Sunday, September 23, 2012

Lack of Economic Opportunity is Social Injustice

The US Economy is Terminally Ill
by Rev. Paul J. Bern

Another area of horrifying ineptitude being orchestrated by the US government, or more accurately “Fannie Mae” and “Freddy Mac” who regulate the home mortgage industry, is that of the current and ongoing foreclosure crisis. By now everybody knows all too well about how people are being thrown out of their homes due to some very shady practices perpetrated by real estate companies, mortgage lenders and brokers, and especially the big banks. As I wrote in my previous book, in over half the foreclosure cases being heard in court the lending institutions can't prove that they are the mortgage holders because they can't produce any proof of ownership. The financial industry, and Fannie Mae in particular, took back many of these homes from their owners illegally, and the American public has figured it out and they are very pissed off about it, and rightfully so. But it gets even worse than that. The banks and other lenders, led by an arm of the Federal Government, were so greedy in repossessing all those hundreds of thousands of houses that they forgot to take into account the upkeep costs associated with holding on to these properties. As a result, they got a lot more than they bargained for. Such is the case for mortgage giant Fannie Mae, which as of March 31, 2012 had a mind-boggling 153,000 foreclosed homes on its books. One example — mowing the lawn. Fannie Mae owns this home, so it's paying a lawn crew to come every few weeks or so to keep up the curb appeal. Fannie Mae officials won't say how many lawns it's paying to maintain, so I did some back-of-the-envelope calculations myself.

Say only half of the homes have lawns, a conservative estimate, that's still more than 75,000 lawns.

X 6 (a six-month grass-clipping season)
X 2 (mowing twice a month)
X $40 (a reasonable guess at how much it costs to mow a lawn)

= $36.7 million

Again, this is a very rough estimate, but that's a whole lot of money to spend on lawn care. Fannie Mae's tab from U.S. taxpayers is up to $86 billion since September 2008 when it was taken into government ownership. In just the first quarter of this year, Fannie racked up $488 million in foreclosure-related expenses, including holding costs (insurance, taxes and maintenance); valuation adjustments for changes in market value; gains/loss when the property is sold; legal fees; eviction costs; weatherization costs to prevent the pipes from bursting; costs to secure the property; and repair costs.

And in the meantime, what happens to all the dispossessed people who have lost their homes? For the lucky ones who still have their jobs, it's not so bad. They can just go and rent another home, although in that case I think it would be wise to move as close to your job as you can – you'll save a lot of time and money that way. But what about all the rest of these unfortunate individuals whose entire world has been destroyed by long-term unemployment and the loss of their homes, their savings, and in many cases even their transportation? For example, the homeless population in New York City has risen to never before seen levels, according to a recent report published by the advocacy group Coalition for the Homeless. A staggering 113,552 people slept in the city emergency shelters last year, including over 40,000 children. The total marked an 8 percent increase from the previous year and a 37 percent increase from 2002. The report also highlighted the growing number of families sleeping in shelters at nearly 29,000 families in the system, an increase of over 80 percent from 2002 levels (another record). Also skyrocketing was the number of families who had previously spent some time in the shelters returning for further aid, now approximately half of all those receiving assistance. However, even these numbers in fact drastically underestimate the true scope of the homeless crisis in New York City. According to the NYC Department of Homeless Services, 64 percent of those applying for emergency shelter last year were denied it.

Meanwhile, the rents in New York City are reaching astronomical levels. According to data available from the National Low Income Housing Coalition, the “fair market” rental rate for a two-bedroom apartment in New York is $1,359. Housing advocates typically consider affordable rates to be no more than a third of the family income. Thus, a family in New York City must earn at least over $54,000 to find an affordable home. The median household income for renters in the Bronx is barely $30,000 a year. For Brooklyn, it is nearly $35,000. At the same time as this catastrophe for the working class deepens, the abundance for the top 1 percent – who collectively earn more than the bottom 95 percent combined – almost defies belief. Last month saw another record for the largest sale price of a single condominium: $48 million for a unit in the Plaza Hotel Residences overlooking Central Park. Under these conditions, the transfer of wealth from workers to the fabulously wealthy takes on a criminal character.

