A Worker Bailout Fund?

In response to the financial crisis, as we help firms that are deemed too big and too interconnected to fail, hundreds of billions of dollars are being tossed around as though it is mere pennies.

Since it is widely expected that the crisis will get worse before it gets better, and since there is a non-trivial chance of a substantial uptick in unemployment, shouldn't we begin thinking about a worker bailout fund?

Or are workers too little to be helped?

I don't think so. So instead of waiting until unemployment goes way up, and then watching Congress fight over what to do about it while people struggle to make ends meet, let's get a plan in place now that dedicates some of the money being tossed around to helping workers. If unemployment goes up, what will we do? How will we help?

If we are going to bail out the big players - take toxic paper off their hands - there's no reason at all not to bail out workers too.

I want to think about this more, so help me out. How should such a proposal be structured? What should the worker bailout fund look like?

Comments

[Daniel]

Why can't we simply extend unemployment benefits, as has been proposed several times in the past year?

I've read that discouraged workers are exceptionally difficult to get back to work - what kind of performance can we expect from job-matching programs that seeks out some of them and slaps them with a job? (What's the bang for the buck?)

Also, what industries would be effected by an increase in the minimum wage? Aren't many of these businesses those that cater to lower-income consumers (ie Wal Mart and McD's), and thus will get more traffic (or relatively more)? What's the risk/reward on bringing the minwage back to where it would be if it had been adjusted to keep pace with inflation?

And lastly, why can't we use a crisis period like this to push universal healthcare? Something akin to Medicare for all would be relatively easy to implement and would cost less than our current system, though it would require more taxes to make up the difference. But if the total cost of the new system is less, and it provides the same service in a way that encourages more preventative treatment, the benefits will likely outweigh the negatives.

"Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable." - Milton Friedman

If we miss this chance to get things like universal health care we're not going to get another. We could get on the right track simply by creating/expanding the government to compete with private insurers and prescription drug companies. The benefits of such an expansion would likely outweigh those of extended (if creative) unemployment benefits.

[robertdfeinman]

What's wrong with reviving prior efforts like the CCC and WPA?

Putting people to work (rather than, say, enhancing unemployment benefits) has several positives.

1. Working people have a better sense of self worth. This means they are happier and healthier and so are those around them. People with a better mental state have less depression and other problems which cost money to treat.

2. Working people are productive. This is a way to get projects done that have been ignored. The projects of the CCC are still yielding benefits, such as in national parks.

3. There is a backlog of civil engineering projects that need to be done. At a minimum cleaning up the Gulf Coast and Texas should provide employment opportunities for hundreds for several years.

4. Getting neglected projects underway will improve the public mood. A history of falling bridges and flooding cities has put people in a sour mood. Rebuilding will improve the public's outlook and make others more willing to try entrepreneurship and other risky tasks.

5. Putting people to work will shrink the labor pool which will make wages trend higher in areas where there is labor demand. Business may not like this, but wages are generally too low for the bottom half of the labor force. A rise for those who spend everything they earn will boost the economy.

6. Letting people remain idle when there is work to be done, is immoral.

[FJ]

In Europe there are influential unions to defend the interests of workers.

As the USA have now become a kind of socialist state by nationalizing companies they should also have trade unions.

Workers have no big lobby in Washington D.C it seems. The lack of political influence may be an important reason why some animals are less equal than others.

[Blissex]

«Since it is widely expected that the crisis will get worse before it gets better, and since there is a non-trivial chance of a substantial uptick in unemployment, shouldn't we begin thinking about a worker bailout fund?
Or are workers too little to be helped?»

Well, the argument goes that headcount is disposable; they produce no profit, just costs and they are not critical to the functioning of the economy. One can always get more headcount overseas, more docile, less expensive; so why subsidize USA headcount?

Especially as many low income workers are dark or brown skinned with the potential to be criminals, burglars, rapists, drug dealers. No middle class respectable True American would want to help these parasites exploit the system.

No, the better solution is my usual Modest Proposal:

* A large TAX CUT, because tax cuts always generate new money.

* To maximize the extra revenue generated by the tax cut, the cut should be larger the higher the income of the taxpayer, because that means incentivizing more the most productive workers.

