Aldermen, Activists Propose City Ordinance To Raise Minimum Wage
Chicagoist - May 28, 2014, by Aaron Cynic - Supporters of raising the minimum wage introduced an ordinance at a City Council meeting today that calls for an increase to $15 an hour. The proposal,...
Chicagoist - May 28, 2014, by Aaron Cynic - Supporters of raising the minimum wage introduced an ordinance at a City Council meeting today that calls for an increase to $15 an hour. The proposal, backed by several Aldermen including John Arena, Joe Moreno and Roderick Sawyer, comes on the heels of a report released that shows a raise in the wage would benefit both workers and the City’s economy.
According to the plan, companies making more than $50 million a year would be required to first raise their minimum wage to $12.50 an hour within 90 days and then to $15 within a year. Smaller businesses would have to raise their wages at a more graduated rate, with a total of four years to get to $15. From there, the minimum wage in Chicago would rise with the rate of inflation.
“Study after study demonstrates that when you put money into the pockets of consumers, they spend it," Alderman Ricardo Munoz, who also backs the measure, told Reuters. "They don't hoard it in their mattresses.”
The recent report from the Center for Popular Democracy says a minimum wage increase would yield workers about $1.1 billion collectively, with an average annual income increase of $2,620 per individual. This would generate $74 million in personal income taxes to the state and yield $616 million in new economic activity.
At a press conference at City Hall, Tanika Smith, a fast food worker, said her current pay of $8.75 an hour, just 50 cents more than the minimum wage in Illinois, simply isn’t enough. “My car note is $500 a month, my rent is about $500, food is going up, lights are going up,” said Smith.
Raising the minimum wage is becoming a key issue with politicians statewide. Last week, Mayor Rahm Emanuel gave a panel of business, labor and civic leaders 45 days to draft a plan to raise the wage in Chicago. Gov. Pat Quinn has championed raising the state wage to $10.65 an hour, and Illinois House Speaker Michael Madigan is pushing for a referendum on the November ballot to ask voters if the wage should be raised to $10 an hour.
Both the Illinois Chamber of Commerce and Illinois Retail Merchant’s Association oppose an increase to the minimum wage. “We think it puts us at a competitive disadvantage,” Chamber CEO Theresa Mintle told Reuters. The Retailers Association has said that raising the wage would force businesses to cut both jobs and hours.
Ald. Moreno, however, disagrees.
“It’s gonna hurt the people at the top possibly. It’s not gonna hurt business. It never has. Raising the minimum wage in the United States has never, ever hurt the broader economy...Our economy has been splintered with those at the top having way more. The middle class is shrinking. We want the middle class to grow.”
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Black Lives Matter coalition issues first political agenda demanding slavery reparations
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Black Lives Matter coalition issues first political agenda demanding slavery reparations
A coalition built on the Black Lives Matter movement has issued its first political agenda demanding reforms in the American justice system and reparations for slavery. Some 60 organisations in...
A coalition built on the Black Lives Matter movement has issued its first political agenda demanding reforms in the American justice system and reparations for slavery. Some 60 organisations in the Movement for Black Lives endorsed the platform calling for "black liberation" that had been forged over a year of discussions.
The agenda included six demands and 40 policy recommendations, including a reduction in military spending and a focus on protecting safe drinking water.
It also called for an end to the death penalty, decriminalisation of drug-related offences and prostitution, and the "demilitarisation" of police departments. It seeks reparations for lasting harms caused to African-Americans by slavery and investment in education, jobs and mental health programmes.
The agenda by the Movement for Black Lives came hard on the heel of the Republican and Democratic national conventions, which failed to satisfy members.
"On both sides of the aisle, the candidates have really failed to address the demands and the concerns of our people," said Marbre Stahly-Butts of the Movement for Black Lives Policy Table, which crafted the agenda.
He told the New York Times. "So this was less about this specific political moment and this election, and more about how do we actually start to plant and cultivate the seeds of transformation of this country that go beyond individual candidates."
The overarching mission of the group is to halt the "increasingly visible violence against black communities". Its agenda was issued just days before the second anniversary of the killing of unarmed black teen Michael Brown by a white police officer in Ferguson, Missouri.
Brown's death and the killing of other unarmed black men by white officers was the birth of the Black Lives Matter movement.
"We seek radical transformation, not reactionary reform," said Michaela Brown, a spokeswoman for Baltimore Bloc, one of the organisations that worked on the platform.
