81 year old Dorli Rainey after being pepper sprayed by police at Occupy Seattle.

I wonder who she raped and what drugs she did?

So Much for States Rights

Republicans claim to be in favor of local control and states rights, but you wouldn't realize it from their ham-handed efforts to use the federal government to prevent states from controlling their own destinies.

Wednesday the House of Representatives passed the "National Right-to-Carry Reciprocity Act," a bill that would force all states to recognize the concealed gun permits that other states issue. This law is controversial because some states allow just about anyone to carry guns, including former felons.

Republicans are also behind efforts to override state laws that prevent out-of-state insurance companies from offering insurance to citizens in states where the company has no real presence (and hence no real ability to provide the services the customer is paying for).

Republicans in the Bush administration were also responsible for the No Child Left Behind law, which was perhaps one of the most intrusive federal mandates into local control of education since federally mandated busing to end school segregation.

They've also been trying for years to pass a constitutional amendment to outlaw gay marriage, forcing federal control over state marriage laws.

Republicans want to force state reciprocity for concealed weapons, but forbid it for openly gay marriages.

Allowing any clown to carry a loaded gun on their person anywhere they go is simply a dumb idea. Remember Plaxico Burress, the football player who shot himself in the thigh when the Glock tucked in the waistband of his sweatpants started sliding down his leg?

If this bill becomes law there won't be a plague of deaths across the land. And neither will those concealed weapons stop any significant number of crimes. But it's just unwise. Even Tombstone, Arizona in Wyatt Earp's day had stricter gun laws than they do today. If this law passes, some number of Americans, maybe 20, 50 or 100 per year, will be shot or killed because some nitwit brought a gun into a place where he shouldn't have. It's just a needless waste of blood and money and time.

The most galling thing about this is how Republicans so shamelessly forget their states rights mantra every time it comes to them forcing what they want on the rest of the country. To be sure, Democrats have variously backed local control for some things and federal mandates for others. But they've never claimed to have a rigidly simplistic and pure ideological stance proclaiming states rights are so completely inalienable that guys like Rick Perry think Texas should be able to secede from the Union if their tender sensibilities are offended.

Democrats have always contended that issues can be complicated, and some things are handled better locally while others are handled nationally. And they also acknowledge that, as technology and society change, the balance changes, things get more complicated or simplified and the way we do things may need to change.

The simple fact is, different people in different places and different situations need different things. A rancher in snake-infested Arizona near the Mexican border has very good reasons to carry a loaded weapon. A football player going into a New York City club -- most likely ferried door-to-door via limo from his posh lodgings -- has no business carrying a gun into a place filled with drunks.

Untrained amateurs carrying loaded weapons in crowded places are a demonstrably greater danger to themselves and the innocent people around them than they are a deterrent to any would-be assailants. Hand guns fired in haste are notoriously inaccurate, and bystanders are very likely to be hit instead of the target. Anyone gunning for Plaxico in that club would shoot him first, in the back, from cover, and then disappear into the crowd very possibly without anyone even seeing them in the mass confusion. Liberal concealed carry laws make the assassin's job that much easier.

People should be able to have guns to hunt, for target shooting, for collections, and to protect their homes (though, honestly, you're much more likely to have it stolen, shoot a family member or commit suicide with it than deter an intruder). If you live in the middle of nowhere it's no big deal carrying a gun in your glove compartment to fend off the coyotes dogging your sheep. But cities like Washington, New York and Chicago should be able to regulate gun usage as they see fit, within reason, just as Cochise County should be able to.

Forcing New York to abide by Cochise County's gun laws makes as much sense as forcing Cochise County to abide by New York's parking laws.

Under this law, would a church or women's shelter have no right to prevent an abusive spouse from out of state from entering their building with a loaded weapon?

Why stop at gun laws? Why not make all states recognize lawyers who've passed the bar in other states? If I live in Texas  If prostitution is legal in Nevada, why can't Nevada prostitutes ply their trade in Omaha? If California decriminalized marijuana use, Californians should be able to smoke weed on the steps of the Mormon Tabernacle in Salt Lake City, right?

One of the basic institutions of our legal system is that everyone is treated the same. With this law would that be the case? Could someone from Texas go into a bar with a gun, while someone from New York could be arrested the instant they set foot in the very same joint?

When someone comes into your home, they have to play by your rules. Isn't that the conservative way? Why should people with guns have more rights than the rest of us?

