INTERESTING CHART

This chart was recently put together by the Federal Reserve of St. Louis. 
It shows, among other things, the fairly simple correlation between jobs (and the tax revenue they produce) and the deficit. When unemployment goes up, the deficit goes up; when unemployment goes down, the deficit goes down. 
So, here's a Pop Quiz: 
(1) What do you think most economists believe is the best thing to do to tackle the deficit? 
(2) What do you think Congress will do?

Americans and Health Care

Here's an interesting tid bit from today's news. In this poll, released Friday, January 21, 2011, it was found that the majority of Americans did NOT want Congress to put Health Care at the top of their agenda, and only 40 percent of them wanted to see it repealed. The majority does NOT want to repeal the health care act of 2010. It turns out that the numbers for repealing the act have never been high, and they have been going down steadily.

It's helpful to point that out because it is not something one would surmise from hearing the heated debate about this in Congress or even the reports on it in the media. This is similar to this CBS poll that came out in September, and this one that came out in December, the week before the vote in Congress to extend the Bush-era tax cuts for the very wealthy. In both instances, people did NOT want an extension of the tax cuts. For all of the heated rhetoric about how the "American people" want this because they don't want taxes for anyone to go up, the surprising fact was that people said just the opposite. The"American people" did NOT want the tax cuts extended to the wealthy and they were even pretty lukewarm about whether their own cuts should be extended.

But, in both cases, members of Congress (frankly, I mean just Republicans, but I'm trying to be fair) still voted against the will of the people, claiming to be voting for what the "American people" wanted. And there are other examples. People want one thing and Congress votes for the opposite claiming a mandate from the people. It is not uncommon.

But how does that happen? How can Congress ignore public opinion and continue to get away with it?

Well, though it has probably happened to some extent since the ancients first began tinkering with voting for their representatives. But it is considerably easier today, for two reasons.

First, the districts for Congressional representatives have been drawn in such a way that the vast majority of the people in their districts are of only one party. So, a Republican, let's say, can know that for the time being in the conceivable future, a will ALWAYS be elected in District "X." Second, the reality of politics today are that in each of the primaries (which have become the only places were meaningful elections are taking place), the largest majority of voters are the true believers, the activists. And for the Republicans, that means a very large number from the radical right wing fringes, the Tea Party, the gun lobby, the religious conservatives, etc. So, when a Republican is running for office, he or she does not need to be concerned about the general national opinions of "Americans." Or even of the more moderate opinions of general Republicans. All he or she needs to appeal to are the far right voters who are going to show up in the primaries. In fact, in Today's climate if a Representative decides to vote too often with the opinions of the vast middle of America, he or she would probably lose out in the next primary because the middle does not represent the voting block that shows up to vote.

Doesn't bode well for Democracy, but then, what else is new?

Stay warm and safe. It's getting cold out there. 

The Economic Meltdown and the Third World

Stan G. Duncan

Years ago I was drinking sangrias at a cock fight outside of Cuernavaca, Mexico, with a guy who had just gotten fired from the Mexican finance ministry (long story, don’t ask).

Among other things we talked about (like why did you take me to a cock fight?) also asked him why he got fired. He said something like, “The US is in a financial crisis, and whenever your economy stumbles, ours collapses. You are like a giant water buffalo and we are the little animals that live in its coat. When you are healthy, we are fine. But if you fall over, or run stupidly into a fire, you get hurt, but we burn up. We are your needed, but unwanted bastard step-child.”

That was a long time ago and the financial crisis passed and now we are in another one. But our conversation has been haunting me as our nation is once again mired in the worst financial briar patch in generations. I wonder how my friend is doing these days?

During the fake money boom years of the US, a better than average amount of money tricked down to the poor and developing countries of the global south, but recently most of that has disappeared. For example, basic credit has dried up and what’s out there cost twice as much. It’s bad for banks in the US but awful for banks in Honduras. Bank lending to emerging markets slid from $410 billion in 2007, to $167 billion in 2008 and will be around $ 60 billion in 2009. A new World Bank study of the effects of the recession on developing countries found that private investments (which is different than loans) fell from $1.2 trillion in 2007 to $707 billion in 2008. And it projects that the inflows will be cut in half this year to just $363 billion.[1] I realize all of this looks like just a bunch of numbers, but in real terms it is about real people. On the ground in real countries it means no schools, no health care, no infrastructure improvement, and many people will die.