* To really stimulate growth, an Extraordinary Income Tax Credit, where those earning more than $1m/year are given a 10% credit by the government to reward them for their hard work generating so much trickle down.

:-)

Put another way: dream on! Those who have political influence and have paid generous campaign donations get bailed out. Pay-per-play is how the system works.

[macbuger]

How about getting rid of the financial casinos and having a proper system that really allocates the savings of workers to productive investments?

Would we be here if workers had rising real incomes, invested part of it, and had returns on their investments, in this last decade? They would have a cushion.

Without this bloated housing bubble, if prices had stayed reasonable and workers had not overpaid, they would now have equity in their homes. That was the cushion.

A system that invests, rather than speculates. That way workers don't need that much bailouts and the system does not need any bailouts.

[Michael McKinlay]

Read Ellen Brown's: It's the Derivatives, Stupid! Why Fannie, Freddie, AIG had to be Bailed Out ...

http://globalresearch.ca/index.php?context=va&aid=10265

It has a great analysis and a great solution to this financial catastrophe ...

[macbuger]

No wonder Wall Street conmen(and the economic establishment) does not like Bogle.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTFTNEzIH.cU&refer=home

John Bogle Says U.S. Government Seems `Punch Drunk' (Update2)

By Nick Baker

Sept. 19 (Bloomberg) -- John Bogle, who created the $106 billion Vanguard 500 Index Fund in 1976, said the U.S. government is ``punch drunk'' with proposals to rescue the financial system.

``We're playing a game of casino capitalism, interfering with the way the market is working,'' Bogle, 79, said in a telephone interview today from Valley Forge, Pennsylvania. ``The government seems punch drunk. It doesn't seem systematic.''

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed removing troubled assets from banks' balance sheets last night, while the Securities and Exchange Commission temporarily banned short sales of financial firms. The plans followed the government takeover this week of American International Group Inc., the biggest U.S. insurer, and its bailout of Fannie Mae and Freddie Mac, the largest mortgage financiers, two weeks ago.

The Standard & Poor's 500 Index rallied as much as 4.8 percent after yesterday's 4.3 percent rebound from the lowest level since 2005. The gains helped send the MSCI World Index of shares in 23 developed nations to the steepest two-day surge since records begin in 1970.

``I'm obviously in the minority,'' Bogle said.

....

``Believe me, the value of American business doesn't change that much in a day,'' said Bogle, named one of the industry's four ``Giants of the 20th Century'' by Fortune magazine in 1999.
....
``We're in the most speculative market I've seen,'' said Bogle, who was born five months before the stock-market crash of 1929. ``We seem to be in the depths of despair one moment, and the heights of optimism the next.''

[Robinia]

NOW is the time to institute a government health care program that every unemployed worker and her family can count on to provide coverage consistently through periods of un- and underemployment, as well as through the process of starting a new business. Wrote about this before, but believe it is essential. While predatory lending practices may lead to foreclosures, un- or under-insured health crises, especially if combined with job loss, lead to personal bankruptcies. Lots of personal bankruptcies are a potential drain on the economy just as serious a few big ones. Single-payer health care, operated by the government (just like in the rest of the civilized world) should form the foundation of a safety net for workers in the coming hard times.

Building on that foundation, I agree that the WPA and CCC were marvelous, and our infrastructure could certainly use some work.

[btg]

It would have all been so much easier if instead of printing money to bail out these wall street firms, the Fed and others had instead found a way to deal with the subprime crisis at the beginning of the year - but I was of the impression that unemployment was at 6% - which is high, but not by the standards of the 1970s, or of course, the 1930s - so it is hardly necessary to bring back the alphabet soup of agencies, and doing so will still not resolve the fundamental problem of the housing market and the crappy mortgages that are at the root of all the recent problems.

[Buy Houses Now!]

Yes let's tax the workers and give money to the banks and also tax them again so we can give it back to them minus the usual administrative overheard. My egalitarian impulses would then be assuaged.

[Icarus]

We're never going to substancially increse wages in the US with government policies. Any attempt to do so will just make off-shoring more attractive.

Americans over-consume, and under-save. Workers should be saving more, by spending less.

[Icarus]

Buy House Now!...

The problem is, most of these workers don't really pay much in federal income tax.