To summarize the situation that working Americans – and particularly those whose wish to work but are unable to find any – find themselves in, we are living in a world with a fundamentally flawed economic system. Capitalism can best flourish so long as the fuel and energy that it takes to keep it running smoothly can be obtained inexpensively. It also can only thrive when the citizens or participants in the system can earn enough disposable income to buy, swap, trade or barter sufficient resources for a reasonably comfortable existence. When it is at its best, capitalism has been not just a way of survival and not just an economic system but an ideology of profit through the pursuit of personal gain. Unfortunately, there have been several things occur since the dawn of the 21st century that collectively signal the death knell of capitalism, or at least as we have known it.

The first aspect is also the most obvious – consumer spending drives 70% of the US economy. But if American consumers run out of disposable income, which is exactly what is now occurring, the whole US economy grinds to a halt. But Washington already knows this and Congress and the President have found a way to deal with the reality that American consumers are broke. Simply put, if America can't generate an income from and drive our economy without consumer spending, then we'll simply have to find a quick and easy substitute. Don't worry, they already have, and they have accomplished this by converting the USA over to a wartime economy, with profits generated by plunder and military domination overseas since working Americans are tapped out. The end result is plain to see, and that is crushing unemployment that has locked millions of able-bodied and industrious Americans out of the US job market, some of them permanently such as what I experienced when my own IT career ended prematurely a couple of years ago.

The second proof that capitalism is at the end of its life cycle is the end of cheap sources of energy due to the fact that we are past the point of “peak oil”. That is, the developed countries of the world have begun using petroleum resources at a rate that is faster than those resources can be pumped out of the ground. This has ominous implications from the standpoint of North American national security, plus that of Europe (particularly Western Europe and the UK), Israel, western and southern Africa, and the entire Pacific Rim from Japan and South Korea down to Australia. Being one who follows world news very closely, there can be no doubt that opposing sides who also have designs on these petroleum resources would consist of Russia, China, and the Muslim nations in North Africa, the Middle East and Indonesia. If world war three breaks out over this remaining oil, which looks increasingly likely since the developed countries are moving too slowly developing alternative energy sources, much of capitalism's infrastructure will be destroyed. The only way to stop all of this from happening is to convert to green energy for our power needs while converting our cars and trucks to run on natural gas, which America has in abundance, and which burns much cleaner than gasoline. Most importantly, since natural gas is about one third cheaper than gasoline, American car and truck owners would see their fuel expenses drop noticeably, and it is relatively inexpensive to convert a petrol-powered engine to burn natural gas.

The third and final side to this triangle of capitalism's demise I can sum up in one word – disillusioned. After generations of buying new cars, new houses, new clothes, new furniture and accessories for your home, and taking on student loan debt to pay for our educations while paying astronomical medical insurance premiums, people are discovering that all this interest and fees they have been paying for all these years has used up all their funds to the point where many of us are having a hard time getting enough to eat. Suddenly the American people are discovering that they have been paying way too much and have been overcharged for years, often for decades, for almost everything they have ever bought in their entire life. We are outraged, we are indignant, and we are absolutely furious!

But there is much deep beneath the surface here, something that surpasses the mere acquisition of stuff and the shallowness of material pursuits, something that is – well – spiritual in nature. Disillusionment, the word I used above to describe the 99%, is running rampant. People feel cut off from having any economic opportunity, and as a result they feel unwanted, abandoned and disenfranchised. But in the process I think that the 99% have collectively become disenchanted with their profit-and-debt driven economic system that they have been stuck living with all their lives, blaming it for their descent into poverty, and consequently the majority of folks have arrived at the same conclusion: People matter more than goods, community cohesiveness matters more than the individual, and cooperative achievement matters more than personal accomplishment. In the process, people are out-growing their need for personal gain and their desire for material goods. Materialism is dying and it is being replaced with its opposite – minimalism, the way of living that says getting by with less is better. And if mankind's habit of always seeking “more” is broken, a profit-and-debt driven economic system cannot survive. If cooperation can replace competition between people, profits can much more easily be shared by all.

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