fragile political and social consensus after years of civil war. I opposed the war in Libya, not only because it was unconstitutional, but it was and is unconscionable for America to precipitate or take sides in a civil war, spending perhaps billions in an ongoing war while we have so many pressing needs here at home. We went in because we were told a massacre could occur, yet civilian casualties in Libya mounted after the U.S. and NATO attacked. In order to please the West, Libya cooperated with the CIA, got rid of its WMD program in 2004 and privatized its economy, resulting in massive unemployment. It was moving through to reform even as the West moved to bomb it and, inexplicably, the West moved to take up the cause of elements of Al Qaeda spurring the rebels. We learn today from CNN that the rebels and fighters aligned with them are looting weapons warehouses across Libya, where as many as 20,000 surface-to-air missiles had previously been kept under lock and key. Western officials, perhaps the same geniuses who knowingly helped Libyan rebels with ties to al Qaeda overthrow the Libyan government, are now worried the surface to air missiles and other weapons will get into the wrong hands. This lawless interventionism spurred on by an unaccountable NATO which violates United Nations Security Council resolutions with impunity, this attempt to use force to bring others to subjection in the name of democracy, actually has become a device for control over the wealth of other nations, the squandering of our own wealth, and the spreading of poverty here at home. Did our government just wake up one day and discover that 14 million Americans are out of work and that we need a massive program to put them back to work? No. It has known that for some time. War has become our great distraction. It has given those who have little or no ability to construct a fair economy an opportunity to pretend to leader at the expense of those brave men and women who serve and at the expense of the American economy and the expense of the American taxpayers. We can no longer afford participating in this wargame of nations. I opposed the war in Afghanistan, and have brought Congress to confront it several times because the U.S. has spent one half a trillion dollars trying to democratize a tribal nation while failing to spend sufficient resources to protect our democracy here at home. The latest report is that we may be in Afghanistan through 2024, at the request of the Afghanistan government. This will cost us hundreds of billions, even trillions more. Doesn’t it make more sense for America to come home, at the request of and for the benefit of the American people? I led opposition in this Congress to the war in Iraq. Nine years ago I warned this Congress that there was no reason to go to war against Iraq. I was asked at that time whose side I was on: America’s or the murderous dictator Saddam Hussein? Opposing that intervention was seen by some as coddling a murderous dictator. No matter that Hussein had opposed Al Qaeda. No matter that there was no proof that Iraq had anything to do with 9/11 or al Qaeda’s role in 9/11; no matter that Iraq did not have the intention or capability of attacking the United States and that no one had been able to show that Iraq had weapons of mass destruction. I wasn’t “for” Saddam Hussein. I was for the truth. And for peace. America pursued the war anyway. America put the lives of its sons and daughters on the line. America will spend over three trillion dollars for this war that was based on lies. And even today we find our government will not bring the troops home as promised, but instead will continue to spend billions on this stupid and corrupt war in Iraq while our own nation is falling apart. Money for war, but no money for jobs? Am I advocating isolationism? Certainly not. We need to strengthen the United Nation’s peacekeeping ability and blunt NATO’s warmaking capability. We must stop NATO from going rogue. We need a counter-terrorism strategy which brings people to justice, not which dispenses justice from 10,000 ft., with the help of Predator Drones. It is the predatory interventionism which must stop. We must stop intervening for the benefit of oil companies or other corrupt corporate interests. We cannot be the policeman of the world and lay off police and firemen in our own nation. We cannot continue to bomb bridges in other countries and say we do not have the money to build bridges here in America. We must stop pretending that America can solve all the problems in the world when we can’t solve our own problems here at home. How can we bring democracy to other nations when we are losing it at home? We cannot tell other people how to live when we have people here at home who are having difficulty living. We should look to the wisdom of Proverbs where it was written: “He who troubleth his own house shall inherit the wind” (Proverbs 11:29) and we must work to set our own house in order. There were no weapons of Mass Destruction in Iraq. But there are weapons of mass destruction here in America. Unemployment is a Weapon of Mass Destruction. Poverty is a Weapon of Mass Destruction. Homelessness is a Weapon of Mass Destruction. Inadequate education is a Weapon of Mass Destruction. Lost pension benefits are Weapons of Mass Destruction. Poor health care is a Weapon of Mass Destruction. Yet despite the obvious needs domestically, the Pentagon budget now consumes over 50% of our discretionary spending. And the Pentagon budget has grown alongside the war budget. Just this year the wars and the Pentagon budget will consume close to $1 trillion in taxpayers’ money. A trillion dollars! Do you have any idea how many jobs a trillion dollars can create? Stop the wars, trim the bloated Pentagon budget and use the savings to put America back to work. The American people want work not warfare. Can we see any clearer example of the danger of endless war? We are supposed to be impressed with the strength of our leaders who, in the name of America wield awesome weapons against states a fraction of our size while when it comes to the economy and jobs, the same leaders lack the ability to confront Wall Street, which is destroying jobs on Main Street. While spending trillions for unnecessary wars, the government bailed out the banks for $700 billion, refusing to link the bailout to mortgage modification which would have helped millions of Americans stay in their homes. The Fed, which infamously looked the other way as the financial crisis was building and failed to properly monitor the overexposure of top banks, created $1.2 trillion out of nothing and gave secret emergency loans to some of the largest banks who helped to cause the financial collapse through reckless investments. This secret money created out of nothing, but backed by the full faith and credit of the U.S., is going to fuel an international financial system which siphons wealth out of the U.S., avoids paying taxes, takes American jobs and moves them to low-wage climates. According to Bloomberg News the “$1.2 trillion peak on December 5, 2008… was almost three times the size of the U.S. federal budget deficit that year and approximates the amount of money, $1.27 trillion that is due in unpaid principal on 6.5 million homes that are in or facing foreclosure.” Secret loans went to: Morgan Stanley 107.3 Billion Citigroup $99.5 billion Bank of America $91.4 billion Goldman Sachs $69 billion and to Foreign Borrowers: Banks of Scotland $84.5 billion Zurich based UBS AG 77.2 billion How is it possible that banks too big to fail still exist? We all know that the banks will fail again. The taxpayers will be asked bail them out again; to preserve the wealth of shareholders, bondholders and executives, again. The destruction of the middle class has been accelerated by the Wall Street manipulators who brought about the collapse of the housing market destroyed trillions of wealth built into American homes. Risk, like taxes, is a yoke unfairly placed upon the shoulders of the middle class. As income and resulting wealth is being redistributed upward at a pace not seen since the 1920s, the purchasing power of the middle class has been seriously eroded. Americans have less equity in homes to fuel home equity loans to keep their consumer spending up. A third of all Americans owe more than their home is worth. How is it possible that 120 million Americans literally have no wealth, just debts: How did it happen that 150 million Americans have less wealth than the top 400 individuals? How did it come to pass that the top 13,400 households, according to David Cay Johnston, have more yearly income than the bottom 96 million Americans? Who created this economy where welfare for the wealthy creates a system where a person earning $4 billion a year managing a hedge fund pays a lower tax rate on most of his income than a person who drives a truck? In a report just released, the Pew Charitable Trust wrote : “The idea that children will grow up to be better off than their parents is a central component of the American Dream and sustains American optimism. However… a middle class upbringing does not guarantee the same status over the course of a lifetime. A third of Americans raised in the middle class… fall out of the middle as adults.” The implications are this report are chilling. America’s middle class is being destroyed. America is headed toward a two class society. Just as America could not survive half free and half slave, America cannot survive half rich and half poor. “What happens to a dream deferred?” wrote Langston Hughes. “Does it dry up, Like a raisin in the sun? Or fester like a sore – - And then run? Does it stink like rotten meat? Or crust and sugar over Like a syrupy sweet? Maybe it just sags Like a heavy load. Or does it explode?” It is democracy itself which at risk here. An economic democracy is a precondition of a political democracy. With endless wars, without solid jobs to sustain a middle class, a new national security state armed with the Patriot Act, will exist primarily to provide surveillance of a growing, bristling poverty class. America knew this forty-four years ago, when on February 29, 1968, The Report of the National Advisory Commission on Civil Disorders or Kerner Report pronounced: “Our nation is moving toward two societies, one black, one white — separate and unequal.” Then the inequalities were in lack of access to opportunities for jobs, housing, education and social services. In 1998, thirty years after the Kerner Report, Senator Fred Harris, said, “there is more poverty in America, it is deeper, blacker and browner than before, and it is more concentrated in the cities, which have become America’s poorhouses.” The inequalities exist today. Just since January of 2009, unemployment has skyrocketed among African Americans from 12.7% to 16.7%. Among, Hispanics the unemployment rate is currently 11.3% While intensifying among people of color, poverty today is colorblind. Foreclosures have spread through all American neighborhoods as a wildfire, consuming with it the hopes and dreams of millions. We had a moral urgency to address unemployment in the inner cities, but we failed as a society to do that. We have learned that writ large, the fate of people who live in our cities has been the fate of those who live in the suburbs, because the same massive economic machinery that for generations was crushing the hopes of millions of inner city Americans — banks who disinvested, insurance companies who redlined, businesses which pulled out, this same plague is now visited throughout America. The official unemployment figure of 9.1% conceals a much larger, more devastating picture in America. According to a recent study by Youngstown State University: the de facto unemployment rate, as conceived and computed by their center for Working Class Studies, is 26.37% This figure includes individuals who are no longer looking for work (discouraged), underemployed and those who are marginally employed. Corporations are sitting on trillions of dollars and not hiring because of “uncertainty,” insinuating that small changes in federal regulations or tax policy are killing jobs. Yet we know that massive changes in federal tax policy and government regulations have taken place at periods of great economic growth in the United States. Our economy has not hit a rough spot in the road; it has hit a wall. The greatest losers in today’s economic system are the young. They have been fleeced. They were promised good jobs with good pay if they got a good education. Millions have done that only to discover that the jobs we promised were not there. Millions of young people have moved in with their family and friends, barely scraping by, dreading student loans that they have to repay. The dread when those loans come due. The major fault in the domestic economy is the failure to provide well paying jobs for Americans. The reasons for the high unemployment and low paying jobs are many, but two major reasons stand out: lack of consumer demand and stagnant wages accompanying low union participation. There is a lack of consumer demand in an economy that is 70% dependent on consumer spending. There are those who say we can spur demand with more tax cuts for businesses. This fails the test of experience. Business received tax cuts. We still have high unemployment. Business profits are greater than ever. Investment is less. We have learned from the past few years that businesses will not invest while economy is in bad shape. Since World War II, America has come out of every recession in less than a year, but this time we have had a false recovery. The economic numbers improved briefly, while stimulus was injected. Today we are back in recession, a double dip recession that is destroying people’s lives and setting back our nation. We did not have enough stimulus to begin with. As the stimulus runs out things are getting worse. The recession is feeding on itself. In 1937, a second round of depression surfaced as stimulus was withdrawn, requiring another effort by the government to stabilize the economy. The parallel between 1937 and 2011 is obvious. We need a second stimulus. It has to be strong enough to put millions of Americans back to work. State and local governments are forced to lay off people by the hundreds of thousands. These layoffs are not introducing efficiency. They undermine service and reduce the necessary role of government in the life of a community. Massive aid is needed to all areas of government, not because governments have spent recklessly, but because revenues are down. Income tax revenue is down. Sales tax revenue is down. Property tax revenue is down due to foreclosures. We can stimulate the economy by providing revenue to rehire state and local government employees. That is the easiest way to put hundreds of thousands back to work. This is an obvious way to stimulate the economy on a significant scale. State, local government, public schools, public and private college would all have an enhanced ability to restore service. Such a stimulus would create an economic climate where businesses will expand their investment, utilizing their own profit. The same thing is true in the housing area. The government must immediately implement a new housing program. More and more properties are becoming vacant and vandalized, while people are doubling up. We need a full-scale program where economically troubled homeowners are given the right to rent, at a market rate, property in foreclosure. The government would provide a rent subsidy while the homeowners seek work. The American people want work, not welfare. There should be work for those who are able to work. Government must become the employer of last resort. The private sector is not providing the jobs. When the private sector fails to provide the jobs, the government has a moral responsibility and a practical responsibility to step forward to put the country back to work. As with FDR and the New Deal, the government must now put millions of Americans back to work rebuilding our infrastructure. The American Society of Civil Engineers issued a report that $2.2 trillion in infrastructure rebuilding must take place to move the commerce of America. It is not enough to describe the situation and to make a few suggestions as to what could be done to take us in a new direction. There comes a time when we need to look at some dramatic change that needs to be done to restructure our economy. This month I am going to be introducing a bill which will be aimed at addressing our structural economic problems directly. It is called the National Employment Economic Defense act — the NEED Act. America needs millions of jobs. How can we create millions of jobs in a time of annual deficits, long-term debt and contracting budgets? Here’s how: The Federal Reserve creates money out of nothing and it has given it to banks. The Fed has assumed that power through an Act of Congress. The Federal Reserve has used all of its standard monetary policy tools. But the American economy is not getting better. Whatever the Fed is doing, it is not working. The reason why is perhaps best explained by the Fed itself: “The Fed can’t control inflation or influence output and employment.” The Fed has been buying Treasury and other securities to put downward pressure on interest rates. The idea is to lower finance costs, encourage more borrowing and nudge investors into riskier investments. This provides breathing space but little else. Consumers are already over their heads in debt and they aren’t going to borrow more. Neither will producers, when sales are slack. Higher default rates are widening spreads. Many investors will still prefer to make a small gain on government securities rather than risk taking losses. Reality beats theory. The reality is that not enough people have enough money. Why is this? Where does our money come from? Why isn’t it coming? The Fed doesn’t create money we use in our bank accounts. The banks do. Most of this money is created when banks make loans. This is why the Fed can’t control inflation or influence output and employment. Output and employment depend on demand. Demand depends on how much money people have, or can borrow. Because banks create this money, they control demand. If banks aren’t lending or borrowers aren’t borrowing, new money isn’t being created to replace the money removed when bank loans are paid, so the money supply shrinks. The Fed can only put more money into the economy by buying assets from non-banks. No money goes into the economy when the Fed buys their assets. It’s just a swap of one asset for another, called reserves. Banks can’t lend reserves into the economy. The non-bank sellers of assets are mainly large institutional investors. They don’t spend much of the money they receive, they reinvest it in other assets — that is their business. But this churning of assets up in the stratosphere doesn’t “trickle down” to earth. The real economy of families, shops and small businesses of roads and schools is bypassed. We know this. The money is not getting to where it is needed. Until it does, things can only get worse. None of the current policies work because of the way the current system is set up. Here is how we fix it. We have to reclaim our Constitutional power to issue money into the economy, unburdened by debt. Last Congress I introduced legislation to do just that, and I am reintroducing it next week. Here is what the legislation does: It ends the Fed’s unaccountability by putting it under Treasury. It ends fractional reserve banking, ending banks’ ability to control demand in our economy. It empowers our nation to issue money directly into the economy to create jobs to rebuild our crumbling infrastructure, unhindered by debt and interest payments – - creating millions of new, well-paying jobs. It gets the money to where it is needed the most. It gets the economy going and keeps it going. It avoids debt and deficits. It primes the pump of the economy. It enables us to regain control of our destiny as a nation. This plan would not create inflation because it would reduce infrastructure costs. Lower costs means prices can go down. Lower prices do not define inflation. Real wealth will be created with the new money. Infrastructure is enduring wealth, unlike the “financial wealth” of the stock market. If government borrows money created by banks for infrastructure it is an interest bearing debt, paid for over a long time. But if government creates money for infrastructure and spends it into circulation, there’s no debt or interest costs. The same amount of money is created in either case, adding to the money supply by exactly the same amount. This is also a way to save the free enterprise system from self-destruction. The American people know what is going on in our economy. It is run by Wall Street for Wall Street. It is run by banks for banks. Unless we look at serious structural reforms we are headed for a two class society. The ability to coin or create money is an inherent power under Article I, Section 8 of the United States Constitution. The NEED Act would enable the government to invest in America. This coming Sunday we will observe the 10th anniversary of a terrible blow to our nation’s sense of security and confidence. We will never forget September 11, 2011. But we also need to remember the enduring capacity of our nation to bounce back from tragedy. We need to remember what this country is made of. America is made of vision and courage: the courage and vision of Washington, Jefferson and Adams to put lives, fortune, sacred honor on the line for the purpose of freedom and independence. We are the country of FDR and the New Deal, of John F. Kennedy and the New Frontier, of LBJ and the Great Society. We are a nation of charismatic leaders like Ronald Reagan and Bill Clinton, who, agree with them or not, inspired a sense of optimism and confidence in America. We need to remember who we are. And in the act of remembering we will regain our confidence, we will regain our economic strength, we will put people back to work, we will help millions save their homes, we will protect the retirement security of elderly Americans, we will ensure that our children will be able to obtain a college education and a job when they graduate. We will restore our public institutions and the services they provide. We can do all of this and more. But we must ask that those who operate the engines of finance to abandon their recklessness, their selfishness and pledge allegiance to our nation and its people. We must demand that corporations pay a fair share of the taxes. We must end the off-shoring of jobs and profits. While some our leaders, with trembling hands and nervous eyes have focused abroad, our country is falling apart from within. America was never meant for decline. America was always meant for an upward, uplit path. We now must correct our course. We must move away from trying to determine the fate of nations around the globe and focus on the fate on the one nation that must matter to us more than all others — The United States of America! This speech was delivered to Congress on September 7, 2011. See video of the address here .

