Economy Loses 159,000 Jobs in September, Sharpest Drop Since March ‘03

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By Dean Baker

“The unemployment rate is likely to cross 7.0 percent early in 2009.”

The economy lost jobs for the ninth consecutive month in September, with the pace accelerating to 159,000 jobs. This was the largest one-month fall since March of 2003 when the economy lost 212,000 jobs. The unemployment rate held steady at 6.1 percent, even though the employment population ratio (EPOP) inched down to 62.0 percent. These data, together with other recent reports, leave little doubt that the economy is in a recession.

Virtually all the news in the household survey was negative. The EPOP fell to 62.0 percent which is equal to the low point from the last downturn reached in September of 2003. Unemployment for men rose by 0.5 percentage points to 6.1 percent. The unemployment rate for black men jumped 1.6 percentage points to 11.9 percent, the highest rate since February of 1994.

By education level, the least educated workers are feeling the worst effects of the recession. Unemployment among workers without high school degrees is at 9.6 percent, more than 2.5 percentage points above the lows hit in 2007. Unemployment for high school graduates is 6.3 percent, more than 2.0 percentage points above the lows hit last year.

The number of workers involuntarily working part-time jumped by another 300,000 in September and now stands more than 2 million above its low point in 2006. The U-6 index, which is a broad measure of labor market slack including underemployed and discouraged workers, hit 11.0 percent, the highest level since April of 1994.

One noteworthy item in this report is that the EPOP for white women exceeded the EPOP for black women for the first time ever, 57.8 percent compared to 57.7 percent. Historically black women have always had considerably higher labor force participation rates, since fewer could afford not to work. While the participation rates of black women are still higher than for white women (63.6 percent compared to 60.3 percent), because the unemployment rate for black women is much higher (9.3 percent versus 4.2 percent), white women now enjoy a slightly higher EPOP.

The establishment survey shows an equally bleak picture. The private sector lost 168,000 jobs in September. The Bureau of Labor Statistics also released preliminary benchmark revisions to the survey, which show that between March of 2007 and March 2008, there were 81,000 fewer private sector jobs than originally reported. Including this revision, the economy has created just 3,061,000 private sector jobs since President Bush took office. By comparison, it created 2,600,000 jobs annually during the Clinton administration.

Note: Data for 2008 is preliminary. Source: BLS Current Employment Statistics, http://www.bls.gov/webapps/legacy/cesbtab1.htm

Job loss was sharpest in manufacturing, where employment fell by 51,000 in September, and is now down by 442,000 from its year ago level. Since its peak in March of 1998, manufacturing has shed 4,257,000 jobs, losing 24.1 percent of employment in the sector. The auto sector has been especially hard hit. It has lost 140,000 jobs over the last year and 441,000 jobs since peaking in February of 2000. This drop is equal to 36.2 percent of employment in the industry.

Construction lost 35,000 jobs in September, while retail trade lost 40,100. Car dealers accounted for 8,600 of these jobs. Trucking shed 12,300 jobs, pushing employment down by 4.6 percent from year ago levels. Financial services lost 17,000 jobs and employment services shed 28,900. Employment growth in health care and state and local government, the two main sources of strength in recent months, has also faded. These sectors added 16,600 and 2,900 jobs, respectively.

The report also shows hours dropping, consistent with the growth in part-time employment reported in the household survey. The index of aggregate weekly hours fell by 0.5 percent last month and is now down by 1.3 percent from its year ago level. Wages grew at a 3.3 percent annual rate over the last quarter, almost the same as the 3.4 percent rate over the last year.

This report should remove any lingering doubts that the economy is in a recession. The rate of job loss is accelerating and the unemployment rate is virtually certain to cross 7.0 percent early in 2009.

The Credit Squeeze Scare

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By Dean Baker

The Federal Reserve Board chairman described the credit squeeze as being "as severe as any supply-induced constraint ever, other than from policy actions." That statement should help to prompt Congress into quick passage of the bank bailout bill, except this quote is from February of 1991, and the chairman at the time was Alan Greenspan.¹

The economy is in a recession and banks always tighten up on credit in a recession. When the economy’s growth prospects are in question, it puts the health of any particular business into question. Therefore, banks will be far more hesitant to make loans during a period of economic weakness. There were literally hundreds of news stories about the credit squeeze in the 1990-1991 recession.

While the story of the big Wall Street banks teetering and/or crashing may be unique to the current downturn, the stories we are hearing of the main street credit squeeze could be cut and pasted from the news coverage of the 1990-1991 recession. There is little reason to believe that the current tightness is any worse than what we have seen in prior recessions.

The most obvious measure of credit tightness is interest rates. We expect that banks will raise interest rates if the demand for credit substantially exceeds the supply. Yet, the interest rates on most categories of loans are far below their averages over recent decades. According to the Mortgage Bankers Association, the average interest rate on 30-year fixed rate mortgages was 6.07 percent last week, down from 6.08 percent the prior week. Back in the early 90s, the average interest rate on 30-year mortgages was over 9.0 percent.

State and local governments are complaining about having to pay interest rates of 5.0 percent, but back in the early 90s they were paying more than 6.0 percent. The same applies to loans for large and small businesses. The interest rates are somewhat higher now than they were in prior months, but they are still relatively low by historic standards. (Real interest rates are even lower by historic standards, since the inflation rate is higher today than it was in the early 90s.)

Of course this past history doesn’t mitigate the pain being suffered by families and businesses trying to make ends meet. But it is important to put the problem in context. No one told us that the world would collapse if we didn’t cough up $700 billion for the Wall Street banks in the 1990-1991 recession.

