Thursday, September 24, 2009

Fiscal Wake-Up Tour - The Concord Coalition

The Fiscal Wake-Up Tour Online

"The Concord Coalition believes that only with an engaged, informed and demanding public can the nation's fiscal challenges be met. The Fiscal Wake-Up Tour's mission is to cut through the usual partisan rhetoric and stimulate a more realistic public dialogue on what we want our nation's future to look like, along with the required trade-offs. We believe that elected leaders in Washington know there is a problem, but they are unlikely to act unless forced to by their constituents. The Tour began as a series of public forums around the country and now, in addition to those forums, we are organizing in-depth local committees to further focus attention on our nation's daunting long-term fiscal challenges."

Click the link above to learn more.

John Maynard Keynes has been dead for 60 years but still managed to help us avoid a second Great Dep

In the September 24, 2009 Salon book review "John Maynard Keynes: Don't call it a comeback," Andrew Leonard says "The legendary economist has been dead for 60 years but still managed to help us avoid a second Great Depression."
The sudden present-day prominence of John Maynard Keynes, an economist who passed away 60 years ago and whose theories have been mercilessly ridiculed by conservatives for at least three decades, calls to mind the famous 1981 Rolling Stone magazine cover story on the Doors' Jim Morrison: "He's Hot, He's Sexy, and He's Dead."

We've witnessed quite the turnaround. From at least the 1970s on, Keynes' star was in eclipse, while Milton Friedman and the free market theorists of the Chicago School of Economics seized the commanding heights of economic discourse. To even mention Keynes was to be dismissed as hopelessly out of touch with state-of-the-art theory. Hadn't you heard? The government governs best when it governs least!

And yet today, you can't click your way three links through the econoblogosphere without stumbling into a flame war between reenergized triumphalist Keynesian supporters of government intervention in the economy and bewildered, angry market fundamentalists who have just watched their painstakingly constructed world crumble around them. Just a few years ago the heat of the debate would have been unthinkable -- Keynes seemed to have about as much relevance to current economic policymaking as Winston Churchill does for the Middle East peace process.

But global economic crises that obliterate the notion that markets are intrinsically self-correcting and efficient have a way of shaking things up. As the University of Chicago's Robert Lucas (who most explicitly does not fall in the pro-Keynes camp) said last October, "Well I guess everyone is a Keynesian in a foxhole ..." Meaning, basically: When shit happens, people want help. And since Keynes is the most illustrious proponent of the idea that government should help get economies back on track when they ride off the rails, his reputation is on the serious upswing.

Few people are better situated to comment or explain Keynes' current fashionableness than Lord Robert Skidelsky, author of the newly published "Keynes: The Return of the Master" -- which comes complete with the possibly overdone sub-headline: "Why, Sixty Years After His Death, John Maynard Keynes is the Most Important Economic Thinker for America."

Skidelsky has devoted the bulk of his creative life to Keynes. He spent decades producing a three-volume biography of the economist that won numerous awards and has already been abridged once -- into a merely 1,000-page tome! The new book, clocking in at a slender 220 pages (including notes), is thus a distillation of a distillation, shoehorned onto the recent economic crisis. Ironically for an author who spent so many years laboring over his definitive account, "The Return of the Master" feels a bit hasty, written as if with one eye focused on the headlines and Paul Krugman's latest blog post.

But that's OK. There is nothing awkward or opportunistic about speedily resurrecting Keynes in the wake of Wall Street's implosion -- it is, on the contrary, entirely appropriate. Keynes would not be surprised at the mess we are in today. While so many leading economists failed to predict or even conceive of the possibility of market failure on such an enormous scale, Keynes wouldn't have blinked an eye. One of his fundamental propositions was that the future was inherently unknowable, that we live in a constant state of "irreducible uncertainty." Shocks, depressions and recessions are bound to happen. The question is: What to do about them?

Anyone who followed the shouting earlier this year over the pros and cons of the Obama stimulus is familiar with the basic contours of that debate. Republicans, taking their cues from conservative economists, argued that the economy would recover on its own, and that government spending now would be equivalent to robbing the future, "crowding out" private investment, guaranteeing huge deficits and, eventually, crippling inflation. Democrats, taking their cues from Keynes, argued that we were trapped in a vicious cycle catalyzed by what the great economist called the "paradox of thrift." Individuals, worried about the future, abruptly began to save instead of spend, creating a "demand shock" that forced businesses to cut production and lay off workers, which further dampened consumer demand and caused the spiral of doom to accelerate. If government hadn't stepped in to break that cycle -- by unilaterally creating demand to jump-start the economy -- we would have run the risk of letting a recession metastasize into a depression.

Skidelsky's pithy summary:

When shocks to the system occur, agents do not know what will happen next. In the face of this uncertainty, they do not readjust their spending; instead, they refrain from spending until the mists clear, sending the economy into a tailspin.

Skidelsky deftly summarizes and explains basic Keynesian economics and how they apply to our current travails. He argues that the main reason we haven't already slipped into a second Great Depression can be attributed to the fact that the world's governments followed Keynes' maxim -- they acted. He also provides a nice capsule explanation of how Keynes was overshadowed by Friedman -- but anyone who has read Paul Krugman's recent New York Times Magazine piece, "How Did Economists Get It So Wrong?" will find the material familiar.

But to focus on the nitty-gritty of how Keynesian economics contradicts Chicago school efficient-market theory or is fulfilled by the Obama stimulus is to miss one of the key points that Skidelsky strives to make. Keynes, whom Skidelsky calls "the wisest and most intelligent economist of the last century," was in some ways a reluctant practitioner of the dismal science. He could just as easily have been a philosopher or a historian -- his interests were wide-ranging, his mind as agile and as easily distracted as a hummingbird. For Keynes, the challenge was not to come up with a comprehensive model of how "the economy" worked, but to ensure that human beings were able to live "wisely, agreeably, and well." The economy was but a means to that end. "To make the world ethically better," writes Skidelsky, "was the only justifiable purpose of economic striving." We fail, morally, when "we worship ... economic growth for its own sake, rather than as a way to achieve the 'good life.'"