80% of our federal income taxes are paid for, by a fifth of our workers. They are subsidizing these bailouts, not ordinary joe-america.

And, this bailout is unfortunately necessary to keep our financial system healthy. I wish it werent...but, it is.

I wouldn't mind banks failing if it didn't affect my 401k...I'm sure many think like this.

[anne]

The price of righting the financial crisis could include a profound green-infrastructure development program, possibly through revenue sharing agreements with states, a move to universal health care insurance, and dramatic tuition reduction or assistance for public colleges and universities.

That China could re-design and re-build much of Beijing for the Olympics, while New Orleans has not begun to be re-designed or re-built, shows what we might do in terms of hard infrastructure development. Improving education opportunities would be our effort in soft infrastructure development. Health care insurance is a basic right to be acknowledged here as elsewhere.

[Alex]

In U.S.S.R we government buy houses and give them to loyal party commardes for free.

We pass laws that all able adults have a job and so company have jobs quota set by government.

As US did today we also fix stock price of companies so it not worry about actual value of said company.

Very pleased to see USA is finnaly accepting communism as the way forward and that capitalism is a failure. Hurray.

[ampersand]

How do rabble rousers and megalomaniacs come to positions with dictatorial powers? Because of such well-intentioned attempts to save the system.

If it was not clear to anyone that this whole game was rigged, todays SEC and Fed/Treasury actions should have freed them of such naivette.

Wall Street and banking is a racket. Your local charity is a much better investment to invest your savings.

[save_the_rustbelt]

"What's wrong with reviving prior efforts like the CCC and WPA?"

Part of the problem is that we no longer do many projects with picks and shovels, and the skill levels for operating engineers, steel workers, masons etc. are pretty high. I suppose we could fall back on picking up little and mowing parks, which would certainly help.

The last time we tried this was CETA, and it quickly became a giant boondoogle of urban politicians playing with the funds.

Let's see:

Extend unemployment

A rebate passed through to anyone receiving the EITC in 2007, plus anyone who now qualifies (paperwork might be a snag for the newcomers). AND/OR a second rebate for everyone making less than $xxx on their income tax return.

A one time "bonus" to all SS recipients making less than $xx in the amount of $_____ (since so many on Wall Street got bonuses the past few years).

Increased home heating assistance to the poor and elderly (could be important this year).

20% increase in all food stamp allotments for 12 months, then reevaluate.

?????

[realpc]

They should not have bailed out the big losers in the first place. One bail out mistake does not warrant another. Yes, workers are the innocent victims of the fiasco, but racing in and baling out just doesn't seem the most effective strategy. Before you know it the US government will own the whole world and everyone will be dependent on it in some way. And the world will be a worthless and inhospitable place.

[ken melvin]

Tall order. The loss to the American worker – esteem, debt, home equity, lifestyle, childrens’ education, divorce , …-- over the past eight (plus) years has been tremendous. But, to the working class is where the $1trillion should have gone.

[robertdfeinman]

STR:
You underestimate the skill level of the unemployed. There are many who are highly skilled, especially in IT. I'm sure you know quite a few machinists, model designers, etc. that have lost their jobs in your region.

I cited civil engineering projects because they are easy to understand, but the WPA employed knowledge workers - writers, artists, etc. A modern WPA could be put to work designing new new transit vehicles or a new electric grid or lots of other such projects.

How about a national health database system, which is sorely needed?

I'm sure if a group of planners were asked they could come up with dozens of projects that are worth funding.

[cindy]

Include Independent Contractors who are always the first to go.....

[anne]

http://www.nytimes.com/books/00/11/26/specials/schlesinger-hundred.html

April 10, 1983

The 'Hundred Days' of F.D.R.
By ARTHUR SCHLESINGER Jr.

Exactly half a century ago, the Republic plunged into the Hundred Days - that time of tumultuous change when a flood of legislation swept away venerable market practices and gave the American economic system a new contour.

In the frenzied weeks from March to June 1933, Franklin D. Roosevelt sent 15 messages to Congress and steered 15 major laws to enactment: among them, central planning for industry and for agriculture, new regulation for banking and for the securities exchanges, the Tennessee Valley Authority, the Civilian Conservation Corps and a national system of unemployment relief.