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QE3 no silver bullet for markets

September 4, 2011

By Edward Krudy NEW YORK (Reuters) – Friday’s jobs report that showed hiring in the United States unexpectedly ground to a halt in August is increasing speculation the U.S. Federal Reserve will move to stimulate the economy. But will it help stocks? Fed action — if it happens — is no longer viewed as the elixir for the stock market it once was. Wall Street tumbled over 2 percent on Friday as investors fretted more about the economic outlook rather than looking ahead to another round of Fed bond buying. Next week, the question of whether the Fed will step up to the plate with another round of quantitative easing will take center stage with a highly anticipated speech from President Barack Obama. That could make for another volatile week. This time last year, anticipation of a second round of quantitative easing, or QE2, sparked an almost uninterrupted rally that lifted the S&P 500 around 30 percent from August to May. What a difference a year makes. Confidence in policy makers is sapping away as the economy languishes, the United States grapples with the loss of its top-notch credit rating, and the European Union seems to be coming undone at the seams. Wall Street sees an 80 percent chance the Federal Reserve will intervene in the bond market to lower long-term interest rates, according to a Reuters poll on Friday. But Friday’s action in the stock market signaled that equity investors do not see that prospect as silver bullet for their woes. The broad-based S&P 500 index fell 2.5 percent on the day. “This downdraft is based on sentiment and that has to be turned around,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “I think we’re in for a longer trend of either malaise or just a down channel.” That means traders and investors who were hoping for a return to normalcy after extreme volatility in August may have to wait a little longer. Obama is due to address a joint session of Congress on Thursday to lay out plans to create jobs, boost economic growth and lower the deficit. He faces an uphill struggle when it come to reassuring investors, who fault the lack of consensus in Washington. Heading into an election year, the disharmony is not likely to get better any time soon. Nonfarm payrolls were unchanged last month, the Labor Department said on Friday, and figures for previous months were also revised down to show employers created a combined 58,000 fewer jobs than had been thought in June and July. The U.S. Treasury market rallied after the data as Goldman Sachs and other U.S. primary dealers — big Wall Street firms that do business directly with the Fed — said they expect the U.S. central bank to start buying longer-dated bonds after its September 20-21 meeting. Seasoned traders say that August’s extreme volatility was one of the most trying periods in living memory, outstripping the 2008-2009 meltdown and the 1987 stock market crash on Black Monday. “I’ve been doing this for 20 years and it’s never been more exhausting,” said the chief executive of a New York-based proprietary trading firm, who said many of his traders closed out their positions in August, reducing the firm’s inventories to just 15 to 20 percent of what they could be. At least some of that volatility looks set to spill over into September until there is more clarity over the economy and what the Fed is likely to do at its September 20-21 meeting. But some fund managers who take a more long-term view are using pullbacks to cut back positions that have done less well while increasing positions in their preferred stocks. Many fund managers are still convinced the U.S. economy will avoid a recession and stocks will rally into the end of the year. One of them, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, does not expect the Fed to act this month. He is not expecting a recession, but admits he has become more defensive. “We used some of the volatility to swap out lower yields for higher yields, believing that a combination of income with capital growth potential will help us weather days like today,” he said. “Equity values should still hold their own if not appreciate given the still-good corporate profit picture.” (Reporting by Edward Krudy; Additional reporting by Ryan Vlastelica; Editing by Leslie Adler)

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Italy minister says no pressure on ECB over bonds

September 3, 2011

By Francesca Landini CERNOBBIO, Italy (Reuters) – Foreign Minister Franco Frattini said on Sunday Italy is not putting pressure on the European Central Bank (ECB) to continue buying Italian government bonds on the market. Frattini said both Prime Minister Silvio Berlusconi and Economy Minister Giulio Tremonti had been in close contact with international financial institutions over the market turmoil which has hit the euro zone’s third largest economy. “But the European Central Bank is an independent institution so there are no requests, pressures,” on bond buying, he told reporters at the margins of a conference. On Saturday, Frattini said he was confident the ECB would continue buying Italian bonds. The ECB began intervening last month to try to hold down yields after market worries over Italy’s 1.9 trillion euro debt pile sent borrowing costs soaring to unsustainable levels. It has since stepped up pressure on the government to meet its pledge to pass measures to balance the budget by 2013. ECB President Jean-Claude Trichet warned on Saturday that swift action was essential to restore market confidence. Underlining the growing concerns, the premium investors demand to hold Italian debt rather than benchmark German bonds rose on Friday to 331 basis points, the highest since the ECB started buying Italian paper in August. Yields on 10-year Italian bonds ended the week at 5.29 percent, creeping back up toward the 7 percent level generally regarded as unmanageable. A 45.5-billion-euro package of austerity measures is currently making its way through parliament but internal divisions in Berlusconi’s center-right coalition are getting in the way. Frattini said the plan would be in place shortly and would not require a confidence vote to push it through. “The Italian government will answer the ECB with deeds, by approving the budget very quickly,” Frattini told reporters on Sunday morning. He said that the Senate would approve the additional package by the end of next week and that approval from the Lower House would follow swiftly. “I don’t see any reason why the government should ask for a confidence vote on the budget,” he added. The government has a 60-day deadline to transform the decree containing the austerity measures into law. (Editing by Sonya Hepinstall)

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Fox News, Google To Hold Presidential Debate

September 1, 2011

Fox News and Google are expected to announce plans on Thursday to host a Republican presidential debate in Florida on September 22, The Huffington Post has learned. The forum will be moderated by network anchor Bret Baier. Fox News Sunday host Chris Wallace and anchor Megyn Kelly will be panelists at the event. Fox News has presented two debates already this election season. The first took place in South Carolina in May and the second was held in Iowa last month. The upcoming Fox News-Google debate is expected to incorporate an interactive element. HuffPost has learned that viewers will be able to participate by submitting questions through YouTube and Fox News. They will also have the ability to vote on questions they would like to see the candidates answer. UPDATE (11:33 a.m. ET): Below, full text of the debate announcement released on Thursday. FOX News and Google announced today that they will present a presidential debate on September 22nd from 9:00-11:00 PM/ET in Orlando, Florida, in conjunction with the Republican Party of Florida. In making the joint announcement, Michael Clemente, Senior Vice President of News Editorial, FOX News, said, “For access to news and information, it’s hard to imagine two more powerful brands than FOX News and Google, which is why we are proud to partner with a leader in global technology. The strength and reach of both should ensure a thorough and engaging debate that anyone can participate in.” Moderated by Special Report anchor Bret Baier with panelists Chris Wallace, host of FOX News Sunday and Megyn Kelly, anchor of America Live, the debate will incorporate video and text questions submitted by the public on YouTube.com/FOXNews. Viewers will be able to vote on the questions they want the candidates to answer, and FOX News will use the votes to help choose which questions are posed to the candidates. In addition, FOX News and Google will present public data and Google search trends on air to help provide context to the questions and inform the debate throughout the evening. Steve Grove, Head of News and Politics for YouTube, said, “We’re delighted to give voters across the country this opportunity to ask their questions of the GOP candidates. Through this joint debate with FOX News we hope to bring more voices into the arena to create an informed and lively dialogue about the future of our country.” The FOX News/Google debate will be presented live from the Orange County Convention Center on FOX News Channel (FNC) and live-streamed on YouTube.com/FOXNews, in addition to FOX News Radio, FOX News Mobile, and FOXNews.com. About FOX News FOX News Channel (FNC) is a 24-hour all-encompassing news service dedicated to delivering breaking news as well as political and business news. A top five cable network, FNC has been the most watched news channel in the country for nearly ten years and according to Public Policy Polling, is the most trusted television news source in the country. Owned by News Corp., FNC is available in more than 90 million homes and dominates the cable news landscape, routinely notching the top ten programs in the genre. About Google Inc. Google’s innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google’s targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia. For more information, visit www.google.com.