To understand Keynes requires a detour into ethics and philosophy and a willingness to ponder such statements as "it cannot be readily assumed that what we desire is desireable." Such discourse, to put it bluntly, is not often found in the policy recommendations of contemporary economists, nor does it fit into their math-heavy models. But for Keynes, it was essential -- he wanted everyone to be able to live "the good life" -- and he did not equate that goal, necessarily, with the accumulation of wealth. If Keynes were alive today, suggests Skidelsky, he would agree with those critics of Wall Street who believe finance plays far too great a role in the economy. He would regard the machinations of hedge fund operators and investment bankers as chaff in a giant casino where all the players are dominated by the crass desire for money rather than by the imperative of living a meaningful life.

To your run-of-the-mill market fundamentalist, questions of ethics are irrelevant. Capitalism works by satisfying consumer needs and wants. Government should stay out of the way. But Keynes is on the comeback trail because our present-day predicament shows this to be manifestly untrue.

Let me give the microphone to Skidelsky. In a paragraph and a half, he asks a set of questions that are at the heart not just of his book, but of our existence on this planet.

Keynes looked forward to a saturation of wants. But he did not see this as a natural, but an ethical terminus. Wants were to be controlled not by the size of the stomach, but by a generally accepted conception of "sufficiency" for the good life.

In terms of arithmetic, he was almost spot on in his predictions of growing wealth, but attitudes have changed less than he expected. Although real incomes in rich countries have doubled in the last thirty years, the populations of these countries work harder than ever and are no happier. This raises the question of why they are still on the growth treadmill. Is it because capitalism needs constantly to expand markets, and ensnare by advertising more and more people into useless consumption? Is it because economists have ignored the fact that, as societies become wealthier, positional goods -- goods which satisfy not our needs, but our longing for status -- become more and more desirable? Is it because globalization has made affluence too insecure and too uneven in its spread for most people in wealthy societies to ease off work? Or is it because we lack any agreed idea of the good life in the name of which we can say "enough is enough"?

If Keynes were alive today, these would be questions he would be asking. And after reading "Keynes: The Return of the Master," one can only conclude that we would be well-served to have him out and about, confounding the status quo with his impertinence.

Census: Recession had sweeping effect on US life

In the September 22, 2009 article "Census: Recession had sweeping effect on US life," Associated Press writer Hope Yen reports:
WASHINGTON – The recession is profoundly disrupting American life: More people are delaying marriage and home-buying, turning to carpools yet getting stuck in ever-worse traffic, staying put rather than moving to new cities.

A broad array of U.S. census data, released Monday, also shows a dip in the foreign-born population last year, to under 38 million after it reached an all-time high in 2007. This was due to declines in low-skilled workers from Mexico searching for jobs in Arizona, Florida and California.

Health coverage swung widely by region, based partly on levels of unemployment. Massachusetts, with its universal coverage law, had fewer than 1 in 20 uninsured residents — the lowest in the nation. Texas had the highest share, at 1 in four, largely because of illegal immigrants excluded from government-sponsored and employer-provided plans.

Demographers said the latest figures were striking confirmation of the social impact of the economic decline as it hit home in 2008. Findings come from the annual American Community Survey, a sweeping look at life built on information from 3 million households.

Preliminary data earlier this year found that many Americans were not moving, staying put in big cities rather than migrating to the Sunbelt because of frozen lines of credit. Mobility is at a 60-year low, upending population trends ahead of the 2010 census that will be used to apportion House seats.

"The recession has affected everybody in one way or another as families use lots of different strategies to cope with a new economic reality," said Mark Mather, associate vice president of the nonprofit Population Reference Bureau. "Job loss — or the potential for job loss — also leads to feelings of economic insecurity and can create social tension."

"It's just the tip of the iceberg," he said, noting that unemployment is still rising.

The percentage of people who drove alone to work dropped last year to 75.5 percent, the lowest in a decade, as commuters grew weary of paying close to $4 a gallon for gasoline and opted to carpool or take public transportation.

Twenty-two states had declines in solo drivers compared with the year before, with the rest statistically unchanged. The decreases were particularly evident in states with higher traffic congestion, such as Maryland, Texas and Washington.

Average commute times edged up to 25.5 minutes, erasing years of decreases to stand at the level of 2000, as people had to leave home earlier in the morning to pick up friends for their ride to work or to catch a bus or subway train.

Palmdale, Calif., a suburb in the high desert north of Los Angeles, posted the longest commute at 41.5 minutes. It barely edged out New York City, with its congestion and sprawling subway system, at 39.4 minutes. Shortest commute time: Bloomington, Ill., at 14.1 minutes.

Nationwide, more than 1 in 8 workers, or 17.5 million, were out the door by 6 a.m.

Marital bliss also suffered. Nearly 1 in 3 Americans 15 and over, or 31.2 percent, reported they had never been married, the highest level in a decade. The share had previously hovered for years around 27 percent, before beginning to climb during the housing downturn in 2006.

The never-married included three-quarters of men in their 20s and two-thirds of women in that age range. Sociologists say younger people are taking longer to reach economic independence and consider marriage, because they are struggling to find work or focusing on an advanced education.

The Northeast had the most people who were delaying marriage, led by states such as New York and Massachusetts. People in the South were more likely to give marriage a try, including those in Arkansas, Tennessee and Texas.