''At the end of February,'' Walter Lippmann wrote when the special session adjourned, ''we were a congeries of disorderly panic stricken mobs and factions. In the hundred days from March to June we became again an organized nation confident of our power to provide for our own security and to control our own destiny.''

The Hundred Days were only the start of a process that ended by transforming American society. Who can now imagine a day when America offered no Social Security, no unemployment compensation, no food stamps, no Federal guarantee of bank deposits, no Federal supervision of the stock market, no Federal protection for collective bargaining, no Federal standards for wages and hours, no Federal support for farm prices or rural electrification, no Federal refinancing for farm and home mortgages, no Federal commitment to high employment or to equal opportunity - in short, no Federal responsibility for Americans who found themselves, through no fault of their own, in economic or social distress?

These social changes have won general approval. Even the Reagan counterrevolution, for all its 19th-century laissez-faire and Social Darwinist passions, shrinks from abolishing the framework of social protection - the ''safety nets'' - created by the New Deal.

But what of the narrowly economic results? How effective was the New Deal in reducing unemployment, promoting economic growth and altering the distribution of income? And does the experience of half a century ago offer any guidance to the nation in its economic perplexities today?

The technique of the New Deal was improvisation and experiment. ''It is common sense to take a method and try it,'' F.D.R. said in the 1932 campaign: ''If it fails, admit it frankly and try another. But above all, try something.'' ...

[Too Much Fed]

macbuger has the RIGHT IDEA!!!!!

The problem is greenspan, paulson, bernanke, and congress only seem to be worried about more debt, debt repayment, housing prices, and stock prices. Lower and middle class Americans do NOT COUNT TO THESE PEOPLE!!!!

[anne]

http://www.nytimes.com/2005/04/18/opinion/18herbert.html?ex=1271476800&en=9f23787f95925a8f&ei=5090&partner=rssuserland&emc=rss

April 18, 2005

A Radical in the White House
By BOB HERBERT

To get a sense of just how radical Roosevelt was (compared with the politics of today), consider the State of the Union address he delivered from the White House on Jan. 11, 1944. * He was already in declining health and, suffering from a cold, he gave the speech over the radio in the form of a fireside chat.

After talking about the war, which was still being fought on two fronts, the president offered what should have been recognized immediately for what it was, nothing less than a blueprint for the future of the United States. It was the clearest statement I've ever seen of the kind of nation the U.S. could have become in the years between the end of World War II and now. Roosevelt referred to his proposals in that speech as "a second Bill of Rights under which a new basis of security and prosperity can be established for all regardless of station, race or creed."

Among these rights, he said, are:

"The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.

"The right to earn enough to provide adequate food and clothing and recreation.

"The right of every farmer to raise and sell his products at a return which will give him and his family a decent living.

"The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad.

"The right of every family to a decent home.

"The right to adequate medical care and the opportunity to achieve and enjoy good health.

"The right to adequate protection from the economic fears of old age, sickness, accident and unemployment.

"The right to a good education."

I mentioned this a few days ago to an acquaintance who is 30 years old. She said, "Wow, I can't believe a president would say that." ...

[Blissex]

Well, thinking again about:

«hundreds of billions of dollars are being tossed around as though it is mere pennies.
Since it is widely expected that the crisis will get worse before it gets better, and since there is a non-trivial chance of a substantial uptick in unemployment, shouldn't we begin thinking about a worker bailout fund?»

it is time to point out a not irrelevant detail: why are those hundreds of billions being deployed to save the shadow financial system?

WHY? WHY?

The reason given is that letting it fail would have very bad consequences on the real economy.

But note: in and of itself it does not that much matter whether it fails or not, except of course to a certain number of Republican (and Democrat) campaign donors.

It seems quite amusing that the obvious alternative hasn't happened: let the shadow financial system collapse, and then bailout the real economy, which could be a lot cheaper and easier.

Saving the shadow financial system with the excuse of saving the real economy is a classic example of the tail wagging the dog. But it is a measure of how finance dominates Usian culture that the first though is bailing out the shadow financial system.

Also, it has an obvious political advantage: bailing out the real economy would have to be done overtly and via the government budget, while bailing out the shadow financial system can be done in an Enronesque way, using monetary mispolicy and malaccounting techniques, turning the Fed into the mother of all off-budget SIVs.

