The Sun Belt Needs a Killer App

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Fresh off Obama imploring the country to “win the [vaguely defined, and definitely not defined as preventing climate change] future,” Calculated Risk has a new chart, showing the decline in unemployment by state. It’s useful to show not just which states are unemployment clusterfucks (Michigan remains near the top, though CA and FL passed it in overall unemployment last month), but also where it’s getting better.

And it’s getting better in the Midwest, where the auto bailout (as well as battery and related subsidies) has provided stimulus that led directly to new jobs.

But it’s not getting (much) better in the states where the housing market, not rusty industries, was the primary cause of the crash: NV, CA, FL, AZ. Now, presumably, that’s partly because the housing crisis–notably underwater homes–remain a big drain on the economy. But it also seems likely that part of the problem is that nothing has replaced housing as the driver of growth. Unlike the Midwest, which has the auto industry (for better or worse), several of the other clusterfuck states were relying on housing.

Now, there’s a lot more that might be gleaned from this chart–why, for example, is the Northeast also getting better? Is AL’s improvement about cars or defense or something else?

The jobs crisis in this country remains horrible just about everywhere. But in some places, it is actually getting better. Slowly. We’d do well to understand what’s driving that improvement and why other regions aren’t sharing in it.

“Competitiveness” Is Peace

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I spent much of the day yesterday pointing out how stupid it was for Obama to put outsourcer, China nut, and TBTF bankster Jeff Immelt in charge of his Council on Jobs and Competitiveness. Meanwhile, Paul Krugman and Robert Reich have been focusing on Obama’s frame for the problem as “competitiveness.”

In his piece, Krugman calls the frame “hackneyed” (and Jeff Immelt’s op-ed on it “vacuous”). He then links to an older discussion on competitiveness of his, in which he explains,

The rhetoric of competitiveness turns out to provide a good way either to justify hard choices or to avoid them.

Reich makes largely the same point about how meaningless the term “competitiveness” has become.

Whenever you hear a business executive or politician use the term “American competitiveness,” watch your wallet. Few terms in public discourse have gone so directly from obscurity to meaninglessness without any intervening period of coherence.

Reich goes on to show how competitiveness might mean:

  • American exports (which, if that was your definition, would require lower American wages)
  • Balance of trade (which, if that was your definition, would lead to dollar devaluation and currency wars)
  • Profits of American-based companies, which, if that were your definition, Reich notes, we’d be doing great:

In case you haven’t noticed, the profits of American corporations are soaring. That’s largely because sales from their foreign-based operations are booming (especially in China, Brazil, and India). It’s also because they’ve cut their costs of production in the US (see the first item above). American-based companies have become global — making and selling all over the world — so their profitability has little or nothing to do with the number and quality of jobs here in the US. In fact, it may be inversely related.

  • The number and quality of American jobs

Reich argues that the only way to improve our “competitiveness” by that last measure–the number and quality of American jobs–is to make investments America is probably not willing to make.

The only sure way to improve the quality of jobs over the long term is to build the productivity of American workers and the US overall, which means major investments in education, infrastructure, and basic R&D. But it’s far from clear American corporations and their executives will pay the taxes needed to make these investments. Read more →

Jeff Immelt’s GE: The Too Biggest To Fail

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In my first post on how stupid it was for Obama to pick Jeff Immelt for his election season commission to appear focused on jobs, I looked mostly at how much GE has been outsourcing manufacturing and technology. Though I mentioned GE’s status as another TBTF finance company, I didn’t explain that in depth.

Mike Konczal has a post in which he corrects Joe Klein’s misperception that GE is not another big finance company, and in the process shows how GE was one of the biggest beneficiaries of the government’s bailout of shadow banking in 2008-09.

In it, he shows how GE received the second biggest FDIC debt guarantees of any of the big finance firms, after only Citi. He borrows the graphic at the left from a Raj Date paper that also explains how GE leveraged (heh!) its teeny FDIC insured deposits to get a big debt guarantee.

Only a small fraction of GE Capital’s funding (some $24 billion in the middle of 2008) came through FDIC-insured deposits. Despite that, the structure of the FDIC’s Debt Guaranty Program enabled GE Capital to issue well more than that (more than $50 billion) in unsecured debt that was, in effect, taxpayer-guaranteed. In essence, the program was structured in a way that almost uniquely favored a shadow bank like GE — one with a relatively small depository, but with immense unsecured debt that had been issued by the depository’s affiliates.

