Guide on Economy
October 9, 2008 - A Gallup poll released this week showed that a majority of Americans -- 53 percent -- are angry about the financial crisis. And 41 percent are afraid. The system, Americans believe, has failed them.
It only takes a glance at the morning news -- or a look at rising food and gas prices -- to see that these fears and frustrations are not without good reason. Every day, more and more people lose their homes and their health care and see their retirement funds erode. Or rather, they watch as these things get taken from them.
It's infuriating to watch and painful to experience, and it's understandable to be mad as hell. It's OK because when a large enough number of people get angry enough, that's when things start to change.
So, our question to you is, Are you mad enough yet? Because this crisis is about all of us. Are you sure your 401K is secure? Do you know how many of your tax dollars are being spent in Iraq -- a country that's sitting on an $80 billion surplus? Have you considered how you'll pay for your health care if Medicare goes broke?
The answers to these questions aren't pretty. Fortunately, Nov. 4 gives us a chance to change things.
But first we have to know where the candidates stand on the issues that matter the most, like the economy, the environment, health care, immigration and reproductive justice. It's no small task to get reliable information on anything, let alone politics, in an age of campaign attack ads, media bias and outright corruption. That's why AlterNet has put together some handy election guides to help you learn what you need to know about Barack Obama and John McCain before you make a trip to the ballot box. The guides aren't meant to be exhaustive, but they do cover a lot of ground. For the next two weeks, we'll be rolling out an election guide each day, starting today, with the economy.
We hope they're helpful, and we want to hear what you think. Let us know in the comment boards or by e-mailing us at firstname.lastname@example.org. -- The Editors
Election Guide to the Economy
The country is in a unique moment in its economic history, facing a deep, structural energy crisis, stagnant wages for most, and spiraling costs for health care, education and food.
The housing market isn't expected to hit bottom until the middle of next year, and the fallout from the housing crash now threatens the global economy -- so much so that on Sept. 20, the Bush administration proposed an unprecedented bailout of many of the biggest players on Wall Street, which came on the heels of the government's multibillion-dollar rescues of Fannie Mae, Freddie Mac and AIG.
There's now a consensus among economists that we have entered a recession. It marks the first time in the post-war era that the country has entered into a downturn before median family incomes had fully recovered from the previous recession. Over the past business cycle, poverty increased by more than 10 percent, and the number of people with employer-based health care dropped by about 8 percent.
The past year has been especially painful for America's working majority. In August, companies' payrolls shrank for the eighth consecutive month, resulting in a five-year high in unemployment.
Whoever ends up occupying the White House in January 2009 will be faced with the epic task of restoring Americans' sense of economic security. What will the next president do about energy? About the mortgage meltdown? What kind of trade policies will he put into place?
Read below for the answers. We've compiled these brief issue overviews to help you make an informed choice in November.
1. SPIRALING INEQUALITY AND ASSAULTS ON UNIONS
The past three decades have produced a historic concentration in American wealth. Economists estimate that 80 percent of the country's inflation-adjusted income growth since Ronald Reagan was elected has gone to the top 1 percent of the income ladder, and the incomes of all but the top 10 percent have actually declined since 1973.
A large body of data across different countries finds a strong correlation between the portion of the work force that's organized into "collective bargaining units" -- unions -- and wage inequality, and that's true in the United States, where the decline in unionization since the 1970s has corresponded with a dramatic increase in inequality.
Slightly less than 10 percent of the private sector work force is organized, but, according to the American Dream Survey (PDF) -- a study of non-managerial wage earners who make up about 80 percent of the working population -- "most American workers believe joining a union can help them achieve the American Dream," and 59 percent would be inclined to join a union if they were protected from retaliation from employers.
That's the leading barrier to labor organizing. According to American Rights at work, a pro-labor group, almost half of all employees report some form of illegal behavior by employers to discourage workers from organizing during votes supervised by the National Labor Relations Board.
Solution: Raising the minimum wage (see below), strengthening workers' rights to bargain collectively and reforming U.S. trade policy (see below) are all key to "flattening" the nation's income distribution.
