What’s Wrong Today:

No, there is no sausage. With limited access to the Internet today, here are a couple of items on the web that the Wrongologist will not have time to write about, but that are worthy of your consideration.

First, The Incidental Economist alerted about the Journal of the American Medical Association’s report: An Analysis of Campaign Contributions to Federal Elections, 1991 Through 2012. Here is a part of JAMA’s a synopsis of the report:

Here are their key findings:

• Physician contributions to campaigns went from $20 million in 1991-92 to almost $190 million in 2011-12. The percentage of physicians who contributed went from 2.6% to 9.4%.
• The percentage contributing to Republicans has decreased over time. In fact, in both the 2007-8 and 2011-12 elections, more physicians contributed to Democratic campaigns than to Republican campaigns. Never mind that they worked significantly harder in the 2010 Congressional elections to elect Republicans.

The common meme is that most doctors oppose the ACA. If so, they didn’t seem to put their political money where their mouths were/are since 2010.

The report also shows that there are big gender differences among Doctors who contribute. About 52% of male physicians who contributed, gave to Republican candidates, while 76% of female physicians who contributed, gave to Democrats.

We will have to wait and see what the trends look like after the 2014 off-year elections. Perhaps the high point in opposition to the ACA by physicians was in 2010.

Second, Barry Ritholtz reported at his Big Picture blog about The Senate Committee on Foreign Relations hearing on March 21st regarding the renewal of the Authorization for the Use of Force (AUMF) in Iraq and Afghanistan.

Apparently, Senators repeatedly asked representatives from the Department of Defense which groups America is at war with.

Wait for it…

The DOD refused to answer! The ACLU’s deputy legal director and director of the ACLU’s Center for Democracy (Jameel Jaffer) was at the hearing and tweeted:

Senate: Which groups are we at war with? Admin: That’s classified. http://t.co/olW6B6Wy35

— Jameel Jaffer (@JameelJaffer) May 21, 2014

The implication is clear. DOD is saying to the Senate: Don’t ask who or why, just clap louder.  

The DOD says “that’s classified” because there can be no answer. We do not have a coherent enemy. We don’t really have a clue who we are currently at war with. Some days, it probably looks like everybody.

And whoever they are, we think they are going to be shooting at us real soon.

It is Congress’ Constitutional responsibility to declare war. So, the DOD’s answer should be: ‘no one’, because we have not declared ‘war’ on anyone.

The implication, by Senators asking the question, is that Congress has completely abdicated their Constitutional responsibility.

Hypocrisy rules!

(Reader Linda S. points out that in the post below, the Wrongologist says that Max Baucus, Ambassador to China, was formerly a Republican Senator. In fact, Baucus is a Democrat. The Wrongologist regrets this jet-lag induced, but understandable error. Baucus was a Democrat in Name Only).

What’s
Wrong Today:

Today
is a travel day in China. Here are a few early impressions of Shenzhen, plus a
few short items from the Chinese media that are worth your attention. Google
has been inaccessible in China for the past few days, along with the New York
Times. Rumors are that it has to do with the 25th Anniversary (June
4) of the Tiananmen Square uprising. Otherwise, virtually every other URL that
the Wrongologist has tried to access is available, although we have not tried
to get to Facebook or other social sites.

Regarding Shenzhen, it is a big, modern city with
major avenues that are 6 lanes wide, with green space in the middle, similar to
Park Avenue in NYC. Huge office towers line these avenues and traffic is very
busy, mostly cars, smaller trucks and buses, unlike some cities in Asia were
motorbikes and scooters predominate.

Here is a city photo taken yesterday:

The main
boulevards make Shenzhen feel like any modern city anywhere in the world. When
you move two blocks beyond the main roads, Shenzhen begins to look more like a
typical Asian city, with mostly 3-story concrete buildings, combining first
floor storefronts and offices or apartments above.

The streets are packed with people, as you would
expect to see in a city of 10 million. It has the look and feel of a wealthy
city with many, many restaurants and shops. Most cars are foreign, with
Japanese and Korean models dominating.