The dip in foreign-born residents comes as the government considers immigration changes, including stepped-up border enforcement and a path toward U.S. citizenship. At nearly 38 million, immigrants made up 12.5 percent of the population in 2008; an estimated 11.9 million are here illegally.

In three large metro areas, Miami, San Jose, Calif., and Los Angeles, more than one-third of all residents are foreign-born.

Roughly half the states showed declines in the number of immigrants from 2007 to 2008. Major metro areas also posted decreases, including Los Angeles, Phoenix, Detroit and Tampa, Fla. An influx of workers from India, who came looking for specialized jobs in telecommunications, manufacturing, computers and software, partially offset the national immigration decrease.

About 1 in 5 U.S. residents spoke a language other than English at home, mostly clustered in California, New Mexico and Texas.

The number of foreign-born and minority residents often tracked closely with how a state ranked in the levels of uninsured.

The highest numbers were in agricultural communities with large Hispanic populations in California's San Joaquin Valley, South Texas and South Florida. Regions in New Mexico, Nevada, Arizona, Alaska, Oklahoma and Georgia also fared poorly.

The numbers help explain why the debate over illegal immigration and health insurance is so heated.

"The fact that many election 'swing states,' with large and growing Hispanic populations, rank low on health insurance for children and young adults points to the significance of this issue for both parties in future national elections," said William H. Frey, a demographer at Brookings Institution, a think tank.

Democratic proposals to overhaul health insurance would exclude illegal immigrants from benefits, but Republicans contend the prohibition is meaningless because of lax enforcement. President Barack Obama has now proposed broader and tougher restrictions; opponents say the steps are still not enough.

Other findings:

• The homeownership rate fell to 66.6 percent last year, the lowest in six years, after hitting a peak of 67.3 percent in 2006. Residents in crowded housing jumped to 1.1 percent, the highest since 2004, a sign people were "doubling up" with relatives or friends to save money.

• The share of people who carpooled to work rose to 10.7 percent, up from 10.4 percent in the previous year. Commuters who took public transportation increased to 5 percent, the highest in six years, with Washington, D.C., at the top.

• Women's average pay still lagged men's, but the gap has been narrowing. Women with full-time jobs made 77.9 percent of men's pay, up from 77.5 percent in 2007 and about 64 percent in 2000.

• More people have high school diplomas. Only two states, Texas and Mississippi, had at least 1 in 5 adults without high school diplomas. This is down from 17 states in 2000 and 37 in 1990.

• More older people are working. About 15.5 percent of Americans 65 and over, or 6.1 million, were in the labor force. That's up from 15 percent in 2007.

Michael Moore's New Target: 'Capitalism' Itself

According to Kenneth Turan's September 22, 2009 National Public Radio (NPR) movie review "Michael Moore's New Target: 'Capitalism' Itself":
Capitalism: A Love Story is more than Michael Moore's latest documentary — it's the summation of the movies he's been making for the past 20 years. He lays all the ills of American society at the feet of an out-of-control free-market system — a system he detests so much that he puts priests on camera to talk about capitalism's moral evils.

Clearly Moore has not lost his provocateur's gift. But not even the director's pot-stirring skills can quell the suspicion that Capitalism would have benefited from the narrower focus that helped give his earlier films such punch. This picture comes by its scattershot approach naturally — just ask Karl Marx, who spent 18 years researching and writing his multi-volume Das Kapital — but it's still distracting.

That said, Moore's scattershot is a lot more interesting than some filmmakers' focus, and many of his individual sequences are classic. The director hasn't lost his zest for confrontational antics: He surrounds all of Wall Street with yellow "crime scene" tape to emphasize his low opinion of the area's activities, and he drives an armored car up to AIG's corporate headquarters, demanding that the company return federal bailout funds.

The main point Moore wants to make — the thing that drives him craziest — is his notion that capitalism, far from being a system that rewards excellence, is a scheme set up to make a profit on absolutely anything, a system that has turned American society into a culture that says money is the only value.

In the end, perhaps the most startling thing about Capitalism is that Moore stands revealed not as some pointy-headed socialist, but as an unreconstructed New Deal Democrat. He admires Franklin D. Roosevelt, believes in increased democracy and opportunity, and feels that the decades-long weakening of unions has fatally weakened America. The fact that this will be a controversial stance says as much about today's political culture as it does about Moore's place in it.

Wednesday, September 23, 2009

Taxi Driver Lets Riders Name Their Price

In the September 2009 Gimundo article "Taxi Driver Lets Riders Name Their Price," Kathryn Hawkins reports:
Essex, Vermont is home to only around 18,000 people—but thanks to newly-minted cabbie Eric Hagen, they now have an inspiring and affordable way to get around the town.

Hagen works for the American Red Cross, but recently, it dawned on him that he could both have fun and do good by starting a side business that relied on his community’s generosity.

“I was watching CNBC—the financial station—and it suddenly hit me: Everybody’s always hearing, ‘This is what your mortgage is going to be; this is what your car payment’s going to be,’” he told the Burlington Free Press. “People want to get away from that.”

As an antidote to rigid financial conditions, Hagan got his cab driver’s license and insurance, and officially opened for business last month with the Recession Ride Taxi. In his SUV, Hagen will take passengers anywhere they want to go in and around Essex—for whatever they want to pay.

There are no set prices for transportation, and Hagen also offers a cooler full of pay-what-you-want beverages to thirsty guests. He even offers special perks to frequent riders: he provides his passengers with hole punch cards, giving them a free ride after every six trips.

Of course, Hagen’s customers could easily get a free ride anyway—after all, he’s not forcing them to open their wallets. Since his payment policy is so flexible, he’s taken some strange trades: one customer gave him a $10 grocery card, and a local musician gave him his group’s CD. But in the weeks since the business has launched, Hagen hasn’t been short-changed once.