"As the 2016 election continues, this platform provides us with a way to intervene with an agenda that resists state and corporate power, an opportunity to implement policies that truly value the safety and humanity of black lives, and an overall means to hold elected leaders accountable."
By MARY PAPENFUSS
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Fast-food Labor Expands Scope of Fight for $15
Chicago Tribune - March 31, 2015, by Alejandra Cancino - The group huddled in front of a...
Chicago Tribune - March 31, 2015, by Alejandra Cancino - The group huddled in front of a McDonald's in downtown Chicago, preparing to tell the 100 people who had gathered there how the Fight for $15 had taken on a broader fight on behalf of low-wage workers ranging from airport workers to adjunct college professors.
Many of the people who listened to the speeches were young, too young to recall the 1960s-era protests. But that clearly was the vibe of Tuesday's rally.
Participants in the Fight for $15 movement, who are planning protests on April 15, say they have taken on a broader fight on behalf of low-wage workers ranging from airport workers to adjunct college professors.
"This fight is a fight about racial justice and economic justice," Charlene Carruthers, national director of the Black Youth Project 100, told the crowd. Her organization is composed of black activists ranging in age from 18 to 35.
"For us, the Fight for 15 is also a fight for our lives," Carruthers said. "When we say 'black lives matter,' that includes black workers."
People in the audience held signs that said "Fight 4/15," a reference to April 15, when organizers of the campaign to increase minimum wages plan to bring together 60,000 protesters in major cities across America and in more than 40 countries and at more than 170 college campuses, including the University of Illinois at Chicago.Ed Shurna, executive director of the Chicago Coalition for the Homeless, which is participating in the Fight for $15 campaign, said its strategy seems to borrow elements from eras of the 1930s and the 1960s.
"It has the feel of the civil rights movement, the feel of the labor movement, but it's 2015 so it's done in a different way," Shurna said. He said this campaign is trying to get corporations to take responsibility for the struggles of their workers and get them to increase wages, offer benefits and improve working conditions.
McDonald's and its franchisees have been the main target of the campaign. Workers have filed lawsuits and complaints at various federal agencies alleging labor law violations, wage theft and unsafe working conditions. Moreover, the campaign, backed by the Service Employees International Union, wants the National Labor Relations Board to declare that McDonald's and its franchisees share responsibility for working conditions, benefits and pay.
"We won't stop until these multibillion-dollar companies pay us a living wage of $15 per hour," said Douglas Hunter, a McDonald's worker.
In a statement, McDonald's said it respects people's right to peacefully protest. "Historically, very few McDonald's employees have participated in these organized events," Heidi Barker Sa Shekhem, a McDonald's spokeswoman, said in the statement.
Matt Hoffmann, an adjunct professor at Loyola University, said faculty members of colleges in Chicago and across the nation have drawn inspiration from fast-food workers and the Fight for $15.
He said adjuncts want to be paid $15,000 per course, a figure that would include wages and benefits. He said he currently is paid $4,500 per course and doesn't receive benefits.
Hoffmann, who spoke at Tuesday's rally, said, "We struggle with our bills; we receive no benefits and we have little job stability."
At an event announcing the actions in front of a McDonald's in New York City's Times Square, organizers said home health care aides, airport workers, adjunct professors, child care workers and Wal-Mart workers will be among those turning out in April.
Terrence Wise, a Burger King worker from Kansas City, Mo., and a national leader of the Fight for $15 push, said more than 2,000 groups including Jobs With Justice and the Center for Popular Democracy will show their support as well.
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The Refugees in New York’s Hotel Rooms
On Sept. 20, Hurricane Maria hit Puerto Rico, turning my life upside down. At the time, my two daughters and I were living in Carolina, a town on the northeastern side of the island. In just a day...
On Sept. 20, Hurricane Maria hit Puerto Rico, turning my life upside down. At the time, my two daughters and I were living in Carolina, a town on the northeastern side of the island. In just a day, my clothes were turned to rags, my home was destroyed, and I lost the few belongings I had.
My mother lived in the same town but her house was still standing. For two months, we slept on a couch in her living room. But we couldn’t stay there forever. In December, the Federal Emergency Management Agency moved us to New York City. Since then, we’ve been staying in hotels provided by FEMA in the Bronx and Brooklyn, like hundreds of other families who were moved to New York after the storm. Read more here.
