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published, teleSUR English Edition, January 19, 2015
copyright 2015, Jack Rasmus

This week President Obama will make another ‘State of the Union’ (SOTU) annual address to Congress. In his SOTU addresses in recent years his comments were typically cautious, careful not to convey or promise too much in terms of new initiatives that would benefit those left behind in the so-called US economic recovery.

Proposals for programs to help raise wages for American workers, help immigrants become citizens, save homeowners from foreclosures, ensure affordable education for students, shore up the USA’s collapsing pension system, and so on were considered too controversial.

As noted repeatedly by his White House spokespersons, anything more than minimalist proposals would only give an excuse for Republicans and conservatives in the US Congress to intensify their opposition; or would put Democrat Party members of Congress coming up for elections in conservative districts in a difficult position.

Since Republicans never agreed on anything whatsoever Obama proposed during his prior six years in office, it’s hard to see how Republican opposition could intensify further if Obama had proposed more aggressive action during those years. And concern about saving a few Democrat politicians’ careers appears to have been a waste of political capital in any event, since they were all swept out of office last November 2014 anyway.

A short list of the token, minimalist initiatives that did flow from Obama’s prior 2010-2014 SOTU addresses included proposals for

• adjusting mortgage rates by a mere quarter percent or so and temporarily suspending some principal payments for homeowners ‘under water’ in their mortgages as a solution to the 14 million who were being foreclosed and losing their homes;

• immigration reform for 11 million that meant no amnesty, continued deportations, and citizenship maybe for a few, years down the road, after big financial penalties and payments;

• a token tweaking of interest rates on student college loans, with rates still charged by the federal government well above market averages, and continued payments of tens of billions of dollars a year from students to the federal government;

• a lot of ‘talk’ about inequality and raising wages but no ‘walk’;

• a return to a 1950s-like voluntary savings plan as a retirement crisis solution;

So Obama ‘low-balled’ it for six years, as they say. And he got what he asked for. Ask for nothing, and that’s just what you’ll get—nothing. That phrase might very well sum up Obama’s presidential legacy when it’s all over two years from now.

But not this year, not in his forthcoming 2015 SOTU address this week. No low-balling this time. This time will be different. This time we’ll hear echoes of what we haven’t heard, and what many naively expected to hear from him back in 2008.

Reports leaking in recent days about his forthcoming 2015 address suggest this week he’ll offer proposals that he should have raised six years ago. Now we’ll hear them because there’s no ‘chance in hell’ they’ll ever get passed the next two years with the Congress solidly Republican, and Obama knows it. But the proposals will make for good campaign material for the Democrats in the next national election cycle, including presidential elections in 2016, which has already begun. And that’s what it’s all about.

With the lowest low voter turnout last November 2014 in over 70 years, at a mere 36%, Democrats are running scared. They’ve earned it. Last November 2014 their major constituencies voted with their feet. Or perhaps we should say they conducted a sit-down strike, staying home, on their butts, and didn’t turn out to vote for Democrats. The Obama strategy of the past six years of ‘propose little and deliver less’ has cost him and the Democratic Party so far both houses of the US Congress. And polls show it may also cost them the presidency next time, since they’re already in a ‘come from behind’ position for the coming presidential race in 2016.

So the next two years Obama, and what remains of Congressional Democrats, will step up the rhetoric and ‘talk the talk’ after having refused to ‘walk the walk’, as they say, in the previous six years. They’ll put on their phony paper hats and march around holding their placards of progressivism, and start the process and cycle of fooling the people all over again (aka lying). It all starts in earnest with the upcoming SOTU address by the President this week.

What we may hear from Obama in his coming SOTU address are nice-sounding proposals for:

• paid sick leave for workers up to seven days a year
• paid family leave up to six weeks for federal workers with newborn children;

• $900 a year lower mortgage insurance costs for 250,000 first time homebuyers;

• a $60 billion program to provide free tuition for students at 2-year community colleges;

• Infrastructure spending to provide millions of construction jobs;

• Raising the federal minimum wage;

• Higher capital gains and inheritance taxes for the richest 1% and tax cuts for the middle class

He’ll also make false claims about how the economy has finally fully recovered from the recession, trumpeting the creation of 6 million jobs since 2009. But he won’t mention the fact that the labor force in the USA has shrunk by 5 million who have given up on getting jobs, or that the vast majority of jobs created have been underpaid and part time or temporary, or that the median working class family’s income has fallen every year since 2008 during the so-called ‘recovery’.

He’ll make threats to veto any Republican Congress legislation to approve the XL pipeline—but only because there’s already a massive glut of cheap oil in the USA and more oil from the tar sands/XL project would only lower oil company profits further. He’ll threaten to veto revisions to his Obamacare health program—after he’s already exempted millions of businesses from having to contribute to its costs.

As Obama and the Democratic Party desperately try to change their image, from partners with Corporate America to advocates for the working and middle classes once again before the next elections, the Republicans who now run Congress have already begun to change the rules of the legislative game in their favor.

While they publicly protest against Obama’s threats of ‘Executive Action’, they quietly engage in their own versions of ‘Legislative Action’, changing rules without passing bills, that amount to an intensifying campaign against the interests of working class Americans.
Here’s just a few of Republicans’ recent aggressive anti-worker initiatives working their way through Congress that may soon become law:

* Redefining what is a full time worker, from present 30 hrs./week to 40 hrs.

This will impact 23 million workers who now work 30-39 hrs. a week and are considered full time employed. By raising the definition of full time to 40 hrs., it will mean their employers will be able to exempt them from the Obamacare health coverage. Employers won’t have to pay a penalty if they refuse to help pay for their workers’ health insurance. That will save them potentially between $52 billion and $73 billion over the next decade. It will also mean hiring of even more part time/temp workers in the USA, with lower pay and no benefits, instead of full time workers.