[anne]

http://www.feri.org/common/news/details.cfm?QID=2088&clientid=11005

January 11, 1944

Message on the State of the Union
By Franklin Roosevelt

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all — regardless of station, race, or creed.

Among these are:

The right to a useful and remunerative job in the industries or shops or farms or mines of the Nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being....

[prostratedragon]

What robertdfeinman said, plus a basic health care package.

[Jay]

The obvious answer is that rich people need to be more "patriotic" like Joe. Joe doesn't voluntarily give any money to charity but believes the government should forcefully steal lots of his money and give it to other people.

[Icarus]

And free cable. We need free cable. It's not fair that the rich get to watch HBO, and the lower middle class is stuck with network tv.

[Jay]

"The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;"

Anne there is a problem with this part of the Nicean Creed... business trade in an atmosphere dominated by a monopoly. It is called the U.S. Federal government. Why do you think corporations spend so much money on lobbyists?

[BJ Feng]

Wait a minute, let's look at these "bailouts" and who they have helped. They've helped bond holders, in every case, the stock holders were just about wiped out. For "rich" people like Hank Greenberg who owned tens of millions of AIG shares, the loss has been staggering, and we can see that all those people who invested in Fannie and Freddie were wiped out.

Only in the case of Fannie and Freddie do I see a potential for the government to lose money. And that's because the government wants to continue to buy mortgages and Fannie/Freddie debt on the open market as a public service policy. Still, both can be very profitable businesses.

I don't see an equivalent when you talk about a worker bailout. Is there money that workers lent out that is in danger of not being repaid? Remember, all the bailouts helped bond owners, the people who the failed firms owed money to.

Now if you are talking about making available government loans to workers, well that's what the Fannie/Freddie bailout was designed to do, keep intact the mortgage market so that cheap loans are available. Otherwise, using the same kind of formula, the worker could receive an AIG type loan with predatory interest rates above 10%, AND the government would impose a tax lien on 80% of his property, I could be in favor of that type of "bailout" for the worker.

The structure of the RTS isn't known yet, but from what Paulson has done in the past, I don't think the terms will be very favorable to the institutions that are supposedly getting a "bailout".

The word "bailout" has been tossed around a lot, but this ain't your father's bailout. This isn't the low interest rate type loan bailouts given to Chrysler 20 years ago, or the favorable loans the airlines received after 9-11. These are punitive loans designed to make sure equity owners suffer huge losses. I don't think the worker would want this type of "bailout".

[Patricia Shannon]

http://uk.answers.yahoo.com/question/index?qid=20071017130134AASTk9X

The Snake
by al Wilson

On her way to work one morning
Down the path along side the lake
A tender hearted woman saw a poor half frozen snake
His pretty colored skin had been all frosted with the dew
"Oh well," she cried, "I'll take you in and I'll take care of you"
"Take me in oh tender woman
Take me in, for heaven's sake
Take me in oh tender woman," sighed the snake

She wrapped him up all cozy in a curvature of silk
And then laid him by the fireside with some honey and some milk
Now she hurried home from work that night as soon as she arrived
She found that pretty snake she'd taking in had been revived
"Take me in, oh tender woman
Take me in, for heaven's sake
Take me in oh tender woman," sighed the snake

Now she clutched him to her bosom, "You're so beautiful," she cried
"But if I hadn't brought you in by now you might have died"
Now she stroked his pretty skin and then she kissed and held him tight
But instead of saying thanks, that snake gave her a vicious bite
"Take me in, oh tender woman
Take me in, for heaven's sake
Take me in oh tender woman," sighed the snake

"I saved you," cried that woman
"And you've bit me even, why?
You know your bite is poisonous and now I'm going to die"
"Oh shut up, silly woman," said the reptile with a grin
"You knew damn well I was a snake before you took me in
"Take me in, oh tender woman
Take me in, for heaven's sake
Take me in oh tender woman," sighed the snake

[ilsm]

Won't kicking real estate prices off the cliff benefit workers?

I expect a 50% decline in prices of houses and condos.

No reason for any bank not to foreclose now that RTC II is in and the fed is taking TP for collateral.

