The Economic Policy Institute Proposes A Workable Bailout Plan

September 22, 2008 | EPI Policy Memorandum #128

Financial industry bailout plan needs to protect taxpayers

The turmoil in financial markets is clearly deep and threatening. The economy, especially the job market, is already facing recessionary conditions, and a further meltdown in credit markets could absolutely deepen this crisis. Piecemeal attempts to repair the damage created by years of inadequate oversight, over-leveraging, and reckless lending and borrowing standards have not worked.

Thus, we support a systematic intervention, but believe that the one proposed by Secretary Paulson is fundamentally flawed. Most important, by committing the government to the purchase of vast amounts of failing debt without any compensation, it fails to protect taxpayers from exposure to significant losses. The way the Paulson plan is structured, taxpayers are likely to pay a premium for “toxic” debt (i.e., more than the underlying value) with little likelihood that they will ever recoup the expense. Moreover, this shortcoming can be easily fixed in such a way that does not threaten to derail the process, given the urgency of the situation.

To do so, the government should follow the lead offered by Congressional Democrats and demand equity for the debt it purchases. We elaborate on this below, but the idea is for the government to act like a private investor—lending money in exchange for a share of the firm. If the loans are effective, and the company once again prospers, the government sells its shares at a premium. If the firm fails, the government has the right to claim the value of any remaining assets.

This is but one condition we believe should be part of the deal—we note others below. While we recognize the urgency of the crisis and the need for quick action, we do not believe that it requires acceding to every aspect of the Paulson plan—and we are relieved to see that some key members of Congress agree. These times call for bipartisan negotiations that protect the taxpayer, offset the government’s expense, and re-regulate markets to reduce the distortions that gave rise to this unfortunate situation in the first place.

With $700 billion of taxpayer money at stake, Congress, the administration, and Secretary Paulson must represent all of us, not just the financial markets. This means paying attention to distressed mortgage holders and to job seekers facing an unemployment rate of 6.1% (more than 10% for African Americans). To offset whatever costs emerge from this bailout, we will need to raise revenues—we suggest levying a tax on financial transactions and raising the tax on income from capital gains and dividends to the same rate as wages. Otherwise, the nation’s needs for expanded health care and investments in infrastructure, renewable energy, and education will be curtailed. We also must make sure that those who are bailed out do not enrich themselves further with excessive salaries and benefits.

Specifically, Congress needs to ensure that there are adequate safeguards for taxpayers included in any bailout package. These measures include:

Equity stakes. Federal assistance must be accompanied by steps to minimize the costs to taxpayers and to ensure that taxpayers participate in any future market gains. The bailout cannot simply be a giveaway to companies that made poor decisions.

Federal purchases of mortgage or related assets should result in taxpayers receiving a share of those companies that participate. The preferred equity stake should be proportional to the size of aid the firms receive. In particular, if assets are purchased by the government at a level above fair value, the equity stake must reflect at least that inflated value. In addition, any injections of capital by the government should be secured by an equity stake at least as large as the cash infusion. Consequently, shareholders and taxpayers will share in both the cost and potential benefits of the bailout.

Further, a "clawback" provision would hold companies responsible for the future performance of the assets they sell to the government. If a given firm's assets perform significantly worse than others in the same asset class in the wider market over a period of five years, the difference should be paid by the companies to the government. This will blunt incentives for firms to swap only their worst assets for equity stakes with the government.

Transparency. If private companies are allowed to participate, they must be subject to the same regulatory and reporting requirements as public firms, including the reporting of all liabilities. Off-the-books accounting should not be allowed.

Compensation. Firms that participate in the program must agree to freeze executives’ compensation at or below a reasonable level—say the salary of the President of the United States—for as long as the government holds an equity stake in the firm. Congress should also include a requirement that compensation packages for public companies be approved by a majority of those shareholders—including government shareholders.