Konczal then goes on to cite another paper explaining why this happened: GE used the credit rating it won in its manufacturing business to make a lot of big finance games possible.

1 run the industrial business for earnings;

2 add industrial services to cover hollowing out of the industrial base;

3 buy and sell companies through acquisition and divestment to achieve returns and growth objectives;

4 rely on large-scale acquisition to prevent like-for-like comparisons and to increase opacity and the power of narrative;

5 grow the financial-services business up to the limit of the company’s credit rating;

6 accept the balance-sheet costs in terms of return on capital but focus on managing return on equity and cost of capital;

7 add financial engineering to smooth earnings and manage growth….

[snip]

If the expansion of GE Capital rested on judgement and controls, it also reflected the structural advantage of the triple-A credit rating, which effectively made the financial business (as user of the credit rating) dependent on the industrial business (as credit-rating generator), and this in turn set limits on how much GE could expand without risking reclassification by credit-rating agencies. GE Industrial may be a low-growth business but it has high margins, is consistently profitable over the cycle and has funded almost all of the dividends that GE Consolidated has paid out, as well as providing the funds for acquisitions and repayment of debt. This solid industrial base is the basis for GE’s triple- A credit rating, which allows GE Capital to borrow cheaply the large sums of money that it lends on to consumers and commercial customers… [my emphasis]

Konczal summarizes the business model that Obama tapped, through Immelt, to build American jobs and competitiveness this way:

GE has been at the forefront of blurring a “financial services”-centric model of business onto the remains of a hollowed out manufacturing base, one kept in a minimal state just strong enough to qualify for high credit scoring.

In other words, Immelt and GE aren’t about building the jobs American needs (for graphic representation of that, see this post). Rather, they’re about transforming the fruits of American manufacturing into yet more destabilizing casino games.

And that’s what Obama picked today to lead his election-season effort to appear serious about job creation.

Sure, maybe it’ll fool the Joke Lines of the world into believing outsourcing to China is a solution to America’s job crisis. But those of us in flyover country seeing that jobs crisis up close are smarter than all that.

Sanders: I hope Immelt changes his mind, focuses on rebuilding manufacturing in the US

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As I noted earlier, President Obama just named Jeff “Nut on China” Immelt  to head his election season effort to appear serious about jobs in the US.

I asked for a statement from Senator Bernie Sanders–who has been critical of the way Immelt and GE received welfare in the Fed bailout–about what he thought of the appointment. He seems as skeptical as I am. Here’s what he said at an event in Vermont:

“I hope he changes his mind and focuses on rebuilding the manufacturing sector here in the United States, not in China, and in the process creates millions of good-paying jobs,” Sanders said during a visit to this once-thriving industrial community in Vermont’s Connecticut River Valley.

“For the sake of our manufacturing sector and the collapsing middle class, let’s hope that Mr. Immelt’s appointment by President Obama indicates a transformation in his thinking,” Sanders added. “It is time for GE and other large and profitable corporations to start investing in America again.”

Obama’s Kabuki Jobs Council, Brought to You By “Nut on China” Jeff Immelt

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When Google announced that Eric Schmidt was stepping down yesterday, I joked that Schmidt must be leaving to lead Obama’s campaign economy — the one he’ll use to get re-elected with. After all, Schmidt is one of the Obama’s closest CEO buddies, and he’s leaving at the same time as Jim Messina and Patrick Gaspard are leaving to take over the campaign infrastructure. The decision to close the Office of Political Affairs seems to indicate a decision to stop governing and start spinning wildly to ensure re-election. There’s no area where Obama will need to spin more wildly than with the economy, right?

Turns out, I wasn’t far off.

What else can you conclude from the news that Obama is replacing his President’s Economic Recovery Advisory Board, led by Paul Volcker, with a President’s Council on Jobs and Competitiveness, led by General Electric CEO Jeff “Nut on China” Immelt?

President Obama has asked me to chair his new President’s Council on Jobs and Competitiveness. I have served for the past two years on the President’s Economic Recovery Advisory Board, and I look forward to leading the next phase of this effort as we transition from recovery to long-term growth. The president and I are committed to a candid and full dialogue among business, labor and government to help ensure that the United States has the most competitive and innovative economy in the world.