The very vocal protesters who took on the Fed are now fighting to protect it
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The very vocal protesters who took on the Fed are now fighting to protect it
Liberal advocacy group Fed Up launched a campaign nearly three years ago in hopes of persuading the nation's central bank to hold off raising its benchmark interest rate.
The group...
Liberal advocacy group Fed Up launched a campaign nearly three years ago in hopes of persuading the nation's central bank to hold off raising its benchmark interest rate.
The group organized protests at the Fed's annual retreat in Jackson Hole, Wyoming. It demonstrated outside the Federal Reserve Bank of New York. And it recruited prestigious economists and former top central bank officials to the cause.
But now, Fed Up has a new target: Republicans who want to curtail the central bank's power.
House Financial Services Chairman Jeb Hensarling, R-Texas, is expected to introduce legislation soon that would require the Fed to set rules for conducting monetary policy and explain any deviation from those rules. The Fed has bristled at the proposal, arguing that the proposal limits its power to revive the economy in moments of crisis.
Fed Up agrees, finding common ground between itself and the central bank it was created to criticize. The group mobilized its members at Fed Chair Janet Yellen's appearance Tuesday before the Senate Banking Committee. The group held protests ahead of her semi-annual testimony and intends to pack the hearing room with members wearing bright green shirts bearing slogans such as, "Whose Recovery?" Executive Director Shawn Sebastian said Fed Up met with several senators before the hearing to voice its concerns.
"We see the [bill] as speeding us toward another financial crash and preventing the Fed's ability to respond to another financial crash," Sebastian said.
The so-called Financial Choice Act would also roll back some of the regulatory authority handed to the Fed following the 2008 financial crisis. Sebastian said his group would be closely watching President Donald Trump's nominees to fill the three vacant seats at the central bank's board of governors in Washington. Fed Up has pushed for greater diversity among Fed appointees, both on the board and among the 12 regional central bank presidents.
The alliance could provide the Fed with its own grassroots support as it attempts to steer clear of the populist anger against economic elites that helped propel Trump into the White House. The president has promised to "do a number" on the post-financial crisis reforms known as the Dodd-Frank Act that were designed to, among other things, curtail risky behavior among banks and protect consumers from unscrupulous practices by lenders.
A draft version of Hensarling's bill includes shifting the Fed's annual bank stress tests into two-year cycles and changing the way banks calculate risk, among other things, according to a memo obtained by CNBC.
"Donald Trump and [Treasury Secretary] Steven Mnuchin, the foreclosure king, don't care about stories like mine. They only care about their billionaire friends," Philadelphia resident Tyrone Ferguson said in a prepared speech. "Now Trump and his billionaire friends want to take over the Fed, too."
Fed Up has proven adept at navigating the often esoteric world of central banking. The group has met with Yellen and Vice Chairman Stanley Fischer. It also raised pointed questions about racial diversity and ties to Wall Street during a discussion with top central bank officials at the Jackson Hole conference last year.
Sebastian compared the Fed's 14-year appointments to those of the Supreme Court. He said he will continue to press the central bank on those issues — as well as the lawmakers responsible for confirming the Fed's new governors.
"The entire world has shifted around us," Sebastian said. "But our principles have remained the same on this."
By Ylan Mui
Source
CFPB: Financial firms can no longer force consumers to use arbitration in group disputes
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CFPB: Financial firms can no longer force consumers to use arbitration in group disputes
Consumers can now sue banks in class-action lawsuits.
The Consumer Financial Protection Bureau said Monday financial companies will no longer be allowed to force customers to use...
Consumers can now sue banks in class-action lawsuits.
The Consumer Financial Protection Bureau said Monday financial companies will no longer be allowed to force customers to use arbitration to settle group disputes, restricting the industry's favored legal tool after years of review.
Read the full article here.
Seattle’s Lessons for Bernie Sanders Activists After the Elections
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Seattle’s Lessons for Bernie Sanders Activists After the Elections
According to Licata, progressives must develop the ability to “see the small things that generate the big things,” linking voter concerns about global threats like climate change to concrete and...
According to Licata, progressives must develop the ability to “see the small things that generate the big things,” linking voter concerns about global threats like climate change to concrete and achievable steps that city government can take to address local manifestations of the larger problem.
As the 2016 primary season draws to an end and Bernie Sanders backers look beyond next month’s Democratic convention in Philadelphia, many who have “felt the Bern” have their eye on local politics.