Regulation. Federal legislation must include a timeline for the Treasury and Congressional committees to propose new financial-industry regulations that would significantly reduce systemic risk. Congressional leaders on a bi-partisan basis should publicly commit now to a set of principles that will guide systemic reform in the next Congress. These principles should include tighter and more broadly applied asset reserve requirements, the elimination of off-balance sheet entities and liabilities, tighter control of conflicts of interest, and a crackdown on predatory mortgage lending and lax underwriting standards. Any congressional deal must include a commitment from both parties in Congress to take up legislation to reform the regulatory structure.

Home owner relief. Bankruptcy judges should be allowed to modify the terms of mortgages when the appraised value of a home falls below the mortgage value. Further, home owners whose loans are modified, either through the court or through a "workout" with a bank, should not be penalized on their credit scores.

Process. The program to purchase certain kinds of financial securities should be reviewed frequently by the administration, and the Treasury Secretary should be required to report to Congress on the program at least every 90 days.

Beyond the immediate crisis

Congress needs to act soon to address structural problems to ensure that this kind of crisis cannot reoccur. These measures include:

Reform financial regulations. Publicly traded companies should have financial books that fully reveal the extent of all liabilities and assets. There is no justification for hiding liabilities from lenders or investors, or the government. Off-balance sheet entities or transactions should be prohibited.

Any institution that assumes a role of insuring financial transactions must have reserves adequate to pay off its reasonably anticipated obligations, and much of current finance involves credit derivative swaps and other transactions that hedge or insure against financial events. Yet non-depositary financial institutions like Bear Sterns are permitted to operate with debt-to-capital ratios in excess of 30-1, grossly inadequate to cover potential losses. Regulators should set and enforce asset responsible reserve requirements for investment banks, hedge funds, and other financial institutions.

Mortgage brokers were at the heart of the financial crisis. The natural restraint on lending to people unable to repay has been undermined by the securitization of mortgages. Once brokers could sell a mortgage to an investment bank without concern for the borrower’s ability to repay, the number of bad loans skyrocketed, and foreclosures followed. Tough underwriting standards must be enacted, and brokers must be prohibited from writing loans that they do not reasonably expect can be repaid.

Conflicts of interest, such as those that permitted rating agencies to accept payment from the investment banks whose securities were being rated, must be rooted out and prohibited.

Address the fundamentals of the economy. While it is important to ensure that financial markets continue to function properly, we should also bear in mind that the broader economy continues to struggle with rising unemployment, stagnating wages and incomes, and increasing prices for energy and food.

Home owners should not be left out. This assistance should include, at a minimum, backing for state efforts to provide counseling and temporary relief, and an expansion of judges’ ability to coordinate adjustments in mortgage terms to allow more people to stay in their houses.

Congress should pass an economic stimulus package that includes infrastructure investments, aid to states, and additional payments for low- and moderate-income families. Such a bill, if large enough, would provide a needed spark to complement the efforts on Wall Street. To have a significant impact, a job creation package must be at least as large as the $162 billion package passed earlier this year (though the outlays might be spread over the next 18 months.)

Shared sacrifice. While it may be necessary to provide a backstop to the broader market, it is also clear that many of those on Wall Street have benefited greatly from the excesses of the last few years. The costs of this bailout are unknown since the value of the assets that will be taken over by the federal government is unknowable at this time. It is important, however, that the costs of this bailout not prevent our nation from addressing its many needs, such as health care, education, investments in energy renewables, etc.

We must demand that the costs of the bailout are shared equitably. That means raising taxes on those with high incomes and setting capital gains and dividends tax rates at the same level as ordinary income. Also, a financial transactions tax should be implemented starting in 2009; this tax alone could yield from $50 to $100 billion to meet the costs of the bailout and other needs.

For more information and discussion go to: http://www.epi.org/

Will Race Decide the Upcoming Presidential Election?

Following is a piece on white privilege and the current election written by Tim Wise for www.buzzflash.com a "pro-Democracy web site."

For those who still can't grasp the concept of white privilege, or who are constantly looking for some easy-to-understand examples of it, perhaps this list will help.