While General Motors claims to be quite successful
in China, particularly with Buick, there was only one Buick, an older Regal
that was visible, parked on the street. Next is a photo of an apartment block across
from the hotel. Here you are beginning to get the look and feel of a city that
is similar to many in Asia:

Finally, here is a photo of a more upscale
apartment, again within walking distance of the hotel, which has a communal green
space built into the façade. Much like Hong Kong of 40 years ago, wash is hung
out to dry in any available space:

Of interest, Barack Obama’s half-brother
, Mark Okoth Obama Ndesandjo, lives in Shenzhen, and is married to a Chinese
woman. He speaks Chinese. The Obama boys had different mothers, did not grow up
together and are not close. Ndesandjo grew up in Kenya but moved to the US for
college, completing a bachelor’s degree in physics at Brown University and a
master’s in physics from Stanford University. Later, he got an MBA at Emory
University. He wrote a book
describing an abusive relationship with his father, one that is very different
from that which Barack Obama outlined in Dreams of My Father. Ndesandjo is a
minor celebrity in Shenzhen, occasionally being interviewed on local TV.

The English newspaper, China Daily had several interesting items showing the different
opinions on world events. First, an item about Internet
spying:

Now, this is old news, but the article points to an Op-Ed
on the same day that is more pointed, entitled World’s
Largest Internet Hacker:

The
opinion piece concludes:

Also
in the same paper was a description
of Max Baucus’ efforts as our new US Ambassador, to develop better economic ties
with China, wherein Baucus said:

To which Xu
Hongcai, with the China Center for International Economic Exchanges replied:

The article
recalls that the US Congress and an agency that reviews foreign investment
denied a $2.2 billion Chinese takeover of 3Com in 2007, and a proposed $18.5
billion takeover of Unocal in 2005.

Is it only the Wrongologist who
thinks it is laughable that a REPUBLICAN former Senator now wants to rebuild
American infrastructure?
And, using Chinese money, labor and technology?

Finally,
another piece from yesterday’s paper:

That isn’t
a relative cap that is tied to GDP, folks. It isn’t “cap and trade”. It is a
hard cap. The paper reported it was
announced in response to the US’ weak tea, an executive order restricting
carbon emissions from our coal-fired power plants.

Gee, a
government that admits climate change can be slowed by reducing carbon
emissions.

Bet you
thought that couldn’t happen.

What’s Wrong
Today:

Many will remember
the feel-good story of 2010 in which Facebook CEO Mark Zuckerberg announced his
plan to make a $100 million challenge grant/investment in the Newark, NJ public
schools.

Well, the initial
returns are now in, and it appears that Zuckerberg’s $100 million was a lost
opportunity for Newark. Although none of what has transpired is Zuckerberg’s fault, instead of reform, the district is awash with civic
disunity, union resistance and school district cost overruns.

Zuckerberg had responded
to New Jersey Governor Christie’s and Newark Major Corey Booker’s appeal to
help reform the Newark schools and make them into a model for the rest of
America. Zuck wanted to use Silicon Valley-style bonuses to incent Newark’s best
teachers. He talked about paying 50% bonuses, a routine event at Facebook.

Instead, according to
a long piece in The
New Yorker by Dale Russakoff, his funds have either been spent or are
fully committed, and that much of Zuckerberg’s money funded controversial
charter schools, union contracts, and possibly, some went into the pockets of politically-connected
education reform activists. How did it all go wrong? Was the hoodied
billionaire hoodwinked, (h/t The Baffler) or was this just the natural consequence of naïve money meeting smart
bureaucrats?

The Newark schools
had been run by the state since 1994, when a judge ended local control, citing
corruption and neglect. A state investigation had concluded:

There was no question
that the Newark school district needed reform. For generations, it had been a
source of patronage jobs and sweetheart deals for the connected and the lucky. The
New Yorker quotes Ross Danis, of the nonprofit Newark Trust for Education:

By 2010, the state
had produced no real improvement. So, New Jersey Governor Christie and Newark Major
Corey Booker decided to work together. Booker warned that they would face a brutal battle with unions and
machine politicians. With seven thousand people on the payroll, the school
district was the biggest public employer in a city of 270,000. Russakoff
reports that Christie replied: “Heck, I got maybe six votes in Newark. Why not
do the right thing?” So began the effort to recruit Zuckerberg. From the New Yorker:

Booker said: “We know
what works”. He (and others) blamed vested interests for using poverty as an
excuse for failure, and dismissed competing approaches as incrementalism.
Education needed “transformational change.” Mr. Zuckerberg agreed, and he
pledged his $100 million to Booker’s and Christie’s cause. From Russakoff:

Yet, the school
district is running in the red. Residents recently learned that the overhaul
would require thousands of students to change schools. The community is up in
arms at Christie and Booker, now a US Senator. They want input and local
control restored. In mid-April, 77 members of the clergy signed a letter to
Christie requesting a moratorium on the plan, citing “venomous” public anger
and “the moral imperative” that people need to control their own destiny.