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DSK May File Civil Charges Against Maid

August 24, 2011

NEW YORK — Former International Monetary Fund leader Dominique Strauss-Kahn might take legal action in civil court against the hotel maid who accused him of sexually assaulting her in a now-dismissed criminal case and in her ongoing civil suit, one of his lawyers said Tuesday. Strauss-Kahn, a former French presidential candidate, could file his own claims to counter housekeeper Nafissatou Diallo’s lawsuit, “and that’s certainly a consideration,” lawyer Benjamin Brafman said in an interview with The Associated Press. “Because she did lie, and he has suffered enormous damages as a result of those lies.” A court Tuesday dismissed the attempted-rape and other charges against Strauss-Kahn, who resigned his IMF post, spent five days in jail and then spent about six weeks on high-priced house arrest before being freed from it July 1. The dismissal came after prosecutors said they couldn’t pursue the case because of doubts about Diallo’s credibility and a lack of other evidence to prove a forced sexual encounter. Diallo wasn’t truthful with prosecutors about several aspects of her life and changed her account of what she did right after when she claims she was attacked, prosecutors said. Strauss-Kahn’s lawyers have long said the encounter at a luxurious Manhattan hotel, though brief, was consensual. But while Diallo’s account of it has been recounted in interviews, in her lawsuit and in the now-defunct prosecution, the married Strauss-Kahn doesn’t want to detail his version of what happened, Brafman said. “What happened in that room, so long as we have now confirmed that it wasn’t criminal, is really not something that needs to be discussed publicly,” Brafman said in the AP interview. “You can engage in behavior that you’re not proud of, and maybe some people might consider it inappropriate – it doesn’t mean that you committed a crime. And it’s not something that you may want to discuss, at the end of the day.” Diallo’s lawyer, Kenneth Thompson, didn’t immediately respond to an email inquiry about the possibility of Strauss-Kahn filing his own claims in civil court. Thompson has said it’s “utter nonsense” to say the encounter was consensual. Earlier Tuesday, he blasted the dismissal of the case, saying prosecutors “would not allow a woman to have her day in court.” Diallo says Strauss-Kahn chased her down in his hotel suite on May 14, grabbed her crotch, propelled her to the ground and forced her to perform oral sex. His semen was found on her uniform, and a gynecological exam found a mark that her lawyer holds up as evidence of an attack but prosecutors say could have resulted from a number of other things. From the start, Strauss-Kahn’s lawyers considered her account implausible, partly because neither she nor Strauss-Kahn had bruises reflecting a forceful attack, Brafman said. The Associated Press does not usually name people who say they are victims of sexual assault unless they come forward publicly, as Diallo, an immigrant from Guinea, has done. ___

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A Decade After 9/11, Pentagon Prepares For New Kind Of Fight

August 21, 2011

WASHINGTON — The Sept. 11 attacks transformed the Pentagon, ravaging the iconic building itself and setting the stage for two long and costly wars that reordered the way the American military fights. Compared with a decade ago, the military is bigger, more closely connected to the CIA, more practiced at taking on terrorists and more respected by the American public. But its members also are growing weary from war, committing suicide at an alarming rate and training less for conventional warfare. The partly gutted Pentagon was restored with remarkable speed after the hijacked American Airlines Boeing 757 slammed through its west side, setting the building ablaze and killing 184 people. But recovering from the strain of fighting in Iraq and Afghanistan will take far longer – possibly decades. The Pentagon’s leaders will have to adjust to a new era of austerity after a decade in which the defense budget doubled, to nearly $700 billion this year. The Army and Marine Corps in particular – both still heavily engaged in Afghanistan – will struggle to retrain, rearm and reinvigorate their badly stretched forces even as budgets begin to shrink. And the troops themselves face an uncertain future; many are scarred by the mental strains of battle, and some face transition to civilian life at a time of economic turmoil and high unemployment. The cost of veterans’ care will march higher. As Robert Gates put it shortly before he stepped down as defense secretary this summer, peace will bring its own problems. The problem was not peace on 9/11. At the time, the military was focused almost entirely on external threats. Air defenses kept watch for planes and missiles that might strike from afar; there was little attention to the possibility that terrorists might hijack domestic airliners and use them as missiles. That changed with the creation of U.S. Northern Command in 2002, which now shares responsibility for defending U.S. territory with the Homeland Security Department. Terrorism was not a new challenge in 2001, but the scale of the 9/11 attacks prompted a shift in the U.S. mindset from defense to offense. The U.S. invaded Afghanistan on Oct. 7 in an unconventional military campaign that was coordinated with the CIA. That heralded one of the most profound effects of 9/11: a shift in the military’s emphasis from fighting conventional army-on-army battles to executing more secretive, intelligence-driven hunts for shadowy terrorists. That shift was important, but it came gradually as the military services clung to their Cold War ways. Still in debate is how the Taliban, which had shielded Osama bin Laden and other al-Qaida figures prior to the U.S. invasion and was driven from Kabul within weeks, managed to make a comeback in the years after the U.S. shifted its main focus to Iraq in 2003. That setback in Afghanistan, coupled with the longer-than-expected fight in Iraq, showed the limits of post-9/11 U.S. military power. It also pointed up one of the other key lessons of the past decade of war: It takes more than military muscle to win the peace. It takes the State Department, with its small army of diplomats and development specialists, and other government agencies working in partnership with the Pentagon. The military grew larger over the past decade, but the growth was uneven. The Army expanded from about 480,000 in 2001 to 572,000 this year, and the Marine Corps grew from 172,000 to 200,000, although both are to begin scaling back shortly. The Air Force and Navy, by contrast, got smaller. The Air Force lost about 20,000 slots since 2001 and the Navy lost about 50,000. In percentage terms, the biggest growth in the military has been in the secretive, elite units known as special operations forces. They surged to the forefront of the U.S. military’s counter-terror campaign almost immediately after the 9/11 attacks, helping rout the Taliban in late 2001 and culminating in May 2011 with the Navy SEAL team’s raid on Osama bin Laden’s compound in Pakistan. And even though al-Qaida’s global reach has been diminished, the increased role of special operations forces is likely to continue. “It’s the most interesting and important change that’s likely to endure,” Michael O’Hanlon, a defense analyst at the Brookings Institution, said in an interview. “I haven’t heard too many people suggest that we can scale back to where we used to be.” The Marines, who had never before fielded forces of this kind, now have 2,600 under U.S. Special Operations Command. The others include the SEALs, the Army Green Berets and Rangers and the Air Force special operators. In all, those special operations forces grew from 45,600 in 2001 to 61,000 today, according to Special Operations Command. A decade of war also has produced its military stars. Army Gen. David Petraeus served in command three times in Iraq and once in Afghanistan before accepting President Barack Obama’s offer to succeed Leon Panetta as the next CIA director. Former Iraq commander Army Gen. Raymond Odierno is about to become the Army’s top general, and the current Army chief, Gen. Martin Dempsey, who served twice in command in Iraq, is due to replace Navy Adm. Mike Mullen as the next chairman of the Joint Chiefs of Staff. The military as a whole is viewed more favorably by the American public. A Gallup poll in June found that the military is the most respected national institution, with 78 percent expressing great confidence in it. That is 11 points higher than its historical Gallup average dating to the early 1970s. The new technological star is the drone aircraft, like the Predators that surveil the battlefield and fire missiles at discrete targets. Their popularity has spawned an effort to field unmanned aircraft to perform other missions, such as a long-range bomber and even heavy-lift helicopters. ___

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Panetta Issues Gag Order

August 19, 2011

Defense Secretary Leon Panetta has moved to gag all communications between the Pentagon and Congress on the highly sensitive issue of the congressional Super Committee.

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Otaviano Canuto: Credit Ratings Matter for Those Who Need Them Most

August 18, 2011

Debt and credit ratings keep making headlines. But for a moment, forget about their impact in the U.S. and Europe, where an abundant set of economic data exists both for international investors and bondholders. Instead, think of what would happen if you lived in one of the 58 developing countries that remain unrated by Standard & Poor’s, Moody’s and Fitch, the three international credit rating agencies. You would have very limited access to capital and investment, and the cost of borrowing would be significantly higher. Let me explain why. In the case of countries not routinely tracked by the majority of investors, the absence of information on creditworthiness — which is costly to acquire — is a disincentive for bond purchases. Sovereign ratings act as widely available and internationally comparable indicators of a coun¬try’s fiscal performance, collectively economizing on costs of information collecting and processing. Even if a government is not issuing bonds, the rating often fulfills a function as a “ceiling” for the private sector and its absence can negatively affect access to the international capital market. In addition, assessments of sovereign creditworthiness are also taken into account by donors providing official development aid. So if you are one of the 58 developing countries still not rated by the three international agencies, you remain pretty much cut off from the many potential bond holders. This is unfair because an unrated country is not necessarily at the bottom of credit worthiness. Contrary to popular perception, some of the non-rated countries would even deserve to be considered investment grade, as our latest World Bank research shows. According to the latest edition of our Economic Premise series, ” Shadow Sovereign Ratings ,” many unrated countries turn out to be doing quite well. Of the 47 unrated countries analyzed, 7 countries, mainly from the Caribbean and the South Pacific Ocean, are likely to be above investment grade (BBB- through AAA). Another 10 are likely to be in the BB category, equivalent to speculative grade; and 10 in the CCC or lower categories of high and very high default risk. This shadow rating model is no substitute for the broader, deeper analysis that experienced rating agencies are expected to provide, but it gives us an approximate idea of where countries stand and what they need to do to improve. There are numerous reasons for a country’s reluctance or inability to be “officially” rated — from the complexity of the process itself to some politician’s fear of losing control over the final outcome. To overcome these disincentives, the international community should play an important role in helping developing countries obtain ratings and even get upgraded. The benefits totally outweigh the risks. In the meantime, the next time you equate unrated with unworthy, please think twice. This blog was originally posted on the World Bank Institute Growth and Crisis website .

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Peter Navarro and Greg Autry: Aircraft Carrier? What Aircraft Carrier? Oh, That Aircraft Carrier!