The bottom line is that we have badly over-leveraged banks who are on the edge of collapse and we have a credit tightening due to an economic downturn. These problems are related, but even if we could snap our fingers and make the banks healthy again tomorrow, we would still have a serious credit problem due to the recession. In other words, many of the businesses and people who have been appearing on news shows because they could not get credit would still not be able to get credit. (Although they probably will not be appearing on the news shows once the bailout passes.)

Figure 1

Figures 1 and 2 show the results of Federal Reserve Board’s Survey of Bank Loan Officers. Figure 1 shows the net percentage (those reporting tightening minus those reporting easing) reporting the tightening of lending standards for commercial and industrial loans. The data go back to the recession of 1990. As can be seen, there is a sharp spike in the percentage of officers reporting tightening this year. However, the data show roughly the same spike in 1990 at the beginning of that recession.

Figure 2

Figure 2 shows the net percentage of loan officers reporting tightening for commercial real estate loans and credit card loans. These data also show a spike in 2008, but it is not qualitatively different than the spike shown in 1990 for commercial real estate. (The credit card series begins in 1996. Of course it is not surprising if the tightening of standards on credit card debt was much sharper in this recession, given the extraordinary destruction in housing equity in the last two years.

Just to remind everyone, the cause is the loss of more than $4 trillion in housing equity due to the collapse of the housing bubble. The collapse of this bubble has not only devastated the construction and real estate market, it also has forced consumers to cut back. Tens of millions of homeowners no longer have any equity against which to borrow. Even those who still have equity realize that they will have to increase their savings to support themselves in retirement.

And all this came about because the experts who are now insisting that we need a bailout had previously insisted that there was no housing bubble and that everything was just fine. It is always important to keep things in context.

What Comes After Senate Approval of the Bailout Bill?

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By Robert Kuttner

Congressional leaders need to look to more than just passing the bill in the House.

With the Senate’s passage of the bailout bill, 74 to 25, Democrats in Congress need to begin preparing right now for a second package to do the job properly. They also need to begin the tightest possible monitoring of Secretary Paulson’s actions and their effects on financial markets. Here is what is likely to unfold over the next few weeks:
The House will pass the bill after at least twenty more Republicans agree to support it. A few more Blue Dog Democrats may switch their votes to no, in protest against the trillion dollars of tax breaks added by the Senate as sweeteners for Republicans.

But Speaker Nancy Pelosi is now under severe pressure to deliver at least the 140 Democrats that she produced on the last vote, which failed because only 66 Republicans voted aye. If the measure were to fail again, this time because of Democratic defections, the Democrats would get the blame for the deepening financial carnage.

After the bill passes, we will see short-lived euphoria. The stock market will rally, and credit will begin to unlock. The overnight borrowing rate between banks will temporarily drop. But, after a week or two, as Paulson begins using his authority to buy up bad paper, the bloom will be off the rose—because there still so many unexploded grenades in the financial system.

Hedge funds will likely be the next casualty, as investors begin withdrawing large sums of money and the funds need to sell assets at depressed prices. Hedge funds typically prohibit their investors from withdrawing funds for a set period, called a lock-in, often two years. This allows hedge funds to pursue highly speculative strategies, knowing that their investors won’t sell out when times get rough. By coincidence, the lock-in period for many hedge fund investors begins expiring this week.

It will also be clear that relieving banks of bad mortgage-backed bonds is not solving the underlying foreclosure crisis. And even if the Securities and Exchange Commission uses its new authority to suspend “mark-to-market” accounting rules, so that banks do not have to downgrade the value of the junk still on their books, it won’t change the underlying reality that banks have taken huge losses and are now severely undercapitalized.

So what should the congressional leadership do?

First, prepare for the likelihood that Congress will have to act again, possibly before the election, almost surely before next January. Hold hearings with expert witnesses on the alternatives to the Paulson plan. The two most important ingredients of a better plan are direct government refinancing of distressed mortgages, and direct government equity investment in troubled banks with government either taking full control of getting a major ownership share.

Second, the House should, at the very least, add to the bailout bill even tighter monitoring requirements. Failing that, Congress should keep Paulson on a very tight leash, so that he blows through as little of the $700 billion as possible on a strategy that can’t work.

Congress should prepare, in detail, to rescue the rescue. The need could materialize either before or after November, but it will surely land squarely on the desk of the next president. And since that president is increasingly likely to be Barack Obama, he and the Democrats need to begin preparing yesterday.

Wall St. Bailout: 'Plan B' for Buffett

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By Brent Budowsky

Plan A is Treasury Secretary Henry Paulson’s plan to spend about $50 billion a month buying distressed assets for resale later. With current law – and with the Paulson bill as written – the government can increase the odds of success by simultaneously executing a Plan B that tracks the recent moves of America’s most respected investor, Warren Buffett.

The government could inject $200 billion into American financial institutions by purchasing preferred stock as Buffett recently did. The government could negotiate a 5 percent dividend (half of Buffett’s) and receive risk-free warrants to buy common stock at slightly below current prices for five years.

That would put the government in line to make money if the stocks rise above the target price of the warrants. Unlike Buffett’s deal, however, the government would never buy the stock, just auction the warrants to private investors, thus reaping a potentially huge profit for taxpayers if and when markets recover.

This Buffett-like plan has other advantages: Major liquidity would be injected quickly into credit markets under terms attractive to companies. The government’s principal would be largely protected. The dividend would create a taxpayer bonus. And the warrants would create a potentially huge taxpayer gain.