Aside from the tired DC trick of renaming the Council with the latest buzzwords — jobs and competitiveness — there’s all the things GE has done under Immelt that make the U.S. less competitive. I noted the other day that GE had signed a big deal with China that will involve us sharing our jet technology with China, which will ultimately help China compete with both GE and — China has said explicitly — Boeing. Then there’s the fact that, even as Immelt has been calling for manufacturing in the U.S., his company has been shutting U.S. plants to move the work to China.

While Immelt was calling for manufacturing to stay in the U.S., his company was at the same time shipping manufacturing jobs overseas by canceling an order with an American-based wind turbine maker, ATI Casting Service in LaPorte, Ind., so that GE could instead buy the parts from a factory in China.

Recently, ATI made $30 million worth of investments to buy, convert, and modernize a shuttered factory in economically ravaged Michigan so the company could provide more parts to GE as the green economy expands with federal stimulus funding. But a Chinese firm underbid ATI, and the factory faced having to lay off 302 union workers and shutter the plant.

In an aggressive bid to keep the factory open, ATI offered to match the price of the Chinese producers. GE once again said they would prefer to buy from China. The ATI plant is now closed, the jobs gone.

Then there is Immelt’s call for Free — not Fair — Trade in his op-ed announcing the Kabuki Council.

Free trade: America cannot expand its manufacturing base without greatly increasing the volume of goods it sells overseas. That is why I applaud the free-trade agreement recently concluded between the United States and South Korea, which will eliminate barriers to U.S. exports and support export-oriented jobs. We should seek to conclude trade and investment agreements with other fast-growing markets and modernize our systems for export finance and trade control. Those who advocate increasing domestic manufacturing jobs by erecting trade barriers have it exactly wrong.

And then, finally, there’s the little detail that GE managed, alone of “manufacturing companies” in the U.S., to turn itself into a Too Big To Fail overleveraged finance company in need of a $16 billion bailout from the government (as has happened with all the TBTF finance companies, bailouts have made GE’s financing business profitable again).

In short, no matter how many times Immelt gets up on a podium or in an op-ed and feigns an interest in American jobs, his actions make him the poster child for everything wrong with the U.S. economy right now.

And that’s what Obama is rolling out, as he moves into campaign mode, to convince Americans he’s going to do a damn thing about jobs.

UAW: A Seat at the Table

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There’s always a lot of tut-tutting when the White House releases the list of people who attend a state dinner. While a lot of that, for the dinner honoring Hu Jintao tonight, has to do with which members of Congress have blown off invites (John Boehner, Harry Reid, and Mitch McConnell, though McConnell’s wife Elaine Chao will attend with her father), I’m rather interested in who will attend from the auto industry.

Not Ford’s CEO Alan Mullaly, who has been working with manufacturers that export to China for years. Not Dan Akerson, who is CEO of that auto company that American taxpayers own that does a great deal of business in China (our investment in GM might be incredibly well-served to give GM this kind of access).

But Bob King, the head of the UAW.

Now, maybe I should be happy that UAW’s head gets a seat at the table with the leader of the country his union has lost so many jobs to.

But I can’t help but remember the transactional language King used to talk about his support for the Administration’s KORUS deal.

King countered that the deal was not perfect; there were many things he objected to about the agreement. However, King added that, “It was important to endorse in order to reward the administration for its good behavior of including labor in negotiations.”

[snip]

When I asked King why the UAW decided to endorse the treaty without consulting others unions he said, “We were on a tight deadline to endorse. If we wanted to be relevant, we needed to weigh in right away with an endorsement.”

Back then, it sure sounded like King was happy to sell out workers in exchange for 800 jobs and a seat at the table. But now I’m wondering whether King got a literal seat at the table.

“Foreclosure,” “Housing,” and “HAMP” Not Part of Epic on Obama’s Recovery Plan

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Peter Baker has an almost 6500-word article describing Obama’s efforts to fix the economy.

Obama’s frustration could set the tone for the remainder of his term. For all the trials of war and terrorism, the economy has come to define his presidency. During the first half of his term, he used the tools of government to shape the nation’s economy more aggressively than any president in 75 years.

It describes the counter-productive relationships of his first economic team and the introduction of a second one.

Over the last two months, I interviewed nearly all of the team’s main figures, past and present, and when we talked about their relations with one another, it was like picking through the wreckage of a messy divorce.

It describes Obama’s purported rocky relationship with business (with extensive quotes from the Chamber of Commerce’s Tom Donohue). It describes Timmeh Geithner’s longevity even while quoting him dismissing legitimate critiques of the last two years as “marginal.” It includes the credulous judgment that the tax deal “amounted to a second stimulus package.”