August 16, 2011

China’s first aircraft carrier recently slipped from its berth with little fan fare. The start of sea trials of the 1,000 foot long flattop gained little media attention in an America that is, as usual, too caught up in its own angst to notice external threats. While financial markets boiled, the ship formerly known as the Varyag and rumored to have been rechristened “Shi Lang” sailed out of Dalian harbor to test its battle systems and scare the hell of out China’s neighbors. The story behind this boat is both entertaining and highly instructive in the ways of Chinese state capitalism and its political and business norms. The Varyag was originally intended to be the pride of the Soviet fleet and was nearly complete when the collapse of that other evil empire resulted in its abandonment at a Black Sea berth. In 1998, she was auctioned off by the Ukrainian government to a subsidiary of a Hong Kong front company, secretly controlled by the Chinese military. Although China assured the world that the carrier would become a floating casino in Macau, America’s NATO ally, Turkey originally blocked the lethal vessel’s transit through the Bosphorus and the giant ship was towed in circles for more than a year. This provoked Yang Wenchang, the Chinese deputy foreign minister and other high level Chinese government officials to fly to Ankara with a reported $360 million “economic aid package” and a profitable tourism deal which secured the Varyag’s China passage. The whole project was a rather stupendous investment of capital and political muscle into what China continued to assert was a casino project. Of course, the warship never went anywhere near Maccau, and instead was sent directly to a special dock in China’s Dalian harbor where it began years of extensive retrofitting with the installation of a new propulsion system, flight decks, and electronics systems. While sticking to the casino story, China negotiated to purchase a number of Russian Sukhoi, SU-33 carrier ready aircraft — pretty odd investment for a nation with no carrier. Then, in its typical fashion, Beijing backstabbed its partner in state capitalism by committing to only a couple of planes in order to copy their design. When China announced the “new” J-15 carrier-capable fighter last year, Pravda reported , “Russia officially notified China of the violation of international agreements and promised to launch legal proceedings to defend its intellectual property.” This lack of honor among thieves would be funny if the subject wasn’t so deadly serious. So when the Communist Party’s puppet news agency, Xinhua now reports that “the aircraft carrier is for peaceful purposes only” we are expected to believe that China went through all that expensive subterfuge in order to conduct humanitarian missions. The fighter jets on its deck must be for entertaining folks at traveling air shows, rather than say, sinking Vietnamese ships in the disputed oil and gas fields of the South China Sea, attacking Japanese cutters defending the Senkaku islands, or providing air cover for the invasion of Taiwan. The entire episode offers a very public demonstration the duplicity of China’s ruling class and it should serve as a fair warning to those who continue to naïvely mistake its intentions and to underestimate its resolve to achieve regional military dominance and control over resource. It also provides a textbook lesson in Communist Party ethics for Western CEOs and investors who are betting their future at China’s casino of state capitalism.

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Steve Rosenbaum: Why ABC’s Shark Tank Is Entertaining, And 100% Wrong On Dealmaking

August 14, 2011

Let’s face it, there’s something hypnotic about the whole process. An entrepreneur with a vision gets a chance to present to a group of successful founders who’ve now entered into the waters of venture capital. And Daymond Johns is both a great entrepreneur and a friend–so how can you not love seeing him support the next generation of innovators? Sure, they’re “Sharks”–but heck, you think you can wow them, or charm them, or bluff them. You’re going to be a winner, and with their capital and their Rolodex, you’ll be on your way to the angel investor’s promised land. WHOA. Stop right there. There are a few problems with the Shark Tank model that should be put out in the open right now. First of all, there is never going to be a situation where you’ll present to a number of investors–and each of them will be able to either bid against each other, or similarly, collude to set a price at which they’ll pool their money and force you to take a deal. Whether you present to partners in a fund, or a group like New York Angels, they’ll speak in one voice and they’ll invest on the same terms. So the idea that you’ll have an auction among partners or peers is simply fiction. But, more significantly–Shark Tank presents as gospel the way that they set the valuation of company. Kevin O’Leary, who plays the “Simon Cowell” character on this show, asks the entrepreneur two seemingly simple questions, “How much are you looking for,” and “For what percentage of the company?” The unwitting victim answers two seemingly low numbers, “I’m looking for $150,000 for 10% of the company.” Then, O’Leary asks the killer question: “And, how much revenue did you have last year?” When the entrepreneur answers, “I made two hundred thousand dollars,” O’Leary pounces. “Are you CRAZZZY? You think your company is valued at ONE AND A HALF MILLION DOLLARS–When it should be two hundred thousand.” That’s the math of every show. Valuation = Revenue, which those of us who’ve raised money know is completely nuts. Truth be told, most angel investments and early stage venture capital is put into companies that are somewhere between an idea and a prototype. Even web properties that have traction and are scaling nicely often do so with little or no revenue as they’re growing. Now, I understand the Shark Tank formula on valuations. It’s meant to push back against wide-eyed entrepreneurs who think their company is worth $10 million with little more than a concept and a sketch. But valuations are a bit like romance, in early stage deals their a mix of passion, promise, and vision. It’s not a formula, it’s a negotiation. But Shark Tank doesn’t leave room for that–by setting the rules the way they do. So when the Sharks call the question, “So, what are you going to DO?” it’s a bit like speed dating run amok. You almost wonder if the most successful entrepreneurs are the ones that use Shark Tank for exposure, and then walk away and let their phone ring with serious investors, to negotiate away from the spotlight. (originally published by FastCompany )

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Scott Bittle: Fiscal Follies: The Leaders, the Led and the Gridlock on the Budget

August 7, 2011

It seems hard to disagree with the 8 in 10 Americans who say Congress is doing a terrible job in wake of the dismal, dispiriting debate over raising the debt ceiling. We dodged a needless and potentially devastating government default, but aside from that, this debt deal is largely a failure. The brutal debate produced an 11th hour band-aid, but it damaged the government’s standing at home and abroad, and it’s still not enough to get the nation’s finances off their unsustainable path. In fact, the main accomplishment — apart from making the U.S. government look both arrogant and inept — was to set up another crisis for December (just in time for the holidays). That’s when the “trigger” mechanism will make automatic (and very severe) cuts if Congress can’t agree on a more sensible solution. And after all that, Standard and Poor’s downgraded the United States government’s credit rating anyway. It’s hard to see how leaders of any political stripe walks away from this proud of what they’ve achieved. But there’s another point of view on this, which is actually pretty widespread among Washington policymakers and the media. Slate ‘s Jacob Weisberg pretty much summed this up when he wrote “there’s no point in explaining complicated matters to the American people.” In this view, elected officials in Washington are just reflecting a nation that’s divided about the role of government and completely unrealistic about what it will take to reduce deficit spending and get the country’s finances back on track. There is plenty of polling to show just that. For example, 51 percent of Americans say ” government should do more to solve problems and help meet the needs of people ,” while 46 percent say “government is doing too many things better left to businesses and individuals.” Meanwhile, 6 in 10 say government should be “smaller and provide fewer services,” but mention the specifics, and that view crumbles to dust. Large majorities of Americans oppose cuts in Medicare, Medicaid, Social Security, and pensions to federal workers. Majorities even oppose cutting subsidies to farmers, and 52 percent oppose cuts in defense. What’s an elected official to do? There’s simply no way to follow those instructions, and get the country out of its fiscal mess. But at this point, arguing over whether leaders or the public deserve more of the blame is the equivalent of fighting over who gets to wear the captain’s hat on the Titanic, after hitting the iceberg. Leaders haven’t done much leading, and the public desperately needs a better grasp of what it takes to really put the government’s budget on a sound footing. But we do get another chance in a few months, so is there any way to avoid the instant replay? Frankly, we’re not that optimistic. The Congressional “super committee” seems set up to fail, and at this point, we’re not sure its report will carry any more weight than any of the dozens of budget plans that have come out in the last couple of years. The debate over its recommendations and the triggers will be vicious. To the public, it will look like another vaguely repulsive food fight. The cable news commentators will endlessly and reflexively pontificate about what it all means for the election — forget what it means for the country’s future. And we’ll end up about where we are with (a) a budget that is neither sustainable nor helping the economy, and (b) a 82 percent disapproval rating for Congress — maybe even worse. The country will be divided and demoralized. Nobody will win — at least no one in the United States. But suppose we actually spent the next few months talking about what parts of government matter most to us, what we’re willing to pay for them, and where we’re willing to compromise to protect the goals that we value most. Throw out the politics for a moment, and however you feel about Tea Partiers, progressives, Eric Cantor, the president or anybody else. Put the election predictions on pause. Let’s talk about what’s most essential to protect, and where we’re willing to give to get a deal. These are questions just every American should be able to answer, and we’re pretty confident that most people can. After all, all those polls that show how unrealistic Americans are also show that most prefer a settlement that blends spending cuts and revenues — just like nearly every commission report and study out there (and that includes many conservatives ). In Greece, people took to the streets when the government decided that some status quo benefits had to be trimmed. We’ll place our bets that most Americans have already accepted that they won’t get everything they want from a meaningful budget deal, but that they want the Congress to pass one anyway. Will the country’s leaders step up to the plate? Well, at least they didn’t let the United States slide into default, which actually wasn’t a sure bet just a few weeks ago. After all the mess and the backbiting, most members of Congress decided that protecting the “full faith and credit of the United States” was an important step to take. Maybe the next time, they can do better. Maybe they’ll even decide to demonstrate the realism, judgment, candor, and honor that the American people have every right to expect.

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Workers Put Verizon On Hold: Portray Strike As Defense Of Middle Class Jobs

August 7, 2011

NEW YORK — Outside Verizon corporate headquarters in downtown Manhattan, a group of more than 40 union employees gathered wearing red shirts and placards proclaiming “CWA on Strike For Middle Class Jobs.” Over 45,000 Verizon workers — 35,000 represented by the union Communications Workers of America, 10,000 by the International Brotherhood of Electrical Workers — went on strike early Sunday morning when contract negotiations between the unions and Verizon broke down. The workers are striking, they say, because the company wouldn’t budge on the nearly 100 concessions headquarters has asked employees to make on a set of broad-ranging issues. At the top of the list: wide spread wage cuts, increased employee contributions to health care plans and pensions — which the company has proposed to freeze for current employees and eliminate for new hires. The contract expired Saturday at midnight and covered the heavily unionized East Coast wireline devision of the company, including FiOS, Verizon’s television and Internet service. Verizon’s wireless devision is not, and never has been, unionized. Those gathered cast their fight as larger than just one union fighting management for a bigger piece of the corporate profits. More broadly, the workers manning the picket line on Sunday afternoon perceived their struggle as being against a national effort to role back union power and increase the gap between executive compensation and rank and file earnings — a gap that has widened in the last thirty years as union power has waned. The workers outside headquarters found a rallying cry in the attack on collective bargaining rights last winter in Wisconsin. In front of headquarters, an employee on a bullhorn shouted: “We ain’t going back on our knees! This isn’t Wisconsin, this isn’t Ohio. The line stops here.” The crowd erupted in cheers. “It’s mind-boggling: These are things we won in the past,” said Greg Albi, a Verizon field technician with the company for thirty years. Albi has been outside Verizon headquarters since 7:00 a.m. Sunday morning. “They want to take fifty years of our contract and just throw it away like it never existed,” adds Al Russo, a Verizon employee for 11 years and a chief steward at CWA local 1101. Russo has been out since 10 p.m. Saturday night. He is losing his voice and looks exhausted but he insists he isn’t tired. He says his son, age 8, just texted him “keep it up Daddy.” While talks are officially on hold at the moment, both sides say that they are ready to continue negotiating — but with caveats. “We are willing to negotiate and we are ready and waiting for the unions to sit down and continue these discussions,” says Richard Young, a company spokesman. “That said, we expect the union to come with an open mind.” The crowd marched in a loop in front of the building shouting traditional labor slogans: “What’s disgusting? Union Busting!” “Who has the power? You have the Power,” and “No contact: no work.” At frequent intervals, a Verizon employee or two would walk in or out of the building — staring straight ahead — and shouts of “scab!” and booing would erupt from the crowd. “What are we going to do?” Albi asks. “We live in a progressive world. Things should get better, not worse.” Like many workers interviewed on the picket line, Albi sees the strike in a context larger than his own benefits, but he has personal concerns too. He worries that if the union gives in, he won’t be able to help his two children finish college. “It’s hard enough,” he said. “I already have loans for them — if I get stuck for money they will get stuck with the debt. The next generation will get screwed, too.” This is the fourth strike Albi has participated in, but, he says, “This is the first time they’ve asked for so many givebacks. They’re trying to break the union. And we’re here to say ‘no.’” The union is accusing the company of making extreme demands which will dramatically erode the middle class life union employees have fought for over the past half-century. Verizon, meanwhile, claims that the concessions are necessary for their wireline devision to stay competitive. While the company has earned around $3 billion in the first six months of this year, according to a company spokesman, they say that the wireless devision is the real profit earner and that the wireline business has been declining for the past decade. “The cost structure of this business was set in place many decades ago at a time when Verizon was the dominant phone provider,” says Young. He denies that they are trying to break the union: “This has nothing to do with breaking the union. It has everything to do with coming to the realization that we’re operating with cost restraints that are out of touch with today’s marketplace.” Union employees say they are outraged that the company is asking for major concessions while they are profitable. Former Verizon Chief Executive Officer Ivan Seidenberg (who stepped down on Aug. 1, 2011) is ranked 10th on the Forbes list of Executive Pay in 2011. At stake, say labor experts, are the future of the union in the industry, and the ability of workers in the field to earn a solid living wage. Union employees earn on average between approximately $60,000 and $80,000 a year. “I think it’s really a question of [whether] union standards are going to be higher than nonunion standards in the industry,” says Jeffrey H. Keefe, an associate professor at Rutgers Univeristy School of Management and Labor Relations. “It’s a question of: will they continue to have bargaining power, going forward?” The strike, he says, is a “declaration that this going to be a very tough-fought battle.”