Temporarily Inconvenienced Millionaires

Yesterday, the Patriotic Millionaires, a growing group of wealthy individuals who are demanding that Congress raise their taxes, went to Congress and pestered the offices of Senators John Kyl, R-AZ, and Pat Toomey, R-Pa., Reps. Nancy Pelosi, D-Calif., minority leader, Xavier Becerra, D-Calif., and Jim Clyburn, D-S.C., assistant democratic leader.

They were led by entrepreneur and former AOL exec Charlie Fink who apparently didn't get the memo that innovators and the wealthy are under attack by vicious government regulators and idiotic moochers all bent on taking the fruits of their hard earned labor with the butt of a gun. Shit, man, didn't this Fink guy see what happened to Steve Jobs and Apple? The US federal government destroyed him.

Fink, who lives in Washington, D.C., said if the Bush tax cuts do not expire, the country "is digging itself a big hole by foregoing revenue." "Without revenue, we will never solve the problem by giving tax cuts to the wealthy while supporting two foreign wars," he said.

Patriotic Millionaire Robert Johnson, former chief economist of the U.S Senate banking committee, said that the current economic system is not broken, but it is "working on behalf of those who designed it in their favor."

"America is no longer based on markets and capitalism, instead our economy is designed as 'socialism for the rich' – it is designed to ensure that the wealthiest people take all of the gains, while regular Americans cover any losses," he said at a press conference this afternoon in Washington, D.C.

"It's a Las Vegas economy where regular Americans put their money on the table and the richest 1 percent own the house," he said. "And if the 1 percent happen to lose money, the 99 percent bails them out – covers their losses and then stands by watching while the house does it all over again."

Amen, brother.

Of course, the response to these simple facts usually consists of any or all of four of the following. First, the wealthy pay more than half of the total taxes. Second, their portion or responsibility of total revenue has doubled over the last 30 years. Third, half of Americans pay no taxes. Fourth, the wealthy pay a higher ratio of taxes paid to income earned than any other country.

All of their points are true but, as is usually the case, they leave out information and don't tell the whole story. A recent article in The Christian Science Monitor explains all of this in a very balanced way. Here are four graphics that take a serious and critical look at the whole picture.

In looking at all of this information, it's obvious that the various cheerleaders for the wealthy (or at least only some of them now that Buffet and the PMs are out lobbying to have their taxes raised) are not being honest. No one is denying that the half of the story they are telling is true. It's the other half that brings out the technicolor and shows us that we have some very serious problems with the way our country is being run by both public and private leaders. As Mr. Johnson said above, it's "socialism for the rich" and no longer capitalism. But why is it this way? How can people (and I'm speaking specifically of a few my regular commenters here in addition to the 40 percent of this country who votes GOP) who aren't wealthy continue to support Bizarro Capitalism? Sadly, the answer is simple.

Because they view themselves as temporarily inconvenienced millionaires.

No Shit

Well?

We had a few elections last week that produced some interesting results.

First up was Ohio's rejection of Proposition 2 which would have limited collective bargaining rights. 61% of the voters rejected it so that's more than a simple majority.

In Mississippi, over 55 percent of voters rejected that a fertilized egg is a person in voting against the so called "Personhood" amendment.

And in Arizona, Russell Pearce, the man who wrote SB 1070, became the first ever Arizona legislator to be recalled by a vote of 53 to 45 percent.

Now, I've been told by several of my readers that elections send clear messages. What do these three elections mean?

A Bankrupt Bankruptcy System

Mitt Romney talks a lot about being a "job creator," but he's destroyed a lot of jobs in his career as a private equity capitalist. A recent article in the New York Times details his adventures with Dade International, a Florida medical company.

Bain Capital bought Dade International  in 1994 with mostly borrowed money. They then bought two competitors, including a German company, and laid off more than 1700 American employees.

After mucking around with Dade for five years, closing plants, relocating workers to other plants and then closing those, eliminating the pension plan, and so on, Bain decided to cash out:

Bain settled on a common tactic in private equity: In April 1999, it pushed Dade to borrow hundreds of millions of dollars to buy half of Bain’s shares in the company — and half of those of its investment partners. 

Bain pocketed the $242 million. Goldman received $121 million. Top Dade executives got $55 million, records show. The total payout to shareholders reached $420 million — nearly as much as the purchase price for Dade.