Speaking of people
controlling their own destiny, Helaine Olen writes in The
Baffler of the irony that on the same day The New Yorker
published the Zuckerberg story, the Robin Hood Foundation,
a charity founded by NY hedgie Paul Tudor Jones, held its annual fundraising
dinner in New York City. The event, headlined by John Oliver and Bruno Mars,
raised $60 million for various New York City social services. According to Bloomberg,
attendees at the fundraiser were told that a $250,000 Robin Hood table would pay
for preschool for 2,500 NYC children.

Who in the 1% would say
no to the little children?

Olen reports that New
York City Mayor Bill de Blasio was among the listeners to the private Bruno
Mars concert. Ironically, he had lost the support of these same millionaires
and billionaires earlier this year when he proposed increasing the New York
City income tax on those earning more
than $500,000 annually to pay for free pre-kindergarten for every New York
City child. De Blasio’s plan would have raised an estimated
$532 million. That plan went nowhere.

You see the point:
The amount that would have been raised by the de Blasio tax would be more than eight times the amount
voluntarily raised by the Robin Hood dinner AND from the same people!

No reason to ask us
to pay more taxes, we will just give a little to the little people.

In the previous
decade, billionaires like Bill Gates, Eli Broad, the Walton family, and others had
embraced charitable giving to education. They were hoping to create sweeping
changes to public schooling. In addition to financing the expansion of charter
schools, they helped finance Teach for America and the development of the
Common Core State Standards. But, is this approach effective? Peter Buffett,
the musician son of the fabled investor, became involved in charitable giving
after his father announced in 2006 that he would give away much of his fortune.
Peter Buffett now calls this form of giving “philanthropic colonialism”, showing a nuanced view in a NYT op-ed:

It seems likely
Newark residents already knew that. In May, Ras Baraka, a fierce opponent of
the Zuckerberg-Booker-Christie inspired reforms was elected to serve as Newark’s
next
mayor. The new mayor was a Newark city council member and principal of one
of the city’s high schools. His campaign slogan was “When I become mayor, we
become mayor”, implying a return to local control and business as usual in
Newark’s schools. He won by 2,000 votes.

Zuck? He still has
more than $1 billion unspent in his charitable foundation. The tuition he paid
in philanthropy 101 was costly, but we all know that a good education is
expensive.

 

What’s Wrong Today:

On May 28th, President Obama delivered a speech stating his strategic doctrine on the occasion of the graduation of cadets at West Point. It was remarkable in a variety of ways:

He is restating the Bush Doctrine of intervention and executive authority. Who voted for that?

The speech emphasized Mr. Obama’s continuing support for the policies that have kept us involved in large parts of the Middle East, Africa, and Eurasia. Claiming exceptionalism requires that the country also has the will to use exceptional means. Mr. Obama knows that, so he said:

This is unlikely to work, since a key factor is how many soldiers we would be willing to lose on the battlefield. Since Vietnam, it is unclear that the US will ever be willing to lose more than a thousand soldiers per month, unless we are directly attacked.

This means it is useless to claim we will ever use force on a large scale. Certainly we could never use it against the Chinese or the Russians under any circumstances. Mr. Obama acknowledges this by saying:

Unfortunately, the bind in the Obama doctrine, (using military force only as very last resort) is that the President remains committed to a large counterterrorism posture: (emphasis by the Wrongologist)

Mr. Obama’s comment implies that we have learned from our past mistakes. That we have fine-tuned the art of counterterrorism so it will not involve squandering of our valuable human and financial resources. Does that strike anyone else as absurd? To continue the War on Terror, President Obama announced the creation of a “counterterrorism partnerships fund,” of up to $5 billion. It aims to train security forces in allied states to fight their own battles with terrorists.

Why is that idea believable? It hasn’t worked since the start of the Cold War.

Walter Russell Mead wrote in Foreign Affairs that Mr. Obama came into office planning to cut military spending and reduce the importance of foreign policy in American politics. But, now he finds himself bogged down in exactly the kinds of geopolitical rivalries he had hoped to transcend. The real and implies threats in our relationships with the Chinese, Iran and Russia have changed what was an uncontested status quo at the break-up of the USSR into a contested one today.