Hundreds, if not thousands, will be heeding the call of Minnesota Congressman Keith Ellison, a Sanders’ endorser and convention delegate. “We need people running for school boards,” Ellison told the New York Times in May. “We need people running for City Council. We need people running for state legislatures. We need people running for zoning boards, for park boards, to really take this sort of message that Bernie carried and carry it in their own local communities.”
Fortunately for those seeking relevant political advice, former Seattle City Councilor Nick Licata has just published a handbook called Becoming A Citizen Activist: Stories, Strategies, & Advice For Changing Our World (Sasquatch Books, 2016). His book draws on 17 years of experience as a progressive elected official and varied campus and community organizing work before that.
Like Sanders, Licata was a sixties radical. He belonged to Students for a Democratic Society (SDS) at Bowling Green State University and first learned retail politics at the dormitory level when he ran successfully for student government president.
Like some Sanders supporters who may become candidates in the near future, Licata had an unconventional resume when he first sought public office. He had lived in a well-known Seattle commune for 20 years and founded two alternative publishing ventures, the People’s Yellow Pages and the Seattle Sun. A Democrat with Green Party sympathies, he defeated a candidate who was backed by the mainstream media and out-spent him two to one.
“In the previous 128 city council elections, only two candidates had won when both daily newspapers endorsed their opponent,” Licata reports, so “the odds didn’t look good.” Fortunately, his message that the city should invest more resources “in all neighborhoods and not concentrate them in just a few” resonated with an electoral coalition of “young renters” and “older home-owners.” Licata’s own track record of neighborhood activism gave him the necessary name recognition and grassroots street cred to win.
Becoming A Citizen Activist is full of useful tips about how activists and allied politicians can collaborate on issue-oriented campaigns. His book makes clear that “going local” is different from backing a presidential campaign focused on national and international questions. According to Licata, progressives must develop the ability to “see the small things that generate the big things,” linking voter concerns about global threats like climate change to concrete and achievable steps that city government can take to address local manifestations of the larger problem.
He describes how Seattle’s four years of skirmishing over plastic bag regulation originated in one neighborhood’s opposition to a new waste transfer station. What might have been just another exercise in NIMBYism evolved into a city-wide push for waste reduction at its source, plus much greater recycling. A plastic bag fee, imposed by the city council, was overturned after a plastic bag industry-funded referendum campaign, but the city’s ban on Styrofoam containers survived. In 2011, the city council passed a broad ban on single-use plastic bags, which the industry opted not to challenge either in court or at the polls.
Licata’s other examples of progressive policy initiatives include raising local labor standards, strengthening civilian oversight of the police, providing greater protection for undocumented immigrants, decriminalizing marijuana possession and using cultural programs to foster a sense of community.
Several of his most interesting case studies reveal the tendency of legislators—even liberal-minded ones—to be overly timid and skeptical about policy initiatives that push the envelope. In 2011, for example, Licata tried to lower the expectations of constituents who met with him about a paid sick leave mandate opposed by local employers.
“I cautioned that it was not likely that we’d see it anytime soon,” he admits in the book. Yet, less than nine months later, he was “shown to be wrong.” Not only was there sufficient public support, but “well-organized advocacy groups” marshaled “a wealth of data to prove that the sky wouldn’t fall if paid sick leave passed.”
Several years later, when some Seattle fast food workers staged union-backed job actions to highlight their minimum wage demand, it was the same story:
Politicians like me were sympathetic but also felt that fifteen dollars was way too big a lift. In my own case, I thought there were more readily achievable goals—like fighting wage theft. I found myself initially offering cautious verbal support and not much more.
What made Seattle’s “Fight for 15” winnable was grassroots organizing by local labor organizations and left-wing activists, who were able to inject the issue into the 2013 mayoral race between incumbent Mike McGinn and his challenger, state senator Ed Murray. Shortly before the election, Murray endorsed a minimum wage hike to $15 an hour while McGinn insisted that Washington state should take action instead of the city.
Key socialist presence
That year, it also made a big difference to have an energetic and charismatic socialist candidate running for city council under the “Fight for 15” banner. Kshama Sawant took on Richard Conlin, “a well-liked liberal politician” who cast the city council’s lone vote against paid sick leave and opposed raising the minimum wage without further study. According to Licata, Conlin, like McGinn, was defeated due to the votes of “many disaffected Democrats who wanted more aggressive council members willing to speak out on issues.”