Romney and Bain essentially milked Dade for hundreds of millions of dollars, saddling Dade with billions in debt. Then interest rates rose, the euro's value slid, and Dade got into trouble.

Creditors, unsettled by deteriorating finances and high debts, began to pounce. More layoffs followed. And in August of 2002, Dade filed for bankruptcy protection.

The creditors threatened litigation against Bain and its investment partners, accusing them of “professional negligence” and “unjust enrichment,” according to bankruptcy documents. 

Bain and the other investors argued that the claims were baseless, but agreed to forgo about $68 million owed to them by Dade. And seven years after buying the company, Bain forfeited its remaining ownership stake. 

Dade emerged from bankruptcy two months later and the stock soon began trading publicly.
Over the next four years, its revenues and share price surged, and in 2007, Siemens, the German conglomerate, paid $7 billion to buy Dade Behring. The Dade name disappeared, but the company survived.

Romney and Bain drove Dade into bankruptcy. They essentially stole money from Dade's creditors, laundering it through Dade and the bankruptcy court. (Romney had already ditched Bain to work on the Olympic Games when Dade went belly up, but he profited handsomely from the deal.)

In 2005 the Republican Congress passed a new bankruptcy law making it much harder for consumers to declare bankruptcy. This was supposed to reduce interest rates because creditors would have fewer losses. That didn't pan out, but credit card company profits have soared. More money is flowing to fewer people.

On the one hand wealthy people like Romney and Bain are able to use the bankruptcy system to make big scores by forcing acquired companies to fail. On the other hand, when regular folks got into trouble, giant credit card companies snapped their fingers and George Bush and the Republican Congress did their bidding to make it harder for the little people to get out of financial hardship.

When corporations go bankrupt there are really no consequences for the guys who are at fault. The entire purpose of a corporation is to remove any kind of personal liability for their actions. Unless they commit actual crimes, they don't have to pay for their mistakes. None of their personal property is at risk, and all the cash they ripped off -- excuse me, their lavish salaries and profits from stock sold before the company nosedived -- is untouchable. If they use borrowed money, like Romney and Bain did with Dade, there are almost no financial consequences for them. But the people who loaned them the money, for example, pension funds or 401K funds, lose everything.

When regular folks go bankrupt they are completely hosed. They lose their house, car, life savings, child's college funds, stereo, TV. Everything that can be sold off for cash is lost. And one of the most common causes of bankruptcy is medical costs, which means these people are often sick and can't work, so it's impossible to get back on their feet and get medical insurance again.

In the worst case, takeover artists who've bankrupted a company like Dade themselves have to declare bankruptcy. But then they can incorporate under a new name, buy up another company, force production into foreign countries, trash the American subsidiary, then milk the company for all it's worth and bail, leaving another few thousand Americans out of work.

This double standard of rich vs. poor in the bankruptcy system is yet another example of class warfare being waged on the poor and middle class.

They Really Said That?

If we re-elect Barack Obama, Iran will get a nuclear weapon. If we elect Mitt Romney, Iran will not.---------GOP Contender Mitt Romney.

The ‘Great Society’ has not worked and it’s put us into the modern welfare state. If you look at China, they don’t have food stamps. If you look at China, they’re in a very different situation. They save for their own retirement security…They don’t have the modern welfare state and China’s growing. And so what I would do is look at the programs that LBJ gave us with the Great Society and they’d be gone.-------GOP Contender Michele Bachmann

Regarding the first quote, I'm please to see that Mitt is not resorting to fear mongering.

Regarding the second quote, I...well...there's nothing else I could add to it really, right?

Humbled

Once in a while, I'll read something that humbles me to the point of bowing my head in shame. The recent piece in the Washington Post by Thomas Day, an Iraq War veteran, Penn State Graduate and product of the Second Mile Foundation (the organization started by accused child molester Jerry Sandusky) has done that at a level I didn't think possible.

His voice perfectly summarizes the last decade in this country and how all of us that are older have failed him. Sure, he points the finger at a few very specific people but it's really the elders as a whole that have destroyed his faith. Even though I don't know Thomas Day, as an educator of the next generation, I'm still responsible. His words are damning, as well they should be, and we must heed them.

Why Can't More Americans Be Like These Folks?

All of the debate about the role of government would be null and void if more Americans were like this guy. And these folks.

Truly amazing stories and great examples of how the little guy does actually have some power if they dedicate some time and patience to this stuff. But this brings up a larger issue.