* Cut disability payments for 10.2 million workers now unable to work due to disability

This measure will slash benefits by 19% for the 10 million now receiving social security disability benefit payments. It will also force liberals in Congress to consider transferring funds from other social security programs—like retirement benefits and survivors benefits—if they want to avoid the disability program cuts. That will accelerate the funding crisis in the general retirement fund of social security. The plan is to use disability benefits as the ‘trojan horse’ to attack the entire social security program.

As the new House of Representatives Chair of the Committee in charge of Social Security, Tom Price, recently put it: “Whether it’s means testing, whether it’s increasing the age of eligibility …. whether it’s providing much greater choices for individuals to voluntarily select the kind of manner in which they believe they ought to be able to invest their working dollars as they go through their lifetime. All those things ought to be on the table and discussed.”

*Allow and encourage employers to cut their contributions to pension plans

Already passed as part of the recent Omnibus appropriations bill by Congress, employer are encouraged to start cutting pension benefits for 10 million workers covered under multi-employer pension (MEPs) union pension plans.

*Rule changes to allow employers to pay ‘Comp-Time’ instead of overtime pay

By reducing hours worked per week to less than 40, should employers require work over 40 hours they would have to pay overtime at one and a half time regular pay. In order to avoid having to pay overtime, Republicans propose employers give workers time off at regular pay for overtime hours worked. That saves them ‘one-half’ an hour pay. The proposal will result in tens of billions of dollars a year transferred from workers to companies.

*Reverse and repeal Obama’s Immigration Executive Order

Instead of issuing an executive order last year to provide legalization for millions of undocumented workers in the USA, Obama merely issued an order to suspend deportations of workers—after having deported more than 2 million himself since 2009. Republicans will propose to restart the deportations, including children, pay contractors millions more for fences and drones, and allow instead tens of thousands more of skilled workers from Asia to take US tech jobs on H1-B visas that tech CEOs from Google, Microsoft and others are demanding.

*End mandates that Employers provide health insurance for workers under Obamacare

Just as the health care law starts January 1, 2015 to require employers help pay for workers’ health insurance or else pay a penalty, the Republican Congress will pass legislation to exempt them altogether from doing so. Republican strategy is to tie this provision to another bill that Obama strongly supports, so that he won’t veto it.

*Continue to pick apart and end financial regulation of big banks

Republicans continue their step by step dismantling of Obama’s much-touted, but already ‘toothless tiger’ Dodd-Frank Banking Regulation Act passed in 2010. With the help of Democrats in Congress, they have already gutted the Act last December in part. Now they have jointly agreed to postpone until 2019 another key provision to prevent banks from trading in highly toxic and unstable securitized financial instruments called ‘Collateralized Loan Obligations’—a kind of derivatives security that contributed to the 2008-09 banking crash.

*‘Dynamic Scoring’ to allow more corporate tax cuts

A recent rule change introduced by Republicans requires government agencies to false estimate economic growth from business tax cuts. This will add ‘on paper’ only estimates of US GDP growth from business tax cuts, giving further cover to pass more such tax cuts in the coming months. ‘Dynamic scoring’ is a phony technique to make it appear tax cuts create jobs, when all the real data of the past 15 years proves the contrary—business tax cuts destroy jobs.

So Obama will propose phony programs to shore up his and the Democratic Party’s shoddy image before the next elections, while Republicans will continue their very real aggressive attacks on US workers’ living standards.

As Republicans in Congress successfully change the rules, Obama and Democrats will try to change their stripes. But as they say, you can’t change a Zebra’s stripes—they all run diagonally up to the right, and you can’t reverse them to appear they run up to the left.

As Obama attempts to change his appearance and Republicans continue to reveal their essence, both sides will work together cooperatively on the really big measures they have in mind—measures that will provide big benefits to their joint corporate campaign benefactors. These true focus measures of the coming months include:

• Approval of the $64 billion allotted for spending for new war with ISIS & Syria;

• Big cuts in top corporate tax rates;

• Passage of ‘fast track authority for the President to negotiate the TPP free trade deal;

• New laws, under the cover of ensuring ‘cybersecurity’ to increase spying and surveillance of the American people by the NSA and other agencies.

These are the real issues in the coming year and session of Congress, that both Obama and Democrats and Republicans and their Teaparty faction in Congress are in total agreement on. These are the real priorities of Corporate America, and the two wings of their one party system are in agreement they will work closely together to deliver the goods. After all, they have to fill their campaign coffers before the next election.

Jack Rasmus is the author of the forthcoming book, ‘Transitions to Global Depression’, Clarity Press, 2015; and Epic Recession: Prelude to Global Depression and Obama’s Economy, both by Pluto Press, 2010 and 2012. His blog is jackrasmus.com and website http://www.kyklosproductions.com.

An Excerpt of Jack Rasmus’s recent publication on the destabilizing effects of shadow banks on China’s economy, published this past week in teleSUR media, follows below. (For the full article, go to Rasmus’s website at:
http://www.kyklosproductions.com/articles.html)

“What China, Argentina, Greece, Venezuela, and Ukraine all share in common is an ongoing struggle with global shadow bankers, who continue to destabilize their financial systems and drive their real economies, at different rates, toward recession and worse.

Since 2010 shadow banks have speculated intensely in Greek government bonds, driving up bond interest rates, forcing the government in turn to impose ever more draconian forms of austerity in order to pay their loan debt to the IMF, the EU, and shadow bankers like global Hedge Funds. Shadow banks have played a major role in forcing more severe austerity on the Greek people, and the hardship that has produced in lost jobs, falling wages, reduced pensions, cutbacks in essential social services, and privatization of public goods. Wages and working class standards of living are reduced, in order to ensure ever-rising interest payments to shadow banks and their investors.

In Argentina, U.S. shadow bankers were behind much of that economy’s prior debt crisis and defaults early in the last decade. Today, the same shadow bankers are at the center of a fight to extract even more payments from Argentina than previously agreed upon years ago in a resolution of that prior debt crisis. As U.S. central bank policy and collapsing world oil prices together force a decline in Argentina’s currency that threatens to push its economy into recession, U.S. shadow bankers continue to maneuver to cut off further global credit access to Argentina as a way to force it to pay them more than before for prior loans—a strategy that may accelerate Argentina’s slide into recession. Argentina’s economy thus reels under a triple assault by global finance capital – led by the U.S. central bank, exacerbated by global oil finance and oil futures securities traders, and simultaneously squeezed by U.S. hedge funds leading a charge to reduce Argentina’s credit availability still further.