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Top S&P Official: U.S. Has 1 In 3 Chance Of Another Downgrade

August 7, 2011

WASHINGTON — A Standard & Poor’s official says there is a 1 in 3 chance that the U.S. credit rating could be downgraded another notch if conditions erode over the next six to 24 months. The credit rating agency’s managing director, John Chambers, tells ABC’s “This Week” that if the fiscal position of the U.S. deteriorates further, or if political gridlock tightens even more, a further downgrade is possible. Chambers also said Sunday that it would take “stabilization and eventual decline” of the federal debt as a share of the economy as well as more consensus in Washington for the U.S. to win back a top rating. S&P downgraded the U.S. rating Friday, from AAA to AA+, for the first time.

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Tea Party Influence On GOP Could Prove Make Or Break In 2012

August 7, 2011

(AP) WASHINGTON — The tea party is here to stay. The 2-year-old phenomenon’s muscular role in the debt-ceiling crisis made that clear, despite earlier predictions it would fade away when the national furor over health care cooled down. Now the GOP establishment wonders if the grass-roots movement will power Republicans to new victories in 2012, or dash them on the rocks of unbending ideology. One thing is obvious: The tea party already is reshaping the Republican Party. Once-moderate lawmakers are shifting sharply right, fearing primary challenges more than Democratic opponents. And most GOP presidential contenders have positioned themselves to the right of party leaders, and even some House tea partyers, on the debt-ceiling issue. The movement’s influence on the GOP remains double-edged. Tea partyers’ adamant opposition to tax hikes helped Republican Party regulars force President Barack Obama to surrender his push for new taxes on the rich. But House tea partyers also embarrassed Speaker John Boehner by forcing him to hastily revise his debt-ceiling bill. To secure their votes, Boehner added a balanced-budget provision that had no hope of becoming law, and which drew ridicule from some quarters. A weakened requirement that the House and Senate only vote on – not necessarily pass – a balanced budget amendment before the end of the year survived in the final product. With the tea party about to play its first role in a presidential election, mainstream Republicans hope to harness its energy in campaigns nationwide, as they did in 2010. The trick is to do it while avoiding the damage of that year, when tea partyers cost the GOP likely Senate pickups by nominating out-of-the-mainstream conservatives in Delaware, Nevada and Colorado. The lesson, party insiders say, is not for the tea party to dampen its fire. Rather, they say, Republican candidates must understand its power. Shame on those who get blindsided this time. The tea party is “driving the conversation,” said Republican consultant Danny Diaz. “The president, Congress, Democrats, Republicans are all talking about austerity, restraint, the spending crisis. That’s not going to change.” Asked if another tea party insurgent might cost Republicans a likely Senate win, as Christine O’Donnell did last year in Delaware, Diaz put the onus on the party’s candidates. “If you are seeking office in this environment,” he said, “it would behoove you to discuss the out-of-control spending that’s taking place in Washington.” Another Republican consultant, Brian Nick, agreed. “A candidate has got to figure out a way to get through a primary,” he said, and it’s unfair to make scapegoats of tea partyers. Veteran elected Republicans with mainstream conservative histories have gotten the message. Some are virtually reinventing themselves as tea partyers. In Utah, already-conservative Sen. Orrin Hatch has veered so hard to the right that it’s a constant topic of conversation, and sometimes amusement, in state political circles. Still, many wonder if he can survive if two-term Rep. Jason Chaffetz, a tea party favorite, decides to challenge him. In New Mexico, former five-term Rep. Heather Wilson built a reputation as a GOP centrist, willing to buck her party’s leaders and support raising the minimum wage and expanding children’s health insurance. In 2008, she lost a Senate primary to a more conservative Republican. Now, running for Senate again, Wilson has pledged to oppose raising the nation’s debt ceiling unless Congress passes a balanced budget amendment to the Constitution. That requires a two-thirds majority in both chambers, which lawmakers in both parties say is politically impossible. Virginia Republican George Allen, who is trying to regain the Senate seat he lost in 2006, has taken a similar stand, even though he voted four times to raise the debt ceiling while in office. Many congressional Republicans support the balanced-budget amendment. In the end, however, a solid majority of them, including most members of the House tea party caucus, voted for the bipartisan debt-limit deal that dropped a demand that the amendment first win passage and be sent to the states for ratification. The big unknown is the tea party movement’s influence on the presidential race. Some political professionals think tea partyers already are pushing GOP candidates so far right that the eventual nominee might struggle to pick up independent voters in the general election against Obama. Former Massachusetts Gov. Mitt Romney appeared unenthusiastic when announcing his opposition to the debt-ceiling compromise that Congress enacted with solid GOP support in both chambers. Jon Huntsman, the only presidential hopeful to support the measure, said Romney did not show leadership. The tea party’s influence on the GOP “will come with heavy baggage in independent-leaning states like Maine or even Indiana,” said Nate Daschle, a Democratic activist whose father was Senate majority leader. That could apply to Senate races in those states, where incumbent Republicans face tea party challengers for the nomination, and to the presidential race, he said. Obama won Indiana narrowly, and Maine handily, in 2008. Independent voters skip most primaries but play big roles in general elections. They want “progress over rigid ideology,” Daschle said. If tea party voters dominate GOP primaries, they can nominate unorthodox candidates such as Delaware’s O’Donnell. “The tea party didn’t happen by accident and it wasn’t contrived,” Daschle said. “It’s one of the purest and most organic movements in politics today, and while it may endanger its parent party, this is exactly the way the system was designed.” A recent Pew Research/Washington Post poll suggests that Republicans did themselves few favors in the debt-ceiling struggle. About four in 10 Americans said they had a less favorable view of congressional Republicans because of the negotiations, while three in 10 said their opinion of Democrats in Congress faded. People who now have a dimmer view of tea party-affiliated lawmakers, because of the debt issue, outnumber those with a more positive view. A CBS News/New York Times poll this week shows that only 20 percent of Americans and 41 percent of Republicans have a favorable view of the tea party, down from 26 percent and 59 percent, respectively, in April. Just 18 percent of Americans now view themselves as tea party supporters, compared with 31 percent who did immediately after the November 2010 elections. Texas Tech University political scientist Tim Nokken warns against overstating the tea party’s influence. “I’m not sure the GOP is going to march lock-step with the tea party,” he said in an email. The movement may have its biggest impact on Republican House members eager to avoid a primary threat from the right, he said. These lawmakers may act “not so much out of agreement with the tea party agenda, but as a means to reduce the likelihood of a primary challenge,” Nokken said. Either way, the tea party is leaving a big mark on the GOP. And the limits of its influence are not yet clear.

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Robert Reich: Why S&P Has No Business Downgrading the U.S.

August 7, 2011

Standard & Poor’s downgrade of America’s debt couldn’t come at a worse time. The result is likely to be higher borrowing costs for the government at all levels, and higher interest on your variable-rate mortgage, your auto loan, your credit card loans, and every other penny you borrow. Why did S&P do it? Not because America failed to pay its creditors on time. As you may have noticed, we avoided a default. And not because we might fail to pay our bills at the end of 2012 if tea-party Republicans again hold the nation hostage when their votes will next be needed to raise the debt ceiling. This is a legitimate worry and might have been grounds for a downgrade, but it’s not S&P’s rationale. S&P has downgraded the U.S. because it doesn’t think we’re on track to reduce the nation’s debt enough to satisfy S&P — and we’re not doing it in a way S&P prefers. Here’s what S&P said: “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.” S&P also blames what it considers to be weakened “effectiveness, stability, and predictability” of U.S. policy making and political institutions. Pardon me for asking, but who gave Standard & Poor’s the authority to tell America how much debt it has to shed, and how? If we pay our bills, we’re a good credit risk. If we don’t, or aren’t likely to, we’re a bad credit risk. When, how, and by how much we bring down the long term debt — or, more accurately, the ratio of debt to GDP — is none of S&P’s business. S&P’s intrusion into American politics is also ironic because, as I pointed out recently, much of our current debt is directly or indirectly due to S&P’s failures (along with the failures of the two other major credit-rating agencies — Fitch and Moody’s) to do their jobs before the financial meltdown. Until the eve of the collapse S&P gave triple-A ratings to some of the Street’s riskiest packages of mortgage-backed securities and collateralized debt obligations. Had S&P done its job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldn’t have become so large – and their bursts wouldn’t have brought down much of the economy. You and I and other taxpayers wouldn’t have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldn’t have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now. In other words, had Standard & Poor’s done its job over the last decade, today’s budget deficit would be far smaller and the nation’s future debt wouldn’t look so menacing. We’d all be better off had S&P done the job it was supposed to do, then. We’ve paid a hefty price for its nonfeasance. A pity S&P is not even doing its job now. We’ll be paying another hefty price for its malfeasance today. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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S.&P. Warns More Downgrades May Come

August 7, 2011

A day after Standard & Poor’s took the unprecedented step of downgrading the creditworthiness of the United States government, the ratings agency offered a full-throated defense of its decision, calling the bitter stand-off between President Obama and Congress over raising the debt ceiling a “debacle,” and warning that further downgrades may lie ahead.