White privilege is when you can get pregnant at seventeen like Bristol Palin and everyone is quick to insist that your life and that of your family is a personal matter, and that no one has a right to judge you or your parents, because 'every family has challenges,' even as black and Latino families with similar 'challenges'are regularly typified as irresponsible, pathological and arbiters of social decay.

White privilege is when you can call yourself a 'fuckin' redneck,' like Bristol Palin's boyfriend does, and talk about how if anyone messes with you, you'll 'kick their fuckin' ass,' and talk about how you like to 'shoot shit' for fun, and still be viewed as a responsible, all-American boy (and a great son-in-law to be) rather than a thug.

White privilege is when you can attend four different colleges in six years like Sarah Palin did (one of which you basically failed out of, then returned to after making up some coursework at a community college), and no one questions your intelligence or commitment to achievement, whereas a person of color who did this would be viewed as unfit for college, and probably someone who only got in - in the first place because of affirmative action.

White privilege is when you can claim that being mayor of a town smaller than most medium-sized colleges, and then Governor of a state with about the same number of people as the lower fifth of the island of Manhattan, makes you ready to potentially be president, and people don't all piss on themselves with laughter, while being a black U.S. Senator, two-term state Senator, and constitutional law scholar, means you're 'untested.'

White privilege is being able to say that you support the words 'under God' in the pledge of allegiance because 'if it was good enough for the founding fathers, it's good enough for me,' and not be immediately disqualified from holding office--since, after all, the pledge was written in the late 1800s and the 'under God' part wasn't added until the 1950s--while believing that reading accused criminals and terrorists their rights (because, ya know, the Constitution, which you used to teach at a prestigious law school requires it), is a dangerous and silly idea only supported by mushy liberals.

White privilege is being able to be a gun enthusiast and not make people immediately scared of you.

White privilege is being able to have a husband who was a member of an extremist political party that wants your state to secede from the Union, and whose motto was 'Alaska first,' and no one questions your patriotism or that of your family, while if you're black and your spouse merely fails to come to a 9/11 memorial so she can be home with her kids on the first day of school, people immediately think she's being disrespectful. White privilege is being able to make fun of community organizers and the work they do--like, among other things, fight for the right of women to vote, or for civil rights, or the 8-hour workday, or an end to child labor--and people think you're being pithy and tough, but if you merely question the experience of a small town mayor and 18-month governor with no foreign policy expertise beyond a class she took in college--you're somehow being mean, or even sexist.

White privilege is being able to convince white women who don't even agree with you on any substantive issue to vote for you and your running mate anyway, because all of a sudden your presence on the ticket has inspired confidence in these same white women, and made them give your party a 'second look.'

White privilege is being able to fire people who didn't support your political campaigns and not be accused of abusing your power or being a typical politician who engages in favoritism, while being black and merely knowing some folks from the old-line political machines in Chicago means you must be corrupt.

White privilege is being able to attend churches over the years whose pastors say that people who voted for John Kerry or merely criticize George W. Bush are going to hell, and that the U.S. is an explicitly Christian nation and the job of Christians is to bring Christian theological principles into government, and who bring in speakers who say the conflict in the Middle East is God's punishment on Jews for rejecting Jesus, and everyone can still think you're just a good church-going Christian, but if you're black and friends with a black pastor who has noted (as have Colin Powell and the U.S. Department of Defense) that terrorist attacks are often the result of U.S. foreign policy and who talks about the history of racism and its effect on black people, you're an extremist who probably hates America.

White privilege is not knowing what the Bush Doctrine is when asked by a reporter, and then people get angry at the reporter for asking you such a 'trick question,' while being black and merely refusing to give one-word answers to the queries of Bill O'Reilly means you're dodging the question, or trying to seem overly intellectual and nuanced.

White privilege is being able to claim your experience as a POW has anything at all to do with your fitness for president, while being black and experiencing racism is, as Sarah Palin has referred to it, a 'light' burden.