Someone post when they wee a 2BR 2 Ba condo in Phoenix for $20K, I am in!! Especially if >2000 sq ft.

[roger]

I think this is a good time to look at what the wealthiest do, and try to vigorously discourage it. The old fashion expropriative tax rate of the Truman era (Truman being a fave president, now, of the rightwing) seems right to me - about 90 percent on incomes above 5 million. If the government expropriates most of the wealth of Americans among the Fortune 100 richest people, it will go some little way to mitigate the damage they've done to the Republic, and continue to do. They are, for the most part, malignant drones, and to talk of "stealing" their wealth is like talking about "stealing" the wealth of the mafia. Stealing, here, is definitely a virtue, since the greater theft is the system of fictitious finances set up over the last thirty years to absorb the productivity gains of those who actually produce them.

It is vital to reconfigure the incentive structure so that the plutocracy loses its prestige wealth, because otherwise, no lesson will be learned here, and the best efforts of the government to furnish bottom up institutions - I'd say, for starters, one created out of nationalized banks that began loaning people money at reasonable rates, helping them to unwind untenable debt positions - will come to nothing.

[homeless]

ILSM: you forget, when housing affordability actually does go up, people groan. The sun only shines when everyone's little slice o' the murrican dream increases in 'value' each week.

They have been incentive-ised to swing for the fences in terms of housing debt, and have become reliant on appreciation to make the loan work. Indeed, this is what amounts to a 'retirement plan' for some people.

Housing is one of those assets where the chart is supposed to move up and to the right, for ever and ever and ever. At an accelerating pace, even. By all means people must be enabled to overconsume housing, even as much of this housing was created in a way that reinforces the overconsumption of energy resources to heat it, power it, etc etc.

Then separately, there must be hand-wringing about 'affordable housing'. How could these two things have the same bubblicious greenspan-esque cause?

Foreclose these shacks and let people stay in them while they're converted to rentals. There is no shortage of housing supply. Shelter should become so cheap after this that the free cash of every working family should significantly bounce (if those that over-bought can return to an affordable monthly rent payment.)

[Julio]

Icarus,

You depict the government as some giant redistribution engine, based on theft of private property.

Think of it instead of a giant holding company, with all of us workers and shareholders in the subsidiaries. Don't think of it as looking for more objects of charity. Think of it as a business in startup mode, looking for more opportunities to launch new initiatives that can only come from the top.

Then think of the extraordinary business opportunities presented by the current crisis:
Opportunity to put everyone to work productively.
A board of directors shaken up enough to consider bold moves.
An executive that already has found it necessary to intervene in the running of the subsidiaries.
Shareholders forced by circumstances to accept a change in direction.

When will the starts be as aligned as they are today?

A massive infrastructure program has been one proposal. There are probably many others.

If such an enterprise is launched, the meritocracy you espouse will flourish too. There will be ample opportunities for those with more ambition and creativity to reap rich rewards.

What's not to like?

[donna]

We could try producing products instead of shuffling money around. That might create some jobs.

Oh and tax the hell out of the top one percenters. Maybe even an extra tax if they make over 300 percent of their lowest paid workers annual income...

[Julio]

homeless,

Agree with the spirit of your post, but as you say:

"They have been incentive-ised to swing for the fences in terms of housing debt, and have become reliant on appreciation to make the loan work. Indeed, this is what amounts to a 'retirement plan' for some people."

I'd say, a bit more generally, that for a long time "investing" in your house has been a significant part of most people's retirement plan, supported by government policy and taxes, touted by investment advisors, etc.

This has been going on long before this bubble.

Getting to the other side of this crisis has to include some protection for the people who followed that path over many years. Maybe it's OK for them to lose their bubble-fueled "excess profits", but not their patiently amassed nest eggs.

[save_the_rustbelt]

RobertF:

Didn't intend to knock anyone, the problem is getting the right skill mix in the right combination at the right place at the right time.

I know some brilliant computer programmers but none of them could operate a crane to set bridge beams or even an asphalt paver.

It was easier when every one knew how to run a pick and shovel.

[Winslow R.]

Thanks for trying Mark :)

From worst to best

1) Bail out financial sector so they can continue to intermediate between the government and the real economy.