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S&P Defends Downgrade

August 7, 2011

WASHINGTON – Standard & Poor’s says it downgraded the U.S. government’s credit rating because it believes the U.S. will keep having problems getting its finances under control. S&P officials on Saturday defended their decision to drop the government’s rating to AA+ from the top rating, AAA. The Obama administration called the move a hasty decision based on wrong calculations about the federal budget. It had tried to head off the downgrade before it was announced late Friday. But S&P said it was the months of haggling in Congress over budget cuts that led it to downgrade the U.S. rating. The ratings agency was dissatisfied with the deal lawmakers reached last weekend. And it isn’t confident that the government will do much better in the future, even as the U.S. budget deficit grows. David Beers, global head of sovereign ratings at S&P, said the agency was concerned about the “degree of uncertainty around the political policy process. The nature of the debate and the difficulty in framing a political consensus … that was the key consideration.” S&P was looking for $4 trillion in budget cuts over 10 years. The deal that passed Congress on Tuesday would bring $2.1 trillion to $2.4 trillion in cuts over that time. Another concern was that lawmakers and the administration might fail to make those cuts because Democrats and Republicans are divided over how to implement them. Republicans are refusing to raise taxes in any deficit-cutting deal while Democrats are fighting to protect giant entitlement programs such as Social Security and Medicare. S&P so far is the only one of the three largest credit rating agencies to downgrade U.S. debt. Moody’s Investor Service and Fitch Ratings have both issued warnings of possible downgrades but for now have retained their AAA ratings. The rating agencies were sharply criticized after the 2008 financial crisis. They were accused of contributing to the crisis because they didn’t warn about the dangers of subprime mortgages. When those mortgages went bad, investors lost billions of dollars and banks that held those securities had to be bailed out by the government. Ratings agencies assign ratings on bonds and other forms of debt so investors can judge how likely an issuer — like governments, corporations and non-profit groups — will be to pay the debt back. Asked when the United States might regain its AAA credit rating, Beers said S&P would take a look at any budget agreements that achieve bigger deficit savings. But the history of other countries such as Canada and Australia who saw cuts in their credit ratings, shows that it can take years to win back the higher ratings. Administration sources, who briefed reporters on condition of anonymity because of the sensitivity of the debt issue, said the administration was surprised by the timing of the announcement, coming just a few days after the debt agreement had been signed into law. Treasury officials were notified by S&P of the imminent downgrade early Friday afternoon and spent the next several hours arguing with S&P. The administration contended that S&P acknowledged at one point making a $2 trillion error in their computations of deficits over the next decade. But S&P officials said the difference reflected the use of different assumptions about how much spending and taxes will come to over the next decade. The S&P officials said they decided to use the administration’s assumptions since the $2 trillion difference in the deficit numbers was not going to change the company’s downgrade decision. In a Treasury blog posting Saturday, John Bellows, the Treasury’s acting assistant secretary for economic policy, said he was amazed by that decision. “S&P did not believe a mistake of this magnitude was significant enough to warrant reconsidering their judgment or even significant enough to warrant another day to carefully re-evaluate their analysis,” Bellows wrote. S&P officials said their decision hadn’t been rushed. They noted that S&P had been warning about a potential downgrade since April. Some critics, the debacle of 2008 still in mind, raised questions about S&P’s actions now. “I find it interesting to see S&P so vigilant now in downgrading the U.S. credit rating,” Sen. Bernie Sanders, I-Vt., said Saturday. “Where were they four years ago?” Standard & Poor’s roots go back to the 1860s. One of its founders, Henry Varnum Poor, was a publisher of financial information about the nation’s railroads. His company, then called Poor’s Publishing, merged in 1941 with Standard Statistics Inc., another provider of financial information. S&P’s website said both founding firms warned clients well before the 1929 stock market crash that they should sell their stocks. The company has been owned by publisher McGraw-Hill Cos. since 1966.

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Donald Blinken: Privatization Helps: The Hungarian Example

July 31, 2011

As Greece works itself out of financial crisis, it should look to Hungary fifteen years ago for part of the answer. Far too large a segment of the Greek economy remains locked up in public hands. Their sale to the private sector, as Hungarians discovered, while not a panacea, will help reduce catastrophic public debts, and salaries and pensions will become the responsibility of private owners rather than the government. The Greek Parliament’s austerity plan would raise 70bn euros from privatization by 2015. The government will sell stakes in banking, airports, water utilities, motorway concessions, port operations, state land, and mining rights. Selling assets to the private sector will also improve managerial know-how, increase transparency, and encourage confidence in a Greek recovery. There is a precedent for this, although on a much smaller scale, in the similar challenges Hungary faced in the mid-1990s. In 1995 Hungary’s economy was in a dangerous free-fall. Its foreign debt, which Hungary had refused to disown after the fall of communism, was approaching $30 billion, the highest per capita debt in all of Central and Eastern Europe. A quick look at Hungary’s dilemma revealed that there was no easy solution in sight. The country’s annual budget, bloated with social program spending, was $3 billion in the red; most of that would have to be borrowed, causing the debt burden to balloon further. The balance of payments showed a $4 billion deficit, largely due to the long-deprived Hungarians’ rush to buy luxury foreign goods. The really frightening number, however, was the rate of inflation. We grow concerned in the United States if inflation runs a few percent a year. In Hungary, the inflation rate had skyrocketed to 30 percent annually! That meant the average Hungarian could buy only two-thirds the groceries and household goods with forints as they could in the previous year. The sharp decline in the forint’s value was a catastrophe for consumers and prospective outside investors alike. Both the U.S. government and the International Monetary Fund concurred that Hungary’s economic problems could result in a crash and perhaps necessitate a costly bailout by the United States. A similar economic disaster had developed in Mexico the year before, which had turned to us for massive economic aid to avoid defaulting on its loans and going bankrupt. The numbers told the story. Nearly 70 percent of Hungary’s economy was still controlled by the government. Although more than $10 billion had been invested in Hungary from abroad since the end of the Cold War, much more restructuring needed to be done. Selling state-owned industries to foreign entities that would pay dollars, marks, or yen to buy and upgrade Hungarian factories and facilities were seen as ways to transform Hungary’s lagging economy and outmoded industrial sector and boost the country’s financial position. As a result of U.S. and IMF warnings and advice, Hungarian Prime Minister Gyula Horn made crucial new economic decisions in early 1995. He replaced the finance minister and the interim head of the central bank with two Western-trained bankers: Lajos Bokros as finance minister and Gyorgy Suranyi as president of the National Bank of Hungary, both highly respected by their counterparts in many Western capitals. Dubbed the “Dream Team,” a term the press picked up on, and the new appointees didn’t disappoint when they immediately stressed the necessity of reducing Hungary’s large deficits. The new financial team made the privatization of Hungarian industry a top priority; they agreed that the importation of new capital into the Hungarian economy and the infusion of Western managerial experience brought to privatized companies was the soundest way for Hungary to jump-start itself out of its financial dilemma. From that point on, the pace of privatization accelerated. With U.S. urging and consultation, the Hungarian privatization agency, given the green light in 1995, sold forty-two companies in its first four months, which brought in about $620 million of new capital. Most of that money went to repay foreign debt, putting the country on a stronger financial footing. The Hungarian government’s signal that foreign investment was welcome resulted in additional direct foreign investments of $10bn by 1997, reducing government ownership of industry to less than 30%. The size of Greece’s current financial crisis and its potential devastating impact, if not resolved, are much greater than those challenging Hungary or Europe in the 1990s. Hungary’s default would not have threatened European governments or financial institutions. And like Hungary in the 1990s, the need for Greece to reschedule its foreign debt, reduce its public employment, and take unfortunate, but necessary, austerity measures, all take precedence. But, privatization, long overdue, will complement these measures and, most importantly, establish a healthier climate for sustainable recovery and the ultimate restoration of confidence in Greece’s future.

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Commercial Plane Crashes In Guyana, No Deaths Reported

July 30, 2011

GEORGETOWN, Guyana — A Caribbean Airlines jet coming from New York crashed and broke in two while landing in Guyana with 163 people aboard on Saturday, causing several injuries but no deaths, said President Bharrat Jagdeo. The Boeing 737-800 apparently overshot the 7,400-foot (2,200-meter) runway at Cheddi Jagan International Airport in rainy weather and barreled through a chain-link fence. It barely missed a 200-foot (60-meter) ravine that could have resulted in dozens of fatalities, he said. “We are very, very grateful that more people were not injured,” he said as authorities temporarily closed the airport, leaving hundreds of passengers stranded and delaying dozens of flights. The cause of the crash was not immediately clear. Authorities struggled at first to remove passengers without adequate field lights and other emergency equipment. About 100 people received medical attention, with four hospitalized for serious injuries, said Devant Maharaj, transportation minister in Trinidad, where Caribbean Airlines is based. He said the company is sending a team to Guyana to help investigate the crash. No further details were available. Maharaj spoke at a press conference in Trinidad and took no questions, saying the investigation is ongoing. Among the injured was Geeta Ramsingh, 41, of Philadelphia, who said passengers had just started to applaud the touchdown “when it turned to screams,” she said, pointing to bruises on her knees. She said she hopped onto the wing and then onto the dirt road outside the runway fence. “I am upset that no one came to rescue us in the dark, but a taxi driver appeared from nowhere and charged me $20 to take me to the terminal. I had to pay, but in times of emergencies, you don’t charge people for a ride,” she said, sitting on a chair in the arrival area surrounded by relatives. She was returning to her native country for only the second time in 30 years. Adis Cambridge, 42, of Guyana, said she felt the thump of a hard landing but did not think much of it until seconds later. “I realized that everything was on top of me, people and bags. I was the second to last person to get off that plane in the dark,” she said, surrounded by her two young children who had come to the airport to meet her after a brief holiday in the U.S. “I hit my head on the roof. It was so scary,” she said as she described hopping onto the wing and then jumping down to the dirt road below as crews with flashlights and beams from fire engines searched for passengers. Some passengers asked authorities for their luggage but were told it was not a priority at the time. The plane had left New York and made a stop in Trinidad before landing in Guyana. The airline said it was carrying 157 passengers and six crewmembers. Jagdeo said he has asked the U.S. National Transportation Safety Board to help investigate the crash. The airport’s main terminal reopened late Saturday morning to only a couple of small planes, including a LIAT airline bound for Barbados, said Orin Walton, a local representative for the Antigua-based carrier. The crash of Flight BW523 is the worst in recent history in Guyana, and only one of the few serious incidents involving the Trinidad-based airline. It is the single largest carrier in the region, operating at least five daily flights. ______ Associated Press Writer Tony Fraser in Port-of-Spain, Trinidad contributed to this report.

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Corbin Hiar: Stolen State Money: Trillions Lost Annually, Only Billions Have Been Recovered

July 25, 2011

By Corbin Hiar , iWatch News 6:00 am, July 25, 2011 The uprisings of the Arab spring have brought renewed attention to long-standing accusations that kleptocratic regimes throughout the Middle East have plundered their nations’ assets. But recovering those assets — though crucial to the future of these impoverished nations — remains a daunting challenge, according to a recently released report. Crime, corruption, and tax evasion by the global elite cost between $1 trillion and $1.6 trillion and hit poor countries especially hard, says the study, ” Barriers to Asset Recovery .” Yet in the past 15 years, only $5 billion in stolen assets have been repatriated. The report offers advice to policymakers aimed at increasing that lowly rate of return. It was produced by the Stolen Asset Recovery Initiative (StAR), a joint project of the World Bank Group and the Office on Drugs and Crime at the United Nations (U.N.). Like iWatch News’ World coverage on Facebook and get the latest news instantly. The problem, says Raymond Baker, the director of Global Financial Integrity, a Washington watchdog group, is that even in nations like Switzerland that have changed procedures and rules to reduce bank secrecy, “it’s not entirely clear” how foreign governments can get stolen assets back. The first efforts to put the spate of new rules to the test, Baker says, “will probably come from Egypt or Tunisia.” For the impoverished people of both these countries, who recently toppled long-standing authoritarian governments, the stakes are substantial.  U.S. intelligence officials estimate that deposed Egyptian President Hosni Mubarak accumulated between $1 billion and $5 billion during his 30-year reign. London’s Telegraph newspaper reported ex-Tunisian President Zine el-Abidine Ben Ali’s personal wealth at £3.5 billion.That’s the equivalent of $5.7 billion, more than an eighth of Tunisia’s annual gross domestic product . Even those estimates of ill-gotten wealth “[do] not capture… the societal costs of corruption,” the report adds. “Theft of assets by corrupt officials, often at the highest levels of government, weakens confidence in public institutions, damages the private investment climate, and divests needed funding available” for investments in public health, education, and infrastructure. And “there are many obstacles to asset recovery,” said Kevin Stephenson, a senior financial sector specialist at the World Bank and the lead author of the study, in a press release . “Not only is it a specialized legal process filled with delays and uncertainty, but there are also language barriers and a lack of trust when working with other countries.” The StAR report, released in late June, documents the few multilateral international legal instruments dispossessed governments have at their disposal. Chief among them: the U.N. Convention against Corruption, the U.N. Convention Against Transnational Organized Crime, and the Financial Action Task Force (FATF) on Money Laundering, an intergovernmental organization that develops policies to combat illegal cash flows. But they’re not worth much, according to Baker. “So you walk into a bank with those two treaties and the task force’s 40 recommendations and plunk them down, and say, ‘I want to recover money stolen by my corrupt former head of state.’ Then the banker raises his eyebrows and says, ‘You want to do what?’ ” As Baker suggests, financial institutions may be reluctant to honor international standards that are not even followed by many of the governments who seek to enforce them. The compliance rate for one important FATF recommendation is troublingly low, as the U.N. Office on Drugs and Crime pointed out in a 2009 report for the StAR Initiative. More than three-fifths of the 124 jurisdictions evaluated were not monitoring accounts held by politically powerful people. This is a challenge for regulators, even in the U.S., according to Sen. Carl Levin (D-Mich.). “Weakness in our financial regulations have allowed these [politically powerful people] to move millions of dollars into or through U.S. bank accounts, often by using shell company accounts, attorney-client accounts, escrow accounts, or other accounts, or by sending wire transfers that shoot through the system before our banks react,” he said in a 2010 hearing on international corruption. Often times, strong domestic legislation coupled with effective bilateral communication has proven to be a more powerful tool than multilateral international agreements. The report, which was largely scrubbed of specific names and jurisdictions, gives the example of a Swiss law that in 2005 allowed authorities “to declare that a former head of state, his family, and associates constituted a criminal organization” and could therefore have their property confiscated. The example sounds similar to the case of the late dictator General Sani Abacha , whose fortune was seized by the Swiss at the behest of the Nigerian government and then returned to Nigeria for use in poverty-reduction programs there. The World Bank did not respond to iWatch News’ requests for comment. The report may yet go some ways towards improving the implementation of international agreements to repatriate stolen national assets and encourage the spread of effective national legislation and cooperation. But for now Baker believes closing the loopholes that allow corrupt government officials to get away with it in the first place is more important than trying to recover what’s already been lost. For example, authorities in India, from which he he recently returned, have been “all exercised about recovering stolen money , but they’re not going to get very much. By all means, go for it,” Baker said, “but it’s far more important to curtail the outflow.” Read more investigations at iWatch News