US presidents must again be concerned with shoring up America’s geopolitical foundations.

Mr. Obama built his foreign policy on the conviction that the “war on terror” was overblown. He articulated an ambitious agenda: blocking Iran’s drive for nuclear weapons, solving the Israeli-Palestinian conflict, negotiating a global climate change treaty, striking Pacific and Atlantic trade deals, signing arms control treaties with Russia, repairing US relations with the Muslim world, restoring trust with European allies, and ending the wars in Iraq and Afghanistan.

But, his view has changed. We are back to All Terrorism, All The Time. The kernel of truth is that although Washington claims to have eliminated much of the leadership of Al Qaeda, it now faces a serious problem of many affiliated AL-Qaeda groups on the march throughout Africa and the Middle East.

And geopolitics have evolved. The 21st century world is too interconnected to again fully break into blocs. A small country that plugs into cyberspace can deliver as much or more prosperity to its people (think Singapore) than a giant with standing armies.

Unfortunately, Russia didn’t read the memo on 21st century geopolitics. Neither has China’s president, Xi Jinping, who is engaging in gunboat diplomacy against Japan, Vietnam and the Philippines. Syria’s Assad is waging a 20th
century war against his own people, dropping exploding barrels of screws, nails and other shrapnel onto apartment buildings. These countries have not been deterred by the disapproval of their peers, the weight of world opinion, or by Wall Street dumping their bonds.

Even without using military power, there are plenty of ways for the US to cripple an adversary. We can use economic sanctions; financial warfare through the international banking, economic, and trade system; we can use subversion, through the Internet, through support of dissident parties and insurrectionists; there are always proxy wars and drones.

It would be good for the future of the world if the US could find a path back to a realistic foreign policy that refrains from constant threats of the use of force. But if Mr. Obama continues to hold up exceptionalism as doctrine, the inherent contradictions between our claims of exceptionalism and our unwillingness to use exceptional means will rip Obama’s West Point doctrine apart.

A step towards realism requires that America shun both. Good luck with that.

The Obama administration wants to begin its “pivot to Asia”, its plan to counter China’s rise, by projecting, but not using military force. It is difficult to see how that is going to work. Our local allies, who Mr. Obama wants to use as proxies, fear that without a believable threat by the US to cover their asses, there will be no restriction of what China can and will do around its block.

On the other hand, there is little need for the US to try to “contain” China in its local business, unless China’s demands grow to nutty levels. As a practical matter, it is doubtful even in that case that the Obama Doctrine would fly as a matter of realist geopolitics.

We should face a final hard truth. US military force is a blunt instrument. It cannot be used to win what Washington wants it to win (see: Iraq, Afghanistan, Libya, Syria); and it hasn’t been tested in battle against a peer-level foe in a very long time (WWII).

Theoretically, use of overwhelming power sounds very nice, but it was unusable against the Russians in the Black Sea when they took Crimea.

And it might not do so well in the South China Sea.

What’s
Wrong Today:

It
is 13 years since 9/11. Since 9/10, Washington has deployed a national security
state, which has caused a significant erosion of our personal liberties. Few
Americans noticed the dark consequences of these changes. The past two US
Presidents have bent America’s laws and have violated some of our most deeply
held rights.

Even
after all of the Edward Snowden revelations, there is no assurance that
anything meaningful will be done by Mr. Obama, or any subsequent administration
to protect the zone of privacy in which most of us believe we have the right to
live. Here is a brief reminder of the 4th Amendment to the US Constitution:

And
there has been little debate in the mainstream media regarding
the growing power of the security state. What limited attention there was did
not lead to follow-up by the major networks, or by old-school print media,
until Edward Snowden met with Glenn Greenwald and Laura Poitras and the story
was picked up and followed by the Guardian
and the Washington Post.

Back
in April, Georgetown University hosted an event called Beyond
Orwell, Surveillance, Secrets and Whistleblowing in the Security State.

The event was sponsored by the Lannan Foundation, among the outstanding
jewels of Georgetown.

Daniel
Ellsberg gave the keynote address, after a long and thoughtful introduction by
Glen Greenwald. The
speakers included Jesselyn Radack, Edward Snowden’s attorney, and 3
whistleblowers, Thomas Drake, Coleen Rowley and Ray McGovern. The
discussion was wide ranging and worth reading (or viewing) in its entirety. Corrente
has a transcript of the event. It is a must read for all of us.

