More Federal Debt and a Weakening Economy

UPDATE!
Link: Existing Home Sales Tumble 2.6 Percent | Associated Press/msnbc.com

Sales of existing homes fell more sharply than expected in June as the housing industry continued to be bruised by the worst slump in more than two decades.

The National Association of Realtors reported that sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units. That was more than double the decline that had been expected and left sales 15.5 percent below where they were a year ago.

The downward slide in sales depressed prices, too. The median price for a home sold in June dropped to $215,100, down by 6.1 percent from a year ago. That was the fifth largest year-over-year price drop on record.

The drop in sales pushed inventories of unsold single-family homes and condominiums to 4.49 million units, up by 0.2 percent. That represented a 11.1 month supply at the June sales pace, the second highest level in the past 24 years.

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Earthside Comments: Congressional Dimocrats are slapping themselves on the back with great abandon for the campaign contributions they soon will get for bailing-out the mortgage industry. Of course, they are calling it legislation to protect the economy from collapse.

But note the bit of news contained in the first link -- the central government's debt ceiling was raised as part of the bail-out bill to well over $10 TRILLION. Truly, we are paying one credit card debt with another credit card.

Meanwhile, the Wall Street blatherers are equally giddy because they are suckering a whole bunch of folks into believing that a "bottom has been formed" in the stock markets.

Finally, below, a good article about what is really going on ... as we have noted many times before. This is all about the greatest transfer of wealth in human history -- from you ... to Dick Cheney and his pals.

Link: House Approves Sweeping Effort to Help Housing | New York Times

The House approved far-reaching government assistance on Wednesday for the nation’s housing market, including broad authority for the Treasury Department to protect the nation’s two largest mortgage finance companies from collapse.

The measure also includes an aggressive plan to help hundreds of thousands of troubled borrowers avoid foreclosure by refinancing their mortgages with more affordable government-insured loans.

The White House, citing an urgent need to restore market confidence in the two mortgage giants, Fannie Mae and Freddie Mac, said President Bush would sign the measure despite his opposition to the inclusion of nearly $4 billion in grants for local governments to buy and refurbish foreclosed properties.

Mr. Bush’s support assures that the bill will become law after final passage by the Senate, possibly on Saturday. The House approved the bill 272 to 152, with just 45 Republicans joining 227 Democrats voting in favor. ...

... Perhaps most significantly, the legislation hardens the government’s long-implicit assurance that it would step in to rescue the two mortgage giants who together own or guarantee about $5.2 trillion of the nation’s $12 trillion in mortgages. Currently, Fannie Mae and Freddie Mac guarantee financing for about 80 percent of new mortgages.

To accommodate a potential rescue for Fannie Mae and Freddie Mac, the bill raises the national debt limit to $10.6 trillion, an increase of $800 billion.

Link: Unemployment Claims Rise to 406,000 | Associated Press/CNNMoney.com

The number of newly laid off people filing claims for unemployment benefits bolted past 400,000 last week as companies trimmed their work forces to cope with a slowing economy.

The Labor Department reported Thursday that the number of new applications filed for these benefits rose by a seasonally adjusted 34,000 to 406,000 for the week ending July 19.

That matched the level seen in late March. The last time claims were higher was after the devastation of the Gulf Coast hurricanes in mid-September 2005. Then, they spiked to 425,000.

Link: Ford Has $8.7 Billion Loss on Writedown, Truck Sales | Bloomberg.com

Ford Motor Co. posted a second- quarter loss of $8.7 billion as it reduced the value of truck plants and loans to buyers of pickups and sport-utility vehicles by $8 billion.

Link: Davis Homes Will Shut Operations | Indianapolis Star

Indianapolis-based Davis Homes on Wednesday became the latest casualty of a national downturn in new home construction that’s seen housing starts in the metro area plummet by more than 40 percent since 2005.

The company’s surprise announcement that it’s closing is a clear sign the area’s weakened housing market isn’t improving and that other builders are in for hard times for months to come, housing experts said. ...

... The sluggish market already has forced more than 30 of the nation’s top 200 homebuilders to close since 2007, according to Builder magazine. And a long-standing housing slump could have wide-ranging economic consequences for consumers and businesses, driving down housing values, eliminating construction jobs and slowing demand for new appliances and other furnishings.

While family-owned Davis Homes wasn’t a national powerhouse, it was a major contributor to the area’s housing stock, having built more than 12,000 homes in Central Indiana since its start in 1985. Many were in fast-growing suburban communities where homebuilders could normally bank on strong housing demand by buyers.

Link: The U.S. Economy Is Socialism for the Rich | Michael Leon Guerrero/AlterNet.org

In the United States, far-Right Republicans and Democratic liberals alike have sold many people on the notion that the market should be the main force to drive the economy and define social relationships. They maintain that government should stay off people's backs and out of our wallets. They promote rugged individualism and consumerism couched in terms like "personal responsibility," "freedom" and "independence." "Greed is good!" was the mantra of Michael Douglas' character, Gordon Gecko, in the 1980s movie "Wall Street," and those became the words to live by in the '80s and '90s. The philosophy and value of greed was taken to heart by many a corporate CEO, and, over the past three decades, this twisted logic -- underlined by the values of individualism and the culture of consumerism -- has turned back the clock on human development with devastating consequences.

The Chicago Boys' Disaster

Naomi Klein's landmark work The Shock Doctrine: The Rise of Disaster Capitalism summarizes the last 30 years of the neoliberal (aka neoconservative) project. These policies have had a stranglehold on the global economy for decades. But Klein argues persuasively that it is primarily in moments of societal or natural upheaval that capitalist extremists, trained by gurus like Milton Friedman at the University of Chicago, have been most able to impose their political and economic agenda. Even if a natural disaster didn't present itself, Friedman's disciples, like Kissinger, Nixon, Reagan, Bush and Clinton, had no problem wreaking their own violent havoc on vulnerable countries.