In Venezuela, much of that economy’s current troubles are also traceable to shadow bankers, working in consort with global commercial bankers and the USA government. Shadow bankers are serving as a key conduit for funneling capital out of the Venezuelan economy. That has resulted in collapsing Venezuela currency, and in turn accelerating import driven inflation, and declining credit availability for the economy in general. Even more so than Argentina, Venezuela is being hammered by global oil commodity futures traders, as well as the rapid rise in the USA dollar. Whereas hedge funds and other shadow bankers are working behind the scenes to deny global credit to Argentina as a tactic to force it to pay U.S. funds even more, in Venezuela the vulture fund tactic is to exacerbate currency decline and capital flight from Venezuela’s economy.

The Ukraine is yet another classical case of shadow bankers preying upon an economy in distress. In the wake of the Ukraine’s descent into economic depression in 2014, the IMF and western commercial bank and government (European Commission) policies have put heads of western shadow banks in direct and daily management control of Ukraine’s economy. This past December, the CEO of the USA private equity firm, Horizon Capital, Natalia Jaresko, was appointed by Ukraine’s Poroshenko government as its official Finance Minister, while a western European, Aivaras Abramavicius, with close ties to Swedish and German shadow banks, was appointed as Economics Minister for the Ukraine. Shadow banks in the case of Ukraine will now be able to dismantle and destabilize the Ukraine economy ‘from the inside’, instead of dictating its policies from the outside as has been traditionally the case of other economies.

Relatively smaller economies like Ukraine, Greece, and even Argentina-Venezuela are more vulnerable to the financial intrigues and maneuvers of global shadow bankers—the overwhelming majority of which originated and are still based in the USA and the UK. Shadow banks are definitely a phenomenon of Anglo-American global finance that re-emerged on a global scale several decades ago, expanded in the 1980s, became truly global in the 1990s, played a central precipitating role in the global financial crash of 2007-09, and have come to represent in the 21st century one of the defining characteristics of global capitalism today.

A Brief Overview of ‘Shadow Banking’

Shadow banks are that exploding growth segment of global finance capital that share the following characteristics: they are largely unregulated, they invest primarily in financial asset securities of various kinds (i.e. stocks, government and corporate junk bonds, foreign exchange, derivatives, etc.) instead of real asset investment (plant, equipment, software, etc.), they target high risk-high return opportunities based on asset price appreciation and volatility to realize financial capital gains, their investments are highly leveraged and debt driven, their investment targets are highly liquid financial markets worldwide that enable a quick entry, price appreciation, and subsequent just as quick short term profit extraction.

Their client base is predominantly composed of the global finance capital elite – i.e. the roughly 200,000 worldwide ultra and very high net worth individuals with net annual additional income from investment flows of $20 million or more—for whom they invest individually as well as for themselves as shadow bank institutions.

Shadow bank ‘forms’ include private equity firms, hedge funds, asset and wealth management companies, mutual funds, money market funds, investment banks, insurance companies, boutique banks, trust companies, real estate investment trusts – to note just a short list – as well as dozens of other forms and newly emerging initiatives like peer to peer lending networks, online investment funds, and the like.

Shadow banks have been estimated to have investable assets (i.e. relatively short term and liquid) of about $75 trillion globally as of year end 2014, a total that does not include revenue from ‘portfolio’ shadow-shadow banking. That is projected to exceed $100 trillion well before 2020.

Shadow banks and their finance capital elite clients make money when financial asset prices are volatile, i.e. when such prices rapidly rise or fall or both. It is thus in their direct interest to cause asset price volatility and instability—whether in provoking a rapid rise in government bonds rates(Greece), in contributing to the collapse in currencies (Venezuela, Argentina), or in IMF-enforced ‘firesales’ of companies (Ukraine). Their strategy is to exacerbate, or even create, financial price inflation in the targeted market and financial instruments, be they stocks, junk bonds, real estate, foreign exchange, derivatives, etc. That same financial price instability, however, is what causes havoc with the real economies of countries—like those in southern Europe in recent years, in Asia in the late 1990s, Japan in early 1990s, and which led to the global financial crash of 2008-09 itself.

In the Shadows of China…..

(go to http://www.kyklosproductions.com/articles.html for the remainder of this article)

Jack Rasmus is the author of the forthcoming book, ‘Transitions to Global Depression’, Clarity Press, 2015; and Epic Recession: Prelude to Global Depression and Obama’s Economy, both by Pluto Press, 2010 and 2012. His blog is jackrasmus.com and website http://www.kyklosproductions.com.

Alternative Visions Radio- 01.03.15
Hosted by Jack Rasmus

The show is accessible and may be downloaded at either of the following urls:

http://prn.fm/alternative-visions-china-chasing-shadows-01-03-15/

or at:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:
Jack Rasmus discusses China’s efforts since 2010 to tame its foreign ‘shadow banks’ that have been playing a central role in creating financial bubbles in its residential housing, local infrastructure, and (Yuan) currency markets in recent years. Jack explains how China–unlike the USA, Europe and Japan—rapidly recovered from the 2008-09 global crash and recession by introducing a 15% of GDP fiscal stimulus focused on direct government investment. China’s GDP quickly surged in the 10-14% range 2010-13, while the USA, Europe and Japan relied primarily on monetary policies plus fiscal austerity and their recoveries lagged. However, China’s 2009 stimulus measures also included massive monetary injections, both by China’s central bank and even more via liquidity in-flows as China opened its doors to western banking, including shadow banks. Shadow bank liquidity in particular flowed in local housing, construction markets and China’s currency markets, creating financial asset bubbles in all three. To check the growing bubbles, and to try to tame the shadow banks, China shifted policies in early 2013 to reduce direct government spending and to have its central bank retract money supply. The result was a slowing of China’s real economy in 2013. China reversed and followed later in 2013 with a mini-fiscal and monetary stimulus to try to restore growth, that did little for real growth but stimulated shadow banks and bubbles further. Similar policies in early 2014 did little to stimulate the real economy, but did tame residential housing and currency bubbles somewhat. China continues today to struggle to tame its shadow banks and bubbles while experiencing slower real growth. Since 2010 shadow banks have pumped more than 20 trillion Yuan–$3.5 trillion–into China. China today experiences the slowest growth in 24 years, a virtually flat manufacturing sector and a probable less than 7% GDP growth in 2015. Jack explains how China’s struggle with shadow banks, its global capitalist speculators, and the financial asset bubbles they create represents a major contraction in global capitalism in the 21st century, and a continuation of other economies’ similar, even less successful, efforts to tame shadow bankers and their financial bubbles in the 1980s, 1990s, in southern Europe since 2010, and currently in Argentina, Venezuela, and Ukraine.

copyright 2014
by Jack Rasmus

The Omnibus spending bill just passed by Congress indicates clearly that the Republican Legislative Offensive is being rolled out faster than otherwise might have been predicted.

In the recent November 2014 midterm elections, Republicans assumed majority control of the U.S. Congress. They deepened their previous control of the U.S. House of Representatives and swept the U.S. Senate. They now have solid, nearly veto proof majorities in both houses of Congress. They may even have enough votes to override Obama’s rumored plans to govern by executive action, should he go that route in 2015 (which, except for an occasional token effort in that regard, is unlikely).
The past six years of Congressional gridlock is therefore about to end in 2015—but on terms highly favorable to Corporate America and, simultaneously, at the direct expense of American workers, their unions, and middle class households in general.

The Republicans new, pro-Corporate anti-worker, initiatives were outlined in a previous article by this writer published by teleSUR on November 27, 2014 (‘The U.S. Republican Congress’ New Agenda’). Technically, the Republican legislative offensive should not begin until the new Republican majorities are sworn into office in late January 2015. However, it now appears those initiatives—i.e. the Republicans’ new legislative offensive—are not on hold until the new Congress is officially seated in January 2015. With the help of many of the Democrats they defeated, the Republicans’ new legislative offensive is now already being rolled out.
In early December 2014, the U.S. Congress passed a 1600 page so-called ‘Omnibus’ spending bill. In an Omnibus bill, all kinds of unrelated legislative proposals are thrown together into one large pot, i.e. one bill. That makes it difficult to vote against any particular proposal. To oppose, to vote against, a particular proposal, one would have to vote against other proposals one supports. For example, to vote against a big tax cut for business might mean necessarily voting against an extension of unemployment insurance as well. So one ends up voting for a big corporate tax cut when actually opposed to it. The ‘Omnibus’ bill is a legislative tactic that was employed typically under prior Republican dominated Congresses, especially during the George W. Bush regime between 2001-2006.

The Omnibus bill just passed by the U.S. Congress, in which the Democrats still had majority control of the U.S. Senate this December, includes numerous pro-banker, pro-corporate proposals that will soon become law. Senate Democrats have gone along with their Republican counterparts in passing ‘Omnibus’.

Senate Democrats’ excuse, their political cover, for voting Republican is that if they voted against the bill, when Republicans officially take control in January the bill would be ‘even worse’ than voting on the December proposal.

That argument and excuse is just typical politician double-talk to give them—Democrats— a CYA (cover your ass) excuse. What will now happen, in actual fact, is that Republicans, welcoming Democrat Senators’ concessions and their voting support in passing the current Omnibus bill, will follow up in January 2015 anyway with the even worse, more aggressive pro-corporate, anti-worker legislation. Democrats will have gained nothing, except providing themselves convenient political cover.

The Omnibus bill passed last week provides $1.1 trillion in spending by the U.S. government for the coming fiscal year, through September 2015. Among its many provisions, however, are several very big benefits for Corporate America.

Corporate Benefit #1: Banking Deregulation Returns

First, the bill—supported by Obama and quickly signed into law—means the beginning of the end of efforts to regulate the big banks in order to prevent another repeat of the 2008-09 banking crash.

A bill enacted in 2010, called the Dodd-Frank Banking Regulation Act, will now be fundamentally gutted by the Omnibus bill. Dodd-Frank was passed in 2010, but was conveniently (for bankers) left largely undefined at the time. Definition of bank regulation was to be implemented piece meal in the next four years, between 2010-2014, by regulators, according to the Act. During the interim years since 2010, banker lobbyists fought furiously to prevent the implementation of many of the Dodd-Frank Act’s provisions. In many cases they succeeded in ‘defanging’ it. But not completely. However, the Omnibus bill’s provisions will complete what bank lobbyists have not yet achieved in terms of rolling back Dodd-Frank. The Omnibus bill’s several provisions addressing banking regulation are designed to stop bank regulation in its tracks, blocking bank regulatory efforts that bank lobbyists were not able to achieve themselves.

For example, Dodd-Frank contained a particular provision that prohibited banks from trading potentially highly financially destabilizing derivatives, especially the high risk so-called ‘credit default swaps’ (CDS), by banks’ commercial units that also took average Americans’ deposits. Bank units taking deposits from U.S. households were units that were also insured by the U.S. Government’s Federal Deposit Insurance Corporation, FDIC. High risk CDS trading, and other derivatives’ losses by the banks, could technically in the event of another financial crash wipe out average households deposits in the banks. That would require the U.S. government, and taxpayer, to bail out banks that mixed CDS losses with household depositors savings and checking accounts. Bankers and their shareholders would reap the profits from highly risky and volatile derivatives trading; but U.S. household depositors and U.S. taxpayers would pay the
bill for derivatives trading in the event of a bust.