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Peter S. Goodman: Republican ‘Terrorism’: Debt Ceiling Debate Are Dangerous For All

July 25, 2011

A major factor in how the United States wound up in hock to the tune of $14.3 trillion is the so-called Global War on Terror, the American jihad under which all causes have been subsumed, while niggling things like facts, the constitution and strategic objectives have been relegated to irrelevance. So it seems a tad ironic that as they attempt to square the books, the same Republicans who have so eagerly prosecuted the war on terror, running up huge deficits in the process, are now behaving like the enemies on which they have squandered so much blood and treasure: They are acting like terrorists. Yes, terrorists. A central feature of any fruitful negotiation is that both sides can reasonably assume that certain outcomes can be ruled out, chief among them the possibility that one party will resort to something so dangerous that it risks blowing everything up. Yet in threatening not to lift the debt ceiling without first extracting enormous cuts in government spending, Republicans are in essence threatening to obliterate the underpinnings of the global financial system — the bed-rock faith that, come what may, Uncle Sam always makes good. How can any rational negotiation take place in the face of such a threat? If the Republicans are serious about following through, they are either fundamentally ignorant about the workings of finance, or they are insane. Or to add a third possibility, they are courageously cynical: They are exploiting the assumption that the people they are dealing with will ultimately cave, paying whatever price is required to avert catastrophe. Act like a madman, the logic goes, and the sane people will be forced to accommodate. Meanwhile, the rest of us wait and worry and wonder what will happen, every day dominated by anxious talk that American creditors will start demanding higher interest rates on the next extension of credit, heaping fresh trouble on a stalling economy. We imagine what an American default would look like, a thought that renders the logic of global capital effectively inoperable. It would change everything — faith in the dollar, confidence in the sanctity of all debts. When everything is different, money has a way of standing still. Perhaps the Cuban missile crisis felt a little bit like this, with the crucial difference being that we are the ones stacking up the nuclear warheads and threatening to detonate them on ourselves. Obama has already rewarded extremism by signaling willingness to cut to some $3 trillion in spending from the federal budget — cuts that would tear further at the damaged fabric of the social safety net by reducing support for Medicare, Medicaid and Social Security, while adding to the drag on the economy. Which means that, whatever happens next, it’s not going to be good. Paul Krugman has it right : Either a deal gets cut and we avert financial crisis, while settling instead for the consequences of idiotic budget-cutting — the long, slow slog through elevated unemployment with no relief — or no deal happens and we find out what happens when the American Treasury slides into delinquency. Last rites have been proclaimed on civility in American politics so many times that bemoaning the state of things is a tired cliché. Yet this episode feels like the reaching of a new low, a renunciation of the most basic form of responsibility by people who were elected to pursue the national interest. The Iraq War was a disaster, an unenlightened response to the tragedy that was 9/11, and yet I’m willing to accept that the people who prosecuted that war believed that we would be safer for it, even as that has proven wrong. The deregulation of finance under the Clinton and Bush administrations produced tragic consequences. Yet there too, I am open to believing that it was a product of a flawed belief system that saturated too much of the decision-making class, a near-religious faith in the merits of laissez-faire economics. What is happening now is appalling in a wholly different way. One party is willfully and intentionally driving us to the edge of a cliff, using the national interest as a hostage. The American system is, like all systems of governance, imperfect and vulnerable to the foibles of the human beings who wield power, along with the fickle ways of the electorate. It is open to the manipulation of powerful organizations whose interests often pull in the opposite direction of the citizenry — people working stressful jobs, hauling kids to school and struggling to figure out how to pay their own bills, with little time left for keeping educated about the doings of the people who are supposed to be managing the national finances in Washington. And still the American system has proven dynamic and strong. It has weathered a civil war and two world wars. It has expanded the rights of people who have been systematically discriminated against. It has more often than not managed to balance the interests of a nation of people who are geographically scattered and separated by culture, race and religious beliefs. None of this is to dismiss the considerable injustice woven into American history, not to mention the present, but if you had to pick one way to run things off the global menu, you could do a lot worse than the American system of governance. Yet the system can only function so long as we can assume that the parties jockeying for influence will respect certain limits — that they will rule out certain tactics whose mere discussion is dangerously destabilizing. That is something we can no longer assume. One organized party is willing to threaten to lay everything to waste in the pursuit of its agenda. It is willing to court extreme danger for everyone as a means of getting its way. This is the message of the summer of 2011, a message that will remain even after some sort of unsatisfying deal is inevitably cut to avoid the prospect of default. The mindset of the terrorist has been insinuated into the practice of American policy.

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Obama Threatens To Veto GOP Bill Aimed At Weakening Controversial New Agency

July 20, 2011

WASHINGTON — The White House on Wednesday threatened to veto a House Republican bill that would curb the powers of the new Consumer Financial Protection Bureau, reviving last year’s pitched partisan battle over President Barack Obama’s overhaul of the rules governing financial markets. The veto threat came a day before the House was to vote on the GOP legislation – a debate to be held on the very day that the bureau officially opens. The agency was created by the financial overhaul measure, which Obama signed into law a year ago Thursday as a response to the 2008 financial crisis. While the legislation is expected to clear the Republican-run House, it has little chance of even being considered by the Democratic-led Senate, making both the bill and the veto threat symbolic gestures. The bureau is supposed to protect consumers from abuses involving mortgages, credit cards and other financial instruments. It’s been embraced by Democrats but opposed by many Republicans who say it threatens to stifle financial companies. The GOP bill being debated this week would replace the bureau’s director with a five-member bipartisan commission. It would delay the planned transfer of powers to the bureau from other agencies until a Senate-confirmed chair of the commission was in place, and make it easier for other federal financial regulators to block the bureau from issuing regulations. The Republican measure “simply promotes greater accountability and transparency” at the bureau, House Financial Services Committee Chairman Spencer Bachus, R-Ala., said in a written statement. “The American people want accountability at every massive government bureaucracy.” In its written statement on the GOP legislation, the White House said the bill “would expose American consumers and the nation’s economy to the same risks that led to the 2008 financial crisis.” The statement said that Obama’s senior advisers would recommend that he veto the legislation and any other that poses similar threats. All 47 Republican senators have promised to block confirmation of anyone to head the bureau unless Obama agrees to change it, including replacing the director with a bipartisan commission. That would leave Senate Democrats seven votes short of the 60 votes they would need to confirm a director. Presidential adviser Elizabeth Warren, a Harvard law professor and longtime consumer activist, has led the administration’s start-up of the agency. Facing sharp GOP opposition to her becoming its director, Obama this week nominated Richard Cordray, the former Ohio attorney general who has been the bureau’s enforcement chief, to become director.

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Robert Teitelman: Fortune’s On-again, Off-again Bubble

July 20, 2011

Fortune has discovered there might be a tech bubble. No, revise that. Fortune has, a little late , declared a tech bubble upon us, at least on its cover, which shouts in big, bold type: “Tech Bubble 2.0.” But once inside the magazine, you’re met with a headline, ” Don’t Call It the Next Tech Bubble — Yet ,” which suggests, well, more uncertainty than the cover declares. In fact, the Fortune story by David Kaplan takes a tortuous path up the mountain of bubbledom, then down into the valley of maybe not. Yes, Silicon Valley is hot, venture capital is flying around, social media companies are going public at high valuations, and — Fortune has a fixation here — already expensive real estate has gotten ridiculous. And, oh yeah, there’s some very expensive balsamic vinegar on sale in the Valley. But is it a bubble or is simply some euphoria over a subset of tech stocks that may — or may not — prove to be justified? Let’s clear a little underbrush. A bubble may be difficult to detect and deflate, but its definition isn’t really in doubt. A bubble occurs when the price of an asset loses any connection to underlying value; it’s increasingly driven by its own momentum. Now, of course, this definition is full of peril, mostly involving that underlying value, which particularly when it comes to tech stocks is a potentiality that exists somewhere out there in the misty future, exposed to all kinds of factors that could justify a price that seems high today, or confirm that some fool paid too much. So it’s hard to tell. This definition is necessary but not sufficient to corner the elusive bubble. Because — and this is often lost in enthusiasm for bubble stories — a bubble is not just an overvalued stock, or even an inflated asset class. A bubble is large and contagious. It must have scale; it must spread. Some stocks are always overvalued — some dramatically. But a sector, say biotech in the ’80s, that sent a lot of companies public without a prayer of success, was not a bubble in the systemic sense, because when reality gobsmacked investors, biotech stocks fell, while the rest of the economy forged merrily forward. Kaplan offers his own attempt to get a feel for this elephant in a dark room. After he enumerates all the conspicuous consumption in the Valley, he admits that the tech crowd itself isn’t sure what’s happening. “Reasonable folks can disagree about the prospects for boom and bust. But their reckoning is about psychology more than economics.” Kaplan then searches for psychological signs, which really means a sort of off-the-shelf sociology. “A sure sign [get that "sure"] of budding bubbliness is the rush to find alternative metaphors.” Not to interrupt, but alternative to what? “Read the blogs, attend the tech conferences, sit at Starbucks for an hour in Sunnyvale some afternoon [but not in, say, Palo Alto?] — you’ll hear most of them. There’s a wave — ride its crest, but don’t get inundated! There’s froth and ferment. There’s a rush and gush. Our favorite, from a well-known investor: ‘The cuckoos have come out of the clock!’” They do love their metaphors in the Valley. But obviously, that’s not quite rigorous enough, for Kaplan then turns to the well-worn cliché of greed and fear. Fear is a hedge. Immediately after the suggestive cuckoo comment, Kaplan argues, “For there to be a bubble, the wisdom goes, greed must overcome fear. And for the moment fear still rules, which means the memory of 2000 lives. Metaphorically [ah, metaphors again], we may be in 1995 or 1996. After all, LinkedIn is not Pets.com.” True. And 1995 is not 2011 either. Kaplan’s conclusion: This is a bubble, but not quite yet. This is a nascent bubble. This is a bubble that may not be a bubble. ” ‘I think it’s a wanna-bubble,’” Kaplan quotes “longtime Valley observer Paul Saffo,” who continues: ” ‘Investors are desperate for something — anything — with a prospect of returns, and there is a lot of hot money looking for a home.’” One can sympathize with Kaplan. The scene, not to say the future, is difficult to read, particularly if you’re trying to interpret psychological signs. And Kaplan obviously didn’t write the cover line. Fortune ‘s bubble story tells you more about Fortune and its relation to the tech economy and its readers than anything else. Fortune knows that tech, euphoria, optimism, winners sell. And for all the handwringing, bubbles are associated with good times, particularly when they’re incipient. Moreover, Fortune is not alone in embracing Silicon Valley as the very model of the American economy, except perhaps for that tendency to bubbledom; this partly explains why there are so many bubble stories out there. In a depressing economy, in a gloomy world, the Valley looks like the best way to provide readers with a dose of blast-from-the-past hope. Kaplan can’t quite close the deal with his bubble diagnosis, but all to the good: That means the Valley may actually be healthy. Folks there (as if denizens of the Valley were the only problem in the dot-com bubble) remember. It’s a small thing, but Kaplan’s story will someday allow Fortune to declare victory no matter what happens. Of course there’s the matter of the bait-and-switch between the cover and the story. This is, alas, too common in magazines these days. An even more egregious case appears in the increasingly downmarket Money, one of Fortune ‘s stablemates at Time Inc., which also tangles with a big macroeconomic story. On its most recent cover, Money offers up: “Why Housing Will Rebound.” ( Fortune predicted a housing rebound a few months ago as well.) That sounds exciting, no? Alas, the cover line refers to a single page of graphics that are both simplistic and generally useless. In fact, one set of charts argues the “sucker” case and the other that “housing is a steal.” Like Fortune , Money can’t decide. This is supposed to help homeowners figure out the housing markets? No, Money just wants you to impulsively buy the magazine for the coverline. This is an old trick, beloved of newspapers and magazines. In the great scheme of things, it’s a minor, if tawdry tactic; newsstands are full of it. Still, the Murdoch scandal does sensitize one to broader issues besides hacking, blagging and bribery that go under the banner of tabloidization. First, what’s the social compact with your readers and how is it violated? Second, how simplistically can the world be described until it resembles no world that we recognize? Fortune and Money are not News of the World , Time Inc. is not News Corp., and silly bait-and-switches are not phone hacking. But newsstand-driven circulation does tend to erode loyalty to readers. And commercial pressures drive even operations with such distinguished histories to treat readers just a little shabbily to sell a few more copies. Besides, what does it really matter in the end? Nobody can really predict the damn future anyway.