Certainly, the right wing media industrial complex would applaud these individuals for assuming responsibility for themselves and their circumstances and getting the job done. I'm wondering why they aren't that way with the Occupy Wall Street Movement? Up to this point, the right has largely painted the OWS folks as socialist hippies who want the government to run everything. Yet, this movement has essentially been saying the same thing as the Tea Party and, like Patrick Rodgers, Wayne Nyerges, and Maureen Collier have taken it upon themselves to work outside of the government and stick it to the banks.

In the past month, 650,000 people have transferred their money from the big banks that the OWS movement are protesting to smaller banks and credit unions. Part of this is due to the new fees that banks have been adding but the other part is due to the OWS movement. Early estimates indicate that the banks have taken a couple of billion dollar hit from this change. This isn't a large amount when you consider all their transactions but it's not chump change either.

So, I'm wondering...what's the problem? Pastor Ed and Doctor Sean were absolutely apoplectic about the OWS movement calling for people to transfer their money. "Our economy will collapse!!!" they both screamed at me last weekend at the gum. I don't get it. The government wasn't forcing anyone to do anything. This is simply a movement of people exercising free will and participating in a free market choice.

Why Can't More Americans Be Like These Folks?

We Will Never Forget Your Sacrifice

So Long, Joe

Yesteday Penn State fired Joe Paterno. Last night Penn State students rioted. They damaged public and private property and assaulted police.

The most common sentiment was that Joe "didn't do anything." On the contrary: he participated in a coverup of the rape of a child. This conspiracy of silence allowed the perpetrator to escape detection and go on to assault other children.

I can understand why some nobody, like the assistant who actually found Sandusky in flagrante delicto with the kid in the shower, would report the incident to higher-ups and let them deal with the police. But Paterno was Sandusky's boss and the symbol of the football program. He was the one with the moral authority -- he always claimed morality and ethics were an integral part of his program -- to make sure that Penn State football wasn't sullied by the actions of one scumbag. But he just kicked the report up the chain and buttoned his lip.

Joe Paterno doesn't deny any of the facts. He helped a felon escape justice. By his own moral and ethical compass, he knew he had to go. That's why he announced he would retire after this season. But the board knew that wasn't good enough and made Joe play by his own rules.

Had this incident occurred at some no-name Division III track program there would be absolutely no question that the parties involved would be fired, and that everyone would agree it was the right decision. But because this is football and Joe Paterno is the figurehead of an iconic institution, a lot of angry students think he should get a pass.

What the angry mob doesn't understand is that their idolizing of Parterno and Penn State football caused this. Putting people and institutions on pedestals fills them with hubris and lets them think that they are above the law. They come to think of themselves and their program as more important than the rights of individuals, and if some little people are hurt to preserve the image of the leader and the program it's justified because the leader and the program are so moral and ethical. Which, when you think of it that way, makes it seem even more corrupt and self-serving than it already does.

If you still think Paterno was wronged, try replacing "Joe Paterno" with "archbishop" and "Penn State" with "Catholic Church." I mean, some people do claim Penn State football as their religion but this is carrying a little too far.

Let Them Eat Cake

I've been talking for quite awhile on here about the one percent of this country and how they really seem to be tone deaf when it comes to the other 99 percent. Worse are the folks who scream about socialist revolutions and yet shit all over the people (the president, many Democrats in Congress) trying to prevent such an uprising.

But I never thought that the wealthy of this country would stoop to a level as low as this. Take a look at these photos.

These images are from a Halloween Party last year at the law firm of Steven J. Baum in New York. Party goers dressed up like people who have had their homes foreclosed amid a "tent city" that was set up in the office for people to go flap to flap and trick or treat. Baum represents banks and mortgage servicers in their foreclosure proceedings. It is the largest firm in New York and represents Citigroup, JPMorgan Chase, Bank of America and Wells Fargo.

At first, I simply couldn't believe that people would be this heartless. Then I realized that this these modern day Marie Antoinettes are really that fucking awful. And clueless. Who the fuck do they think caused all of this to begin with? THEIR clients. If anything, they should be dressing up as bankers and financial sector "whizes" who busted our country out like the mafia.

I guess the capacity to blame the victim is infinite.

Open Season on the Poor

Every time anyone talks about raising taxes on the rich, people like Rush Limbaugh and Ann Coulter start screaming "class warfare" at the top of their lungs. The thing is, the rich have been waging class warfare on the poor for years. Here's the latest example of the trend, which has the distinct possibility of blowing up like the housing bubble.

