Progressive Mayor supports school vouchers

Bridgeport Mayor Bill Finch

Columnist Rick Green, writing for the Hartford Courant [www.courant.com], notes that a progressive Democratic Mayor is supporting an experiment with education choice. Support for vouchers is really a liberal position - if not a civil rights issue.

Before More Kids Fail, Try School Vouchers
Rick Green
Hartford Courant
April 21, 2009

Bridgeport Mayor Bill Finch isn't crazy about school vouchers.

But the inequality of our failed system of urban education is even less appealing.

Finch, a liberal Democrat and former state senator in his first term as mayor, stunned observers not long ago when he unexpectedly suggested that using public money to pay for children to go to private schools might help his financially strapped city out -- and provide some hope for poor, minority children.

"It's a shock when you become the mayor of a Connecticut city," said Finch, faced with laying off teachers, shutting programs and perhaps even closing schools this year.

"There is no there, there," he said, bluntly describing his city's inability to pay for vital services.

"We could send children to private school in our city for a fraction of what we spend on public schools," he said. "We need to reduce the number of children in the public school system."

Private schools -- and we're talking Catholic schools -- can do the job "just as well," said Finch. His endorsement of vouchers is based in reality, not antipathy toward public education or some new-found belief in the free market.

He's watching another generation fail.

It's as simple as this: We have been unable to come up with a way to fund public education so that our neediest children get what they need.

Finch's schools are growing more crowded while he sees empty seats in parochial schools.

This makes it pretty hard to argue that the system is working.

Education Commissioner Mark McQuillan cautioned me that while "these are desperate moments for Bridgeport," it is not time to turn away from public schools.

"I don't know that vouchers have proved to be a worthy mechanism or tool to assist poor students," he said. "The real issue is not vouchers but to have adequate funding."

This is what a long line of education commissioners, mayors and urban superintendents of schools have concluded for decades. But what do you do when the politicians and the courts can't come up with a better system? While we wait, the nation's biggest achievement gap between whites and minorities only grows wider.

That's the frustration that Finch faces in Bridgeport. At least he's looking for an immediate solution instead of waiting for a court ruling that may never come.

"I perpetuate the creation of an underclass every day I open my [schools] up, because I can't catch up," Finch explained. "I can't get my kids to catch up."

At some point somebody has to be courageous enough to try something else.

We fund schools based on how wealthy a municipality is, not where the need is.

Meanwhile, our future workforce -- the people who will pay for your retirement -- is going to come from Bridgeport, Hartford and New Haven, where the schools are failing.

John Cattelan, director of the Connecticut Federation of Catholic School Parents, said there are about 400 seats open in Catholic schools in the Bridgeport area, with another 1,000 in Hartford.

"This is a way to relieve the financial stress on these municipalities," said Cattelan, who would like to see tax credits for corporations that help fund private school scholarships.

We can declare that it isn't right to use public money at one of Cattelan's Catholic schools.

But then we must accept over-crowded schools and inferior programs for city children who are years behind their suburban counterparts.

It's what voucher advocate Jay Greene, a professor of education reform at the University of Arkansas, calls "a very uncomfortable choice."

"For how long," Greene asked me, "can you say we don't need vouchers because you are going to improve public schools?"

Finch isn't willing to wait. That's far better than pretending we're fixing the problem.

http://www.courant.com/news/local/columnists/hc-rick-green-0421-column,0,1145473.column

SIngle Payer Health Plan Blows Away the Competition

A new TV commercial promoting Medicare for All a/k/a Single Payer Health Care. Our present medical care system is broken. A single payer health plan would provide universal coverage at a lower cost.

Dean Baker on the Need to Tax the Wealthy

After thirty years of class warfare against the middle class, it is time for the wealthy to pay their fair share. Dean Baker makes an excellent case for why we need a tax on financial transactions.

The Need to Tax the Wealthy
By Dean Baker

April 14, 2009, The Economist

This article is a guest opinion on an Economist online debate on whether or not the rich should pay higher taxes.

The quest to increase taxes on the wealthy is not a gratuitous attack on upper income households; it is driven by the need to raise more revenue to run the government. While many deficit hawks been irresponsible in raising fears of an impending collapse of the American government, the projected deficits for years following the recovery are in fact larger than is desirable.

There are areas of American spending at the federal government level that could be reasonably cut, but even after we have zeroed out the "waste, fraud, and abuse" category of federal spending we will still likely need additional revenue of between 1-2%t of GDP to keep budget deficits in an acceptable range. That leaves a choice between increasing taxes on the wealthy or imposing more taxes on the middle class.