Obama's position: Obama was a co-sponsor of the Employee Free Choice Act, a bill that would make it easier for working people to join a union. He has called for increasing the minimum wage and indexing it to inflation so it grows with the cost of living.
McCain's position: John McCain voted against the Employee Free Choice Act and for the National Right to Work Act, a bill that, despite its deceptive name, would have crippled union organizing. He has said, "I think the unions have played a very important role in the history of this country to improve the plight and conditions of laboring Americans. I think that like many other monopolies, in some cases, they have serious excesses."
Learn more: Barack Obama's economic plan, John McCain's economic plan, Center for Economic and Policy Research, Economic Policy Institute, American Rights at Work
2. HOUSING AND DEBT CRISIS
According to a forecast by Credit Suisse, a financial services group, 6.5 million U.S. houses may go into foreclosure by 2012 -- a figure that "could put 12.7 percent of all residential borrowers out of their homes." To put that number in context, the number of homes currently in foreclosure is 1.2 million, and that's an all-time high. The bank notes that although the percentage of subprime loans that will go belly-up is very high -- over half! -- the total number of non-subprime loans will be larger. They project that almost 4 million other borrowers won't be able to maintain their mortgages. This has a ripple effect throughout the economy, with construction and a number of service industries taking a hit.
Solution: Homeowners in trouble need the ability to renegotiate costly adjustable-rate mortgages before their debt burdens force them out of their homes. They require direct assistance in some cases, and the mortgage industry needs tighter regulation to reign in the "securitization" of mortgage debt. The 2005 Bankruptcy Reform Act should also be amended to increase consumer protections.
Obama's position: Barack Obama has called for the following: Create a new Federal Housing Administration Housing Security Program. The senator supports the efforts of Senate Banking Committee Chairman Chris Dodd, D-Conn., to create a new program that will offer incentives to lenders to buy or refinance existing mortgages and convert them into stable, 30-year fixed mortgages with a federal guarantee provided for the resulting loans. Obama called this a "backstop," not a "bailout."
Ask lenders to write down loan amounts for more conventional borrowers. Lenders should take action to restructure loans as early as possible when borrowers are at risk of financial trouble or when housing prices plummet. To alleviate lender concerns over tax and legal issues, the senator's plan also calls for legislation that would clarify the ability of servicers to act on behalf of the loans' investors/owners.
Close the bankruptcy loophole for mortgage companies. Under current Chapter 13 rules, judges cannot modify the terms of home mortgages, even if the loan is unfair or predatory. Making this change could prevent as many as 600,000 foreclosures.
Create a new mortgage interest tax credit, which will assist homeowners who do not itemize their taxes. This would involve a 10 percent universal mortgage credit that would effectively cut 10 percent off the interest rate paid by 10 million mostly low-income homeowners.
Obama has also called for bankruptcy reform and tighter regulation of lenders.
McCain's position: John McCain's position on the housing crisis is less clear. In late March, he said, "It is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers." Two days later, he released a statement saying, "The fact is that there are about 4 million homeowners in danger of losing their homes. We have a responsibility to take action to help those among them who are deserving homeowners." Also in late March, McCain defended himself from Democrats' criticism by saying he'd leave all options on the table. "I will consider any and all proposals based on their cost and benefits," he said during a campaign stop in Orange County. He later offered the McCain "HOME Plan," which would allow those with good credit holding a subprime loan for a house in which they live the ability to retire their mortgage and replace it with a lower-cost, government-backed loan. According to McCain's own estimates, 200,000 to 400,000 homeowners would be eligible for the program, but critics have raised doubts about the number because many people holding subprime loans have credit problems.
Learn more: Brookings Institution, Center for Economic and Policy Research
3. EXCESSIVE EXECUTIVE INCOMES
According to Sam Pizzigati, "Last year top CEOs in the United States continued to pocket outlandishly large paychecks, $10.5 million on average. That's 344 times the pay of an average U.S. worker -- and 10 times the pay gap that existed 30 years ago." According to a report by the Institute for Policy Studies and United for a Fair Economy, American taxpayers subsidize executive pay to the tune of about $20 billion each year. Last year, a Financial Times/Harris poll revealed that 77 percent of Americans think chief executives "earn too much." But shareholders have little say in how much top executives are paid, as CEOs generally work with a friendly board of directors, and corporations are able to write off unlimited amounts of executive pay as long as it is classified as "performance-based."