That’s exactly what happened in 2008-09. Big banks like Citigroup and others mixed deposits with derivatives and, when the latter crashed in 2008, it threatened the loss of general depositors’ savings. The government had to step in and bail out the banks, which it did, including Citigroup, a massive financial conglomerate that technically went bankrupt in 2009 but was bailed out by a $300 billion guarantee by the U.S. government. Dodd-Frank provisions in the 2010 Act were supposed to prevent this from happening again, by requiring banks to trade derivatives, like CDSs, in bank business units that were separated from bank units holding depositors’ savings accounts. But bankers like the idea of using depositors money to invest in derivatives like CDSs. So they lobbied hard since 2010 to eliminate the Dodd-Frank provision. Reportedly in the business press, Citigroup actually wrote the language on exempting derivatives that was passed by the U.S. House version this past summer. Lobbying by Citigroup and other big U.S. banks then intensified over the summer. It paid off in the Omnibus bill just passed.
The derivatives exemption passed the U.S. House version of the bill without even a recording of the vote. It passed the U.S. Senate by a 56-40 vote in the Omnibus bill, with more Democrats (31) voting for the bill than even Republicans (24). Less than half of the Democrats in the U.S. Senate (only 21) voted against the spending bill and its derivatives deregulation.

One Senator, Elizabeth Warren of Massachusetts, publicly described the Omnibus, and specifically the derivatives provision, as follows: “Congress proved tonight that if you’re a Wall Street bank, Washington works great for you”—which is not exactly a recent revelation to most Americans since 2008. Nor is Warren’s recognition that the stripping out of the derivatives provision will result more money for the bankers. So ‘Chalk up’ one big one for big banks in the Omnibus bill just passed by the U.S. Congress, a Christmas gift by Senate Democrats to their Republican counterparts even before the latter take control!

Corporate Benefit #2: Corporate Tax Cut Machine Leaves the Station

Another big win for Corporate America in the Omnibus is big business tax cuts, of which there are many in the 1600 page bill. Too many to list and describe here. But to note just a few:

Special tax cuts for big health insurers, Blue Cross and Blue Shield, which were to be eliminated by the Affordable Care Act (aka Obamacare), were conveniently deleted by the Omnibus bill just passed.

The Omnibus provides another $41 billion in what is called ‘tax extenders’ tax cuts, many of which are corporate related cuts already in effect, for yet another year through 2014. Just three corporate tax cut extensions—for multinational companies offshore income, business expensing, and business research & development—amount to $18 billion. Conspicuously excluded from the ‘extenders’, however, were previous tax cuts for workers in the form of costs due to loss of a job as a result of free trade and health care costs tax cut eligibility.

Much of the debate on taxes in the Omnibus bill concluded, by both parties, that a major tax code overhaul is high on the agenda of the 2015 Congress. No doubt even more corporate tax cuts are in the works.

Corporate Benefit #3: Gutting the Environmental Protection Agency

The Omnibus bill signals the beginning of a major rollback of environmental initiatives in the U.S. once again, providing significant benefits to the dirtiest polluting industries in the U.S.—i.e. oil, coal, utilities, agribusiness, transport, chemicals, etc. The major means by which these rollbacks have been accomplished in the past, under George Bush and Ronald Reagan, has been to gut the funding of the Environmental Protection Agency (EPA). The bill returns to this process by reducing the EPA’s budget for 2015 by a further $60 million—a budget which has already been reduced by 21% below its 2010 levels.

The Coal Industry in addition got a provision that reduces U.S. government limits on coal-fired power plants. The Clean Water Act’s regulatory scope was reduced, exempting ponds and irrigation systems. Big farm and cattle ranch companies were excluded from reporting greenhouse gas emissions from methane. And in a direct attack on work environments, the Omnibus bill eliminates previous rules for U.S. truck drivers, whose maximum workweek was set at 70 hours; truck drivers may now be required by their employers to work as much as 82 hours a week—i.e. and 11 hour day, seven days a week!

Corporate Benefit #4: Defense Corporations ‘Pig-Out’ Again

Another major benefit for big business is the Omnibus bill’s authorization for at minimum half of the $1.1 trillion bill, at least $554 billion, to be spent on national defense, much of that for jet aircraft, missiles and submarines. That includes $94 billion to big military equipment manufacturers like Lockheed and Boeing. $64 billion for new military research & development. Another $64 billion earmarked for more spending to fund Syrian rebels and for offensives against ISIS forces in Iraq. Plus an immediate $175 million minimum for emergency military equipment and aid to Ukraine’s new pro-U.S. government in its fight against separatists in its eastern regions, another $810 million for new rapid deployment forces in east Europe and the Baltics, as well as unknown further bailout funds for Ukraine’s collapsing economy.

More defense spending, and therefore profits, for U.S. war contractors is still to come, however. The Omnibus specifically left out spending for ‘Homeland Security’ beyond January 2014 in the Omnibus. That will be taken up by Congress in another bill in February 2015 again. It will mean still further military spending, now targeted for the U.S. itself, financing still more surveillance of U.S. citizens, more use of drones, electronic spying, military-police equipment, training, and cooperation, and no doubt other nefarious domestic control initiatives in the works.

Corporate Benefit #5: More Corporate Money for Political Parties

During the Obama years, the U.S. Supreme Court rendered decisions that essentially allowed, contrary to prior U.S. laws since the 1970s, individuals and corporations to spend as much money as they pleased on U.S. elections. U.S. corporations were declared ‘persons’ and spending money in elections was determined to be ‘free speech’.

Not satisfied with this massive corruption of American democracy and voting processes, both Republicans and Democrats in passing the Omnibus bill opened the corporate money spigot still wider—allowing wealthy political donors to give more money to political parties and not just to individual candidates, as per the Supreme Court’s decisions. A previous maximum limit of $97,200 a year donation by an individual to a political party was raised to $777,000 a year.