Today,
let’s focus on what Daniel Ellsberg said about Edward Snowden’s motives. He
quotes Snowden from a Vanity Fair interview:

Ellsberg
asks in his keynote:

Ellsberg
says that Snowden’s thought:

Ellsberg:
(emphasis by the Wrongologist)

When
Ellsberg told Snowden that he was going to be keynoting the Lannan
Whistleblower event, Ellsberg asked: “What message would you think I should
give?” And Snowden said,

Ellsberg
then had an important rumination on how that effort of conscience makes the
standee a target. He said it is a platitude that all can agree with. In fact,
who would say, “No, don’t stand up for
something”?

In
practice, who stands up? Almost no one. That includes Congress and politicians
everywhere. They follow the advice, “To
get along, go along.” Your mother or father probably told you, (and you
probably tell your own kids): “Of course, you must  stand up for what you believe.”

Ellsberg
speaks of the internal voice that says “I’ll go this far, but there’s a line I
will not cross. I will not go that far.” He says humans have this self-image:
“Too much is too much. I will go along with certain things for various reasons,
consequences, but there are things I won’t go along with. There’s a line I
won’t cross.”

How
does this relate to whistleblowers and Congress? Think about how someone in the
know reacted when James
Clapper, Director of National Intelligence lied when he was asked the
question by Senator Ron Wyden (D-OR), “Are you, (the NSA), is NSA under you,
collecting data, any kind of data at all, on millions of Americans?”

And
Clapper of course, said no. Now, because of Snowden, we know what was unusual
about that lie was not the lie, but the fact the truth was already known to the
Committee.

Wyden
had also given an advance warning of the question to Clapper, who went forward with
the lie. And when Snowden revealed that it was a lie, that the NSA was collecting
data on hundreds of millions of Americans, Clapper’s response was: “Well, it was not true, what I’d said, but
it was the least untruthful statement I could have made.”

Clapper’s
line in the sand was moveable. And when he came up to the point they had
earlier defined as the line that no one should cross (lying to Congress) and
they wouldn’t cross, it moved. Sen. Wyden’s line moved as well. Sen. Wyden did
not say, “You and I both know that your statement is false. You have committed
perjury”.

Clapper
of course, had not deceived the committee. They all knew the reality. Wyden joined
Clapper by not challenging him. He became a partner in the deception of the
American public, and in a violation of the Constitution, and not some minor
part of the Constitution. They were undermining the Fourth Amendment.

Ellsberg
added a thought about personal sacrifice if one is to be a whistleblower. He
reminds us that he was often called a traitor. Ellsberg says:

We
need more Snowdens. People who will say as Snowden did, “There are things worth
dying for.”

Ellsberg
closed with a thought about Nathan Hale. Nathan Hale was a spy for the Colonies
against the British. He was the first American to be prosecuted as a spy. Ellsberg
was the second, 200 years later.

Nathan
Hale was hanged as a traitor. All of the signers of the Declaration of
Independence were traitors in the eyes of the British government. Five of them were
also hanged. Nathan Hale said, “I regret that I have but one life to give for
my country”, quite similar to what Snowden has said.

So,
Ellsberg sees a direct line from Nathan Hale, through him, to Snowden.

And
you, dear Wrongologist readers, you should decide how far to go, what is the
line that for you, shouldn’t be crossed. Then you must work to get your elected
representatives to see it the same way.

Thomas Drake, one of the whistlers, said, this notion that somehow privacy doesn’t matter, but it’s
fundamental to who we are. He reminds us of the motto of the Stasi: (East German Secret
Police): “To Know Everything”.

The Wrongologist and Ms. Oh So Right are off to China in the morning. The sole purpose of this trip is to visit Shenzhen, where Ms. Oh So Right is making a series of presentations to 3 hospitals and a medical education center. The Wrongologist will be attempting to mingle within the high-tech community, which appears to be quite sophisticated and entrepreneurial. 

Shenzhen’s population is 10 million. About 6 million of
the people are migrant workers, many living in factory dormitories during the
week. Shenzhen is the largest migrant city in China, and it has a very large expatriate community. It also has the highest per-capita income of any city in China.

Photo of Shenzhen

Of note, we will be in China on June 4th, which is the 25th anniversary of the Tiananmen Square protests. According to a new book by Louisa Lin of NPR, “The People’s Republic of Amnesia“, the current younger generation in China have little or no understanding of what happened when the protests came to a sudden end, since no discussion or acknowledgement of it is sanctioned.