Solution: Close tax loopholes that effectively subsidize executive pay and give shareholders the ability to block outlandish compensation packages.
Obama's position: Obama supports closing one tax loophole related to executive pay, and he sponsored a bill that would give shareholders a nonbinding "advisory vote" on executive pay packages. An advisory roll, however, falls far short of an effective veto for excessively lavish compensation packages.
McCain's position: McCain has called for shareholders to have veto power over executive compensation packages, but he has not proposed legislation that would do so. A top adviser to McCain told Reuters that "the senator wants to shine a light on the issue (of bloated executive pay) and is not offering specific new proposals to rein it in."
Learn more: Institute for Policy Studies, United for a Fair Economy
4. OFFSHORING AND TRADE POLICIES THAT FAIL FAMILIES
According to Economic Policy Institute economist Josh Bivens, "Jobs are created by American exports but destroyed by imports; hence, the rising trade deficits cause job loss. This imbalance in the U.S. economy heightens economic insecurity by causing workers to search for new work or accept jobs of lower quality, even though some job loss can be partially offset by other influences, as when manufacturing jobs in the late 1990s were lost to trade while construction jobs boomed." Furthermore, "wages are squeezed as imports from lower-wage trading partners reduce demand for domestic workers. Between 1973 and 2006, growing trade with poorer trading partners lowered wages of U.S. workers without a four-year college degree by 4 percent."
Solution: 1. Pass the TRADE Act, legislation proposed by a group of progressive lawmakers that would require a review of existing trade agreements and a process to renegotiate existing trade agreements. It also calls for new thinking on labor, environment, investment and food safety to be included in future trade agreements, and strengthens the role of Congress in trade policymaking. 2. Pass the NAFTA Accountability Act, legislation proposed in the House at the end of 2007 that would require proponents of the North American Free Trade Agreement to prove their claims that the treaty helps Americans more than it hurts them and would require that the deal be renegotiated if they failed to do so.
Obama's position: Obama has called for amending NAFTA, if necessary, in order to protect American workers, closing tax loopholes that reward companies that offshore jobs, supporting firms that create U.S. jobs and improving transitional assistance for workers displaced by foreign trade.
McCain's position: McCain supports current trade policy. He has argued against agricultural subsidies, a key issue for anti-poverty campaigners in developing countries, but he insists on maintaining the status quo.
Learn more: Obama campaign site, McCain campaign site, Public Citizen, Third World Network
5. DETERIORATING INFRASTRUCTURE
Aging and overburdened infrastructure threatens the economy and quality of life in every state in the nation. The problem was thrown into sharp relief in recent years, with the Northeast blackout of 2003, the failure of New Orleans' levee system during Hurricane Katrina and the collapse of the I-35 overpass in Minnesota that killed 13 people in 2007. According to the American Society of Civil Engineers, $1.6 trillion is required to "bring the nation's infrastructure to a good condition."
Solution: Elect officials who will prioritize infrastructure investment over tax savings.
Obama's position: Barack Obama has called for the creation of a National Infrastructure Reinvestment Bank that would invest $60 billion per year over 10 years for transportation infrastructure projects across the nation. His campaign claims, "These projects will create up to 2 million new direct and indirect jobs per year and stimulate approximately $35 billion per year in new economic activity." He has also called for the investment of $150 billion over the next 10 years for new "green" energy infrastructure. He has promised to pay for these programs with savings gained by ending the war in Iraq.
McCain's position: McCain has been largely silent on this issue. He has said that "earmark" reform -- cutting pet projects -- could free up resources to invest in better science education and new teachers. He opposes the creation of a National Infrastructure Reinvestment Bank. Before launching his bid for the White House, McCain sat on the Senate Committee on Commerce, Science, and Transportation, a key committee dealing with infrastructure issues that has had a key role in determining the government's infrastructural priorities.
Learn more: American Society of Civil Engineers, Apollo Alliance.