And finally, white privilege is the only thing that could possibly allow someone to become president when he has voted with George W. Bush 90 percent of the time, even as unemployment is skyrocketing, people are losing their homes, inflation is rising, and the U.S. is increasingly isolated from world opinion, just because white voters aren't sure about that whole 'change' thing.

Ya know, it's just too vague and ill-defined, unlike, say, four more years of the same, which is very concrete and certain.

White privilege is, in short, the problem.

Annenberg Pubic Policy Center Websites Cut Through the Political Rhetoric

Factcheck.org & factchecked.org
Useful web sites to get to the heart of public policy, with lesson plans to help students develop critical thinking skills while exploring timely issues.

Here is a description of the web sites, in their own words.

You may think there are already plenty of Web sites devoted to teaching kids one thing or another, from elementary to obscure. Our goal is a little different. We believe that truth is an elusive commodity in our world of ceaseless communication, a world in which information is transmitted in huge helpings and in a virtual instant. All of us are overwhelmed with messages, many of them attempts to persuade us to do or buy something.

Our aim is to help students learn to be smart consumers of these messages, not to accept them at face value; to dig for facts using the Internet, not to stop looking once they get to Wikipedia; and to weigh evidence logically, not to draw conclusions based on their own biases.

The materials on this site, then, are meant to help students acquire the skills to see through the spin. Under the heading Tools of the Trade we’ve outlined a five-step framework for analyzing information and avoiding deception. That process is the essence of what we do at FactCheck.org, where we have been debunking false and misleading claims in politics since 2003.

Some of our Lesson Plans present students with a message, such as an advertisement, and guide them through a process of discovery leading to the facts. All of the ads are real, and students probably have encountered some of them already. For example, many students and teachers will have seen ads on the Internet and television for a dietary supplement called Hoodia, which supposedly helps users lose weight by suppressing their appetites. Our lesson plan encourages students to ask such questions as, “Is there any scientific evidence that Hoodia works?” and to hunt for some answers.

Political messages are at the hub of a number of our lessons. We are strictly nonpartisan. We found long ago that misleading statements aren’t the purview of Democrats or Republicans alone. So, for example, you’ll find a lesson dealing with misleading claims made by Republican presidential candidates during a debate, as well as one framed around out-of-context assertions in an ad by a group opposing the Iraq war. We’ll post these topical lesson plans on an ongoing basis to keep up with current events.

Another group of lessons teaches some of the basic concepts of reasoning, giving students the building blocks that will help them parse others’ arguments and strengthen their own. Using Monty Python skits and clips from other popular television programs and films, we’ve created engaging lessons on deductive versus inductive reasoning, picking out logical fallacies and similar subjects. These are our core lesson plans.

Straight from the Source is our go-to list of Web sites, the places we visit when we’re looking for information, along with our synopses of what they offer. Official government sites can be terrific fonts of facts, like the U.S. Senate’s Office of Public Records, which identifies companies that have hired lobbyists trying to influence government policy on, say, offshore oil drilling, and the FBI’s Uniform Crime Reports site is a reliable source for finding out something like how many murders occurred in Chicago last year. We also include a number of think tanks and issue advocacy groups with rundowns on their political leanings and reliability.

Our Dictionary helps decode bureaucratese as well as legal, political, economic and other terms of art that often plague discussions of policy and politics.

Click on Ask FactCheck to see our answers to commonly asked questions about politics, government and current affairs, which we select from queries submitted by users of this site and FactCheck.org. You may also e-mail us directly at Editor@FactCheckEd.org.

The techniques we use at FactCheck.org, and those we try to convey here at FactCheckED.org, are essentially those used by any good investigative reporter, researcher or logician (all of which we have on staff). We try to be skeptical but not cynical. When we review a new claim, we neither accept it at face value nor do we assume it is false. We listen carefully, look for evidence and weigh that against what’s being said or implied. We think those are good habits to teach anybody. We hope you agree.