Plan B also wouldn’t require changes in the existing legislation. If Congress passes the current bill, including Paulson’s Plan A, this Plan B could be executed simultaneously in a two-pronged attack that would inject far more liquidity into the system than Plan A – the purchase of troubled assets – alone.

Paulson’s plan for moving $50 billion a month alone is grossly inadequate to the task. Adding Plan B would offer far greater support to the economy, very quickly, with less downside risk and greater upside potential than Plan A alone.

So, a Buffett-like move by the government would provide fast benefit to credit markets, bolster consumer confidence and enlist greater taxpayer support because it’s easily understandable and mirrors the moves of the person often called the world’s smartest investor.

Time for truth: If Secretary Paulson sought venture capital financing in the private sector with his current proposal, the deciders would say: “Nice concept, come back with a business plan.” If he then fell to his knees and pleaded for money, saying he would go bankrupt within 72 hours, they would suggest counseling, not financing.

Paulson’s approach has been a ridiculous way to push a proposal of such momentous risk, danger and cost. Paulson waited far too long, then dumped on the Congress and markets a plan he could not cogently explain, seeking powers that would have made Leonid Brezhnev proud.

Paulson also used fearful rhetoric that is grossly inappropriate for any Treasury secretary. It was destructive to market psychology, consumer confidence and public support. Making matters worse, no Democratic, progressive or conservative alternative was seriously considered.

Soviet elections under Brezhnev involved one candidate. The current congressional debate involves only one highly speculative and incompetently explained plan that alarms and confuses markets, depositors and voters.

My advice to members of Congress: Vote for the plan. Let Paulson begin work but demand that he be flexible and receptive to also executing Plan B – or some other Plan C.

Let changes from the Federal Deposit Insurance Corporation reassure depositors. Let mark-to-market accounting changes allow some distressed assets to be properly revalued upwards, some write-downs to be written back up, and credit rating agencies to withdraw some recent downgrades to ease credit conditions as the plan begins and global central banks cut rates.

The Treasury secretary and all public officials should stop rhetoric that wrongly promotes panic. Cable television hosts who throw chairs on shows named “Mad Money” and yell about Great Depressions should shut up.

We will get through this, calmly.

DHS satellite spy program going forward despite objections

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By Nick Juliano

'Ridiculous' to think program doesn't violate Posse Comitatus, ACLU lobbyist tells Raw

The Department of Homeland Security has been given the money it needs to begin turning international spy satellites within the country’s borders, despite lingering fears about the program’s lack of focus and the potential for it to infringe upon Americans’ civil liberties.

After more than a year of delay, Congress quietly authorized DHS to begin sharing data gathered by military satellites with civilian and law enforcement agencies. A $634 billion spending bill signed into law earlier this week provides funds for DHS to establish the satellite surveillance program, known as the National Applications Office, without addressing the myriad concerns about NAO privacy and civil liberties protections that had been delaying its implementation.

Supporters of the program claim, according to the Wall Street Journal, that its scope will be limited to "emergency response and scientific needs," but civil liberties advocates and some members of Congress fear the door has been open for the highly classified satellite surveillance program to shift into high gear.

"I’m kinda shocked it got through," Tim Sparapani, an American Civil Liberties Union lobbyist, told Raw Story, saying the spending bill language authorizing the NAO is not "strong enough to forbid what we would want to see forbidden."

Essentially, the bill only requires the Homeland Security Secretary to assure lawmakers that NAO programs comply with exisiting laws. Congress also has required the DHS Inspector General to provide quarterly classified reports on how much information has been collected by the domestic satellite surveillance, although the bill required those reports be made to the House and Senate Appropriations Committees, not the Homeland Security Committees that are traditionally in charge of DHS oversight.

House Homeland Security Committee members recommended the program be put on hold a year ago, when they requested documents outlining its legal framework and privacy protections. Those reports still have not been handed over, and committee members are not happy at the apparent subversion they suffered by Appropriations Committee members.

"It would appear they have not been satisfied in their demands," Sparapani said of the Homeland Security Committee members who have objected to the satellite surveillance.

Rep. Jane Harman, who has compared the Bush administration’s efforts to expand the use of spy satellites to its warrantless wiretapping program, has been one of the key members attempting to block implementation of the program until all these questions are answered.

"Having learned my lesson," she told the Journal, "I don’t want to go there again unless and until the legal framework for the entire program is entirely spelled out."

Lawmakers also have seen a 60-page report from the Government Accountability Office, on the condition they not release the report publicly. Sources described its contents for the Journal’s Siobhan Gorman, who reports that GAO found that DHS "lacks assurance that NAO operations will comply with applicable laws and privacy and civil liberties standards."

The report cites gaps in privacy safeguards. The department, it found, lacks controls to prevent improper use of domestic-intelligence data by other agencies and provided insufficient assurance that requests for classified information will be fully reviewed to ensure it can be legally provided.

A DHS official told Gorman the department worked hard to include privacy protection and a spokeswoman justified the satellite surveillance’s legality because GAO did not specifically say it violates any current laws.

That justification misses the point, Sparapani says, because GAO simply answers questions posed by Congress, and since its latest report has not been made public, no one outside of the government knows what those questions are.

Besides, he says, it’s not GAO’s job to determine whether programs are legal or not.

"That’s like asking the FDA to talk about Internet communications," he says.

Raw Story has left a message with DHS seeking further comment.