Once elected, Sawant was quick to utilize what Licata calls “the unique means that public officials have to help mobilize the public”: holding public hearings, forming issue-oriented or constituency-based task forces and commissions and backing ballot measures like the threatened popular referendum on “15 Now” that kept Mayor Murray and his allies from weakening minimum wage legislation more than they did in 2014.
Yet when Sawant—a generation younger than Licata—first ran against his longtime colleague, Richard Conlin, the council’s most left-leaning member didn’t support her. In Becoming a Citizen Activist, Licata now acknowledges Sawant’s unusual strengths as a radical politician, including her social media savvy, “dedicated following” and ability to project “a message that resonated with the public.” Her tweets, blogging and website use “helped her obtain 80 percent citywide name recognition after a year on the council, far surpassing all the other council members,” Licata reports.
According to the author, local pollsters surveying the relative popularity of city councilors prior to Seattle’s 2015 election found that Sawant’s “numbers were higher than all the others but mine, and I beat her by only one point.” These results might explain why Mayor Murray and the Seattle business community failed to unseat their Socialist Alternative critic when she ran for re-election last year, with Licata’s backing this time. (Licata himself chose to retire from the city council.)
New Forms of Organization
Readers interested in further detail about their over-lapping council careers will have to wait for American Socialist, a political memoir by Sawant (to be published by Verso next year) or Jonathan Rosenblum’s forthcoming book for Beacon Press about labor and politics in Seattle. Rosenblum worked on Sawant’s re-election campaign which, in his view, demonstrated “the indispensability of organization” and an “independent political base.”
Unlike Licata’s own more typical electoral efforts in the past, Sawant’s “campaign strategies and tactics were not directed by a single candidate or campaign manager.” Instead, Rosenblum points out, they were “developed through collective, thoughtful discussions” among Socialist Alternative members who live in Seattle and “are connected to a broader base of union and community activists.”
One limitation of Licata’s book is the absence of any discussion about fielding slates of progressive candidates who are committed to a common platform that includes rejection of corporate contributions. To his credit, Licata did play a major role in creating the multi-city network of progressive elected officials known as Local Progress. In the Bay Area, this group includes Richmond, Calif., city councilor (and former mayor) Gayle McLaughlin, whose Richmond Progressive Alliance only runs candidates who spurn business donations.
Nationally, about 400 mayors, city councilors, county supervisors and school board members use Local Progress as a “think tank” and clearing house for alternative public policies. Assisted by the Center for Popular Democracy in New York, the group distributes a 60-page handbook for improving labor and environmental standards, housing and education programs, public safety, and municipal election practices. At annual conferences—like its national meeting in Pittsburgh on July 8-9—local victories of the sort Licata describes in his book are dissected and their lessons disseminated.
Local Progress leaders believe that neither street politics nor electoral victories alone will make a sufficient dent in the status quo. As Licata told his fellow “electeds” when they met in New York two years ago, municipal government changes for the better only when progressives have “an outside and inside game…people on the inside and people protesting on the outside to provide insiders with backbone.” Licata’s new book provides many useful examples of that necessary synergy.