Viveca Novak
Project Director, FactCheckEd.org
Deputy Director, FactCheck.org

Brooks Jackson
Director, FactCheck.org

The New Inequality

Special edition of The Nation explores the current state of inequality in the U.S. The June 30 issue explores the impact of the greatest level of inequality since the Gilded Age prior to WWI.

The Rich and the Rest of Us by John Cavanagh and Chuck Collins
Over the last three decades, market worshipping politicians and their and their corporate backers have engineered the most colossal redistribution of wealth in modern world history, a redistribution form the bottom up, from working people to the tiny global elite.
Read more http://www.thenation.com/doc/20080630/cavanagh_collins

Our Gilded Age by Doug Henwood
It has become a cliche to say that we live in a new Gilded Age. True enough, up to a point. Money, mostly new money, rules politics and culture. Corporations merge into larger corporations. You have to go back to before World War I to match today’s levels of income and wealth inequality.
In some ways, the second Gilded age is worse than the first. Sure, we live longer now, more of us can read and you don’t have to be a white man to vote. But to prove my point, consider two big arties thrown 110 years apart.
Read more http://www.thenation.com/doc/20080630/henwood

Meet the Wealth Gap by Gabriel Thompson

For a delivery worker, perched on a bicycle with plastic bags of food dangling from each handlebar, Manhattan's East Side offers many opportunities for a trip to the emergency room. I learn this one May afternoon as I trail 26-year-old Apolinar Perez, a chubby-faced Mexican immigrant who skillfully steers his black mountain bike through the chaos. A taxi switches lanes without warning, nearly clipping my front wheel. Suit-clad men and women stride purposefully into the street, too wrapped up in their phone conversations to notice they're crossing against the light. A black Suburban with tinted windows screeches to a halt in front of us, directly in the path of the bike lane.
Perez arrived in New York City five years ago, after crossing the Texas border in the back of a truck while hidden beneath a pile of children's toys. Since then, he's delivered food for the same Italian restaurant, working eleven hours a day, six days a week. Pay couldn't be simpler: before heading home each night, one of the managers hands him a $20 bill. That's an hourly wage of $1.82--well below the state's $4.85 minimum wage for delivery workers. The rest of his earnings come through tips, which average $60 a shift. There's no overtime or healthcare, no sick days or workers' comp. I inquire about any benefits I might be forgetting. "For Christmas they give me $50," he says. "Sometimes.

Read more http://www.thenation.com/doc/20080630/thompson

Race and Extreme Inequality by Dedrick Muhammad

The current presidential campaign has sparked a lot of conversation about race, but it has primarily been at the symbolic and interpersonal level. It has failed to probe the underlying substance of racial economic disparities and the slow rate of progress toward equity in wealth and wages. Too many Americans naïvely see the strong presidential candidacy of Illinois Senator Barack Obama as evidence of the resolution of the racial divide.

Read more http://www.thenation.com/doc/20080630/muhammad

This Land is Their Land by Barbara Ehrenreich

I took a little vacation recently--nine hours in Sun Valley, Idaho, before an evening speaking engagement. The sky was deep blue, the air crystalline, the hills green and not yet on fire. Strolling out of the Sun Valley Lodge, I found a tiny tourist village, complete with Swiss-style bakery, multistar restaurant and "opera house." What luck--the boutiques were displaying outdoor racks of summer clothing on sale! Nature and commerce were conspiring to make this the perfect micro-vacation.
But as I approached the stores things started to get a little sinister--maybe I had wandered into a movie set or Paris Hilton's closet?--because even at a 60 percent discount, I couldn't find a sleeveless cotton shirt for less than $100. These items shouldn't have been outdoors; they should have been in locked glass cases.

Then I remembered the general rule, which has been in effect since sometime in the 1990s: if a place is truly beautiful, you can't afford to be there. All right, I'm sure there are still exceptions--a few scenic spots not yet eaten up by mansions. But they're going fast.