There are further concerns about whether the surveillance program would violate Posse Comitatus, which prohibits the military from participating in domestic law enforcement activities. It’s "ridiculous" to think that’s not what would be happening under this program, Sparapani says.

The ACLU is examining all its options in trying to prevent implementation of this program, which has dramatic potential to violate citizens rights, he says, but filing a lawsuit against DHS may be untenable because of the classified nature of the activities and the difficulty in being able to demonstrate any particular defendant was directly harmed.

Mostly, the ACLU will continue to push Congress and encouraging efforts of lawmakers like Harman and Homeland Security Chairman Bennie Thompson to stop the program.

"The Homeland Security Committee has the right instinct," Sparapani says. "It smells a rotten fish, and the only thing you can do with a rotten fish is throw it out in the trash."

Psychological Weapons of War

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By Cesar Chelala

It is a mystery how the Iraq war was planned and supported for a long time without an effective opposition, despite being one of the worst foreign policy decisions in recent U.S. history. But it becomes less of a puzzle if one applies to the situation some principles of social psychology. In this light, a return to the classic literature is pertinent.

In 1895, Gustave Le Bon, a French social psychologist, published a seminal book on the psychology of crowds, "La psychologie des foules." He probably never imagined that it would become a classic in its genre and a basic source for Sigmund Freud when dealing with the same subject. Le Bon´s ideas, which are pertinent even today, were later further elaborated by other authors and put to use in other tragic historical events, as happened in Germany with the Nazis.

Although Le Bon wrote mainly about the psychology of crowds, his ideas can also be applied to populations. Even though both are different entities, they share some common characteristics. Crowds are transitory and tend to gather because they are homogeneous in their ideas about a specific subject or event. Populations are groups of people with different ways of thinking, living in a place geographically defined but who, like crowds, can be swayed by mass media or by a leader acting through it.

In his analysis of Le Bon´s work, Sigmund Freud wrote, "A crowd is trusting and easily influenced; it is non-critical. The concept of improbability doesn´t exist…. Whoever wants to influence it doesn´t need to present logical arguments. It is only necessary to paint the most alluring images, to exaggerate and to repeat the same concept several times."

According to Le Bon, opposite ideas can coexist and be tolerated in a way that their logical contradictions do not generate a conflict. This may explain why the actions against Osama bin Laden in Afghanistan were essentially abandoned when there was a serious chance of capturing him, and how a war against Iraq was initiated without facing serious opposition in the United States.

According to Le Bon, crowds are subject to the magical power of words, which can provoke the most serious storms in the soul of its members, or can also contribute to calming them down. In this regard, what greater insult can be used against a country than to call it part of an "axis of evil"?

As is now widely known, the Iraq war was conducted on false premises, something that became increasingly evident with time. However, as Le Bon pointed out, "Crowds are never thirsty for truth. They demand illusions, to which they are unable to renounce. Irreality prevails over reality, irreality acting almost as strongly as reality. The visible tendency of the crowd is not to make any difference between them."

The George W. Bush administration used the concept of eliminating a tyrant and bringing democracy to Iraq with great effectiveness. The Iraqi tyrant, Saddam Hussein, was eliminated. But Iraq is still in chaos, corruption is rampant and the Iraqi government is clear in its decision to see the United States withdraw its forces from the country sooner than the Bush administration intends.

Both crowds and populations are subject to the influence of their leaders´ ideas. Through his actions and his words, a true leader can bring peace to a country, and to the world. When a leader is misguided, a terrible war can be his most devastating legacy.

Why Paulson's Plan is a Fraud

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By Paul Craig Roberts

Bail Out the Homeowners!

Is the Paulson bailout itself as big a fraud as the leveraged subprime mortgages?

Yesterday, here on CounterPunch, I discussed the bailout as proposed and noted that the proposal cannot succeed if it impairs the US Treasury’s credit standing and/or the combination of mark-to-market and short-selling permits short-sellers to prosper by driving more financial institutions into bankruptcy.

A reader’s comment and an article by Yale professors Jonathan Kopell and William Goetzmann raise precisely this question of the fraudulence of the Paulson package.

As one reader put it,“We have debt at three different levels: personal household debt, financial sector debt and public debt. The first has swamped the second and now the second is being made to swamp the third. The attitude of our leaders is to do nothing about the first level of debt and to pretend that the third level of debt doesn't matter at all.”

The argument for the bailout is that the banks will be free of the troubled instruments and can resume lending and that the US Treasury will recover most of the bailout costs, because only a small percentage of the underlying mortgages are bad. Let’s examine this argument.

In actual fact, the Paulson bailout does not address the core problem. It only addresses the problem for the financial institutions that hold the troubled assets. Under the bailout plan, the troubled assets move from the banks’ books to the Treasury’s. But the underlying problem--the continuing diminishment of mortgage and home values--remains and continues to worsen.

The origin of the crisis is at the homeowner level. Homeowners are defaulting on mortgages. Moving the financial instruments onto the Treasury’s books does not stop the rising default rate.

The bailout is focused on the wrong end of the problem. The bailout should be focused on the origin of the problem, the defaulting homeowners. The bailout should indemnify defaulting homeowners and pay off the delinquent mortgages. As Koppell and Goetzmann point out, the financial instruments are troubled because of mortgage defaults. Stopping the problem at its origin would restore the value of the mortgage-based derivatives and put an end to the crisis.