Robert Weissman, president of Public Citizen, a research and advocacy group, concluded that the political money provisions of the Omnibus bill essentially wipes out one of the few remaining campaign contribution limits for corporations and the wealthy in the U.S.. Weissman added, “This is only about the parties’ ability to solicit donations from the super-rich”. Despite efforts by numerous citizens groups to ask Obama to veto the Omnibus bill’s “most corrupt campaign finance provisions ever enacted”, Obama White House spokesman, Josh Earnest, publicly replied “the president made a tactical decision to go ahead and support this piece of legislation”. Some sources report that the political money provisions were actually drafted by Democrats and added to the bill, in order to allow the Democratic Party’s National Committee to pay for its $20 million debt that remains from last November’s elections.

Workers’ Benefits Rollback #1: Cutting Private Pension Plan Payments

In sharp contrast to the many benefits and funding increases for big businesses, bankers, and investors in the Omnibus bill, American workers are forced to give back benefits; specifically their wages they deferred over decades in order to fund their pensions after retirement.
An important provision of the Omnibus bill will allow companies and their pension fund administrators, for the first time ever, to unilaterally cut their pension benefits. More than 10 million American workers in construction, retail, trucking and manufacturing industries will be negatively impacted by reductions in their monthly pensions.

Despite record business profits since 2010, many employers have continued to refuse to make payments to their union pension funds. Many have dropped out of what are called ‘multiemployer pension plans’. Deficits in these plans have consequently risen from $8.3 billion to $42.4 billion in just the past year. Even though the pension plans still have enough to fund pensions for another 15-20 years, according to business press sources, the Omnibus bill gives employers and fund managers the authority to start reducing pension payouts now for retired workers less than 80 years old.

This action by the U.S. Congress toward workers’ pension funds, which are a financial institution, contrasts dramatically with the more than $14 trillion in U.S. government and Federal Reserve Bank bailouts of big banks, mutual funds, hedge funds and other financial institutions since 2010 where the wealthy keep their investments and income. A more blatant, crass discrimination against workers in the U.S. has not been seen in many years.

Equally disturbing is that the Omnibus, joint Republican-Democrat, bill’s clear authorization for employers to start the process of a final destruction of workers’ multiemployer pension plans established a clear precedent and signal for other private sector employers with ‘single’ private pension plans to start planning to do the same. In addition to the 10 million workers covered by multiemployer pensions in the U.S., there are an additional 31 million covered still by single employer plans.

As Karen Friedman, executive vice-president of the Pension Rights Center, noted in the wake of the Omnibus bill’s passage, the bill will almost certainly encourage similar cutbacks in state and local government pension benefit payments. Friedman added, thereafter possibly even Social Security and Medicare.

The politicians and employers are thus now taking aim at all that remains of collective pension plans in the U.S.. More than 50 million workers’ deferred wages (i.e. pension benefit payments) are thus now coming under direct attack. And if the practice of pension cutbacks expands to Social Security retirement benefits, that’s another 58 million retirees, spouses, and disabled workers and their families.

The Omnibus spending bill just passed by Congress indicates clearly that the Republican Legislative Offensive is being rolled out faster than otherwise might have been predicted. The rollout is made possible, moreover, by wide Democrat support for many of the initiatives, in both Houses of the U.S. Congress, as well as from the Obama White House as well. The bill is no doubt a harbinger for more pro-Corporate and anti-worker legislation to come.

Jack Rasmus is the author of the forthcoming book, ‘Transitions to Global Depression’, Clarity Press, 2015; and Epic Recession: Prelude to Global Depression and Obama’s Economy, both by Pluto Press, 2010 and 2012. His blog is jackrasmus.com and website http://www.kyklosproductions.com.

Copyright 2014, by Jack Rasmus

“With Ukraine’s economy sinking faster into depression by the month, since November 2014 the IMF, European Commission, and USA have been intensifying their demands that Ukraine’s Poroshenko government expand and accelerate the IMF’s April 2014 plan to ‘restructure’ the Ukrainian economy.

In October, the World Bank forecast that Ukraine’s 2014 GDP will fall by at least -8%. That now appears to be a floor for the decline, as the economy has continued to further deteriorate rapidly. As year-end 2014 approaches, the situation has become dire. Ukraine’s central bank foreign currency reserves are now equal to less than one month. Meanwhile Ukraine’s own currency continues to decline in value, its export earnings fall, and credit is quickly drying up.

Various public and private estimates being floated in the western press in recent weeks are that Ukraine will soon need an additional $15 billion loan in 2015. That likely additional funding was confirmed by a USA White House spokesperson recently who, in response to a press query, admitted a new package was coming and that the USA would participate. The IMF is therefore, in recent weeks, in the process of implementing its ‘Plan B’ for restructuring Ukraine’s economy. In anticipation of providing more money, Plan B means “front-loaded implementation of reforms”, as the IMF’s December 13, 2014 press release noted. That in turn means more aggressive restructuring and even more direct control of Ukraine’s economy.

In the past, the IMF has allowed a host country to implement the plans and restructuring details it defines as necessary. The IMF lays out the program; the host country implements—under the direction of the IMF mission team of technocrats. However, this time it appears the IMF—and the European and American interests behind it—are demanding that its own more ‘reliable’ western managers directly manage the IMF program implementation.

After a flurry of IMF missions back and forth to Ukraine in November, on December 2 the Poroshenko government therefore agreed and appointed two western shadow bankers—one from the USA and one from Europe—to its two key economic positions of Minister of Finance and Economics Minister—to ensure that restructuring now occurs more rapidly, more aggressively, and to the fullest benefit of western economic interests.

In an unprecedented move, Natalie Jaresko, a USA citizen and current private equity firm, Horizon Capital, CEO was appointed Ukraine Finance Minister; and Aivaras Abramavicius, a Lithuanian with past employment ties to Swedish and German investment banks and, like Jaresko, educated in the USA, was appointed Ukraine Economics Minister.

Who is Natalia Jaresko?