A recent story in the LA Times reports on a chain of used car dealerships called "Buy Here Pay Here." They specialize in selling junker cars to poor people at exorbitant interest rates. Until recently, responsible investors wouldn't touch these outfits with a ten-foot pole: a quarter of the loans go into default. But in May the private equity firm Altamount Capital Partners in Palo Alto bought the J. D. Byrider chain of used car dealerships for $50 million.

Private equity firms in California used to invest in computer companies, bio-tech firms, Internet startups and other high-tech ventures that would create completely new industries and more jobs. But they've moved on to greener pastures. From the LA Times article:

The dealerships make an average profit of 38% on each sale, according to the National Alliance of Buy Here Pay Here Dealers. That's more than double the profit margin of conventional retail car chains like AutoNation Inc. 

"The amount of return from these loans you can't get on Wall Street. You can't get it anywhere," said Michael Diaz, national sales manager for Small Dealers Assistance Inc. in Atlanta, which buys loans originated by Buy Here Pay Here dealers. "It's the gift that keeps giving."

Although they're backed mainly by installment contracts signed by people who can't even qualify for a credit card, most of these bonds have been rated investment grade. Many have received the highest rating: AAA.

That's because rating firms believe that with tens of thousands of loans lumped together, the securities are safe even if some of the loans prove worthless.

Where have we heard this scam before?

Buy Here Pay Here is also being boosted by one of the sophisticated financial strategies that drove the nation's recent housing boom and bust: securitization. Loans on decade-old clunkers are being bundled into securities, just as subprime mortgages were a few years ago. In the last two years, investors have bought more than $15 billion in subprime auto securities.

So, just like at the beginning of the housing bubble, we have big banks and investors figuring out a new way to take money away from people who don't have any and then passing the bad loans on to someone else. But this scam is even worse, because the interest rates on these loans can be just about anything. For example, one Buy Here Pay Here dealership charges 14.9% interest.

Now, that's a really high interest rate. You can generally get home mortgages -- if you can qualify -- for 2.5 to 4%. For comparison, if you get a certificate of deposit from a bank a typical return is currently 1% for one-year CD to 2.5% for a five-year CD. But Buy Here Pay Car Lots doesn't shrink from the fact that they're screwing you. They brag about it:

So, are interest rates high at buy here pay here car lots? Well, what do you call high? We charge 14.9%. That’s more than you’ll pay on your mortgage–if you can still get one. It’s very likely what you’ll pay on a credit card balance–with one huge difference. The card issuer would love to see you stretch out payments forever. Any buy here pay here dealer that I know wants you to pay off in a couple of years at most. What’s that mean? Well, compare the following two loans. 

 $5,000 credit card balance at 14.9% over 10 years. 

Payment = $80.36 a month, but total interest paid over the life of the loan is $4,643.39. 

$5,000 car loan at 14.9% over 2 years. 

Payment = $242.20 a month, but total interest paid over the life of the loan is $812.70.

Seriously. Who is really milking the consumer here, you[r] local car dealer, or Citibank?

Of course they can't stretch the loan out over 10 years. The junkers they sell don't last 10 years, so they have to pry the money out of your hands right now or they'll wind up repoing a useless heap when it breaks down and you stop repaying them.

What these Buy Here Pay Here companies don't tell you is that if your credit rating is good enough to get the right kind of credit card, you can pay off your balance in two years or one year, or six months, or one month, with no penalty and even no interest. But they neglect to mention that their car loan contracts usually have prepayment penalties.

Their rationale for charging high interest rates is essentially: "The big banks are screwing you, so we're going to screw you too. We're just screwing you faster: instead of a long, leisurely weekend dalliance, we give you quickie in the backseat of your car."

You can just see how this will play out when this house of cards collapses and some big bank goes bust when these "AAA" securities fail. Limbaugh and Coulter will blame those worthless scumbags and leeches for taking out loans that they can't pay, and the rest of us have to suffer for it. But the real leeches are the loan sharks making loans to poor people that they fully expect will default on the loan?

In the olden days the local used car dealer or loan shark profited from your misery. Now that these BHPH dealerships are being bought up as by venture capitalists and their loans are being repackaged as Wall Street investment instruments, Citibank or some other giant out-of-state investment firm is getting your money. That raises another issue: out-of-state banks don't have to abide by state interest rate limits.