The vast majority of the income gains in the United States over the last three decades have gone to the richest 5% of the population, largely as a result of policies that were explicitly designed to redistribute income upwards. Therefore it is far more appropriate to tax the richest 5%t of families who have prospered than the broad middle class who have suffered.

Of course taxes can be designed in a better or worse manner. The best way to increase taxes on the wealthy, in addition to allowing the Bush tax cuts to expire, would be to apply a modest financial transactions tax (FTT).

There is a long history in both the United States and the rest of the world with FTT. Until 1964, the United States imposed a tax of 0.12% on new stock issues and 0.04% on stock trades. Britain still has a tax of 0.25% on each stock sale or purchase, raising five billion pounds a year. This would be equivalent to roughly $30 billion a year in the American economy.

Robert Pollin and I calculated that a scaled set of FTT on stock, futures, options and other financial instruments could raise approximately $150 billion a year. This would go far towards bringing the long-term budget deficit down to a manageable level.

A FTT would be hugely progressive. While many middle income families own stock, their holdings are dwarfed by the holdings of the wealthy. Furthermore, few middle income families are active traders. Their intention is to hold their stock to support their retirement or their kids' education, not to shuffle it around on a daily or hourly basis. Some mutual funds do engage in frequent trading. An FTT would encourage investors to move their money to funds that are less active traders, thereby allowing them to escape most of the impact of the FTT.

Most of the burden of the FTT will fall on wealthy individuals who are active traders and also on the financial industry itself. Either way, the tax will be overwhelmingly borne by the wealthy. By raising the cost of trading, the tax will discourage the trading that provides the revenue for the financial industry. A well-designed tax should also discourage the creation of exotic assets that may serve little useful purpose, since it could lead to the tax being paid multiple times. For example, the holder of an option on a stock would both pay the tax on the purchase and sale of the option and also on the purchase and sale of the stock itself, if the option was ever exercised.

While most taxes impose some economic cost in addition to the revenue raised, a FTT may actually increase economic efficiency. By discouraging financial transactions that are entirely rent-seeking in nature, a FTT will reduce the resources used up by the financial sector, without affecting at all its ability to serve the productive economy. The reduction in trading volume will of course reduce liquidity to some extent, but American financial markets will still be quite liquid. Even with a 0.25% tax on a stock sale or purchase, transaction costs will still only be raised back to their mid-80s levels. And, the United States had a large and very liquid stock market in the 80s.

There also is a powerful element of justice in imposing a FTT in the current situation. The main reason that the budget situation has deteriorated so much in the last two years has been the damage caused by the irresponsibility and greed of the financial industry. In this way, a FTT can be seen as sort of a user tax, where the industry is effectively forced to pay for some of the damage caused by its practices, just as we might like to tax the output of industries that pollute our air or water.

In short, there is a very good argument for increasing taxes on the wealthy given the current budget situation. The alternative is taxing those who are not wealthy. And, there is no better way to tax the wealthy than to tax their gambling in financial markets. A financial transactions tax will raise revenue at the same time that it makes the economy more productive. This is a genuine win-win situation.

http://www.economist.com/debate/days/view/299

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy. He also has a blog on the American Prospect, "Beat the Press," where he discusses the media's coverage of economic issues.

Why don't pro-lifers protest insurance industry's discrimination against expectant mothers ?

We never hear complaints about this from the pro-life movement or the many "pro-life" Republicans in Congress, but insurance companies and HMO's are routinely denying maternity coverage to expectant mothers. Why don't pro-lifers protest the outrageous practices of the insurance industry which provides an incentive for abortion ?

The Miami Herald has uncovered the secret rules of HMO's when it comes to pregnancy. According to a handbook by VISTA, an HMO, it says:

"There is no coverage for maternity and routine newborn charges until the initial 15-month waiting period is satisfied. During the first 15 months from the effective date, no coverage is available for pre-natal, post-natal or delivery charges. For all plans, complications of pregnancy are covered the same as any other illness. If it is determined that conception was prior to the effective date, coverage will be voided, and the premium will be refunded less benefits provided. This also excludes elective abortion."

http://media.miamiherald.com/smedia/2009/03/28/19/Vista_Producer_Guide.source.prod_affiliate.56.pdf

With the passage of the Pregnant Women Support Act sponsored by Senator Bob Casey (D-PA), pregnancy will no longer be a pre-existing condition in American health insurance. It will also eliminate the "abortion incentive" that too many women and families face everyday. This is one of the many reasons why Democrats for Life is working so hard to pass PWSA. We want to bring both sides together to agree that there is much we agree on, and making sure that women who want to carry their child to term shouldn't be coerced to end their pregnancy so they can obtain their health insurance.

www.democratsforlife.org

Ed Show: Bailout Banks Double Dipping (HQ)

There May Be an Answer to Detroit's Problems

Greenpeace Founder Supports Increased Nuclear Power

The Daily Northwestern [http://media.www.dailynorthwestern.com] reports:

When Patrick Moore co-founded Greenpeace International in 1971, he was firmly against the use of nuclear energy to power Americans' lives. Fifteen years later, Moore split from the environmental organization when he began studying nuclear energy more in-depth.