“I believed from the start that this would work,” he said. “I believed that people are going to be generous enough to make it worth my while, and I’m going to be generous enough to let them decide.”

Tuesday, September 22, 2009

Why banks delay crediting deposits

In the September 22, 2009 New York Times article "Hurry Up and Credit My Account," Ron Lieber explaines why banks do not credit deposits immediately:
What is it with these banks that are so quick to hit you with a fee for spending more than you have in your checking account but take their own sweet time in crediting deposits?

My colleague Andrew Martin and I heard that complaint repeatedly from readers after we wrote about overdraft fees earlier this month. The angry questions happened to arrive as we approach the five-year anniversary of when the federal law known as Check 21 took effect. The law allows banks to turn paper checks into digital images and settle them electronically instead of shipping bags of paper around the country on airplanes.

Once banks embraced the new procedures, money disappeared from your account much faster when you wrote a check. But the old laws on how quickly banks must credit your account when you make a deposit did not change at all. They still haven’t. In fact, they haven’t changed in more than 20 years.

In part because of that, consumers are suspicious that banks earn more money by not making the funds available until they absolutely have to. Banks, meanwhile, say that they often make deposited funds available before they know that the checks haven’t bounced.

The banks and the Federal Reserve have made some progress in speeding up many deposits. But the rules — and especially their exceptions — still trip up plenty of people.

So first, a refresher course on the rules, the ones the bank explained to you when you signed up for an account in a fine print document that you probably ignored. (I’ve posted links to more detailed explanations from the online version of this article.)

Banks are supposed to allow you to withdraw the following types of deposits no later than the next business day after the bank receives them: cash, electronic payments like paychecks and other direct deposits, government checks, postal money orders and cashier’s checks. That said, if you don’t make the deposits in person (say, if it’s through an A.T.M.), there may be further delay.

For other checks, the Federal Reserve rule that governs deposits makes a distinction between local checks and nonlocal checks. Once you deposit your check in your own bank, it may go to a Federal Reserve check processing center before it heads to the bank of the person or company who wrote it. If the same center services both banks, then the check is local. If not, it’s nonlocal.

Banks must make your deposits of local checks available no later than two business days after you hand them over. But they get a full five days on nonlocal accounts. In either case, they must make $100 available to you the next business day after the deposit as a sort of good-faith advance. That number, too, has not changed in two decades.

One piece of good news here is that because of the rapid adoption of electronic check imaging, the Federal Reserve is a year or so away from completing the consolidation of all its processing centers. As a result, many more checks are already local. So when you deposit them, they hit your account more quickly.

The bad news, however, is that there are still a number of exceptions that allow banks to put a hold on part or all of the deposit, often for at least five business days. Any deposit over $5,000 is automatically suspect. If your account has been overdrawn at least six days in the last six months, then the bank can delay all deposits to your account. If your account is less than 30 days old, then your bank gets the extra time there, too (plenty of fraud happens in new accounts).

The large deposit exception ensnares plenty of people, according to Gail Hillebrand, senior attorney for Consumers Union. They include those who are paid on commission or quarterly and those earning royalties, and a large number of others moving money around from, say, a brokerage account to their checking account to pay big medical or tuition bills or buy a car or house.

She suggested taking an active approach with the bank when big money is involved, deposit by deposit. “Ask the bank if there will be a hold and how soon you can have the money. Don’t assume it’s going to be there because the teller smiled at you and accepted it,” she said. “If you’re moving money for a big payment, do it well in advance.”

Banks can and do move faster than the regulations require. And some have pushed their daily deadlines for depositors later by a few hours. Credit unions, in particular, tend to clear deposits more quickly, according to a 2007 Federal Reserve study of the effect of Check 21.

But you can’t count on that happening. So if you can’t keep a cushion in your checking account to protect yourself from running out of money while waiting for deposits, there are a few other available tactics.

Use direct deposit for everything you possibly can, from government benefit checks to tax refunds to reimbursement from your health insurer or flexible spending account administrator. Freelancers who do regular work for large companies can often receive payment via direct deposit, too.

If you’re sending money to a child in school or supporting a relative in some other way, you’ll spare yourself a lot of desperate phone calls if you can find a way to transfer money electronically into their account from your own linked account, say by listing yourself on the account with them.

There’s one big win for consumers arising from Check 21 that should have happened by now but mostly hasn’t. It’s something bankers like to call remote deposit capture. In plain English, that means you scan the check using your home computer and send it to the bank without having to bother with envelopes and mailboxes or remembering to stop at the branch in person.

Banks were fairly quick to make this available for their biggest customers — businesses. But only a couple of hundred banks or credit unions have given it to consumers so far, according to Bob Meara, a senior analyst with Celent, a financial services consulting firm.

The early adopters tend to be institutions like USAA Federal Savings Bank, which has only one branch but has lots of customers serving in the United States military who don’t want to send money in from an Army base. In fact, the bank has gone a step further and created an iPhone application that allows many of its customers to take pictures of their checks and deposit them that way. One in four of the bank’s check deposits now arrive remotely.

Customers of bigger banks could get their deposits into their bank accounts a lot faster if only the institutions were willing to let them move money this way. So why don’t they?

According to Mr. Meara, 90 percent of all transactions with bank tellers involve checks. If everyone had an iPhone deposit app, people wouldn’t come into the branch as often. That would be fine had banks not invested so much time and energy in training branch workers to persuade checking account customers to move into more profitable products.

“One the one hand, fewer deposit transactions could mean a headcount reduction,” he said. “But it invites the erosion of store profitability. The banks are struggling with the enormity of what it means.”