This approach has the further advantage of stopping the slide in housing prices and ending the erosion of local tax bases that result from foreclosures and houses being dumped on the market. What about the moral hazard of bailing out homeowners who over-leveraged themselves? Ask yourself: How does it differ from the moral hazard of bailing out the financial institutions that securitized questionable loans, insured them, and sold them as investment grade securities? Congress should focus the bailout on refinancing the troubled mortgages as the Home Owners’ Loan Corp. did in the 1930s, not on the troubled institutions holding the troubled instruments linked to the mortgages. Congress needs to back off, hold hearings, and talk with Koppell and Goetzmann.Congress must know the facts prior to taking action. The last thing Congress needs to do is to be panicked again into agreeing to a disastrous course.

Bailing Out Wall Street by Selling out Main Street

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By Cindy Sheehan

"Small People."

I am watching the debate on CSPAN over HR 1424 the "Emergency Economic Stabilization Act." As you can imagine there is empty rhetoric on both sides of the issue and there is bi-partisan support and opposition. If anything, it's a little more interesting than usual.

Rep Gary Miller (R-Ca), in a rare lapse of guarded "poli-speak" said that this bill would help the "Small People." Meaning, you and I. Fundamentally, that's what we are to the Congressional-Wall Street Cabal---the "Small People."

But, watching the proceedings, I am underwhelmed how these people are all of a sudden worried about we "Small People."

Congress, under the failed leadership of Nancy Pelosi, has passed laws to undermine our 4th Amendment rights to be safe and secure in our personal correspondence, phone calls and emails. Nancy Pelosi's Congress has given George Bush over 500,000,000,000.00 dollars to age his insane wars in Iraq and now they are going to give his Secretary of the Treasure, Henry Paulson, (Former CEO of Goldman-Sachs), 850,000,000,000. 00. That's a lot of zeros!

Congressperson after Congressperson have risen to say that we must hand over billions of "Small People" tax dollars so "Small People" will not "lose their jobs" or "lose their homes." We "Small People" have been losing our jobs and our homes at record paces only rivaled in the 1930's, and not one Bill was passed to help the "Small People" keep our jobs and homes. Tent cities are arising all over the country and Congress is going to bailout an industry that caused these cities and not only that, but use our money to help keep the CEO's in the style to which they have become accustomed.

Congressperson after Congressperson have also risen to say that their constituents, we "Small People" are overwhelmingly against the bailout of corporate piracy and pillaging, but he/she will vote for the Bill anyway, because he/she knows better what is good for us "Small People." We will eat our spinach and like it, because our REPRESENTATIVES have become mini-dictators in the shadow of the Fuhrers who are exercising fascistic control over every aspect of our lives.

I would like to remind everyone that at the beginning of the year, Congress passed another "emergency" bill that gave we "Small People" a few hundred dollars that did nothing to stimulate the economy. The solution to the crisis may cost billions of dollars, but not to hand to Wall Street. The bill failed on Monday, but Wall Street did not crash.

The solution is to put our economy to work for we "Small People." Federal Jobs programs that pay living wages to repair our crumbling infrastructure and rebuild the Gulf States so "Small People" can return to their homes.

Put a moratorium on foreclosures until the housing bubble can adjust to reasonable levels and restructure loans with fixed interest rates so "Small People" can pay their mortgages and the economy will "Gurgle Up" to the Congressional-Wall Street Cabal. We need to extend food stamp and unemployment benefits to pump money directly into the "Small People" economy.

Taxes need to be raised on the top one percent of wealthy people in this country that own more wealth than the bottom ninety percent combined. Taxes need to be reduced dramatically for the bottom 99%. A .25 transaction fee for the people who gamble on Wall Street must also be levied and put into the "Small People" economy for such programs as education and energy.

Regardless, if HR1424 passes or fails, every Congressperson, Democratic or Republican, who voted to sell out the "Small" Person needs to be retired and not sent back to Congress in January.

Reject fear-based politics. We "Small People" need courageous REPRESENTATIVES that will work on real solutions for us, because, as a matter of fact, we are not the "Small People," we are the sovereigns in this Republic and we need to reassert our sovereignty and show our employees in DC that we mean business.

Help me replace Nancy Pelosi in January, she has been the biggest Bush enabler of them all. She sent a very obsequious letter to George Bush this week promising him that Congress would pass a Bill for him. Not only did she not hold him accountable for the crimes he has committed while in office, she is giving him one last victory (at the expense of we "Small People") before he shamefully rides into the sunset while our Republic is burning and Nancy Pelosi plays her fiddle, obediently. George Bush is going to leave quite a mess, and this Congress has proven that they not only do not know how to clean up his messes, but they have collaborated in the orgy that made the mess.

Update: HR 1424 just passed and Congress applauded the marauding of our Republic. We "Small People" have been given a significant defeat.

237-153
Democrats: 154 yeas; 58 nays
Republicans: 86 yeas; 103 nays
31 Reps not voting

Marijuana Is Real Medicine

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By Paul Krassner

Dying to Get High: Marijuana as Medicine is an important and accessible book -- not heavy on academic jargon, but rather lively and engaging, like a true detective novel -- with a broad appeal to those interested in the medical potential of cannabis, an end to the drug war and grass roots activism. I asked the co-authors, Wendy Chapkis and Richard Webb, how working on the book changed them.

WENDY CHAPKIS: "I certainly was one of those people who thought that ’medical marijuana’ was probably mostly a way for Americans to get around ridiculously punitive drug laws. It seemed like a reasonable strategy to me. But the very first time I walked into a WAMM [WoMen’s Alliance for Medical Marijuana] membership meeting, looked around the room and saw people who were ghostly white and frail, people in wheelchairs, people huddled in small groups talking about a WAMM member who needed round the clock care, I realized that medical marijuana was no ’ruse.’ These were very ill people. And, as I started doing interviews, the stories of the medicinal properties of pot blew me away.