The activist spoke Monday night at the McCormick Tribune Center about America's need to increase its use of nuclear power.

"I lost my fear of nuclear energy when I started studying it more closely," Moore said. "It is one of the safest technologies we ever invented - it's an excellent job-creation technology."

Moore took time during his speech to reflect on his experience with Greenpeace, an organization that is now known for its outspoken advocacy for environmental issues. He said Greenpeace was "quite a ride - we got a lot of things right in the early years."

"In retrospect … we painted 'nuclear' with too broad a brush," Moore said. "We lumped nuclear energy with nuclear war as if 'nuclear' was evil. We were young and enthusiastic and we made the mistake of ignoring the benefits of nuclear energy."

Moore dispelled myths about nuclear energy and discussed the safety and practicality of nuclear technology.

He cited a study which found that 52,000 nuclear plant workers had fewer occurrences of cancer and disease and enjoyed a longer lifespan than that of the general population. The nuclear industry is "safer to work in than real estate and financial services," he said.

Moore is now the co-chairman of the Clean and Safe Energy Coalition and chairman of Greenspirit Strategies.

"I want to promote nuclear energy and this is a vehicle to do it," Moore said. "The purpose of Greenspirit to build a strong grassroots coalition which includes industry labor politicians of all stripes and community leaders to support new nuclear plants."

He said Greenspirit is "based more on science and logic" than Greenpeace, which he said "depends on scare tactics where there's no evidence."

http://media.www.dailynorthwestern.com/media/storage/paper853/news/2009/04/07/Campus/Greenpeace.CoFounder.Lauds.Benefits.Of.Nuclear.Energy-3700036.shtml

Additional resources on nuclear energy:

www.pronucleardemocrats.blogspot.com
http://www.ecolo.org/
http://left-atomics.blogspot.com/

Senator Specter on the Employee Free Choice Act

Senator Arlen Specter (R-PA) was a strong supporter of the Employee Free Choice Act before recently declaring his opposition under intense pressure from corporate lobbyists and fellow Republicans. Specter makes a strong case in 2005 for this pro-middle class legislation and against his present position on EFCA.

Protest The Banks

The Threat of China

Thom Hartmann - Founding Fathers and the Constitution

What is Single Payer ?

China Environmental Practices Cast Pall on Climate Issue

Public Health, U.S. Jobs at Stake in China’s Industrial Spew;

New Report Focuses on Failures of China’s Environmental Regulation

WASHINGTON – With China now among the world’s leading polluters, climate change can not be achieved unless the Administration and Congress hold China accountable for its reckless environmental practices. A new report provides the most in-depth and detailed examination to date of the serious flaws in China’s pollution-control regime and the damage it is doing to human health and global efforts to address climate change.

Released on the eve of a Congressional hearing on climate issues, the report focuses on China’s rapidly growing steel industry, and documents China’s ineffective enforcement of weak pollution-control standards, its failure to use adequate pollution-prevention measures, and the resulting high levels of pollution.

The extensive research was conducted by the Alliance for American Manufacturing (AAM) with a team of environmental and legal experts, including investigators working in China. Last year, AAM released a report by Dr. Usha Haley, of the University of New Haven, that found China’s steel producers have received more than $27 billion in governmental energy subsidies since 2000.

“China’s steel industry is not only harming the health of its own people, but spreading pollution around the world and contributing to global warming,” said Scott Paul, executive director of AAM. “At the same time, China benefits economically from its failure to control pollution, giving it a significant advantage over its foreign competitors.”

“Ironically, China pays a heavy price for the serious harm it is inflicting on its citizens, resources, and environment,” he said. “And we suffer from the damage China is doing to the planet and unfair competition in the steel industry that’s vital to American jobs and our economic future.”

China’s production of steel has quadrupled this decade, making it by far the world’s largest source of steel. It now produces more than the United States, Russia, and Japan combined. And, while China produces one-third of the world’s steel, it is responsible for half of the world’s carbon dioxide from steelmaking, making it a leading contributor to global warming.