By now, the mantra of the "Chicago Boys" has become all too familiar: Eliminate regulations, cut taxes, slash public spending, privatize public services, etc. Their policies dominated the global political landscape, unraveling the gains of centuries of social movements, while a new global elite has been enriched beyond imagination. A handful of people have become super-wealthy, and megacorporations have become even bigger and more powerful.

"Free trade" policies and the loan sharks that have run the World Bank and the International Monetary Fund have destroyed national economies. Millions of people have been forced into poverty, and entire communities have been displaced from the countryside. Multinationals and northern industrial nations siphon wealth from the developing countries. Those that migrate from their homelands to make a living in the north are greeted with walls, bullets and racism. In the United States, millions are homeless, unemployed, in prison, or one paycheck away from bankruptcy. The social wage has been beaten down to unsustainable levels -- real wages are lower now than they were 30 years ago. Yet the costs of fuel and raw materials have skyrocketed, causing worldwide food shortages. We have wiped out public budgets by eliminating taxes on those who profit most. Vital public infrastructure and services cannot meet basic needs like maintaining the levees in New Orleans and reconstructing the Gulf Coast, or controlling the devastating blazes in Southern California. Yet the majority of our federal budget sponsors the wars and occupation in the Middle East, the warehousing of generations of the poor and people of color, the witch hunt of immigrant refugees of U.S. foreign and trade policy, and the growing national debt.

Capitalism unchecked has given us Big Oil, Blood Diamonds, Enron and Halliburton. They have given us Afghanistan, Iraq, Guantanamo and the Wall of Death on the U.S.-Mexico border.

The rise of the neoliberal regime has occurred in the same era that we are experiencing the decline of the economic and political dominance of the United States empire. Scholar Immanuel Wallerstein observes that economically the United States has been losing its top economic position since the 1970s as other regional economies have expanded. The country is staring economic collapse in the face, driven by the bursting of the housing bubble. This bust is enough to make even billionaire George Soros nervous, arguing that there is a profound difference between this downturn and other recent ones:

... the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.

Soros argues that with the deregulation of the financial industry, many of the mechanisms put in place to withstand a significant bust cycle have been eliminated. The Federal Reserve and the government may no longer have the tools to stave off a recession.

Today, the United States is the leader in a number of shameful statistics: the highest percentage and total numbers of its population in prison, the highest consumption of the world's natural resources, the only industrialized nation without universal health care, the biggest military budget. It seems that the greatest product that the United States is capable of producing today is war, and this makes us a very dangerous country. Our primary role in the global community is as a mercenary army in the interests of big business.

The hyper-consumerist culture of the United States has led to predatory lending and credit schemes that have put millions of people on the brink of bankruptcy and the sacking of the Global South for exploited, underpaid workers and natural resources to make cheap products. The U.S. population represents 6 percent of the world's population, yet consumes 30 percent of the world's resources and produces the greatest amount of carbon pollution.

And while we're at it, let's just be clear that the free market capitalism we have seen in the United States is by no means "free." In reality, the U.S. economy functions as a form of socialism for the rich. Taxpayers have bailed out the savings and loan industry, banks and airlines. We finance at least two federal social security programs: the one to which most of us contribute through each paycheck, and the one for United Airlines employees (since that company no longer pays its pension obligations). We give huge government contracts to the prison and military industrial complexes, and increasingly to private education and health care companies.

The "land of the free" is also one of only two countries in the world building walls between themselves and their neighbors (the other being Israel). This fortress mentality is a telling sign of an empire in decline. At a time when the U.S. population needs to be reaching out to the rest of the world more than ever, our government leaders are circling the wagons.

The Chicago Boys and their friends have made a terrible mess, and we haven't even touched on the destruction caused by unchecked industrialization, gutted environmental regulations, and the addiction to fossil fuels that have pushed life on the planet to the edge of oblivion. Fixing this disaster will take generations and a fundamental shift in the values and premises on which we base our politics.

A Cultural Shift: Reintroducing Community Values

It's clear that a profound change in the U.S. political direction is necessary. A fundamental shift in the political and economic direction of the country will require a cultural shift and a redefinition of social and political relationships. We need to challenge the values of individualism and competition and the culture of consumerism and reintroduce key values in defining our economic and social relationships -- values such as reciprocity, community, cooperation and solidarity. We need to affirm that as a society we share collective and community responsibilities. We must confront the underlying premises that have sustained the neoliberal/neoconservative agenda -- namely that taxes, unions and government are all bad. As Donald Cohen has outlined, we need to assert that taxes, organized labor, regulations and government are in fact necessary to keep the greedy in check and to achieve a just and democratic society.

A significant political and cultural shift in the United States will also require us to redefine the "American Dream." The dream is not about a motivated individual being able to strike it rich. The dream that would benefit most Americans (including Latin Americans and Canadians) would be closer to the dream outlined by Dr. Martin Luther King Jr. The dream should include racial, gender and queer liberation, meeting the basic needs of everyone in the community, and achieving peace in our local and global community.

In the Story of Stuff, Annie Leonard beautifully explains the cycle of production and consumption that is driving the planet toward destruction. She describes how the values of consumerism were engineered during the 1950s and have become part of our social DNA today. Consumerism was designed as a deliberate political strategy, and must be challenged by a deliberate political strategy. The cycle of consumption is sustained by externalizing costs by exploiting communities for cheap raw materials and labor. Challenging this model will mean supporting the struggles of exploited and displaced communities and their right to organize.

Shifting our values will allow us to make bold policy changes that are absolutely necessary.