It can’t hurt to ask your bank for this sort of deposit-at-home service. But Mr. Meara thinks it will be many years before everyone gets to use it. That’s too bad. Until the Federal Reserve acts to tighten the deposit crediting rules further, having more ways to make deposits is one of the best benefits that can still come out of Check 21. If only your bank were in a bigger hurry to give you the tools.

Uncommonly Clever Economic Indicators

In the September 21, 2009 Forbes article "Uncommonly Clever Economic Indicators," Maureen Farrell explains "The stock market is a foggy window on the economy. Follow the pink ties and restaurant garbage piles."
The folks who get paid big bucks to know are saying the recession is over. Then again, those are the same folks who didn't head off the latest crippling crisis swelling right beneath their noses.

Want to know if we're really on the road to recovery? Look for pink ties, says Robert Allsbrook, chief economist for Regions Bank, in Birmingham, Ala.

"Men and women wear bright colors when they feel confident, and drab beige colors when they feel bad," says Allsbrook. "Men's ties are a leading indicator because they're a very inexpensive way to change a wardrobe."

Last summer, even before Lehman Brothers fell into bankruptcy, Allsbrook says he saw muted wardrobes, what he calls "funeral clothes." And now? "Since the start of the summer, I've seen lots of men wearing pink and fuchsia colored ties," he says.

Economists have access to reams of data and sophisticated computer models at their disposal, based on standard variables like the unemployment rate, bond yields, new housing starts and inflation. One problem with much of that data: "The stuff that people are looking at in the news are lagging indicators," says Owen Shapiro, principal at Leo J. Shapiro & Associates, which tracks consumer and investor behavior. Clouding matters further, he adds: "Many numbers have an emotional or disproportional impact on how people feel."

Even stock prices--which in theory are supposed to reflect the future earning power of the companies they track--don't do a consistently good job of calling a crash, or a recovery.

For extra enlightenment, we went looking for a slew of offbeat economic indicators. The overall message: Things aren't getting worse, but we still have a long way to go. Here are some highlights:

Telecommunications Infrastructure
Dave Maddox owns and operates communications towers leased to wireless operators like Sprint and T-Mobile. Each of his 10 towers (what your cellphone talks to in a given area) in the Los Angeles and Boston metropolitan regions can service up to 10 different carriers. This summer, he set up four new base stations for four operators looking to expand their coverage areas--the most activity he's seen in several years. That kind of cap-ex spending portends a rebound, he says.

Christie's Autumn Wine Auction
Of all items auctioned at Christie's, wine may be the best proxy for economic activity. That's because--unlike rabid, 17th-century-furniture collectors, for whom price might be no option--wine bidders are often speculators looking to buy low and sell high, explains Heather Barnhart, the auction house's senior vice president and regional director for the Americas. In September Christie's moved $2.6 million worth of vino, nearly double last year's volume. "I think it's a great measure of people's overall confidence," she says.

The Size Of Restaurant Garbage Piles
Americans are eating out again, and that's a good sign. You can see that trend in the size of the garbage piles behind restaurants, says Sam Firer, a consultant for the Hall Company, a restaurant advisory. "The garbage is not from what people have eaten, it's from what you use to make the food," says Firer, whose clients include New York's B.R. Restaurant Group, which owns Dos Caminos, Blue Water Grill and Blue Fin. After a rough 2008, he adds, "this summer it was stinky [of garbage] again."

Another good sign: One of Firer's clients, Alicart Restaurant Group, is opening a 6,000-square-foot Carmine's Italian restaurant in Washington, D.C. "And they're conservative folks," says Firer.

Denim Sales
Denim offers a dependable take on the economy, says Marshal Cohen, chief industry analyst at NPD Group, a market research firm. Reason: Jeans are a relatively cheap investment and one of the first things consumers buy when the economy starts to bounce back. While overall apparel sales have slumped, denim sales have already started to pop: For the six months from January to June, denim sales jumped 5.3% to $7.6 billion vs. the same period in 2008.

Hotel Cancellations
Last winter no one wanted to keep a date with the MGM Mirage in Las Vegas. Cancellations at the company's meeting and corporate events department spiked by more than 50% between October 2008 and March 2009, says Dan D'Arrigo, executive vice president and chief financial officer. "We couldn't drop prices fast enough to keep our space filled," he adds. By early April, cancellations had slowed down, and by August, the rate was about 20% (in ordinary climates it hovers in the mid teens).

More good news: In the past three months, major event planners are booking space for 2010, 2011 and even 2012. "We couldn't get meeting event planners to take our calls earlier this year," says D'Arrigo.

Monday, September 21, 2009

House moves to extend unemployment benefits

In the September 21, 2009 article "House moves to extend unemployment benefits," Associated Press writer Jim Abrams reports the U.S. House of Representatives voted to extend unemployment benefits:
WASHINGTON – Despite predictions the Great Recession is running out of steam, the House is taking up emergency legislation this week to help the millions of Americans who see no immediate end to their economic miseries.

A bill offered by Rep. Jim McDermott, D-Wash., and expected to pass easily would provide 13 weeks of extended unemployment benefits for more than 300,000 jobless people who live in states with unemployment rates of at least 8.5 percent and who are scheduled to run out of benefits by the end of September.

The 13-week extension would supplement the 26 weeks of benefits most states offer and the federally funded extensions of up to 53 weeks that Congress approved in legislation last year and in the stimulus bill enacted last February.

People from North Carolina to California "have been calling my office to tell me they still cannot find work a year or more after becoming unemployed, and they need some additional help to keep their heads above water," McDermott said.

Critics of unemployment insurance argue that it can be a disincentive to looking for work, and that extending benefits at a time the economy is showing signs of recovery could be counterproductive.

But this recession has been particularly pernicious to the job market, others say.

Some 5 million people, about one-third of those on the unemployment list, have been without a job for six months or more, a record since data started being recorded in 1948, according to the research and advocacy group National Employment Law Project.