Propelled by its rapid industrial expansion and low environmental standards, China has also become one of the world’s biggest polluters. It now produces more sulfur dioxide than any other country, and has taken the lead in generating carbon dioxide as well.

The resulting pollution is taking a heavy toll within China. It causes as many as 750,000 premature deaths in China each year, according to the World Bank, and 99 percent of the 540 million Chinese who live in urban areas breathe unsafe air. But it also raises global threats. According to the Environmental Protection Agency (EPA), on some days, one-fourth of the particulate matter (dust and soot) in Los Angeles comes from China.

Low standards combined with heavy industry investments to expand capacity, as well as poor regulation and enforcement, result in far more pollution from steel plants in China than in the U.S. Although both the Chinese government and leading companies in the steel industry claim they want to address the industry’s environmental problems, the levels of pollution are still three to twenty times higher per ton of steel produced in China than in the U.S., depending on the specific pollutant and industrial process analyzed.

“American jobs are at stake and so is the health of the planet,” said Leo W. Gerard, International President, United Steelworkers (USW). “This report should be used as a guide for China and the U.S. to make Chinese pollution standards and enforcement efforts more consistent with programs in other steel producing countries.”

Gerard will testify on Tuesday, March 24, before Congress at a House Ways and Means hearing on climate issues. The USW represents more than 85,000 active workers in the basic steel industry, plus hundreds of thousands of retired steelworkers who are impacted by the inequities of environmental standards for China steel production.

Perhaps the most glaring example of the huge gap between environmental protection in China and the United States is the resources and personnel devoted to regulation and enforcement. China’s Ministry of Environmental Protection (MEP) has only about 300 employees, compared to the 18,000 who work for its U.S. counterpart, the Environmental Protection Agency (EPA). With few employees, most of whom are confined to Beijing, MEP relies on provincial and local governments to implement generally vague environmental laws. But these local entities often give higher priority to economic growth and employment.

Even if China’s environmental infrastructure was sound, its air and water pollution standards applicable to the steel industry are far less stringent than in the U.S. For existing equipment in integrated steel mills, emission-control standards for particulate matter, for example, are from two to six times more stringent in the U.S., depending on the steelmaking process. Chinese limits on sulfur dioxide are so low that most companies do not need additional pollution-control equipment to meet them.

In addition to low standards, the new report found that “the Chinese steel industry operates in an environment in which enforcement of existing standards is weak, the permit system is ineffective, and facilities do not do an adequate job of monitoring their emissions and discharges. Financial penalties for violations are too low to have a substantial deterrent effect.”

For example, the maximum fine for non-compliance in China is $14,000 for most violations, and repeated violations don’t necessarily lead to additional penalties. By contrast, American companies may incur penalties of as much as $32,500 per day.

Due to China’s low standards and lax enforcement, U.S. steel companies in recent years spent 80% more than their Chinese counterparts per ton of steel –$8.83 vs. $4.85—on controlling air and water pollution alone. This meant a yearly savings for China’s steel sector of more than $1.7 billion at 2006 production levels. With respect to capital expenditures on pollution control equipment, estimates suggest that Chinese steelmakers would have to triple or quadruple their capital expenditures to reduce emissions to U.S. levels.

“This report shows that China does not enforce its own environmental regulations,” said Terrence D. Straub, Senior Vice President, Public Policy & Governmental Affairs, United States Steel Corporation. “Since Beijing has been unwilling to impose reasonable emissions regulations on provincial and local governments, there’s little anticipation that they will address carbon emissions and global climate change either.”

Other factors contributing to the Chinese steel industry’s pollution problems include higher use of energy (20 percent more energy per ton of steel than the international average), a heavy reliance on coal to produce that energy, a large number of smaller steel companies, and low use of recycled steel.

The report said it’s misleading to compare the Chinese steel industry’s practices to those in the U.S. decades ago, before regulations and pollution-control technologies existed. “Environmental technology that is in widespread use today has made the human and environmental impacts of industrial pollution both quantifiable and controllable,” the report noted.

China now has access to “the know-how needed to address effectively the industry’s environmental problems,” the report notes. And if China doesn’t take steps “to bring pollution levels closer to those in the rest of the world, China’s trading partners can justifiably complain that China’s failure to act confers on its domestic steelmaking industry an unfair competitive advantage.”

The Alliance for American Manufacturing is a unique non-partisan, non-profit partnership forged to strengthen manufacturing in the U.S. AAM brings together a select group of America’s leading manufacturers and the United Steelworkers to promote creative policy solutions on priorities such as international trade, energy security, health care, retirement security, currency manipulation, and other issues of mutual concern. For more information: www.americanmanufacturing.org.