"I wasn’t the only one surprised to discover that marijuana did in fact have therapeutic effects. Many patients were equally astonished. Like me, they had been recreational users who appreciated the pleasurable effects of marijuana and were suspicious of the claim that the herb was medicine. Then they started chemotherapy, for example, found themselves fighting off non-stop nausea, took a hit and the nausea disappeared. Or they had intolerable nerve pain from multiple sclerosis, AIDS or post-polio syndrome, used some cannabis tincture and the pain quieted down. It was funny how surprised we all were that it really worked.

"I think this shows how effective drug-war propaganda really is. Even (or maybe especially) people who are very familiar with marijuana are prepared to believe that it doesn’t really work as a medicine. Of course, since the discovery of the cannabinoid receptor system in the body (and the production of endogenous cannabinoids), scientists haven’t been at all surprised at the medical properties of the plant -- which I guess helps explain why the feds have been so reluctant to allow any scientific research.

"In any case, this research really transformed my understanding of the effects of cannabis -- including enriching my understanding of the therapeutic effects of the so-called ’high.’ The chapter on the high is one of my favorites because I think even the medical marijuana movement tends to downplay the psychoactive properties of the drug. They talk a lot about relief of ocular pressure, anti-nausea properties and the effect of cannabis on AIDS-wasting and relief of neuropathic pain, but there is very little discussion of the ways in which the psychoactive effects contribute to a sense of wellness for those who are seriously ill. And that is no small thing."

RICHARD WEBB: "Working with the WAMM has, indeed, been a transformative experience. I have learned a great deal, and formed some of the most cherished and important relationships of my lifetime, but perhaps the most profound change for me has been the development of a new awareness of the importance of compassion and forgiveness. Two events epitomize the many experiences that led to this change.

"The Gay Pride festival in San Francisco has been one of WAMM’s most successful annual fundraising events. One year, I was working T-shirt sales, and when I turned my back for a moment, someone in the crowd stole a pile of shirts. Angry at the perpetrators and embarrassed about my carelessness, I told Valerie Corral, WAMM’s executive director, about it, and all she said was, ’Well, let’s hope they get a good price for them, because they must need the money very badly." Val’s forgiveness was like an epiphany, a moment I will never forget. It was as if a lifetime of blame and resentment had been lifted from my heart, and I became suddenly aware of the deep suffering that drives some people to behave badly.

"When I began my research on WAMM, one of the first people I got close to was an HIV patient named John Taylor. As a result of his illness, John was desperately poor and physically debilitated, but he retained a sense of humor and joie de vivre that made him a pleasure to be around. We eventually became best friends, and when at last John’s struggle against the disease became futile, I turned my living room into a hospice facility and, with the assistance of many WAMM members -- most of whom were trying to manage their own devastating ailments -- I was able to provide John with a safe and comfortable place to live out his final ten weeks.

"These experiences, and many others of a similar nature, have almost completely altered my view of the world, my sense of who I am, and my beliefs about what is most important in life."

Meanwhile, Barack Obama promises he would curb federal enforcement on state medical marijuana suppliers. John McCain has actually ridiculed patients who pleaded for more compassionate policies.

Chomsky: "The Majority of the World Supports Iran"

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By Subrata Ghoshroy

On Wednesday night, in a vote of 86 to 13, the U.S. Senate passed a historic nuclear deal with that will allow the United States to trade with India in nuclear equipment and technology, and to supply India with nuclear fuel for its power reactors. The deal is considered hugely consequential by its supporters and opponents alike -- and a significant victory for the Bush administration.

Last month, Subrata Ghoshroy, a researcher in the Science, Technology and Global Security Working Group at the Massachusetts Institute of Technology, met with Noam Chomsky in his office at MIT, where he is the institute professor of linguistics. "Before we started our discussion," Ghoshroy writes, "Professor Chomsky asked me to give him a little background information. I told him that I was researching missile defense, space weapons and the U.S.-India nuclear deal." Ghoshroy is a longtime critic of the U.S. missile defense program and a former analyst at the Government Accountability Office who in 2006 blew the whistle on the failure -- and attempted cover-up -- of a key component of the program: a $26 billion weapon system that was the "centerpiece" of the Bush administration’s antimissile plan.

Ghoshroy and Chomsky discussed the then-pending nuclear deal, which would sanction trade hitherto prohibited by U.S. and international laws because of India’s refusal to sign the Nuclear Non-Proliferation Treaty and the nuclear tests it conducted in 1998. Ghoshroy has written several articles criticizing the U.S.-India deal as a triumph of the business lobby -- an assessment Chomsky agreed with. He said that Condoleezza Rice is actually on record admitting what is truly behind this deal, which he characterized as a "non-proliferation disaster."

Ghoshroy’s subsequent conversation with Chomsky touched on a number of interweaving topics, including: India and the importance of the non-aligned movement; the myths of free trade and the so-called "success" of neoliberalism; Washington’s historic opposition to promote new world economic and information orders; Latin America’s growing independence; the West’s hypocrisy over Iran’s nuclear program -- and MIT’s ironic role in it during the shah’s regime; and, finally, U.S. elections and the prospects for change.