Jaresko is not just a shadow banker, the CEO of the USA, Chicago based, private equity firm, Horizon Capital. She began as a former official of the US State Department, a chief of the economic section of the US Embassy in the Ukraine in the early 1990s. Jaresko was, as they say, ‘in the right place at the right time’, when President Bill Clinton in 1995 set up the USA government funded, ‘Western NIS Enterprise Fund’ (WNISEF), a USAID $150m fund to promote USA and western investments into the then newly created Ukraine after the Soviet Union breakup. WNISEF specifically targeted the Ukraine and Moldova for western investors. Clinton appointed Jaresko to the WNISEF, along with several other ‘private’ bankers who together would operate WNISEF on behalf of the US State Department. Jaresko became WNISEF’s president and CEO in 2001.

As a new Clinton-appointed director of WNISEF in 1995, Jaresko lost no time in quickly leveraging WNISEF to create her own private equity firm targeting investments into Ukraine and other former East European Soviet republics. In 1995, according to Bloomberg News, at the same time WNISEF was established, Jaresko and two other Chicago investors, Jeffrey Neal and Mark Iwashko, together founded Horizon Capital, a US private equity firm. Horizon Capital thereafter managed WNISEF, extracting millions in fees over the years since 1995.
Around the time of the ‘orange revolution’ in 2005, Jaresko and Horizon subsequently set up another fund within Horizon, called the ‘Emerging Group Growth Fund’(EGGF). Today Horizon, WNISEF, and EGGF coordinate their investment activities throughout the Ukraine-Moldova and beyond, including Belarus.
In her current role as Finance Minister, Jaresko is thus in a unique position to indirectly funnel the most lucrative Ukraine investment opportunities and Ukraine company acquisitions to her Horizon Capital private equity firm.

Who is Horizon Capital?

Horizon Capital, like all private equity firms, not only seeks deals on its own, but also functions as a conduit to other big investors and shadow banks. Horizon will arrange and broker the ‘deals’ for big USA finance capitalists to purchase Ukrainian companies, in return for fees and for sharing spin-offs and sell-offs in the future.
Who Horizon will likely benefit is suggested by its Board of Directors’ many other USA corporate connections. The board members have interests and ownership in scores, perhaps hundreds, of other companies in the USA. It will be easy for them to put these companies in touch with Horizon’s Kiev, Ukraine offices which in turn no doubt will be in constant contact with Jaresko. She apparently plans to retain her position as CEO of Horizon even as she functions as Finance Minister. Jaresko and Horizon need not consider any of this a ‘conflict of interest’. Horizon need not directly invest or acquire companies; it will be the enabler-broker for the real investors back in Chicago and the USA. Jaresko will suggest the relationships, Horizon set them up, collect fees, and put the right USA capitalists in touch with the ‘right’ Ukraine businesses.

A closer look at Horizon’s Board of Directors reveals the likely USA companies, banks and investors who may directly benefit from their Horizon Capital-Jaresko connection:

Board director Patrick Arbor has long time connections with Chicago banks, USA commodity producers, options and futures traders. Director Whitney Macmillan with the giant USA agribusiness firm, Cargill. Directors Robert Cotton and Richard Arthur with USA defense companies, like Hughes Electronics and Lockheed-Martin’s naval and submarine electronics divisions. Horizon co-founder, Jeffrey Neal, held long time CEO and senior positions with global investment banks and Merill-Lynch, now a subsidiary of Bank of America. The other Horizon co-founder, Mark Iwashko, co-founder with Jaresko in EGGF, now independent, has extensive holdings and connections in mortgage banking and industrial manufacturing. He is also chairman of the Ukraine real estate firm, Dragon Ukraine properties PLC’.

Not coincidentally, agribusiness, naval construction, finance & banking, construction, and defense sales to Ukraine will prove among the ‘hot Ukraine investment opportunities’ as the USA deepens its economic and political penetration of the Ukraine in the months ahead. Horizon and its investor connections in the USA are thus well-positioned to benefit from Jaresko’s key role as Finance Minister.

Poroshenko’s other ‘foreign’ appointment of Aivaras Abramavicius, a Lithuanian with similar deep connections to German and Swedish west European hedge funds and bankers. He’ll serve a similar role of ‘conduit’ no doubt, on behalf of western European economic exporters and importers.

Together, Jaresko and Abramavicius will function much like western ‘economic viceroys’ (in the British 19th century imperialist tradition), determining who gets the IMF money, who gets connected with western bankers and investors, who gets investments and acquisitions from western corporations—in short who benefits (and who doesn’t) from new western economic ties now being deeply forged in Ukraine.

This Alternative Visions radio show presentation is available for download and listening at:

http://prn.fm/alternative-visions-oil-deflation-russias-recession-ukraines-depression-12-20-14/

or at:

http://www.alternativevisions.podbean.com

SHOW ANNOUNCEMENT

Jack Rasmus reviews the continuing collapse of global oil prices and its effect on the emerging recession in Russia, continuing economic stagnation in Europe, and the deepening Depression in the Ukraine economy. Rasmus discusses how the global oil price collapse may be entering a second phase soon, further impacting not only the major oil commodity producers (Russia, Venezuela, Nigeria, Norway, Mexico, etc.), but now, increasingly, the economies of other non-oil commodity producers (Brazil, Indonesia, India, Turkey, and others). Additional pressures appear to be building as well on global financial asset markets, especially US and European corporate junk bonds. How this is related to last week’s US Federal Reserve decision to put off raising US interest rates another 2-3 months, and the subsequent latest surge in the US stock market, is explained. Jack then discusses developments in the Russian economy as it clearly enters recession; the feedback effects of Russia’s recession on Germany and other eastern European economies; and the further feedback effects of both in turn on the deepening Depression in the Ukraine. Jack concludes with a detailed review of the negative effects of the IMF bailout on Ukraine, the recent installation of US and EU citizens as economics and finance ministers in Ukraine’s new government, Poroshenko and Yatsenyuk’s pleading for more aid from the west, and latest hard nose demands by the IMF and G7 for Ukraine to impose even more austerity on its people if it wants more loans in 2015.