Explaining the Employee Free Choice Act

How Unions Can Help Restore the Middle Class

The following testimony on the importance of unions to restoring a solid middle class was given to the Senate Committee on Health, Education, Labor and Pensions on Tuesday, March 10, by Dr. Paula B. Voos, a professor in the School of Management and Labor Relations at Rutgers, and an Economic Policy Institute [www.epi.org] research associate.

Thank you for the invitation to speak today. I am pleased to have the opportunity to consider the role unions can play in rebuilding the American middle class, a matter of utmost importance not only for ending the current economic downturn, but also for our nation in the longer term. As an economist, I have been studying the role unions play in our economy for some time and in 1993-94, I had the opportunity to serve on the Dunlop Commission in its consideration of how labor law should be modernized to serve the “Future of Worker Management Relations in the United States.”

There is now a substantial body of research evidence on the economic impact of U.S. unions. Unions typically:

- Raise the wages of the employees they represent;

- Increase the fringe benefits of those same employees, usually by a greater extent than they increase wages;

- Reduce income inequality within the represented firm, by reducing differentials between low-paid and high-paid employees, men and women, various racial/ethnic groups, younger and older employees, and so forth;

- Increase pay of nonunion workers in occupations and industries with substantial union presence as nonunion employers move closer to union standards;

- Reduce income inequality in the wider society by reducing inequality not only within and between represented firms, but also across entire industries as nonunion employers increase compensation to discourage unionization, all of which strengthens the middle class (Card, Lemieux, and Riddell, 2007).

- Reduce employee turnover by lessening the number of quits (voluntary separations); and

- Thus increase the retention of skilled employees, enhancing human capital and productivity in both the firm and the economy as a whole;

(See Freeman and Medoff, 1984; Bennett and Kaufman, 2007).

Furthermore:

- Because they suffer less turnover, unionized employers have greater incentives for employee training and for high-skill, high commitment human resource policies, rather than low-skill, high-turnover or other “low road” approaches to human resources. Reduced turnover avoids costs to employers but also lessens society’s costs associated with unemployment, such as Food Stamps, uncompensated care and other social programs.

- Union-represented employees have been found to be more productive, on average. This is probably both due to the fact they have more work experience and due to greater employer investments in them and in physical capital (see Doucouliagos and Laroche 2003 for an overview of seventy-three statistically independent studies);

- The nature of the labor-management relationship is crucial in this regard: good union-management relationships are ones that foster high workforce productivity, but workplaces characterized by labor strife and worker resentment—whether union or non-union—do not (Belman, 1992).

- Union employees typically cannot be disciplined or discharged without a reason, termed “just cause.” This assurance of fair treatment is one reason union employees have greater “voice” than non-union employees and typically are more willing to make suggestions or speak up to improve business operations.

The most important reason to improve the ability of employees to organize into unions is that such membership is a fundamental right in democratic societies, related to freedom of association and the right of all human beings to band together to improve their lives. For that reason alone, I would urge you to pass legislation to make real in the U.S. once again the promise of the National Labor Relations Act. Section 1 of that Act puts federal law behind “the practice and procedure of collective bargaining and ... the exercise by workers of the full freedom of association, self-organization, and designation of representatives of their own choosing.” (NLRA Sec. 1).

Nonetheless, some may be concerned with the economic consequences of increased unionization at this moment in time. They should be assured that the economic consequences would be positive. There are two main reasons:

- First, greater union membership would help the United States recover from the current economic downturn and help prevent future economic crises.

- And second, greater union membership would help the United States make the transition to competing internationally on the basis of high productivity, high quality, and innovation, rather than on the basis of low wage labor or long hours - a race to the bottom that we can never win against nations like China.

http://www.epi.org/analysis_and_opinion/entry/how_unions_can_help_restore_the_middle_class/

Dissent Magazine: Our Economy Fails Without Manufacturing

Dean Baker, co-director of the Center for Economic and Policy Research, argues that the United States cannot prosper with a substantial manufacturing sector.

Our Economy Fails Without Manufacturing
By Dean Baker

March 12, 2009, Dissent Magazine

I have often thought that economists should be required to have a better grasp of simple arithmetic. It would prevent them from repeating many silly comments that pass for conventional wisdom, such as that the United States will no longer be a manufacturing country in the future.

Those who know arithmetic can quickly detect the absurdity of this assertion. The implication of course is that the United States will import nearly all of its manufactured goods. The problem is that unless we can find some country that will give us manufactured goods for free forever, we have to find some mechanism to pay for our imports.