6. EQUAL PAY
Women make only 77 cents for every dollar a man makes, and the Institute for Women's Policy Research in Washington, D.C., estimates that, if progress continues at its current rate, it will take until 2057 for the gender wage gap to close.
Solution: Expand enforcement of the Equal Pay Act.
Obama's position: Obama is a strong advocate of gender pay equity. He supports improving women's economic situations at every level, from strengthening the Equal Pay Act to increasing investments in women-run small businesses.
McCain's position: McCain has said publicly that he supports equal pay for equal work, but his legislative record shows otherwise. McCain opposed a recent Senate bill, the Lilly Ledbetter Fair Pay Act, seeking equal pay for women. The bill would have made it easier for women to sue their employers for pay discrimination.
Learn more: 9to5, National Association of Working Women, National Committee on Pay Equity, Women's Institute for Secure Retirement
7. PAID FAMILY LEAVE AND WORKPLACE FLEXIBILITY
The United States is the only industrialized country that does not provide workers with paid maternity/paternity leave. This, combined with other discriminatory workplace policies, can make work-life balance nearly impossible for women.
Solution: Create more family-friendly workplace policies and expand the Family and Medical Leave Act.
Obama's position: Obama strongly supports expanding the Family and Medical Leave Act and wants states to adopt paid-leave systems. He has proposed providing $1.5 billion in aid to states to assist in start-up costs for instituting a paid-leave system.
McCain's position: McCain voted to pass the original Family and Medical Leave Act in 1993. Since then, he has remained silent on the issue.
Learn more: National Partnership for Women and Families, Moms Rising, Progressive States Network
8. MINIMUM WAGE
In 2008, the nation's minimum wage was worth about 20 percent less, when adjusted for inflation, than it was in 1979. According to the Economic Policy Institute, "Evidence from an analysis of the 1996-97 minimum wage increase shows that the average minimum wage worker brings home more than half (54 percent) of his or her family's weekly earnings."
Solution: Raising the minimum wage is a crucial step toward pulling working families out of poverty. Of the workers who would benefit from a raise in the federal minimum wage, 53 percent are full-time workers.
Obama's position: Obama has voted for minimum wage increases. He is also a co-sponsor of the Global Poverty Act, which aims to cut extreme global poverty in half by 2015 -- an outcome that would greatly benefit women, thereby also helping families and communities.
McCain's position: McCain has voted both for and against minimum wage increases. McCain did vote to increase the minimum wage in February 2007; however, historically, he has voted against minimum wage increases.
Learn more: The PEW Forum on Religion and Public Life, Economic Policy Institute
9. TAXES AND DEFICITS
Tax cuts targeted at the wealthiest Americans during a period of runaway spending -- with hundreds of billions of tax dollars spent on the wars in Iraq and Afghanistan -- have resulted in massive federal deficits. In July, the New York Times reported that the Bush White House announced that it would "leave a record $482 billion deficit to his successor, a sobering turnabout in the nation's fiscal condition from 2001, when Mr. Bush took office after three consecutive years of budget surpluses."
Solution: Return the tax rates for top earners to their Clinton-era levels, and offer tax relief to struggling families. Rein in spending, preferably on the occupation of Iraq and Afghanistan, which are "sunk costs" rather than investments in America's economic future.
Obama's position: Obama has called for a withdrawal of most (but not all) troops from Iraq in his first term. According to an analysis of his tax plan by the Tax Policy Center, Obama would cut taxes on the 95 percent of filers who make less than $227,000 per year, and raise taxes on the 5 percent who exceed that number. Compared with current policy, Obama's tax plan would increase government revenues by $627 billion over the next 10 years.
McCain's position: McCain's plan would cut taxes on top earners by $23,000 per year. He would also cut taxes for all other Americans, but his cuts would only be deeper than Obama's for those earning between $112,000 and 227,000 -- about 20 percent of the population. Compared with current policy, McCain's tax plan would decrease government revenues by $595 billion over the next 10 years.
Learn more: Tax Policy Center, Center on Budget and Policy Priorities
© 2008 Independent Media Institute. All rights reserved.
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