Many states used to have limits on interest rates (in Minnesota's case it was 12%). Marquette National Bank of Minneapolis sued First National of Omaha when FNO started offering cards in Minnesota at a higher interest rate. In 1978 the Supreme Court decided against Marquette, preventing states from imposing interest rate limits on national banks. Which is why so many banks moved their credit card operations to North Dakota, and interest rates have often been as high as 18 and 21%.

What about states' rights? Local control? Christians should be outraged by this: usury is condemned by the Bible as immoral. The First Council of Nicaea and subsequent ecumenical councils forbade usury and charging interest greater than 1% per month. If we want our state to abide by Christian precepts dating back to the founding of the Church, the big bad federal government steps in and stops us.

This is just one more example where more and more money is flowing into fewer and fewer hands, most notably the hands of Wall Street bankers. The people who can least afford it wind up paying more for everything: from cashing their paychecks, to buying groceries, to car loans, to furniture, the poor wind up paying more money for less value in every instance. They can't even put their money into a bank because of the fees.

This is why the poor can't pull themselves up by their bootstraps. The ways rich or middle-class people save money are unavailable to the poor. As the old saw goes, it takes money to make money. How much money can you save if your life consists of working three part-time minimum wage jobs 60 hours a week for $25K a year, driving a BHPH-financed junker that keeps breaking down, living in an overpriced and underheated roach-infested apartment, getting your kids' beds and the living room couch and the TV from the RentaCenter down the street for three times their actual value, buying the kids Fruit Loops at the the local convenience store for twice what the Publix in the suburbs charges, having to pay a couple hundred bucks out of pocket (because you've got no health insurance) every time your kids start puking their guts out or screaming bloody murder because of an ear infection?

If the poor were getting hammered by just one of these problems they might be able to find a way out. But every way they turn they're getting nickeled and dimed to death by people who make a lot more money than they do. What's worse, more and more middle class people are losing their jobs, and they're being pushed down the same hole that the working poor have been living in for decades. And the guys at the top keep raking more and more money in, concentrating it in fewer and fewer hands.

Nope, Limbaugh and Coulter are right when they say they aren't engaging in class warfare. Warfare implies some kind of roughly symmetrical conflict. The wealthy have simply declared open season the poor.

Her Ignorance Is As Good As My Knowledge

The most horrifying part of this video is when she talks about brainwashing. Heaven help us...

My Wife Shrugs

My wife just finished reading Atlas Shrugged by Ayn Rand. It was given to her by my brother-in-law who considers it "his Bible." I asked her what she thought about it and this was our conversation.

"Are there actually people out there that think these characters are real?" she asked me.
"Which characters"
"The ones that make up most of society in this book...Rand's users and the mooches who take advantage of all the creative innovators."
"Uh...yeah."
"You mean that's how people who post on your site view people who collect Social Security?"
"Yep."
"Good Lord..."

The expression on her face made me realize how truly deluded the perception is of far too many people in this country. They actually think that people who are participate in government programs are dragging down our society. It also helped me to understand why blue collar folks are conservative. They are all under the horribly mistaken impression that our government is driving away innovators when, in fact, the exact opposite is true.

Just ask Bill Gates, Steve Jobs, and Mark Zuckerberg.

Remember This?

A 500 percent tax? Oh, I see...yet another bullshit lie.

But I do love how the owner of the gun shop kept using the word "scared" over and over again. Ah, the free market at work:)

Any of you folks who rushed out to buy guns feel foolish right now? We're almost three years into Obama's presidency and he's allowed states to do what they want. In addition, he's actually increased gun owner's rights by signing the credit card protection bill which contained a clause in it to allow people to carry loaded guns into national parks and wildlife refuges. So, all that fret and worry was for absolutely nothing.

I wonder if some of the other things they froth at the mouth about will also amount to one gigantic nothing like this did. Hmmm....

They Don't Have Any

We saw some good economic news this week as GDP grew 2.5 percent in the third quarter of 2011 and around 100,000 jobs were added bringing the unemployment rate down to 9.0 percent. Certainly, neither number is thrilling. The reason?

Ideally, those trends could signal stronger growth, followed by more hiring. Yet until consumers consistently spend more, businesses are unlikely to hire enough to drive down unemployment.

What's that again, you say?

Many employers are hesitant to step up hiring until they see steady demand from consumers.