The result is a two-part interview, the second of which will run on AlterNet tomorrow. Part One begins with India, the Non-Aligned Movement, and why a "majority of the world supports Iran." (The Non-Aligned Movement, which consists of some 115 or more representatives of "developing countries," originated at the Asia-Africa Conference in Bandung, Indonesia, in 1955, which was convened mainly by newly independent former colonies from Africa and Asia to develop joint policies in international relations. Jawaharlal Nehru, then India’s prime minister, led the conference. There, "Third World" leaders shared their similar problems of resisting the pressures of the major powers, maintaining their independence and opposing colonialism and neo-colonialism, especially Western domination. India continued its vigorous participation and leadership role in NAM until the end of the Cold War. For further reading, visit the NAM Web site.)

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Subrata Ghoshroy: (Comparing India) with the situation in Latin America, there is a lot more explicit stance (in Latin America) against imperialism and toward independence.

Noam Chomsky: It exists (in India), but I think that India should be in the lead, as it was in the l950s when it was in the lead in the non-aligned movement.

SG: This is the tension in the Indian situation. The Indian government, the Congress Party and the Bharatiya Janata Party, they think NAM is anachronistic and a relic of the Cold War.

NC: I think that they are quite wrong. I think that it is a sign of the future. The positions of the Non-Aligned Movement, and the South Commission before it, and alongside of it, are pretty sound. A good indication of how sound they are is they are almost entirely suppressed in the West, which tells you a lot.

Take the question of Iranian enrichment. The U.S, of course, takes a militant position against it, which is kind of ironic because the same officials who are now having tantrums about it are the ones who supported the same programs under the shah. MIT is right at the center of that; I can remember in the l970s there was an internal crisis at MIT when the institute authorities pretty much sold the nuclear engineering department to the shah in a secret agreement. The agreement was that the Nuclear Engineering Department would bring in Iranian nuclear engineers, and in return, the shah would provide some unspecified -- but presumably large -- amount of money to MIT. When (this was) leaked, there was a lot of student protest and a student referendum -- something like 80 percent of students were opposed to it. There was so much turmoil, the faculty had to have a large meeting. Usually faculty meetings are pretty boring things; nobody wants to go. But this one, pretty much everybody came to it. There was a big discussion. It was quite interesting. There were a handful of people, of whom I was one, who opposed the agreement with the shah. But it passed overwhelmingly. It was quite striking that the faculty vote was the exact opposite of the student vote, which tells you something quite interesting, because the faculty are the students of yesterday, but the shift in institutional commitment had a major impact on their judgments -- a wrong impact, in my opinion. Anyway, it went through. Probably the people running the Iranian program today were trained at MIT. The strongest supporters of this U.S.-Iranian nuclear program were Henry Kissinger, Cheney and Rumsfeld and Wolfowitz.

SG: This was right around Nixon?

NC: This was in the mid-’70s. Kissinger now says, "How can Iran be pursuing a peaceful program when they have so much oil -- they don’t need nuclear energy." In 1975 he was saying the opposite. He was saying, "Of course Iran has to develop nuclear energy. It cannot rely upon its oil resources." Kissinger was asked by the Washington Post why he had completely changed his judgment on this issue. He was quite frank and honest. He said something like, "They were an ally then, so they needed nuclear energy. Now they are an enemy, so they don’t need nuclear energy." OK, I appreciate honesty. It is ironic to see this developing right now.

When you read the media on this, say the New York Times, the coverage is uniform. "Iran is defying the world." "Iran is defying the international community."

The fact of the matter is that the majority of the world supports Iran. The non-aligned movement supports Iran. The majority of the world is part of the non-aligned movement. But they are not part of the world, from the U.S. point of view. It is a striking illustration of the strength and depth of the imperial mentality. If the majority of the world opposes Washington, they are not part of the world. Strikingly, the American population is not part of the world. A large majority of Americans -- something like 75 percent -- agree that Iran has the right to develop nuclear energy, if it is not for nuclear weapons. But they are not part of the world either. The world consists of Washington and whoever goes along with it. Everything else is not the world. Not the majority of Americans. Not the majority of countries of the world.

All of this illustrates many things, among them the importance of the non-aligned movement. Just as the South Commission was important, the same is true of NAM. But the commission’s important positions were never quoted or mentioned; they were treated as insignificant. They are not insignificant.

The same is true of NAM. India should be in the lead of ensuring that the voice of what is euphemistically called "developing countries" should be heard, should be influential and should be powerful. Not just what comes out of Washington and London!

(In India), on one hand, there has been significant growth and development in the past 20 years or so. On the other hand, the internal problems are simply overwhelming. If you look at the human development index, for example, when the neoliberal reforms, so-called, began, India was 125th or so. Now it is 128th, the last time I looked. Meaning that the fundamental internal problems of India which are so overwhelming, when you just even walk the streets, have clearly not been addressed. If you go to places like Hyderabad or Bangalore, you see wonderful laboratories, high-tech industries, software and a few miles away a sharp increase in peasant suicides coming from the same source. The same social and economic policies are driving both processes.

In places like West Bengal, there has been serious internal strife over land rights and industrial development, and I don’t think that the Left has worked out a way to come to terms with that constructively. On issues like the U.S.-India nuclear pact, from what I read of the Left’s positions, I have found them quite disappointing. They seem to be opposing the pact on nationalist grounds, that India might be surrendering some element of sovereignty. But the real problem is quite different; it is a major step toward undermining the Non-Proliferation Treaty -- as India’s refusal to join it and its secret bomb was in the first place. You know that India does have a tradition about disarmament and non-alignment and so on going back to Nehru, of pressing for nuclear disarmament, non-alignment and so on, and the U.S.-India pact is directly counter to that honorable tradition. And I would have expected the Left to be emphasizing this.