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John Edwards In $2 Million Dispute

July 20, 2011

RALEIGH, N.C. — The Federal Election Commission is considering whether former North Carolina Sen. John Edwards’s 2008 presidential campaign should repay the treasury about $2.3 million. The FEC is scheduled to consider at its meeting Thursday whether to order the repayment. Federal auditors say all but about $200,000 of that sum came from matching funds. The campaign collected a total of nearly $13 million in matching funds after it was approved in December 2007. Edwards dropped out of the presidential race Jan. 30, 2008. FEC auditors say Edwards’s campaign understated its cash and overstated its expenses. At issue is how much Edwards’s campaign was entitled to receive as a result of qualifying for matching funds and the cost of winding down the effort. Edwards’s lawyers say the Democrat doesn’t owe anything.

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Gulf Oil Spill Claims Fund Will Be Audited To Speed Up Process

July 20, 2011

WASHINGTON — An independent audit will be performed on the $20 billion fund set up to compensate victims of last year’s BP oil spill in the Gulf of Mexico, Attorney General Eric Holder announced Wednesday. In a letter to the fund’s administrator, Kenneth Feinberg, Holder stressed that the goal is to balance the need for resolving claims quickly and fairly along with the need to start an audit before the end of the year. Holder said the fund’s “highest priority” should be to achieve speed and fairness. Holder made a June 30 trip to the Gulf Coast in which he heard concerns from Alabama officials and residents about the transparency of the claims process. In his letter, the attorney general said Feinberg agreed to an audit, a step that Holder has been urging for some time. In response, Feinberg said the audit will begin this year but won’t disrupt “the timely processing of claims.” He said the audit “is something we have always considered we would do.” To date, the fund has paid $4.7 billion to 198,475 claimants. The total number who have sought money stands at 522,506, many with multiple claims. In all, the fund has nearly 1 million claims and continues to receive thousands of claims each week. Feinberg also oversaw payouts from the victims compensation fund that was set up after the Sept. 11, 2001, terrorist attacks. The procedures to implement the 9/11 fund’s activities were audited, said Deborah Greenspan, the fund’s deputy. Feinberg said the 9/11 claims themselves were not audited, due to confidentiality requirements and proprietary information. He noted that the fund did issue a final report that laid out overhead costs and expenses related to claims. ___ Associated Press writer Harry Weber in Atlanta contributed to this report.

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Fernando Espuelas: Why Republicans Can’t Say Yes to Obama

July 20, 2011

So it’s not about the deficit after all. For months we’ve heard the increasingly shrill alarms being sounded by supposedly sober-minded Republican Congressional leaders that America is the next Greece — balancing carefully over a debt precipice, destruction inevitable unless radical action is taken. These alarms have been so effective that the true nature of our national crisis — chronic unemployment at unacceptably high levels, overall slack economic demand — has been relegated to a secondary plane of importance. Some 20 million people unemployed or under employed are not just a human tragedy but a major contributor to our still under-performing economy. The GOP trope that the federal government deficit is somehow responsible for high unemployment defies common sense and basic economics. Yet this fallacy is repeated often and loudly as if it were a proven fact. Meanwhile, the chairman of the Federal Reserve recently told Congress that the Fed is ready to take even more aggressive action — read some massive stimulus — if the economy falters. So we come to the intransigence of Republican “negotiators” trying to hammer out some compromise to raise the debt ceiling with the Democrats. It would seem that these elected leaders’ responsibility to the country, their oaths of office, is seemingly trumped by their religious oath to Grover Norquist, the founder of special interest group Americans for Tax Reform and the godfather of the “all taxes are evil” movement, to never raise taxes regardless of the economic conditions This fetishistic oath, seemingly sworn and signed in blood, has kept the Republicans from saying “yes” to President Obama’s offer for raising the nation’s debt ceiling — a deal that would whack some $4 trillion dollars from the national deficit. Charlie Cook, one of America’s most respected non-partisan political analysts, is brutal on the Republican’s stance on the debt ceiling — and thinks that it may cost them the support of Independent voters in 2012.  Cook writes in the National Journal : …What has happened is that the New Republican Party has come to hate taxes a lot more than it hates deficits and the country’s growing indebtedness. It has rewritten history to omit any acknowledgment that President Reagan, when it was necessary, went along with tax increases. The memory of Reagan accepting tax increases, however reluctantly, has been supplanted by President George H.W. Bush’s fateful decision to go along with tax increases in the 1990 budget negotiations. What the New Republican Party remembers is Bush losing reelection, not the fact that those tax increases were pivotal in eliminating the federal budget deficit under President Clinton and in the resulting period of strong economic growth. Bush’s loss is remembered, and the period of fiscal responsibility is forgotten. At least history will treat Bush 41 with more gratitude than his own party does… Why did the Congressional Republicans walk away from the biggest deficit reduction pact in history?   Based on a several recently published polls, Americans everywhere outside of Washington are befuddled by their elected leaders’ stance in these negotiations. A new CBSNews poll found that “only 21 percent of the people surveyed said they approved of Republicans’ handling of the negotiations, while 71 percent disapprove.” Other recent polls point to a similarly stark divide between Republican voters and their elected representatives. So why walk away from a great deal to shrink the government deficit?  Could the “of the 1%, by the 1%, for the 1%” be the reason?  A recent  article in Vanity Fair by Nobel-winning economist Joseph Stiglitz is as cogent as it is alarming: Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income — an inequality even the wealthy will come to regret. Stiglitz goes on to say that enlightened self-interest — the patriotic desire for the whole country to prosper, for the middle-class to thrive, so you too can be successful – should provoke the “1%” to support policies that improve the whole of society, not just those initiatives that dump tax benefits to the wealthiest Americans paid for by the middle class. Warren Buffett, the iconic self-made American man, is clear on this subject. No one has made a dime in this country without the unique advantages that America offers, he repeats and repeats. From an ethos of fairness, hard work and sacrifice, to a belief (at least in classical American mythology) that any kid can grow up to be president, the success of every American is tied to, as the U.S. Constitution states in its preamble “the general Welfare.” Stiglitz writes that the 1% no longer identify with the bottom 99% — and that this division is bad for all Americans, rich, middle class and poor. When the “1%” fund and elect elect representatives that are committed to the welfare of that “1%” at the expense of the 99%, we find ourselves in a dire situation with negatively profound implications to the future of America and our ability to remain the world’s leader. In fact, we find ourselves in a self-created, completely avoidable, national crisis that shatters Americans’ faith in their own government while also damaging America’s standing in the world.

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Republicans Introduce Bill Aimed At Crippling Labor Board

July 19, 2011

WASHINGTON — House Republicans introduced a bill Tuesday afternoon aimed directly at scuttling a controversial complaint issued by the National Labor Relations Board (NLRB) against The Boeing Company. Called the Protecting Jobs from Government Interference Act, the bill would prohibit the labor board from ordering any company to “close, relocate, or transfer employment under any circumstance,” severely weakening the board’s ability to enforce labor law. The maneuver is just the latest development in an escalating spat between conservatives and the labor board, which conservatives and business groups have decried as having a pro-union tilt under President Obama. Earlier this year, the board’s general counsel, Lafe Solomon, issued a complaint alleging that Boeing broke labor law when it created a production line for its 787 Dreamliner in South Carolina. Solomon said the move was retaliation against Boeing’s unionized employees in Washington state for having gone on strike in the past. If Boeing is deemed to have broken the law, it could feasibly have to move the production line to Washington. “No government board should have the authority to tell a private employer where it can run a business,” Rep. John Kline (R-Minn.) said in a statement on the bill. “Yet as the Boeing dispute has made disturbingly clear, the National Labor Relations Board is empowered to override the business decisions of American employers.” The bill may be more theater than substance, since it would seem to conflict with the National Labor Relations Act. The act authorizes the agency to issue complaints like the one filed against Boeing. If passed, the law as introduced would effectively gut the board’s remedy process when labor law has been broken. The bill was introduced by Rep. Tim Scott (R-S.C.) and co-sponsored by Kline along with Reps. Phil Roe (R-Tenn.), Joe Wilson (R-S.C.), and Trey Gowdy (R-S.C.). South Carolina Republicans, in particular, were incensed over the Boeing complaint, claiming it could cost the state jobs. Unions and labor activists, however, hailed the decision as a victory for workers, as well as an indication that the board was enforcing labor law in a manner not seen in the Bush years. In a statement, Rep. George Miller (D-Calif.) said he was “disappointed” in the Republicans decision to push a “far-reaching” bill through the education and workforce committee so quickly without a hearing. The bill is scheduled for a vote on Thursday. “A quick first read indicates that the Republican bill will make it easier to play American workers against each other in a race to the bottom and even easier to ship American jobs overseas,” Miller said. “It would create an open season for CEOs to punish workers for exercising their rights.” The labor board, an inconspicuous agency not known to many Americans, has been assaulted by Republicans ever since the Boeing complaint was issued in April. Last month, Republicans called a special oversight hearing in South Carolina, where Solomon was largely castigated for his decision to issue the complaint against Boeing. For the last two days, the NLRB has hosted public hearings on new rules it plans to issue that will streamline the union election process. Republicans have publicly assailed that decision as well, calling it a gift to unions.

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