But, China is a land undergoing great change. The Wrongologist is reading Evan Osnos’ book about today’s China: “Age of Ambition” which observes that in 1978, the average Chinese annual income was $200, while in 2014 it is $6000. What is really underway is the collision of  individual aspiration and authoritarianism.

We hope to get a direct view of that, and report on it when we return.

“Patriotism is supporting your country all the time, and your government when it deserves it.” – Mark Twain

“I have never been able to think of the day as one of mourning; I have never quite been able to feel that half-masted flags were appropriate on Decoration Day.  I have rather felt that the flag should be at the peak, because those whose dying we commemorate rejoiced in seeing it where their valor placed it.  We honor them in a joyous, thankful, triumphant commemoration of what they did.” – Benjamin Harrison

Every year, the Wrongologist reminds everyone that Memorial Day used to be called Decoration Day. Back then, it was our most solemn holiday. It was established by a military general order issued by Gen. John Logan, the national commander of the Grand Army of the Republic.

It was first observed on May 30, 1868, when flowers were placed on the graves of Union and Confederate soldiers at Arlington National Cemetery. The Civil War claimed more lives than any conflict in US history, requiring the establishment of the country’s first national cemeteries. This is from Gen. Logan’s order:

By the end of the 1860s, Americans in towns and cities everywhere had begun holding springtime tributes to these countless fallen soldiers, decorating their graves with flowers and reciting prayers.

Decoration Day became Memorial Day when Congress passed the National Holiday Act of 1971, which moved observing national holidays observed to Mondays, creating three-day weekends.

So, along with parades, picnics and three-day sales, and many thinking that we are celebrating the start of summer, let’s stop and remember the people who died in our wars. Let’s do that irrespective of whether we “believed” in a particular war. Here are a few Memorial Day cartoons.

Remember the real costs this weekend:

Uncle Sam wants U:

Let’s remember that all of the war dead were Americans:

On
Thursday, Sen. Ted Cruz (R-TX) told the conservative pastors gathered at the
Family Research Council’s Watchmen on the Wall conference:

He
was met with an audible (and understandable) gasp. He earned more gasps when he
warned that this amendment would suppress the political speech rights of the
“citizenry” and “muzzle” pastors in their pulpits.

That
would be huge news if true, but Ace Detective Ted was embroidering. He was talking
about the coming vote by Senate leadership on a constitutional amendment that
would overturn
Citizens United and the
related McCutcheon case, which,
taken together, have steadily eliminated the limits on election spending by
corporations and wealthy individuals. Cruz was talking about the possibility of
losing his corporate money. Whenever a tea-party type talks about the Constitution,
it’s always about the money. Even when it’s about guns, it’s about the money.

Also
this week, Doyle McManus of the LA Times quoted
Grover Nordquist:

The
Tea Party now drives the Republican limo:

The real question is, who co-opted who?

Many Republicans aspire to drive the crazy train, but none can touch Pat Sajak. Yes he’s THAT Pat Sajak:

Tea Party wants Obama to violate the 22^nd Amendment:

And in other depressingly same old, same old, news this week, this week’s vote by Congress doesn’t really put the NSA on a short leash:

The Two Faces of Uncle Sam:

Notice from the Wrongologist:

The Wrongologist leaves next Thursday for a 10-day visit to Shenzhen China, where Foxconn makes the iPhone and iPad, and half of the world’s mobile phones are manufactured. If any blog reader has friends or contacts in Shenzhen, and you are willing to share their contact information, email the Wrongologist privately @: jomo@wrongologist.com

What’s Wrong Today:

About
a million students will graduate from college this month. As they walk with their
diplomas, they face a familiar worry: Will I get a job? Will I get a job I
actually want? Will it let me pay off my student loans? Will my income be enough for me to cover all of my additional bills and finances? Could I turn to somewhere like Qik Car Title Loans to apply for a loan based on the value of my car if I find that I’m ever short of money? Will this help me to keep on track of my current finances?

The
US Department of Labor (DOL) announced that unemployment among 2013 graduates is at 10.9%, down from
13% for graduates in 2012. That’s still weaker than the economy overall, and
worse than it was pre-recession.