"It smashes any other figure we have ever seen. It is an unthinkable number," said Andrew Stettner, NELP's deputy director. He said there are currently about six jobless people for every job opening, so it's unlikely people are purposefully living off unemployment insurance while waiting for something better to come along.

The current state unemployment check is about $300 a week, supplemented by $25 included in the stimulus act.

That doesn't go very far when a loaf of bread can cost $2.79 and a gallon of milk $2.72, Senate Finance Committee Chairman Max Baucus, D-Mont., said at a hearing last week on the unemployment insurance issue.

"We need to keep our unemployed neighbors from falling into poverty. We need to figure out how best to make our safety net work," Baucus said.

The jobless rate currently stands at 9.7 percent and is likely to hover above 10 percent for much of 2010. Gary Burtless, a senior fellow at the Brookings Institution, said at the Finance Committee hearing that, according to Labor Department figures, 51 percent of unemployment insurance claimants exhausted their regular benefits in July, the highest rate ever.

"It is likely the exhaustion rate will continue to increase in coming months" as the unemployment rate continues to rise, he said.

Stettner predicted that Congress will likely have to continue extending jobless benefits through 2011.

McDermott in July introduced a more ambitious bill that would have extended through 2010 the compensation programs included in the stimulus act. Those benefits are now scheduled to expire at the end of this year.

But with a price tag of up to $70 billion, that bill would have been far more difficult to pass. McDermott instead decided to offer the scaled-down 13-week extension to meet the urgent needs of those seeing their benefits disappear this year.

McDermott said his bill would not add to the deficit because it would extend for a year a federal unemployment tax of $14 per employee per year that employers have been paying for more than 30 years. It would also require better reporting on newly hired employees to reduce unemployment insurance overpayments.

Three-fourths of the 400,000 workers projected to exhaust their benefits this month live in high unemployment states that would qualify for the additional 13 weeks of benefits under his bill, McDermott said.

They include Alabama, Arizona, California, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, North Carolina, New York, Ohio, Oregon, Pennsylvania, Puerto Rico, South Carolina, Tennessee, Washington, Wisconsin and West Virginia.

Other states could qualify for more benefits if their unemployment rates are approaching the 8.5 percent threshold.

"The Informant" highlights some failures of unregulated markets

Unregulated markets frequently provide socially undesirable outcomes. A good example of this is highlighted in the 2009 movie The Informant, starring Matt Damon. This comedy is based on the real world price fixing conspiracy by corporate food giant Archer Daniels Midland (ADM). Damon plays an ADM executive who became an FBI informant and provided substantial evidence of illegal and unethical business behaviors.

The scandal was originally discussed on Ira Glass' This American Life program on National Public Radio (NPR) on September 15, 2000. The program was rebroadcast by NPR on September 18, 2009 to coincide with the release of the Matt Damon movie.

The episode description from the NPR website says:
168: The Fix Is In

Yes, airline prices are always the same no matter which airline you call; in Presidential elections you always feel like you're choosing between the lesser of two evils; and it doesn't really make your hair any cleaner if you do the final part of the instructions "shampoo, rinse, repeat." There are all sorts of situations in which we suspect the fix is in, but we almost never find out for certain. On today's show, for once, we find out. The whole program is devoted to one story, in which we go inside the back rooms of one multinational corporation and hear the intricate workings—recorded on tape—of how they put the fix in.

We hear from Kurt Eichenwald, whose book The Informant is about the price fixing conspiracy at the food company ADM, Archer Daniels Midland, and the executive who cooperated with the FBI in recording over 250 hours of secret video and audio tapes, probably the most remarkable videotapes ever made of an American company in the middle of a criminal act.

Prologue.
Host Ira Glass speaks with two people who believe they've uncovered behind-the-scenes conspiracies but can't be sure. Attorney Andy Hail has sued the two biggest supermarkets in Chicago (Dominick's and Jewel) because they charge a dollar more for milk than stores around the country, and because their prices seem to change simulateously, as if orchestrated. Cindi Canary from the Illinois Campaign for Political Reform tells the story of an Illinois law that seems to mostly benefit one man—the man who made sure it made it though the legislature. (8 minutes)

Act One.

We hear the first part of our story about Archer Daniels Midland and FBI informant Mark Whitacre. In this half, Whitacre inadvertantly ends up a cooperating witness—and turns himself into one of the best cooperating witnesses in the history of U.S. law enforcement, gathering evidence with an adeptness few have matched. (25 minutes)

Act Two.

Our story about ADM and Mark Whitacre continues. The FBI finds out that their star cooperating witness Mark Whitacre has been lying to them for three years about some rather serious matters. (22 minutes)

Song: "Lost in the Supermarket," The Clash

The NPR website has a links to download or listen to the program.

Sunday, September 20, 2009

Meltdown jolts consumers from financial fairyland

In the September 20, 2009 article "Meltdown jolts consumers from financial fairyland," Associated Press personal finance writer Dave Carpenter reports:
CHICAGO – The stock market bounced back, just as it has for nearly three decades. It just doesn't feel that way.

Last year's financial meltdown knocked the swagger out of Americans' views toward investing. The baby boomers who forged the Reagan bull market; survived the 1987 crash; bought Amazon.com at $2 a share and sold at $100; brushed off the collapse of the dot-com bubble and kept plowing money into their 401(k)s are reassessing what they once believed.

It's hard, after all, to keep the faith in buy-and-hold after the market crashed harder than at any time since the Great Depression. It's hard to trust your financial adviser after Bernard Madoff stole billions from his clients. Most of all, it's hard for a generation that equated personal finance with investing in stocks to accept that the rules have changed.

People are still investing. The Standard & Poor's 500 index is up 58 percent since hitting a 12-year low on March 9. 401(k) participation rates have held steady.