SG: And what you are saying is that this is where the Left should be much more vocal and active?

NC: To an extent, they are. It is very hard to break through Western propaganda. This was dramatically true in the l970s, in the early period of decolonization, when there were calls for a new international economic order, a new information order -- a restructuring of the world to give the voiceless some voice. The United Nations Conference on Trade and Development (UNCTAD) was an important institution at the time. UNESCO was pressing for an international information order in which the Third World would have a voice. There was bitter opposition to that here. It was really brutal here; UNESCO was practically destroyed.

SG: And the U.S. left UNESCO for a while?

NC: First it practically destroyed UNESCO, and then it left it for a long time. Media and commentators were full of outright lies about how UNESCO was trying to destroy freedom of the press, and so on and so forth. What they were trying to do, very clearly, was to break the Western monopoly and to allow independent voices to appear. That is intolerable to Western intellectual communities. We have to have an absolute monopoly; otherwise it violates freedom.

There is quite a good book on this running through the details. It is called Hope and Folly, and it could never be reviewed, because of the devastating story that it tells about the efforts of the media and the intellectual community and so on to destroy UNESCO out of fear that it might open the international communications system to Third World voices. Take a look at the book -- it is very devastating, and what happened is incredible.

The same thing happened with the new international economic order. Instead of a new international economic order of the kind that UNCTAD was pressing for, which made a lot of sense, what happened was the opposite. That’s when the West -- with U.S. and Britain in the lead -- rammed through neoliberal programs, which have been pretty much of a disaster. International economists often say it has been a great success, pointing to average growth rates and the rise out of poverty during the past 30 years. That is a scam. The rising growth rates and rise out of poverty are primarily from China. But China was not following neoliberal rules. They were pursuing a policy of export orientation with a state-directed economy. State-directed export orientation is not the Washington consensus. Muddling the two things together is real dishonesty.

SG: I see. Because of sheer numbers in China? A billion Chinese are growing …

NC: If you have a billion Chinese who are growing, the average growth rate increases. So you have an increase in average growth rate mainly through the efforts of countries that are not following the rules. The same is true of India. One of the reasons that India escaped the Asian financial crisis was that it maintained financial controls.

SG: Right, which would not be the case anymore.

NC: Not anymore. But in that period (it was the case). It escaped the disaster that took place. Take South Korea: It has had spectacular growth. It is heralded as a success of neoliberal principles. That is not even a bad joke. In South Korea, the controls over capital were so strict that a capital export could bring the death penalty. What does that have to do with neoliberalism? It was a state-directed economy, more or less on the Japanese model. Incidentally, just to make the irony even more extreme, one of the leading state-based economies in the world is the United States. Surely, everyone at MIT knows that. What pays their salaries? MIT is part of the funnel by which the taxpayer pays the costs and takes the risks of high-tech development, and the profits are ultimately privatized.

SG: Absolutely.

NC: That’s where you get computers and Internet and the biotech. The entire high-tech economy almost derives from the dynamic state sector.

US congressman: “If we don’t pass this bill, we’re going to have martial law in the U.S.

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By Tom Eley

In the wake of Monday’s vote in the US House of Representatives rejecting the $700 billion bailout package for the American financial industry, prominent voices in the US and international media have responded by denouncing the lower house of Congress and complaining that the American political system is too susceptible to popular opinion and insufficiently obedient to the will of the corporate and political elite.

The yearning for more authoritarian forms of rule was expressed by, among others, Michael Gerson, the former chief speechwriter for George W. Bush. In a column in the Washington Post, he complained, “[I]t is now clear that American political elites have lost the ability to quickly respond to a national challenge by imposing their collective will.” The Times of London, part of Rupert Murdoch’s media empire, was even more blunt, headlining a column, “Congress is the Best Advert for Dictatorship.”

Socialist Equality Party (SEP) vice presidential candidate Bill Van Auken authored an article on the World Socialist Web Site Wednesday (“The Wall Street bailout and the threat of dictatorship”) explaining the connection between the appearance of such openly anti-democratic polemics in the mainstream media and the bill to bail out Wall Street that is being pushed through Congress.

Van Auken wrote, “The furor over the vote in the House serves as a warning that capitalism in crisis will inevitably move toward new forms of rule capable of defending the economic dictatorship of finance capital by means of an open political dictatorship against the working class.”

The next day, the Los Angeles Times, in an article on the Senate passage of the bailout measure, noted in passing a statement by Democratic Rep. Brad Sherman from the San Fernando Valley in Southern California which underscores the authoritarian atmosphere surrounding the proceedings in Congress.

Sherman, who voted against the bailout bill on Monday, said, “The one thing that’s been proven is the absolute fear-mongering that’s being used to drive us is false.” He continued, “I’ve seen members turn to each other and say if we don’t pass this bill, we’re going to have martial law in the United States.”

The Los Angeles Times offered no comment on this astounding statement.

The World Socialist Web Site has long warned that the growing concentration of wealth and widening social inequality in the US are ultimately incompatible with democratic forms of rule. These deeply anti-democratic tendencies are being accelerated by the eruption of the financial crisis and the response of the American ruling elite and both of its political parties.

As Van Auken wrote:

“The crisis is being utilized to effect an ever more immense concentration of economic power that is incompatible with political democracy. Three banking behemoths—Citigroup, Bank of America and JPMorgan Chase—are gobbling up their failing competitors and now control fully a third of US bank deposits... These intense social antagonisms cannot be contained within America’s existing political set-up.”