What’s
more, those who are working have increasingly settled for jobs outside their
fields of study or for less pay than they’d expected. CNN
reports that:

So,
high unemployment, plus low pay for many who DO find jobs, and then there is the
high debt load many graduates have taken on.

Wolf
Richter of the Testosterone
Pit reports, student debt outstanding has soared 362% to $1.1 trillion
since 2003, during a period when mortgage debt rose “only” 65% to $8.2 trillion
and credit card debt actually declined by 4.2% to $660 billion. Wolf
asks a great question: How will the
burden of servicing the increasing student debt level impact these recent
graduates’ efforts to buy a home?

All
the signs point to them having great difficulty. The proportion of first-time
buyers – the single most important sign of a healthy housing market – has been
shrinking for years. This could simply be down to the fact that graduates don’t have the finances to be able to pay for a house of their own. Luckily, people who have a degree in the medical field may be eligible to qualify for physician loans to help them when it comes to buying a property of their own. But others aren’t so lucky and will have to look for an alternative in the housing market.

Over
70% of the students who are sitting through a commencement speech this spring
have student loans. They will start their careers (if any) with an average
student loan balance of $33,000.

Even
when adjusted for inflation, that’s about twice as much debt as 20 years ago.

Back
then, only 43% of students graduated with student loans. However, after decades
of sustained tuition and fee increases, working your way through college in
four years has become a difficult task. And every year, it gets worse: The
Class of 2012 was the most indebted ever. Then the Class of 2013 took that
dubious honor, only to be trumped by the Class of 2014.

Next
year, that honor will go to the Class of 2015.

The
equation might not have gone so horribly wrong if each class of graduates had
seen their median incomes move in line with their average student debt. That
didn’t happen:

Between
2005 and 2012, (the last year for which the data are available), the
inflation-adjusted average student loan balance of graduates under 30 years old
grew by 35%; while the median annual income adjusted
for inflation for college graduates between 25 and 34 years old has declined by 2.2%.

According to the Department of Numbers blog, in
2012, 36.09% of households were renters, up 3 percentage points since 2008, at the
start of the recession.
For the US, they calculate median
monthly gross rent as a fraction of median household income at 20.65% in 2012.

They
also have an analysis of how much
of a mortgage loan someone can borrow, given a monthly mortgage payment equal
to 30% of the median household income, with a 30 year fixed-rate loan. Their
estimate of the maximum amount a
household could borrow to purchase a home in February 2014 was $257.7k,
while the median US home asking price was $280.4k.

Another disparity is that the current median household income for the United States is $51,371,
yet the overall average starting salary for Class of 2013 new college graduates
was $6k lower, at $45,327, according to the September 2013 Salary
Survey by the National Association
of Colleges and Employers (NACE), a non-profit group.

Now,
the Class of 2014 takes their record-setting pile of student loans and their skimpy
wages out into the American economy. They will become the next generation of
first-time home buyers. And on top of student loans, they’re facing higher
interest rates and higher prices for real estate, forces which will suffocate some
first-time buyers.

Something
has to give. Not raising the minimum
wage in line with inflation is based on a conservative principle that says the
profits of companies are more important than the needs of the working poor.
And surely, paying workers just enough to provide food and basic shelter,
instead of paying them living wages, helps the conservatives’ goals
immensely.

Today’s
grads may have to blow up the system if they are to see change that works for
them. Perhaps they already have: They’re not buying houses, they’re renting in
urban environments, they’re not buying cars, and they’re not getting cable TV.
In short, they are adopting a significantly different lifestyle from that of
their parents. They have to. Rent payments and a subway/bus pass instead of a
mortgage and a car.

That’s not the American dream.

These
kids are part of a generation that will have difficulty building a middle class
lifestyle because finding that middle class wage is harder than ever. At the
same time, due to growing inequality and economic insecurity, the earnings and
status gap between those with a college education and those without is growing,
so aspiring students and parents will
remain willing to pay the price in order to reach for a middle class life.

And
though student loan programs may have been designed with good intentions, they
now simply aid and abet the colleges in extracting ever more money from the
future lives of students.

Student
debt levels are high because college costs way more than it used to cost. And state
governments are not subsidizing public colleges the way they used to.

If only the masters of the universe would take off
their blinders and see that they are wiping out the future for many kids.

Short term gains today at the expense of tomorrow
will cost the country royally.