The second thing is trade. Developing countries are like export platforms to places like the US and Europe. In Trinidad, for example, exports of commodities account for almost twenty-five percent of their entire GDP. But the World Bank has recently projected that prices for developing country commodities will fall by around twenty-three percent this year. And that doesn’t even count the black hole of tourism this year. Hotels in the Caribbean, a major magnet for tourists, are expecting an eighty-percent drop in occupancy and are offering sixty percent discounts[2] (if you still have a job, this deal’s for you). Imagine what your own life would be like if your income dropped that far in less than a year (no, wait, some of you probably can imagine that).

The third thing is remittances, Those are the extra money that immigrants send home after cleaning toilets in Tulsa or picking watermelons in California. In many countries remittances are so high they are greater than what they receive in foreign aid and they rival the income from their major exports. Remittances make up 24 percent of Guyana’s GDP and 25 percent of Honduras’. Migrant workers sent over $ 8 billion to the Caribbean and $ 11 billion to Central America to support their families during 2006. That is expected to suffer a steep decline this year, probably around a fourteen percent drop.[3] It will be devastating to communities that depend on them.

As if we didn’t need any evidence, a recent study put out by the British Institute for Development Studies[4] showed that underclasses in poor countries are eating less often, pulling their children out of schools to work the fields, and families are being broken up as husbands are forced to leave home looking for work. Remember too, that in addition to the present crisis, last year’s oil price spike and multi-national crop failure and creeping climate change, had already begun causing human destruction throughout the third world like a modern black plague.

So, what can you and I do about it? Well, the short answer is not much. On a macro level, even if the wealthy countries stepped up to the plate and spent the paltry $20 billion they promised in April to help the developing world (which they won’t) it still wouldn’t make up for the amount that has been lost by the decline in remittances. And if you and I gave more money to Church World Service (which we should), cumulatively it would help only a fraction of the people who have lost their homes to the global destruction.

What it would take in the long run would be a complete re-drawing of the global economic map. The financial crisis that we are going through is terrible, but it is a bi-product of a much deeper economic structural problem that until addressed will continue to force these wild and painful bi-polar economic mood swings onto the world forever.

Things like an international regulatory agency with enforcement powers which could reign in the banks who make dangerous obsessive compulsive bets with other peoples’ money. And do it with impunity because they know that they will always be bailed out by rich country governments if they bet the farm and lose everything.

Re-writing of global trade rules that are now subtly (and sometimes not so subtly) biased towards the countries with the most money (remember the Golden Rule: Those who have the gold get to make the rules). And an end to policies that force poor countries to continually over produce, which is good for us because we can buy things for less money, but bad for them because they have to sell things for less money.

Dismantling (and in some cases arresting) the oligarchies who have ruled both rich and poor countries (starting with our own) since at least the beginning of the modern age of globalization (which I put at August, 1982, but that’s for another time).

And a few others.[5]

What small things can you do? Well, we’re not helpless. Don’t do nothing because you can’t do much. For one thing, if you have a job you really ought to be giving more money to Church World Service, or Oxfam or another fine development organization. It can’t save the world, but it can save a family, and that’s a start. Click here for Church World Service.

For another, there are several bills in Congress right now that are a down payment on a new international economic order and you can write your senators and representatives in support of them.

For example, Bread for the World, the Christian hunger and poverty lobby is sponsoring a bill that would completely overhaul and make more effective the way the US allocates its foreign aid money. It’s in John Kerry’s Senate Foreign Relations committee right now. Write him a letter telling him you support it. (More on the bill here, and how to write Kerry’s office here).

Second, JubileeUSA, known best for its relentless campaign to lift the crippling debts that have been drowning most of the developing world for thirty years, is still alive and involved in a number of important campaigns for better financial structure and terms of trade around the world. A good example is their “Vulture Fund” campaign. Vulture funds are the insidious, immoral companies that buy the defaulted debt of poor countries from the original lender, often for pennies on the dollar. Then they wait until a country receives debt cancellation from governments or international financial institutions and then sue in US or European courts to seize the newly available resources and make the poor country pay top dollar. It seems impossible to do, but they are doing it and they should be stopped. There is a bill in Congress about it now. Click here to go to their web page and get more information.

Interestingly, both Bread and Jubilee host a special Sunday for churches each year to highlight their issues in a worship setting. This year, by total coincidence, they have fallen on the same Sunday, October 18. This is a tremendous opportunity for you to lift up the global economic crisis and our churches’ response to it. Both organizations offer sermon notes, worship ideas, and Bible studies that can help you. Put the two together and celebrate the possibility of making a contribution to lightening the darkness of this global crisis. It would be a great way to educate and motivate your congregations on how to be a part of the global community.

Bread for the World Sunday
Jubilee Sabbath resources


When my banker friend down in Mexico decided to leave the cock fight both of us had had a little too much to drink and he left the parking lot and started driving in exactly the wrong direction to get us back to Cuernavaca. After about half an hour he figured it out and turned around. “What happened?” I asked him.