The end of manufacturing school argues that we will pay by exporting services. This is where arithmetic is so useful. The volume of U.S. trade in goods is approximately three and half times the volume of its trade in services. If the deficit in goods trade were to continue to expand, we would need an incredible growth rate in both the volume and surplus of service trade and our surplus on this trade in order to get to anything close to balanced trade.

For example, if we lose half of our manufacturing over the next twenty years, and imported services continue to rise at the same pace as the past decade, then we would have to see exports of services rise at an average annual rate of almost 15 percent over the next two decades if we are to have balanced trade in the year 2028.

A 15 percent annual growth rate in service exports is approximately twice the rate of growth in service exports that we have seen over the last decade. It would take a very creative story to explain how we can anticipate the doubling of the growth rate of service exports on a sustained basis.

The story becomes even more fantastic on a closer examination of the services that we export. The largest single item is travel, meaning the money that foreign tourists spend in the United States. This item alone accounts for almost 20 percent of our service exports.

There is nothing wrong with tourism as an industry. However, the idea that U.S. workers are somehow too educated to be doing manufacturing work, but instead will be making the beds, bussing the tables, and cleaning hotel toilets for foreign tourists is a bit laughable. Of course, with the right institutional structure (e.g. strong unions) these jobs can be well-paying jobs, but it is certainly not apparent that they require more skills than manufacturing.

The category “other transportation” accounts for another 10 percent of exported services. These are the fees for freight and port services that importers pay when they bring items into the United States. This service rises when our imports rise. It is effectively money taken out of our consumers’ pockets because it is included in the price of imported goods.

Royalty and licensing fees account for another 17 percent of our service exports. These are the fees that we get countries to tack onto the price of their products due to copyright and patent protection. It might become increasingly difficult to extract these fees as the spread of the Internet increasingly allows more movies, software, and recorded music to be instantly copied and exchanged at zero cost. It’s not clear that the rest of the world is prepared to use police-state tactics to collect revenue for Microsoft and Disney. The drug patent side of this equation is even more dubious. Developing countries are not eager to see their people die so that Pfizer and Merck can get high profits from their drug patents. This component of service exports is likely to come under considerable pressure in future years.

Another major category of service exports is financial services. This category accounted for approximately 10 percent of service exports in recent years. It is questionable whether this share can be maintained in the years ahead. Wall Street had been known as the gold standard of the world financial industry, with the best services and the highest professional standards. As a result of the scandals that have been exposed in the last year, Wall Street no longer has this standing in the world. After all, investors don’t have to come to New York and give their money to Bernie Madoff or Robert Rubin to be ripped off; they can be ripped off almost anywhere in the world. Perhaps the Obama administration will be able to implement reforms in the financial sector that will restore its integrity in the eye of world investors, but that will require serious work at this point.

Finally, there is the category of business and professional services, which accounts for roughly 20 percent of service exports. This is the area of real high-tech and high-end services. It includes computing and managerial consulting.

Rapid growth in this sector would mean more high-end jobs in the United States, but the notion that it could possibly expand enough to support a country without manufacturing is absurd on its face. First, even though it is a large share of service exports, it is only equal to about 0.8 percent of GDP. Even if it quadrupled over the next two decades, it wouldn’t come close to covering the current trade deficit, to say nothing of the increase due to the loss of more manufacturing output.

More important, it is implausible to believe that the United States will be able to dominate this area in the decades ahead. The United States certainly has a head start in sophisticated computer technologies and in some management practices, but it is questionable how long this advantage can be maintained. There are already many world-class computer service companies in India and elsewhere in the developing world, and this number is increasing rapidly.

The computer and software engineers in these countries are every bit as qualified as their U.S. counterparts and are often prepared to work for less than one-tenth of U.S. wages. Furthermore, unlike cars and steel, which are very expensive to transport over long distances, it is costless to ship software anywhere in the world. Given the basic economics, it seems a safe bet that the United States will lose its share in this sector of the world economy. In twenty years it is quite likely that the United States will be a net importer of this category of service, unless of course wages in the United States adjust to world levels.

In short, the idea that the United States can survive without manufacturing is implausible: it implies an absurdly rapid rate of growth of service exports for which there is no historical precedent. Many economists and economic pundits asserted that house prices could keep rising forever in spite of the blatant absurdity of this position. The claim that the U.S. economy can be sustained without a sizable manufacturing sector is an equally absurd proposition.

http://dissentmagazine.org/online.php?id=214
http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/our-economy-fails-without-manufacturing/

Waking Up The "Fiscal Wake-Up" Tour

Rally Against the Insurance Industry

Michael Lind: Obama needs to follow FDR, Eisenhower

Michael Lind explains that no matter what the radical free market types say, public provision of public goods isn't socialism. And Republicans like Dwight D. Eisenhower would agree.