By STEVE EARLY
Source
Risking Public Money: Illinois Charter School Fraud
Best Practices to Protect Public Dollars & Prevent Financial Mismanagement
...Download the full report
Executive Summary
In 2010, fourteen years after Illinois passed its charter school law, the U.S. Department of Education raised a red flag about the state’s oversight of fiscal controls at its charter schools, finding that the state “has no system in place for monitoring [charter schools].” Four years later, this problem continues. To date, $13.1 million in fraud by charter school officials has been uncovered in Illinois. Because of the lack of transparency and necessary oversight, total fraud is estimated at $27.7 million in 2014 alone. Our research uncovered three fundamental flaws with the state’s oversight of charter schools:
Oversight depends heavily on self-reporting by charter schools, or by whistleblowers. Illinois oversight agencies rely almost entirely on complaints from whistleblowers and audits paid for by charter operators. Both methods are important to uncover fraud; however, neither is a systematic approach to fraud detection, nor are they effective in fraud prevention. General auditing techniques alone do not uncover fraud. The audits commissioned by the charters and provided to Illinois oversight agencies use general auditing techniques, not those specifically designed to uncover fraud. The current processes may expose inaccuracies or inefficiencies; however, without audits targeted at uncovering financial fraud, state and local agencies will rarely be able to detect fraud without a whistleblower. Adequate staffing is necessary to detect and eliminate fraud. We found evidence that the government agencies tasked with investigating fraud are severely understaffed, which is prohibitive to conducting high quality, time-intensive audits of any type.We propose the following targeted reforms of the existing oversight structure to remedy these flaws:Mandate Audits Designed to Detect and Prevent Fraud
Charter schools should institute an internal fraud risk management program, including an annual fraud risk assessment and audits that specifically investigate high-risk areas; Charter schools should commission audits of internal controls over financial reporting that are integrated with an audit of financial statements; Existing oversight bodies should perform targeted fraud audits focused on areas of risk or weakness through the annual fraud risk assessments; and Auditing teams should include members certified in Financial Forensics trained to detect fraud.Increase Transparency & Accountability
All annual audits and fraud risk assessments should be posted on the websites of charter school authorizers, typically the local school system; Charter authorizers should create a system to categorize and rank charter audits by fraud risk levels to facilitate transparency and public engagement; Charter schools should voluntarily make the findings of their internal assessments public; Charter school authorizers should perform comprehensive reviews once every three years; The Attorney General’s office should conduct a review of all charter schools in Illinois to identify inadequate school oversight by boards of directors or executives and publicize the findings; and The state should impose a moratorium on new charter schools until the state oversight system is adequately reformed.Despite the possibility of almost $30 million lost to fraud in the last year alone, charter schools continue to experience unprecedented growth. Since 2003, charter school enrollment in Illinois has grown by 680 percent. Illinois students, their families, and taxpayers cannot afford to lose a dollar more in public funds as a result of fraud, misspending, or misdirection within the charter school system. The reforms proposed herein require a smart investment and a commitment to the future of Illinois’ youth and all its communities.
Download the full report
Activists to SEC’s White: Step aside on audit regulator appointment
A national coalition of 14 organizations told Mary Jo White, chairwoman of the Securities and Exchange Commission, to take herself out of the selection process for the next chair of the Public...
A national coalition of 14 organizations told Mary Jo White, chairwoman of the Securities and Exchange Commission, to take herself out of the selection process for the next chair of the Public Company Accounting Oversight Board, the audit regulator.
In a letter sent on Thursday the signers said they believe there’s a conflict of interest created by her decision on an issue that will impact her family’s income. That’s because John White, her husband, is a member of the PCAOB’s Standing Advisory Group, selected by the board of the PCAOB, who are in turn chosen by the SEC and White.
The conflict has existed ever since White was approved as SEC chairwoman. Her spokeswoman told MarketWatch in September that her husband’s role in the PCAOB group was reviewed when she first took the job, and then again when the first PCAOB board appointment during her tenure was required. The conflict rose to the surface in early September, when Bloomberg reported that White was considering potential candidates to replace PCAOB Chair James Doty.
Doty has signaled he would like to return for another term but his industry reform-minded tenure has caused some, including at the SEC, to criticize his tenure. Critics say progress on the “nuts and bolts” of the agency is slow because of Doty’s preoccupation with larger industry-level initiatives focused on greater accountability and transparency for auditors and audits.
Bloomberg’s coverage of the conflict, and White’s admission that she was shopping for alternatives to Doty, led John White’s law firm, Cravath, Swaine & Moore, to remove marketing-type references to White’s position on the SAG from its website the following day, as reported by MarketWatch.
The organizations are the Alliance for a Just Society, American Family Voices, Campaign for America’s Future, Center for Effective Government, Center for Popular Democracy, Community Organizations in Action, Communications Workers of America, Democracy for America, Main Street Alliance, The Other 98%, Public Citizen, RootsAction, Rootstrikers and MoveOn.org Civil Action.
Source: MarketWatch
When To Raise Rates? Boston Fed Chief Pokes Fellow Liberals
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When To Raise Rates? Boston Fed Chief Pokes Fellow Liberals
Eric S. Rosengren, president of the Federal Reserve Bank of Boston, has been famous as an inflation dove – until now.
Being a dove means he almost always favors smaller and fewer interest...
Eric S. Rosengren, president of the Federal Reserve Bank of Boston, has been famous as an inflation dove – until now.