But financial planners around the country say there is a sense that people are returning to basic principles that were shunted aside: Maximize your savings; limit your use of credit cards; keep a substantial emergency fund; know how much risk you can tolerate; diversify your investments; don't try to short-cut your way to wealth.

"Before the market chaos, there was a very low savings rate, inappropriate use of credit cards, too much risk in investments, excessive spending on residences," says Tom Warschauer, a finance professor at San Diego State University. "Virtually every type of financial decision was being made in a kind of fairyland atmosphere, thinking 'This will lead me to be better off' when in fact that was never the case."

Warschauer, who also sees clients as a certified financial planner, predicts the new behavior could last for a decade. Others financial planners say people still believe in the market; they're just more realistic.

"People were in shock for a while. Now they're reassessing their situation and being very pragmatic, especially about their retirement," says Mark Jamison, a vice president at financial services firm Charles Schwab Corp. "They are learning that if you're willing to work a little more, spend a little less, take Social Security later, things can still work out all right."
___

The jolt to investors hurt so much because it hurt so many.

A generation ago, most people had no direct stake in the daily dealings on Wall Street. Fewer than 6 percent of households owned mutual funds in 1980. Four years later that number had more than doubled, thanks to the birth of the modern-day 401(k) and an economic boom that followed the severe recession of 1981-82. It nearly doubled again, to more than 24 percent, in 1988. By the turn of the century about half of all households owned them.

Wall Street can thank the baby boomers for that. They bought the idea that stocks would always go up — or if they fell, that they would rebound quickly. The Dow Jones industrial average fell 23 percent on Black Monday in October 1987 — its largest one-day percentage drop. But it took just 15 months to make that up. And a decade later the Dow had nearly quadrupled from there.

Boomers piled their money into the latest market fad — whether it was biotechnology stocks, the Internet or exchange-traded funds. They put the money for their children's college education in 529 plans and saved for retirement by investing in 401(k)s and IRAs.

Then came the crash. The Standard & Poor's 500 lost 55 percent of its value from October 2007 to last March. Even with the recent bounce back, it remains 32 percent below its peak.

And with three-plus months to go, it has been a lost decade. The S&P began 2000 at 1,469 and is now 27 percent lower at 1,068. This decade trails only the 1930s as the worst in the modern investing era, and not by that much. Losses this decade have averaged 3.2 percent annually, compared with 5.3 percent a year in the '30s.

The market turmoil has lengthened careers and delayed retirements.

David Sinclair, 62, of Rio Rancho, N.M., retired in 2007 from his job as budget officer for a federal agency. He was confident his savings of more than $500,000, bolstered by a government pension, would be enough to support him and wife, Debra. He had spent 20 years playing by the rules and carefully planning for retirement.

But then the value of his portfolio fell 33 percent, and he ended up back at work at his old desk.

"One of my goals when I retired was to do a lot of traveling," he says. "With the way things were going, it became pretty apparent that I'd be lucky to take a trip every three years."
___

It might seem we've been here before — in this decade.

The collapse of the dot-com bubble, the terror attacks on Sept. 11 and a recession sent the stock market reeling to three years of double-digit losses from 2000-02.

Then it was over. As in the past, the consumer helped the economy roar out of recession with a surge in spending. Stocks rebounded 26 percent in 2003 to start a five-year run that lasted through 2007.

Why can't it happen like that again?

Consider:

• The tech crash was different. The stability of the entire financial system was never in jeopardy, as it was with the collapse of Lehman Brothers, and the tech crash didn't affect all investors.

"It was sobering, but if you held (mostly) non-tech stocks you did well," says Austin Frye, a certified financial planner in Aventura, Fla. "The lesson from that was you need to spread your money around a little."

• The first baby boomers turn 65 in just two years. When that happens, the 78-million-strong group will begin the long process of removing its wealth from the market.

There is evidence that the nation's love affair with stocks is already ebbing. Just 45 percent of U.S. households owned stocks or mutual funds by 2008, down from 53 percent in 2001, according to the Investment Company Institute, a mutual fund industry trade group. That number is unlikely to increase as the biggest, richest and most invested generation starts to cash out.

• The consumer is tapped out. Even as their stock portfolios begin to recover, consumers are left with deflated home values and debts piled up during the boom years. If they spend less and save more for years, as many predict, corporate profits may be sluggish and stock gains muted.

• The U.S. economy will be wrestling for years with the effects of the Great Recession and the record amount of government debt it spawned. That could lead to higher taxes. At the same time, a share of global wealth is gradually shifting to markets in developing countries, especially China and India.

• For many, cash and bonds have become the new stocks, reflecting investors' desire for safety and security.

About two-thirds of the money flowing into the $11 trillion U.S. mutual fund industry in the second quarter went into bond funds and one-third went into stock funds, according to the research firm Strategic Insight. That's roughly the reverse of the pre-crash ratio.

Bonds have far outperformed stocks this decade. While the S&P has been taking a beating, a benchmark bond index has posted 6 percent annualized returns and an 83 percent cumulative return since the start of 2000, according to Morningstar, an investment research firm.

Typical of many financial advisers, Joy Slabaugh of EST Financial Group in Delmar, Del., says liquidity is a priority of her clients.

"People are leaving tons of their money in cash and not wanting to move it," she says. "They want it to be cash, they want it to be FDIC-insured, and that's that."

And it's not just the little guy who is cooling on stocks. Some financial professionals have questioned the buy-and-hold approach to stocks, along with the strategy of putting 60 percent of a portfolio in stocks and 40 percent in bonds.

Money manager Rob Arnott says the past year has challenged some basic premises behind what he calls the "cult of equities."