Read more http://www.thenation.com/doc/20080630/ehrenreich

For more information on income and wealth inequality and how to work for a more equal society:

www.extremeinequality.org
The Working Group on Extreme Inequality began coming together in 2007. Many of the organizations involved in the Working Group had, over the years, been active in organizing against poverty and economic insecurity. That effort had helped us understand that the fight against inequality, to make significant headway, has to both “raise the floor” and challenge the concentrated wealth and power that increasingly sit at the top of our economic ladder.

www.inequality.org
About Inequality.org
Ten or fifteen years ago, we can attest, the growing concentration of income and wealth was not a focus of overwhelming national concern. The problem is worse today than it was then. Nevertheless, over the past year, America has taken a huge step forward in awareness. Across the political spectrum, there is almost universal acknowledgment that our nation (and planet) are pulling apart economically.
Alan Greenspan has spoken out. So has George Bush. Jim Webb made rising inequality a theme of his successful campaign for the Senate in Virginia. "When I graduated from college, the average corporate CEO made 20 times what the average worker did," Webb pointed out in his response to the President's State of the Union Message in January. "Today, it's nearly 400 times. In other words, it takes the average worker more than a year to make the money his or her boss makes in one day."
You'll find many other startling and disturbing statistics in our "By the Numbers " section. None are widely contested.
The debate now turns to three important questions: Does it matter? Why is it happening? What can be done? Despite the emerging consensus over the fact of rising inequality, there is still wide divergence of opinion over its sources - and potential solutions.
Inequality.org was created to serve as a dependable portal of information. Too much inequality, we believe, undermines democracy, community, culture and economic health. Because the problem is so important, accuracy is important, and we are committed to presenting the best and latest information.
We hope you will bookmark us, join us regularly for up-to-date information and analysis, and participate in the conversation - and the action.
Chuck Collins, Institute for Policy Studies
James Lardner, Demos

www.faireconomy.org

United for a Fair Economy is a national, independent, nonpartisan, 501(c)(3) non-profit organization. UFE raises awareness that concentrated wealth and power undermine the economy, corrupt democracy, deepen the racial divide, and tear communities apart. We support and help build social movements for greater equality.

www.toomuchonline.org

About Too Much
Each and every week, Too Much explores excess and inequality, in the United States and throughout the world. We cover a wide swatch of economic and political territory, everything from executive pay and lifestyles of the rich and famous to the latest research insights on how staggering income and wealth divides are impacting our health and our happiness.
Too Much began publication in 1995 as a print quarterly jointly published by the Council on International and Public Affairs in New York and the Boston-based United for a Fair Economy, then became an online weekly nine years later.
Too Much, ever since its inception, has been edited by labor journalist Sam Pizzigati, the author, most recently, of the award-winning Greed and and Good: Understanding and Overcoming the Inequality that Limits Our Lives.
Subscriptions to the weekly Too Much email newsletter are free. You can read the current issue online or check our archive for back issues. To get Too Much in your e-mail inbox every Monday, just sign up here.

You've Received Your Economic Stimulus Check: Now What

May 15, 2008 EPI Policy Memorandum #124

Making the case – again – for an economic rebound
by Nancy Cleeland and John Irons

With federal stimulus checks in the mail this month, it’s worth reconsidering the much-trumpeted bipartisan accord that was reached in January to jumpstart the U.S. economy – and all that it fails to do. For instance, the stimulus deal provides for no extension of unemployment benefits; no aid to cash-strapped states; and no spending on immediate repairs to schools, bridges, ports, and other crucial infrastructure. All of the above were identified by EPI as cost-effective ways to inject money into a shrinking economy, in many cases, creating good jobs in the process. They were not incorporated into the plan then, and despite far worsening economic conditions, efforts to revive the ideas have not gathered sufficient support. In fact, the latest effort toward a second stimulus package in the House, which began with talk of halting foreclosures and building infrastructure, has shrunk down to a minor extension of unemployment benefits tagged onto a supplemental appropriations bill used to fund the war in Iraq.