Being a dove means he almost always favors smaller and fewer interest rate increases by the Fed, in the hope that more money from the spigot will lead to more jobs and wage increases for workers. Rosengren and Janet Yellen, the Fed chair, have led the dove charge in recent years.
But on Wednesday, Rosengren dissented when the central bank postponed a rate hike at least until December. That surprised his fellow dovish liberals because, to oversimplify, lower rates tend to help workers, while higher rates, making money harder for borrowers to get, can protect accumulated wealth by warding off inflation.
The pro-hike dissent was his first in almost 10 years as a Fed governor; he has certainly opposed rate hikes and urged faster cuts, sometimes with formal dissents.
The move ignited debate not along the usual lines of doves and hawks – those who favor rate hikes to control inflation even before it appears – but between doves and doves, in much the same way that, for example, foreign trade deals divide liberal Democrats.
All of this might seem like an esoteric spat to Joe Grabasandwich, as my old politics professor used to say. But it lies at the heart of how the central bank can prod the economy to help more people, sooner. And it matters especially in Connecticut, where growth is slow even in good times, making rate hikes hurt worse than elsewhere.
On Friday, Rosengren explained his dissent in a public statement in which he said the economy is stronger than many people think.
"By 2019, I expect the unemployment rate to have declined below 4.5 percent," Rosengren said in the statement. "While I have a long track record of advocating for policy that supports robust labor market conditions, that is below the rate that I believe is sustainable in the long run."
What Rosengren is saying is that a 4.5 percent unemployment rate is so low that it would heat up the economy to the point of inflation above 2 percent, and that's the big no-no the Fed is trying to prevent – a clear charge to anyone who remembers the nightmare of the 1970s.
Taking the medicine of a one-quarter of 1 percent rate increase now, immediately, will, in his view, allow for relatively low rates over the long haul. That's part of the so-called soft landing from an expansion that is so hard to achieve.
Not so fast, left-leaning economists say. Or rather, not so slow. In the big picture, economist Jared Bernstein said, workers only see wage increases when the unemployment rate is at or near full employment – as we saw in the Sept. 15 Census report. The report showed a robust 5.2 percent 2015 jump in the income of households at the middle of the scale.
Did Eric Rosengren, of all people, turn his back on this?
"I've always considered him sympathetic to my view, which is that the last thing you'd want to do is tap the brakes and slow down job growth at a time when the economy is finally starting to...help people who have been left behind," said Bernstein, a senior fellow at the Center on Budget and Policy Priorities and author of a new book, "The Reconnection Agenda: Reuniting Growth and Prosperity."
Bernstein, a former chief economist for Vice President Joe Biden, doesn't believe Rosengren is suddenly looking out for capital at the expense of labor. Rather, the issue comes down to the murky relationship between inflation and unemployment.
The financial media widely reported Rosengren's 4.5 percent jobless figure Friday. But in itself, it's not news, considering the rate is now 4.9 percent. The real news, Bernstein said, is that Rosengren thinks he can tell when too hot is too hot, without data.
Rosengren, in a visit to New Britain in April, explained that the "natural" or "full" rate of employment, the level that delivers the maximum benefits to the economy without accelerating inflation, will be reached when the jobless rate is 4.7 percent.
The trouble with that view, Bernstein said, is that "it is widely understood by people who look very closely at this question that we cannot reliably estimate that rate within 2 points one way or another."
There are too many variables in play, such as productivity and distribution of income, so, why risk punishing workers by applying certainty to a mystery?
Rosengren explained, in his statement Friday: "My goal is to achieve a long and durable recovery – a sustainable expansion...I believe a significant overshoot of the full employment level could shorten, rather than lengthen, the duration of this recovery."
As I noted when Rosengren visited in April, his view of the economy, literally, from his downtown Boston office, is full of cranes in the torrid market of a red-hot city. Is that coloring his fear of inflation? Maybe.
No one thinks another quarter-point increase in the Fed's overnight borrowing rate, after last December's uptick, will make a big difference by itself. But the signal the Fed sends can and does move markets and the economy.
"If we want this recovery to reach down and help people it has yet to reach, that's inconsistent with even a small rate increase," Bernstein said. "Where's the inflation?"
"It's gradually coming up," Rosengren told a Quincy, Mass. audience on Sept. 9.
That's the $15 trillion debate as the U.S. economy either is, or is not, nearing its speed limit.
By Dan Haar
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22 hours ago
3 days ago