What’s Wrong Today:

Credit Suisse (CS), the Swiss bank, admitted on Monday in its guilty plea, that it helped American clients evade US taxes. From the plea:

In March, we wrote about Credit Suisse. We gave you the flavor of Credit Suisse’s evasion efforts:

The CS financial penalty was roughly $2.6 billion in fines, with $100 million going to the Fed, $715 million to the New York Department of Financial Services, and $1.8 billion to the Department of Justice (DOJ). CS will also appoint a monitor for two years subject to the approval of the NYDFS.

This fine dwarfs that imposed in 2009 on another big Swiss bank, UBS, who paid $780m, and whose offense may have been more extensive.

Yet, the most important difference with 2009 is not the money, but the charge and the plea. UBS was permitted to enter a deferred-prosecution agreement, enabling guilt to be expunged. CS was forced to plead guilty to aiding tax evasion—making it the first big firm with ties to the financial industry to be tagged with a criminal charge since Arthur Andersen in 2003.

The DOJ is crowing about its new found willingness to convict major financial institutions, with Eric Holder claiming,

The guilty plea certainly seems like a step forward from the neither-admit-nor-deny settlements that banks have counted on for the past decade, but as James Kwak said in The Atlantic:

The Economist reported that:

Moneynews reported on CS’s reaction to the plea:

Credit Suisse Group AG CEO Brady Dougan said he doesn’t expect a guilty plea to a US criminal charge will drive customers away from the bank:

And in the CS press release describing the settlement, there is no expectation of:

Two controversial aspects of the agreement: First is the survival of current senior management. Five lower-level employees who had been indicted for their involvement in the tax scheme but were still being paid, will be terminated. This despite comments by Benjamin Lawsky, New York’s Superintendent of Financial Services, who said that the activity at Credit Suisse was “decidedly not the result of the conduct of just a few bad apples.”

The Second aspect is a provision allowing the identities of CS’s American clients who dodged paying taxes to remain protected.

The Wall Street Journal quotes Sen. Carl Levin (D-MI):

Senator Levin’s committee had published a report on CS showing that more than 22,000 of its accounts were held by Americans, and the CS settlement leaves no clear path to getting those names.

When UBS settled with the DOJ, it disgorged 19,000 names of US account holders.

There are two main ways to punish criminals and deter wrongdoing. One is criminal prosecution of the individuals involved, ideally getting lower-level employees to cooperate and gathering evidence as far up the management hierarchy as possible. (Some ongoing prosecutions against several CS employees continue)

The other is putting a bank out of business by revoking, or temporarily suspending its license, called the “death penalty”. Even if he escapes jail, no bank CEO wants THAT on his résumé. And that penalty would seem entirely appropriate for a bank that engages in a decades-long criminal conspiracy that costs US taxpayers billions of dollars.

More from the Economist:

If this is true, it’s an overwhelming argument that such “too big to jail” banks shouldn’t exist in the first place.

The reason some financial institutions are too big to fail (or jail) is that their collapse could trigger losses at other major institutions and provoke a system wide panic. That was the lesson of AIG in 2008: If it failed to make good on its credit default swaps, various pillars of the financial system might have collapsed, and no one knew how far the damage would spread.

The underlying problem in 2008 was that Lehman, AIG, Citigroup, Bank of America, and other financial institutions were both illiquid and essentially insolvent: They couldn’t come up with the cash to pay their bills, and in the market at that time their assets weren’t worth enough to cover their debts.

But that’s not the case today. Our banks today are sound, so the regulators say. In that case, CS has enough assets to pay off its debts, all of its creditors and counterparties will be made whole, and there is no reason to think about a bank failure.

The fundamental point is that CS is solvent. There are no losses that would have to be absorbed by someone else. If its assets really are worth more than its liabilities, then it must be possible to close down the bank (permanently or temporarily) without harming anyone except shareholders.

As an aside, the Wrongologist spent a couple of decades as an international banker. Back then, banks were supposed to be the ultimate symbol of honesty and decency. We are now witnessing how hollow this myth has become.

Look, were you or the Wrongologist to purposely defraud the US government of $millions, (perhaps in your case, $billions), we’d lose everything and with a felony conviction, get to enjoy several years of fine dining at the greybar hotel.

Yet, CS gets to pay a fine and move on, continuing to do business in the US, and senior bankers everywhere remain a protected class for the DOJ.

As Travis Bickle said: “someday a REAL rain is gonna come and wash the scum away”. Back then, he didn’t mean bankers.

But today, he would.