But nowhere in this epic does Peter Baker once use the word “foreclosure.” Or “housing.” Or, god forbid, “HAMP.”

Now, there’s no way to tell whether Baker neglected any discussion of the entire cause of the economic crisis and one of the elements that continues to rot out the core of the economy because he simply didn’t ask about it–in two months of interviews. Or because his sources didn’t or wouldn’t talk about it.

But somehow the paper of record wrote what was supposed to be a definitive article on how the Obama Administration plans to fix the economy without once mentioning that part of the economy, housing, that has traditionally led recoveries but that, partly because of the obstinance of Obama’s economic team, continues to drag down the recovery.

Blindspots and Fear of the Working Class

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I think a lot of the discussion about Freddie DeBoer’s “the blindspot” (with Steve Hynd as one exception) focuses too closely on the personalities–on whether Jane is mean in print or whether Ezra is too conciliatory–and not on whether our political dialogue is dangerously ignoring the plight of workers. For the purposes of this post, I’d like you to first ask yourself why, during the Depression, we started building a safety net for working people, whereas during this current crisis in capitalism, many developed nations are using the crisis as an opportunity to dismantle the safety net.

Then read this part of what DeBoer had to say:

That the blogosphere is a flagrantly anti-leftist space should be clear to anyone who has paid a remote amount of attention. Who, exactly, represents the left extreme in the establishment blogosphere? You’d likely hear names like Jane Hamsher or Glenn Greenwald. But these examples are instructive. Is Hamsher a socialist? A revolutionary anti-capitalist? In any historical or international context– in the context of a country that once had a robust socialist left, and in a world where there are straightforwardly socialist parties in almost every other democracy– is Hamsher particularly left-wing? Not at all. It’s only because her rhetoric is rather inflamed that she is seen as particularly far to the left. This is what makes this whole discourse/extremism conversation such a failure; there is a meticulous sorting of far right-wing rhetoric from far right-wing politics, but no similar sorting on the left. Hamsher says bad words and is mean in print, so she is a far leftist. That her politics are largely mainstream American liberalism that would have been considered moderate for much of the 20th century is immaterial.

[snip]

I look out onto an America that seems to me to desperately require a left-wing. American workers have taken it on the chin for thirty years. They have been faced for years with stagnant wages, rising costs, and the hollowing out of the middle class. They are now confronted with that and a cratered job market, where desperate people compete to show how hard they will work in bad conditions for less compensation. Meanwhile, the neoliberal policy apparatus that brought us here refuses even to consider the possibility that it is culpable, so certain of its inherent righteousness and its place in the inevitable march of progress. And the blogosphere protects and parrots that certainty, weeding out left-wing detractors with ruthless efficiency, while around it orbits the gradual extinction of the American dream.

What seems most important, to me, is that a blind faith in capitalism led to catastrophe. And at a time when we should be reining in the capitalism that failed so badly, we are instead capitulating to it, using the event of the failure of our corporate masters to give them even more. How is that even happening? And to what degree does the blogosphere deserve some of the blame?

Now, aside from the fact that the blogosphere came of age at a time (after Bush v. Gore v. Nader) and with a politician (Dean) when the left reinvested in the two party system, I’m not sure how much of this is distinctly a problem with the blogosphere. Rather, it’s a problem with US discourse generally, and the taxonomy that DeBoer maps out largely comes from compromises many in the blogosphere made to be able to take part in that discourse. (Oh. Btw. Blowjob.) The blogosphere has been certified and thereby neutralized by our political elite, but only certain parts of that blogosphere.

And voila: that means not enough of the leading voices of the blogosphere speak for workers (or the unemployed or the elderly poor or immigrant workers)–or even speak out against our failed capitalist masters. More importantly (and this is why I think DeBoer’s point about socialism is important), while some–many of us here at FDL, for example–do offer critiques of our capitalist masters and support for labor such as it exists, almost no one is offering an affirmative ideological alternative to the neoliberalism of the Village.

The absence of a viable threat from the working class makes it easy for DC to use this failure of capitalism to double down on it, to further disenfranchise the poor. Shock Doctrine, baby.

Mobilization Threats

Just as a way of thinking about this, consider last year’s three big political rallies in DC. Obviously, rallies are not the only way for real people to inspire fear among the elite, it is a way such threats get narrativized.