Obama's Timid Liberalism

By Michael Lind, New America Foundation www.newamerica.net

Salon www.salon.com, March 6, 2009

Barack Obama's bold, ambitious budget plan proves that he is the true heir of Franklin Roosevelt and the New Deal. Consider Obama's Rooseveltian energy plan. In 1939, President Roosevelt decided to mobilize Americans to create a new source of energy: atomic power. Although he was urged to focus on government-funded R&D, FDR chose a different route. He wisely encouraged private capital to invest in atomic energy research by a variety of tax incentives. To make atomic power investment more palatable to private capital, FDR boldly chose to make all other forms of energy in the U.S. uneconomical, by slapping high taxes on kerosene and coal. With the money from the new federal Kerosene Cap and Trade system, President Roosevelt and Congress funded a small-scale federal research program, in the hope of attracting much greater private investment ...

Wait. What's that you say? FDR didn't do that? He poured federal money into the all-public Manhattan Project and created the first atomic bomb in a couple of years? He didn't tax kerosene to make it uneconomical and to encourage private investment in atomic power?

Oh. OK. Never mind.

But what about Social Security? In 1935, FDR signed the historic Social Security Act. It created a complex "retirement mandate" system, forcing all elderly Americans to buy expensive annuities from private insurance companies, without, however, imposing price controls on the insurance companies ...

What? FDR didn't force the elderly to subsidize private annuity brokers? He imposed a single, simple, efficient tax to pay for a single, simple, efficient public system of retirement benefits?

All right, then, forget FDR. He was a socialist, anyway. Let Dwight Eisenhower serve as a model for the Obama administration. President Eisenhower authorized the biggest infrastructure program in American history, when he signed the National Interstate and Defense Highways Act of 1956. The interstate highway act created an elaborate system of private tax incentives and public-private partnerships (PPPs) to encourage private corporations to build national highways. To begin with, all U.S. highways were leased to domestic and foreign corporations for a period of decades. Second, all U.S. highways were set up with toll booths, so that American drivers would be forced to repay the corporate owners of the national highways every few dozen miles. Finally, a system of high-speed lanes with higher tolls was created, so that the rich could whiz down the road while middle-class and poor Americans were stuck in traffic jams ...

All right, what now, wise guy? So that's wrong, too? Eisenhower's national highway system wasn't based on tolls, leases to foreign companies, income-based pricing, and tax credits for private corporations? It used gasoline taxes to fund free public highways?

Free highways without toll booths, owned by the public, paid for out of taxes? My God. So the John Birch Society was right after all. Dwight Eisenhower was as much of a socialist as Franklin Delano Roosevelt!

The point of this imaginary monologue is simple. Once upon a time in the United States, public goods -- from retirement security and energy research to public roads -- were provided by the government and paid for by taxes. As late as the Nixon administration, the provision of public goods by government was considered perfectly compatible with a robust market economy by so-called Modern Republicans like Eisenhower and Nixon as well as New Deal Democrats like Roosevelt, Truman, Kennedy and Johnson. In the intervening 40 years, however, free-market fundamentalists of the Chicago School have managed to change the debate, redefining "socialism" to mean not only public ownership of the means of production, but also public provision of public goods.

Rather than fight back, most Democrats in the last generation adapted to this hostile conservative political climate by jettisoning New Deal "big government" liberalism for "market-friendly" neoliberalism. Neoliberals shared the right's enthusiasm for deregulating industries that New Deal Democrats had regulated in the public interest. Jimmy Carter and Ted Kennedy supported the deregulation of trucking and airlines, while Bill Clinton presided over the dismantling of the New Deal era's banking regulations and declared: "The era of big government is over." Neoliberals and conservatives agreed that public goods should be provided by private, for-profit or nonprofit entities, rather than government agencies. If private corporations or universities had no motivation to provide public goods, well, then, they would be bribed with tax credits or other government subsidies.

Neoliberals are liberals in one sense -- they fret about unequal outcomes. But rather than help middle- and low-income Americans by regulating the prices of privately provided public goods, as the crude and direct New Dealers would have done, neoliberal Democrats have argued for allowing the "market" (translation: the publicly subsidized entities) to set prices and then promised to provide tax subsidies or grants to help middle- and low-income Americans pay for the expensive, privately provided public goods.

You might have thought that the Crash of 2008 would have led Democrats to reconsider this neoliberal approach to providing public goods by private means. But to judge from President Obama's budget, the White House is still living back in the neoliberal era, when the diminutive Milton Friedman cast a giant shadow.