So it's not some phantom uncertainty that's being caused by President Obama's policies but the simple fact that consumer spending (70 percent of our economy) isn't where it should be for any real improvement. Why aren't they spending money?

They don't have any.

The Empire Strikes Out

Bank of America has struck out with its controversial plan to charge debit card customers $5 a month just to use their money. When customers complained and started to cancel their BoA accounts, many in favor of local credit unions, Bank of America dropped the plan.

Bank of America had to do this, they insisted, because of a law Congress passed that limits "swipe fees," the fees the banks charge retailers when you use your debit card. The regulation limits the swipe fee to 21 cents; swipe fees had averaged 44 cents before the regulation went into effect last month. (The original proposal was a 12-cent swipe fee, but regulators were convinced that was too low.)

I can remember a time when banks actually paid me to keep my money there. These days interest rates are essentially zero and the banks have fees for every imaginable thing -- depositing money, withdrawing money, talking to a teller, using ATMs, having a checking account, and on and on. (Banks are charging more fees because they're not making money the way they used to, by making loans.) Most of these fees can be avoided by maintaining minimum balances that can range up to tens of thousands of dollars. But that means people who don't have a lot of money wind up spending a lot of money just to have access to a bank account.

People who can't afford a bank account often have to pay companies just to cash their paychecks. These outfits frequently charge a lot for the privilege, and often make shady pay-day loans at exorbitant interest rates. For all the bad things Wal-Mart has done, this is one area where they may well have helped people out: they charge just $3.00 for cashing payroll checks.

Fortunately, most local not-for-profit credit unions have some form of a free checking account. Credit unions are basically customer-owned banks. They're often formed for employees of big corporations, union members, or government employees, but many allow anyone to join.

Some critics of the Dodd-Frank bill, whose provisions resulted in the swipe fee regulation, are trumpeting BoA's backtracking on the debit card fee as a victory for the free market. It is, no doubt about it. But this free market win is a direct result of the swipe fee regulation -- without that law, the big banks would have continued to silently charge retailers more than twice as much as they're charging now. That's money that we wind up paying in higher prices at the grocery store, gas station and shopping mall. Money that goes not to the retailer, but to some big bank.

The free market can work very well, but only when customers are aware of what's really going on. When banks make their profits in ways that aren't apparent to their customers, their customers can't make informed decisions about which bank provides the best service for the lowest price. The high swipe fees were essentially an extortion racket that allowed the big banks to use their monopoly position to gouge local merchants for providing a convenience option to their customers. This caused invisible price hikes on everything you buy with your debit card. (People who pay cash get socked the worst, but that's a separate issue.)

BoA figured it was their right to maintain their current profit margin by charging their customers directly for something that they had been making money on through transactions hidden from their customers. Their customers disagreed.

In the short run we probably won't see any price cuts at the checkout counter. But in the long haul the cost of doing business will be lower for merchants and that will ultimately result in more money staying local, resulting in healthier local businesses and more local hiring. Which seems better than sending all that extra money off to the banks so that they can give their execs more outrageous bonuses.

Nice

The Turning Tide

I saw this recently and just about fell out of my chair.

A new survey from Spectrem Group found that 68% of millionaires (those with investments of $1 million or more) support raising taxes on those with $1 million or more in income. Fully 61% of those with net worths of $5 million or more support the tax on million-plus earners.

Holy Shee-aht! My initial shock was that it was even published at all in the Wall Street Journal. After that wore off, I was pleasantly surprised to see that two thirds of the wealthy now think that raising taxes is a good thing. But why do they support this?

Explains George Walper of Spectrem: “What this tells us is that there are a number of wealthy folks who said: ‘Gee, we need to increase taxes to stimulate the economy. No one likes to be taxed more, but the reality is maybe it has to be done.’ ”

Yep.

Here are some of the comments from the supporters of this increase.

“When you have someone who made four and a half billion pay fifteen percent, and because it’s a hedge fund, I have a problem with that.”

“Quite frankly if Warren Buffett gets taxed an extra fifty thousand dollars or your typical investor of two hundred and fifty [thousand] or larger has to pay an extra thousand dollars in tax; It’s not gonna change his lifestyle. Whatever he or she was gonna buy, he or she is gonna buy.”

I have to say that I am fairly elated that wealthy people in this country are saying things like this. The tide is turning, folks, and it honestly can't happen too soon.