He laughed. “It’s you,” he said.

“What do you mean?” I said. “I’m just sitting here.”

“Seems like every time we’re around you Americans,” he said, “we start going off in the wrong direction. I think you are a bad influence on us.” He was kidding, but he also made a point.

Maybe someday—probably not soon, but some day—there will be a time when none of our children are step-children, all of us are in the same family, and all of us will be going in the same direction. It’s a possibility, it's worth a shot, and it’s worth a prayer.

---

[1] http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/EXTGDF/EXTGDF2009/0,,menuPK:5924239~pagePK:64168427~piPK:64168435~theSitePK:5924232,00.html

[2] Dirk Willem te Velde, “Poor countries hit harder than expected by global financial and economic crisis” (Overseas Development Institute: June 04, 2009), http://blogs.odi.org.uk/blogs/main/archive/2009/06/04/global_financial_crisis_poor_developing_countries.aspx?utm_source=newsletter&utm_medium=email&utm_campaign=20090707

[3] Ibid.

[4] http://www.ids.ac.uk/

[5] Joseph Stiglitz gives a list of about twenty suggestions coming out of the “UN Commission of Experts,” which he chairs. See “A Global Recovery for a Global Recession” The Nation, July 13, 2009.

The Mexican Truckers' Dispute--a Backgrounder

You have probably read something (or more than something) already about the ongoing dispute between the US and Mexico over our broken promises to lift a ban on Mexican trucks coming into this country. Recently there has been one more lawsuit filed by Mexico against the U.S. over it. Here is a bit of background about the dispute that can put the issue in context.

The dispute actually goes back to 1982 when the U.S. Congress passed a law banning the entry of foreign trucks. Actually the official language was that foreign trucks would not be allowed to operate within the U.S., which effectively meant a block at all of the borders to their entry. The stated reason was that foreign trucks were not as clean or safe as our trucks. The unstated reason was that our truckers wanted in on the business. Eventually Canada lobbied and got the ban lifted from their trucks, leaving Mexico to be the only dirty, unsafe country on the list. For the next thirty years, no matter what Mexico might do to clean up its trucks or professionalize its drivers, the ban stuck. Eventually having little to do with the first reason and a lot to do with the second.

What they have to do is, when a Mexican truck full of, say, corn or televisions or cars, comes to the border, it has to stop, be emptied out, reloaded on a U.S. truck with a U.S. driver and off it goes. It is a lengthy, expensive way to do business. For Mexican trucking companies, the difference in costs between the Mexican drivers they hire on their side of the border and the U.S. drivers they have to hire on our side is significant and Mexico has been complaining about it from the start. In the suit filed this year they note that it adds an additional U.S. $2 billion each year to their costs.

In the late 1980s and early 1990s, when NAFTA was being negotiated, Mexico insisted that a cancellation of the trucking ban be written into the treaty. The U.S. reluctantly agreed and in 1994, when it came to operation, the the U.S. promised to phase out the ban.

Except that the very next year, 1995, the U.S. Congress passed another law extending the ban on Mexican trucks indefinitely.

Later that same year the Mexican government sued the U.S. under NAFTA’s Chapter 20 party-to-party dispute resolution mechanism. They won the dispute, but the U.S. politely did not comply.

In 2001, the NAFTA dispute tribunal unanimously found against the U.S. again saying that, the ban violated NAFTA’s provisions on national treatment and most favored nation obligations. The U.S. then lifted a ban a bit, but only on Mexican citizens owning American trucking companies, which did not really get at the heart of the dispute, because Mexican-owned companies were still not granted the necessary permits to operate in the U.S.

Following that, the Mexican trucking federation, CANACAR began what turned out to be years of negotiations with people in the Bush Administration to get them to obey the law. The administration argued that even if the federation could win over members of the Bush Whitehouse, Congress would never vote to obey the provisions of the treaty or the tribunal’s ruling. What they offered to do instead was to set up a pilot program in 2007 which would allow certain inscribed Mexican trucking companies to operate in the United States.

Yet even then, with a Democratic majority in both houses, the U.S. Congress refused to fund the project. And when President Obama’s budget was unveiled this year, money for the limited pilot project was not in it. In April, the trucking federation responded by once again filing Chapter 11 arbitration suit against the U.S., claiming this time that the U.S. was violating its NAFTA commitments by blocking the entry of Mexican trucks.

Although there are no damages demanded in the arbitration suit, as I noted above, the suit does mention that presently it costs the Mexican trucking companies over US $2 billion each year for the higher priced U.S. truckers and trucks. So, however it will be resolved (if ever) it will be worth a significant fortune to one side or the other of the border.