Consider Obama's education proposals. The problem with higher education is that it costs way too much. Tuition costs at private universities and some state universities have been growing far more rapidly than inflation. A crude, old-fashioned, old-thinking New Deal liberal would see the problem as one of excessive prices demanded by universities, not insufficient funds on the part of the students whom the universities gouge. The hypothetical New Deal liberal would threaten to deny universities their privileged tax-exempt status unless they spend more of their endowments on tuition and keep their prices affordable.

The neoliberal alternative is to avoid impolite and divisive inquiries into the reasons for skyrocketing tuition costs. That would entail the government concluding that prices in a particular industry (in this case, a nonprofit industry) are too high, something that government should not do. Instead, the taxpayer will be forced to cough up money to help students meet the exorbitant fees. Thus Obama's first budget calls for maintaining the $2,500 New American Opportunity Tax Credit for middle-class students, while converting Pell Grants up to $5,550 into a permanent government entitlement. If I were a university, I'd raise my tuition by ... oh ... let's say $5,550 a year. Government subsidies without government price controls would encourage cost inflation, one might think, but this possibility appears not to bother the brilliant economists on Obama's team.

Then there's energy. The problem with alternative energy sources like solar power and wind power is that they are still too expensive, compared to coal, natural gas and nuclear energy. The answer, according to a minority of enviromentalists like Ted Nordhaus and Michael Shellenberger, should be massive, Manhattan-style public sector R&D to discover ways to bring alternative energy prices down -- in absolute, not just relative, terms, to maintain cheap electricity for American industry and American households. That would be the Roosevelt approach. But the Obama approach is to use a cap-and-trade system to artificially raise the prices of conventional energy, in the hope that private capital (with modest help from public capital) will pay for efforts to invent a cheaper solar cell or wind turbine. The fact that most of the left embraces cap-and-trade should not blind us to the fact that cap-and-trade is a classic example of an indirect, overly complicated, "market-friendly" neoliberal approach, touted originally by conservatives and neoliberals as an alternative to the allegedly discredited "top-down, command-and-control" approach that gave us, among other things, the TVA, the Manhattan Project and the Internet.

And healthcare? The Obama administration deserves credit for trying to reduce prescription drug costs and to promote electronic medical records. Obama's budget director Peter Orszag in particular deserves praise for pointing out that escalating economy-wide healthcare costs, not the Social Security and Medicare costs associated with the aging of the boomer generation as such, represent the real long-term threat to the U.S. economy. Even so, it seems likely that whatever ultimately emerges as the consensus Democratic healthcare plan will be yet another Rube Goldberg scheme for massively subsidizing employers, private health insurers, or both.

I'm sympathetic to the argument that the public, after nearly half a century of conservative anti-government propaganda, will oppose the direct provision of public goods paid for out of straightforward taxation -- the "socialistic" old Eisenhower-Roosevelt approach. It was the conviction that a single-payer healthcare system was politically impossible that led me to endorse the individual mandate system as the next best alternative, in "The Radical Center," a book I co-authored with Ted Halstead in 2001.

But a lot has changed since Wall Street imploded last fall. The great investment banks are gone, the U.S. has nationalized much of the financial system, and appears to be on the way to effectively nationalizing the automobile and housing sectors as well. In this environment, we need to consider some heresies, like the idea that the best way to provide a public good is not necessarily to pour subsidies on middlemen, and then bail them out with more subsidies when they fail at their public function.

The fundamental barrier today is the way that the issues are framed, by Democrats and Republicans alike. Thus the problem is defined not as making credit available for individuals and businesses, but as saving the banks and the shadow banking system. The goal is not to provide healthcare to all citizens, but to enable all citizens to purchase private health insurance. The objective is not to ensure universal access to higher education; it is to insure universal access to colleges and universities. In these and other cases, the means is confused with the end. The ultimate goal -- providing credit, healthcare or education -- is identified with the interests of non-governmental for-profit or nonprofit providers of that service. If these private institutions fail to provide the public service in a low-cost, effective and equitable way, then they must be subsidized even more. The idea of achieving the same public goals through simpler, more direct and efficient means that would cut out the middleman appears to be heresy to the Obama administration.

It's not necessary to nudge the Obama administration leftward until it arrives at socialism. When it comes to the public provision of public goods, Eisenhower Republicanism would be just fine.

http://www.newamerica.net/publications/articles/2009/obamas_timid_liberalism_11559

http://www.salon.com/opinion/feature/2009/03/06/neoliberalism/index.html

Time to Protect American Jobs