Despite Abenomics 1.0’s abysmal record for the majority of Japanese households, Japan voters elected Abe for another four years. Moreover, his Liberal Democratic Party (LDP) captured 290 of 475 seats this past week in the lower house of Japan’s Parliament as well. With its coalition partners’ additional 35 seats, Abe’s LDP controls more than two-thirds majority in Japan’s national legislature, which enables it to pass legislation without recourse to the upper house of the Parliament, according to Japan’s political system. In short, Abe can now get whatever policies he wants passed, including his ‘3rd arrow’ however he defines it, and that means more austerity measures.

So why would Japan voters re-elect Abe again, and give his party a safe majority in the legislature? The answer to this question reveals important broader political trends at work in the global capitalist economy—trends that not only ensure continuation of austerity policies but the likely intensification of such policies.

Abe’s re-election was hardly an endorsement of his failed policies by Japan voters. Barely half the eligible voters turned out to vote last week, down from a 70% turnout in 2009. What Abe’s re-election represents is a collapse of centrist parties now underway everywhere in the advanced economies and a rejection of their policies by the voting public—i.e. policies which have largely failed to generate economic recovery for all but investors, bankers, and big corporations since the 2008-09 global crash. That collapse is making possible a return of even more aggressive, pro-capitalist parties and policies.

Japan voters saw nothing to vote for in the now discredited Democratic Party (DP) of Japan, a mostly center-right party that was in power between 2009-2012 and that failed miserably to achieve any real economic recovery for any but wealthy investors, bankers and multinational companies. So Japan voters stayed home or else voted against the DP by voting for the LDP as a protest.

The dissolution of Japan’s DP as a political force began in 2012 and accelerated this past election, with the DP winning only 73 seats out of 475, well below its projected 100 seats. Today it remains in disarray, divided, without effective leadership or any new ideas as to how to pull Japan out of its current, latest recession.

A similar dissolution is now beginning with the Democratic Party of Obama in the USA in the wake of its recent November election debacle. It too is in disarray, increasingly divided internally, lacking in effective leadership and bereft of new ideas as to how to bring recovery to the rest of the populace .

Like the 20 percentage point collapse in Japan voter turnout last week, in the recent USA midterm November 2014 elections a similar record low turnout resulted in deep losses for Barack Obama and Democrats. Obama and Democrats lost by landslides in both the US House and US Senate in November 2014, largely because key working class constituencies refused to turn out and vote for them after Obama and Democrats failed to deliver in a so-called economic recovery after 2009 that largely left them, and continues to leave them, behind.

Constituencies like immigrant workers, union workers, and youth everywhere in the USA—potential tens of millions of voters—abandoned the Democrats and Obama in USA midterm elections last month. They simply did not turn out to vote. Their major, historic losses in the US House and US Senate in November 2014 have left the USA Democratic Party today fissuring, if not yet fracturing, along several lines; floundering and dividing into a continuing and still dominant pro-corporate wing, on the one hand, and a small, growing vociferous ‘populist’ wing on the other.

In other words, both Japan and USA recent elections reveal the same basic trend: Centrist parties and their policies are now perceived as having failed by most voters, especially those of working class backgrounds. In response, those voters are now refusing to vote and/or voting against those failed centrist parties and policies as a protest.

The political dynamic that accompanies the continuing global economic crisis is thus similar in Japan and the USA, though not exactly. Both reflect a system dominated by two political parties—the one unapologetically pro-business (i.e. Abe’s party and the USA Republican Party) and the other dominated by business interests but harboring wishful thinking but misguided populist elements (i.e the Democratic Parties in both Japan and USA).

The now deeply entrenched political party dynamic in the key capitalist sectors of the USA and Japan goes something like this:
The former conservative parties—LDP and Republican—ensure their investor-capitalist constituencies get rich even though they wreck the economy in the process; the latter centrist Democrat Parties then win elections and ensure those same constituencies get further rich while failing to generate general recovery for all. When the center-right parties fail to bail out the broad populace from the economic crisis, that populace itself in turn ‘bails out’ of the political system and does not vote. That allows the unabashedly pro-business conservative (Japan) and republican (USA) parties to take advantage of low turnout and return again to office. The cycle then repeats itself: the conservative-republicans proceed once again to wreck the economy further while making their wealthy friends still wealthier, and so on.

In Europe the political dynamic is a variation on this trend of growing dissolution of center-right political parties. Due to its more open Parliamentary systems and histories, as social-democratic centrist parties in Europe decline and give way to dominant pro-Business parties after they fail to generate economic recovery, the dissolution of centrist parties stimulate the growth of smaller 3rd parties on both the left and the right. The case of France today and the collapse of the Socialist Party and rise of the National Front is perhaps the most notable case. But similar developments are also underway in Greece with the rise of the Syriza party, with Podemos in Spain, with UKIP in the UK, and perhaps even ‘Die Linke’ in Germany. Other less developed trends are also occurring in Italy, Netherlands and elsewhere.

What’s similar in Europe is that center-right parties are in decline there as well as in Japan and the USA. What’s different in Europe is that the collapse of the center does not necessarily result in the return of the unapologetic pro-business conservative party—i.e. Abe’s LDP in Japan and Republican-Teaparty in the USA. The ability of pro-business parties in Europe to impose structural and labor market reforms—i.e. new labor market forms of austerity—is therefore more unstable and less assured.

How the current efforts to push ‘structural’ and labor market reforms in Europe plays out remains to be seen in 2015. Political maneuvering by pro-business parties and elements in Europe to impose Abenomic 2.0-like and USA Republican Congress-like further labor market forms of austerity has begun. But unlike the USA and Japan, the outcome is less clear.
Meanwhile, as the global economy slows, the push for still more and newer forms of austerity continues worldwide—with Abenomics 2.0 in Japan, with the new pro-corporate/anti-worker initiatives of the USA’s newly elected Republican Congress, with France’s Socialist government’s new labor market reform proposals for 2015, with similar efforts by Italy’s Renzi government, and with Germany’s Merkel conservatives proposing to restrict bargaining and strikes of workers there. Austerity is far from dead; it is simply morphing into new forms with a new global capitalist offensive to expand it about to occur.

Dr. Jack Rasmus
copyright 2014

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