The good news is that the January deal between House leaders and President Bush puts cash in the pockets of people who are likely to spend it, ratcheting down the payments for individuals who earn more than $75,000 a year. The bad news is that businesses get tax breaks worth an estimated $45 billion this year that will do nothing to get the economy moving again—businesses need customers, not incentives to increase capacity. If there was any doubt of recession in January, it should be gone by now, after four months of shrinking employment, a quarterly gross domestic product rate that is barely above zero, and signs of a pullback in consumer spending.

Here is some of what needs to be done in a second stimulus package to immediately boost the economy, create jobs, and ensure against a prolonged period of economic weakness:

Infrastructure:
With thousands of bridges in need of repair, accelerated investments in road and bridge repair would create jobs today while making our transportation system safer;
A school maintenance and repair initiative would eliminate years of deferred maintenance and improve the learning conditions for students and teachers;
By putting a down payment on regional transportation projects by creating an infrastructure investment bank we can begin to meet long-term infrastructure needs.

Unemployment insurance:
With long-term unemployment at unusually high levels, extending unemployment insurance benefits would yield an immediate stimulus and protection against a longer-term economic downturn.

State aid:
States continue to project significant budget shortfalls; providing emergency aid to states would prevent cutbacks that would worsen economic conditions.

Economic Policy Institute www.epi.org

New Campaign to Cut Poverty in Half

From Poverty to Prosperity: A National Strategy to Cut Poverty in Half


While thirty-seven million Americans living below the official poverty line, and many millions more unable to meet their basic needs, a mere 150,000 families or 0.01% of the nation’s population accounts for 5.5%of total income. As millions of homeowners face foreclosure and the value of the dollar continues to tumble, inequality in the Untied States has surpassed that of many developing and third world countries. While elective and cosmetic surgeries become ever more popular, the number of working Americans with health insurance continues to decline, exceeding forty-seven million people. And, while crime continues to decrease, the Untied Sates prison population continues to grow, topping 2.2 million people incarcerated, the cast majority of whom are poor and men of color.

As our inequality continues to grow and take an ever larger toll, our elected officials continue to ignore reality and since the end of John Edwards’ presidential campaign, poverty is not even an issue on the campaign trail. While Republicans and Democrats continue to squander billions on a failed war effort, social programs are forced to cut back, increasing the burden on working and low income families.

A new effort has been launched to address these inequalities in America, Half In Ten, a campaign to cut poverty in half within ten years. Spearheaded by former Senator john Edwards and the Association of Community Organizations for Reform Now (ACORN), the Center for American Progress Action Fund (CAPAF), the Coalition on Human Needs (CHN), and the Leadership Conference on Civil Rights (LCCR), the campaign goals are to:

1) Elevate and sustain a focus on the situations facing the poor and middle class today (2) Build and strengthen an effective constituency to demand legislative action on poverty and economic mobility (3) Advance specific legislative and policy proposals that will deliver real benefits to struggling American families.

This campaign is based upon a report published by the Center for American Progress, titled From Poverty to Prosperity: A National Campaign to Cut Poverty in Half. The report lays out four principles that guide the campaign, they are:

• Promote decent work
• Provide opportunity for all
• Ensure economic security
• Help people build wealth

To realize the goal of cutting poverty in half within ten years, the report sets out the following twelve point agenda:
1) Raise and index the minimum wage to half the average hourly rate
2) Expand the earned income tax credit and child tax credit
3) Promote unionization by enacting he Employee Free Choice Act
4) Guarantee child care assistance to low-income families and promote early education for all
5) Create 2 million “New Opportunity” housing vouchers and promote equitable development in and around central cities
6) Connect disadvantaged and disconnected youth with school and work
7) Simplify and expand Pell Grants and make higher education accessible to residents of each state
8) Help former prisoners find stable employment and reintegrate into their communities
9) Ensure equity for low wage workers in the Unemployment Insurance system
10) Modernize means-tested benefits programs to develop a coordinated system that helps workers and families
11) Reduce the high cost of being poor and increase access to financial services
12) Expand and simplify the Saver’s Credit to encourage saving for education, homeownership and retirement.