2) Lower long-term interest rates with Paulson's bazooka and allow worker's to refinance out of banks into fannie and freddie at the lower rates saving some workers and some banks.

3) Shift to fiscal policy and massive deficit spending on infrastructure so worker's wages allow them to afford the rising interest rates.

4) Open Fed window to citizens (individual directed). Global public investment (socially directed) in projects determined by local democratic regimes to be worthy of funding.

[Francois]

We've neglected the infrastructure of this country for more than 25 years. I say it is past due time to invest in our common home now!

How many people can you put to work if we repair water systems (ours in Philly in 105 years old damn it and leaking like...) roads, bridges (Minnesota anyone?) airports and so on?

Let's not forget tax credits to alternative fuels AND energy sources. Just listen to ScienceFriday at NPR; American creativity is bursting with ideas and projects (some well advanced tyvm) that could redefine the energy paradigm.

Here an example: with competitively priced solar panels, you got 20,000,000 square MILES of rooftops in this country that could use relief from high electricity rates and alleviate the national grid overload. For the sake of argument, let's say 5,000,000 are easily usable.How many workers would we need just to install the stuff? Let alone the manufacturing, transportation, handling, design and so on and so forth.

And I haven't touched wind, gasoline derived from algae etc.

Before we can start all that jazz, let's extend unemployment benefits AND start a serious program (not the lip-servicing BS we've been served up to now) of retraining for displaced workers.

I say enough fixed binary ideas and politics: we need creativity, courage and entrepreneurship to rebuild our common house, redefine the way we live and leave our children a decent place to thrive.

J'ai dit!

[Francois]

Ooops!

"20,000,000 square MILES of rooftops" should read "2,000,000 square MILES of rooftops"

and "5,000,000 are easily usable" should read 500,000 are easily usable"

Sorry for the confusion

[Frank]

No money needs to be gathered for this "fund". Instead, everyone just agrees to stop paying their mortgage for, let's say, 2 years, and default on credit card balances. And agree to come to the aid of their fellow with a "farmers' crowd" if the sheriff comes around. Tell me why this is a bad thing relative to Wall $treet's bailout.

[OhNoNotAgain]

"I know some brilliant computer programmers but none of them could operate a crane to set bridge beams or even an asphalt paver."

I think you're underestimating people. When it's a choice between learning a new job and being unemployed with no money, you'd be surprised how quick people learn. Besides, I'm a programmer and a lot of programmers I know don't actually even like their jobs, they just do it because that's what they thought would bring them the most money. I bet there's at least a few really good construction foremen and crane operators in there. Plus, think of how enlightening it will be for a large contingent of our white-collar workforce to, perhaps for the first time, get out in the fresh air and do an honest day's labor.

And Frank, yeah, I agree completely. This occurred during the Great Depression quite frequently. After all, what kind of people try to take a home from those that have nothing left ? Ultimately it comes down to a question of morality, not economics.

[Blissex]

«Joe doesn't voluntarily give any money to charity but believes the government should forcefully steal lots of his money and give it to other people.»

Well, this happens indeed in fascist dictatorships (many of them endorsed by the USA government around the world), where the government taxes and exploits most workers to the benefit of a small elite of predatory plutocrats, and beats up and imprisons those who protest.

But I don't think this is yet the case of the USA and I reckon that Joe was not advocating it for the USA, even if surely quite a few Republicans would want that to become the case.

However rigged in favour of the rich, the USA political and tax system is still based on voluntary participation; poor workers pay a disproportionate tax burden (especially in the form of indirect taxes) compared to other first world countries (and similar to that of third world fascist countries), but they are free to vote and free to leave.

Nobody is forcing the workers to pay taxes to support the state and its wars and bailouts of the wealthy; there is no coercion, there is no gun at the head.

A majority of workers voluntarily voted for those wars and bailouts and the minority always have the option of emigrating if they don't like the deal that the USA government, which like most governments is a group purchase scheme, offers them a deal that they think is not mutually beneficial.

Just like no worker is forcefully made to work at Wal*Mart and accept a minimum wage, no worker is forcefully made to stay in the USA and accept the burden of helping its rich people become richer or to fund plans to throw some small country against the wall and beat it up to teach a lesson to the others.