Consider, first of all, the rally that probably got the most attention: Glenn Beck’s Restoring Honor rally in August, which brought out tens of thousands of TeaPartiers. Now, I think the elite does fear the Tea Partiers. The left (and some Republicans) have reason to fear TeaPartiers physically; the right has to fear them ideologically.

But the rally was notable not for the way it expressed populist anger. Rather, Beck shifted his focus from central TeaParty anti-government issues to instead focus on religion. This was a message about putting your faith in God, not your boots into mobilization. Moreover, the rally would never have been as big as it was without a bunch of Koch-funded buses to ship people to DC. So rather than an expression of class anger, the Beck rally was more an expression of the cooptation of it by big capitalism (the Kochs) and the neutralization of it with religious themes.

Then there was the other big rally celebrated by the press: the Stewart/Colbert Rally to Restore Sanity/Fear in October. What does it say that one of the biggest popular mobilizations last year, in a year that should have featured pitchforks, instead starred comedians? Read more →

Noted “Nut on China,” Jeff Immelt, Uses $16B Bailout to Share Technology with China

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Remember this? Remember when Bernie Sanders used a chunk of his FiliBernie to note that GE CEO Jeff Immelt, whose company benefited from $16 billion in welfare from the federal government, was a big fan of outsourcing to China?

Gee! When GE had, a couple of years ago, some really difficult economic times, they needed $16 billion to bail them out, I didn’t hear Mr. Immelt going to China, China, China, China, China. I didn’t hear that. I heard Mr. Immelt going to the taxpayers of the United States for his welfare check. So I say to Mr. Immelt, and I say to all these CEOs that have been so quick to run to China, that maybe it’s time to start reinvesting in the United States of the America.

Well, that “Nut on China,” Immelt, will take the opportunity of Hu Jintao’s visit to the US this week to sign a deal that will share GE’s jet technology with a Chinese partner hoping to compete with Boeing and Airbus.

G.E., in the partnership with a state-owned Chinese company, will be sharing its most sophisticated airplane electronics, including some of the same technology used in Boeing’s new state-of-the-art 787 Dreamliner.

For G.E., the pact is a chance to build upon an already well-established business in China, where the company has booming sales of jet engines, mainly to Chinese airlines that are now buying Boeing and Airbus planes. But doing business in China often requires Western multinationals like G.E. to share technology and trade secrets that might eventually enable Chinese companies to beat them at their own game — by making the same products cheaper, if not better.

The other risk is that Western technologies could help China in its quest to play catch-up in military aviation — a concern underscored last week when the Chinese military demonstrated a prototype of its version of the Pentagon’s stealth fighter, even though the plane could be a decade away from production.

The first customer for the G.E. joint venture will be the Chinese company building a new airliner, the C919, that is meant to be China’s first entry in competition with Boeing and Airbus.

Now, I’m not surprised about this–this is what all companies hoping to do business in China do. In fact, GM is surely sharing technology with its Chinese partner at the same rates it was before it got an even bigger bailout from the federal government.

This is just the next phase of it, the next higher level of technology we give away to China, soon to be followed by our jobs.

You’d think we could have gotten more in exchange for that $16 billion we gave GE.

Or Maybe Your Profit Levels and Bonuses Are Simply Obscene?

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Jamie Dimon says they’re going to have to chase 5% of their customers away in response to limits Dodd-Frank put on the usurious rates banks charge merchants for each debit card transaction.

Federal limits on debit card processing fees will force banks to charge customers more for services, making accounts too expensive for as many as 5 percent of customers, JPMorgan Chase’s chief executive Jamie Dimon said Friday.

The rules, proposed as part of the Dodd-Frank financial reform law, would cap the fees that merchants pay banks for processing debit card transactions at 12 cents each.

That is almost 75 percent less than the average 44 cents per transaction that banks get now.

U.S. banks could lose about $13 billion of their annual industry debit processing revenues because of the rules, which the Federal Reserve proposed last month.

Dimon also announced today that their profit was up 47% last quarter. And that’s after the $10 billion in bonuses Dimon’s banksters will share.

In other words, JP Morgan could easily afford to keep serving its poorest customers, just by accepting reasonable profit and bonus levels instead of the positively immoral ones they’re now getting. But it has chosen, instead, to push millions into “unbanked” status, I guess because those people aren’t as worthwhile as people as JPM’s MOTUs are.

Note, too, that Chase is one of the national leaders in contracting with states to provide debit cards for state unemployment benefits. I wonder if JPM will forgo these big state contracts and captive consumers as part of its “unbanking” plans?