The entire report From Poverty to Prosperity: A National Campaign to Cut Poverty in Half, can be accessed at: http://www.americanprogress.org/issues/2007/04/poverty_report.html

The web site for Half In Ten From Poverty to Prosperity can be accessed at: http://www.halfinten.org/aboutus.html

US: ‘Drug War’ Unjust to African Americans

Two National Reports Detail Racial Disparity in Arrests and Imprisonment

Washington, DC, May 5, 2008) – Ostensibly color-blind, the US “war on drugs” disproportionately targets urban minority neighborhoods, Human Rights Watch and The Sentencing Project said in two reports released today. Although whites commit more drug offenses, African Americans are arrested and imprisoned on drug charges at much higher rates, the reports find.

In the 67-page report, “Targeting Blacks: Drug Law Enforcement and Race in the United States,” Human Rights Watch documents with detailed new statistics persistent racial disparities among drug offenders sent to prison in 34 states. All of these states send black drug offenders to prison at much higher rates than whites. “Most drug offenders are white, but most of the drug offenders sent to prison are black,” said Jamie Fellner, senior counsel in the US program at Human Rights Watch and author of “Targeting Blacks.” “The solution is not to imprison more whites but to radically rethink how to deal with drug abuse and low-level drug offenders.”

Key findings in the Human Rights Watch report include:

• Across the 34 states, a black man is 11.8 times more likely than a white man to be sent to prison on drug charges, and a black woman is 4.8 times more likely than a white woman.
• In 16 states, African Americans are sent to prison for drug offenses at rates between 10 and 42 times greater than the rate for whites.
• The 10 states with the greatest racial disparities in prison admissions for drug offenders are: Wisconsin, Illinois, New Jersey, Maryland, West Virginia, Colorado, New York, Virginia, Pennsylvania, and Michigan.

The Sentencing Project’s 45-page study, “Disparity by Geography: The War on Drugs in America’s Cities,” is the first city-level analysis of drug arrests, examining data from 43 of the nation’s largest cities between 1980 and 2003.

The study found that, since 1980, the rate of drug arrests in American cities for African Americans increased by 225 percent, compared to 70 percent among whites. Black arrest rates grew by more than 500 percent in 11 cities during this period; and, in nearly half of the cities, the odds of arrest for a drug offense among African Americans relative to whites more than doubled. “The alarming increase in drug arrests since 1980, concentrated among African Americans, raises fundamental questions about fairness and justice,” said Ryan S. King, policy analyst for The Sentencing Project and author of “Disparity by Geography.” “But even more troubling is the fact that these trends come not as the result of higher rates of drug use among African Americans, but, instead, the decisions by local officials about where to pursue drug enforcement.”

Among The Sentencing Project report’s key findings:

• African-American drug arrests increased at 3.4 times the rate of whites despite similar rates of drug use.
• Extreme city variations in drug arrests point to local enforcement decisions as a prime contributor to racial disparity.
• Six cities experienced more than a 500-percent rise in overall drug arrests between 1980 and 2003: Tucson (887 percent), Buffalo (809 percent), Kansas City (736 percent), Toledo (701 percent), Newark (663 percent), and Sacramento (597 percent). The Sentencing Project and Human Rights Watch urge public officials to restore fairness, racial justice, and credibility to drug-control efforts.

They recommend public officials take a number of concrete steps, including:

• Eliminating mandatory minimum sentences and restoring judicial discretion to sentencing of drug offenders;
• Increasing public funding of substance abuse treatment and prevention outreach to make these readily available in communities of color in particular;
• Enhancing public health-based strategies to reduce harms associated with drug abuse and reallocating public resources accordingly.

These reports follow in the wake of the March 2008 recommendations of the United Nations Committee on the Elimination of Racial Discrimination. The committee urged that US criminal justice policies and practices address the unwarranted racial disparities that have been documented at all levels of the system.