The borders are open, and all it takes for someone who thinks he is being given a raw deal in the group purchasing scheme that is the USA government to choose, freely and without coercion, a different group purchase scheme, choosing to become the citizen and resident of another country.

Those few of the rich who think (quite wrongly) that it is them who are getting a bad deal out of the USA group purchase scheme just leave it and move to a different country and citizenship; freely, as nobody can forcefully steal from them using the government (which by and large they control), they are free to leave and do use that freedom. Indeed many of them are in effect transnationals like the corporations they own, with no real allegiance to any particular country, ready to move where they can extract the best deal, freely and without coercion.

Of course there is always the possibility that USA workers while not being *forcefully* stolen a lot of their income by the government for the benefit of corporations and the rich, are *deceived* into voting for that and into staying in the USA and paying for that.

And indeed situations like the past 10-20 years of decreasing wages and increasing debt have transferred a lot of GDP and wealth from workers to the rich, and the workers have enthusiastically voted for it.

Usually turkeys don't vote for Christmas, so perhaps they have been sold and voted for a scam.

The sting of the scam seems to be have come due this week, with a wealthy billionaire who just happens to be the secretary of the Treasury proposing to buy at "fair" value with the money of the group purchase scheme largely funded by the workers a lot of dubious paper "assets" that rich people (millionaires to billionaires) own.

But still this is not stealing, not coercion: those workers have voted that administration in place, and every previous administration that has let the scheme run and run until it blew up.

As to turkeys voting for Christmas an amusing essay by Taleb:

http://www.edge.org/3rd_culture/taleb08/taleb08_index.html

[James Kroeger]

My idea of a worker bailout is:

(A) Keep everyone working through huge government expenditures = no unemployment, and

(B) Tax the hell out of upper class to pay for the bailout.

Don't borrow the money needed for the bailout from the rich...tax them for it. They will be the ones who benefit primarily from it, anyway...

[ken melvin]

The end of the Reagan Revolution? Certainly a consequence.

[baileyman]

Worker bailout, well consider the size of the problem. Among those who own houses, if prices bottom at a 30% decline, that's $6-7T of the total residential value on their balance sheets. Their loan losses are less. But this is a ballpark upper bound on their problem. Not counting CRE and derivatives.

[save_the_rustbelt]

"I think you're underestimating people. When it's a choice between learning a new job and being unemployed with no money, you'd be surprised how quick people learn."

I am not underestimating people.

The standard apprenticeship for a crane operator, I think, still runs 5 - 6 years. It is a very complicated job (either dragline or pick) that combines mechanics, physics, common sense and experience, especially experience. Watching a veteran and seeing how each type of situation works is how you learn.

And operating a paver (properly) requires years of experience, usually starting with a shovel and working your way up (and by the way, the modern paver is full of computers). Again, understanding the mechanics and physics. Learn by seeing and doing.

Contact the local hall of the Operating Engineers and inquire about apprentice openings, or check with some local contractors, they often train on the job.

Caution - opening the throttle on a CAT D-9 dozer is a thrill few ever experience, it is great (and operating the damn thing for 8 hours is exhausting - noise and vibration).

(I think Texas leads the country in crane accidents because they put non-union [barely trained] operators in the seat and expect them to know what they are doing.)

[chris]

I first want to shop till i drop buy things i never will need and then turn to the worker rescue fund to pay my millions in credit card bills.

[Jay]

Blissex:

You should go calculate the odds that a single vote swings a U.S. national election. Or the odds that a single vote for a congressperson tips whether an important bill passes the (house/senate) or not.

Voting is the least productive things Americans do. Because the answer to both is practically 0.

Also take a look at the immigration policy of most OECD countries. While people walk across the U.S./Mexican border all the time, this is not common policy in most developed countries.

[Winslow R.]

chris wrote "I first want to shop till i drop buy things i never will need and then turn to the worker rescue fund to pay my millions in credit card bills."

Millions?

You must dream of working for the financial sector? Don't worry the Paulson bailout is on its way even though the financial sector created the problem (don't tell me subprime borrowers forced the financial sector to lend to them).

This post is about the 'other' guys who are losing 'thousands' because of the shock to the real economy created by the financial sector.