"There's nothing wrong with stocks if you buy them at sensible prices," says Arnott, chairman of Research Affiliates in Newport Beach, Calif. "There's something very wrong with buying stocks when they're terribly expensive, and assuming that time will heal all.

"The notion that stocks will always help us if we're patient — well, how patient do you have to be?"

Bill Moyers' JOURNAL - Sam Tanenhaus (The Death of Conservatism), Bill Fletcher & Michael Zweig

The transcript of the September 18, 2009 episode of Bill Moyers' Journal:

September 18, 2009

BILL MOYERS: Welcome to the JOURNAL. And to an exploration of what's happening with two powerful movements in American life: unions on the Left, and conservatives on the Right.

CROWD: You work for us! You work for us!

BILL MOYERS: Conservatives were out in force in Washington over the weekend. They had come to express their opposition to big government, to taxes and wasteful spending, and health care reform they fear would lead to a nightmare of bureaucracy. Max Blumenthal, author of REPUBLICAN GOMORRAH waded into their midst to sample opinions.

MAX BLUMENTHAL: So you're saying if the government eliminates Social Security and Medicare then you'll get out of the program?

WOMAN: No, I said if they get out of my life.

MAX BLUMENTHAL: Out of your Social Security and-

WOMAN: No, out of everything.

BILL MOYERS: But they had also come to deplore and denounce President Obama- in their minds a tyrant akin to Stalin, Mussolini, Hitler, and Saddam Hussein.

MAN: I'm afraid he's going to do what Hitler could never do and that's destroy the United States of America.

MAX BLUMENTHAL: And what's the Obama revolution, what's going to happen?

MAN: Similar to Germany, like what Hitler did. He took over the auto industry, did he not? He took over the banking, did he not? And Hitler had his own personal secret service police, Acorn is an extension of that.

BILL MOYERS: They had found a new hero in Joe Wilson, the South Carolina Republican whose shout heard 'round the world was now the rallying cry of the weekend.

CROWD: You lie! You lie!

BILL MOYERS: Glenn Beck, their favorite pundit, had promoted this march and was reveling in its success.

GLENN BECK: This is a collection of Americans who but want both parties to stop with the corruption, stop with the spending and start listening to the people. Fox's Griff Jenkins is there now in Washington D.C., hey Griff.

GRIFF JENKINS: Glenn its unbelievable, thousands and thousands of people, look at this crowd right there. Do you guys have something you want to say to Glenn Beck?

BILL MOYERS: Watching those protestors you would have to say there's a lot of fight left on the Right, and you wouldn't be wrong. This rising tide of populist resistance to Obama, the anger over the massive government bailout of Wall Street and big failed corporations, have raised Republican hopes for a comeback And it has Democrats scratching their head wondering how to respond.

So what do we make of this new book titled THE DEATH OF CONSERVATISM? Has the author Sam Tanenhaus spent his time and considerable talent on a premature obituary?

Sam Tanenhaus edits two of the most influential sections of the Sunday NEW YORK TIMES - the Book Review and the Week in Review. He's has had a long fascination with conservatives and conservative ideas. He wrote this acclaimed biography of Whittaker Chambers, the journalist who spied for the Russians before he became fiercely anti-communist and a hero to conservatives. Now Tanenhaus is working on a biography of the conservative icon William F. Buckley JR.

BILL MOYERS: Welcome to the JOURNAL, Sam Tanenhaus.

SAM TANENHAUS: Oh my pleasure to be here, Bill.

BILL MOYERS: So, if you're right about the decline and death of conservatism, who are all those people we see on television?

SAM TANENHAUS: I'm afraid they're radicals. Conservatism has been divided for a long time -- this is what my book describes narratively -- between two strains. What I call realism and revanchism. We're seeing the revanchist side.

BILL MOYERS: What do you mean revanchism?

SAM TANENHAUS: I mean a politics that's based on the idea that America has been taken away from its true owners, and they have to restore and reclaim it. They have to conquer the territory that's been taken from them. Revanchism really comes from the French word for 'revenge.' It's a politics of vengeance.

And this is a strong strain in modern conservatism. Like the 19th Century nationalists who wanted to recover parts of their country that foreign nations had invaded and occupied, these radical people on the right, and they include intellectuals and the kinds of personalities we're seeing on television and radio, and also to some extent people marching in the streets, think America has gotten away from them. Theirs is a politics of reclamation and restoration. Give it back to us. What we sometimes forget is that the last five presidential elections Democrats won pluralities in four of them. The only time the Republicans have won, in recent memory, was when George Bush was re-elected by the narrowest margin in modern history, for a sitting president. So, what this means is that, yes, conservatism, what I think of, as a radical form of conservatism, is highly organized. We're seeing it now-- they are ideologically in lockstep. They agree about almost everything, and they have an orthodoxy that governs their worldview and their view of politics. So, they are able to make incursions. And at times when liberals, Democrats, and moderate Republicans are uncertain where to go, yes, this group will be out in front, very organized, and dominate our conversation.

BILL MOYERS: What gives them their certainty? You know, your hero of the 18th Century, Burke, Edmund Burke, warned against extremism and dogmatic orthodoxy.

SAM TANENHAUS: Well, it's a very deep strain in our politics, Bill. Some of our great historians like Richard Hofstadter and Garry Wills have written about this. If you go back to the foundations of our Republic, first of all, we have two documents, "creedal documents" they're sometimes called, more or less at war with one another. The Declaration of Independence says one thing and the Constitution says another.

BILL MOYERS: The Declaration says--

SAM TANENHAUS: …says that we will be an egalitarian society in which all rights will be available to one and all, and the Constitution creates a complex political system that stops that change from happening. So, there's a clash right at the beginning. Now, what we've seen is that certain groups among us-- and sometimes it's been the left-- have been able to dominate the conversation and transform politics into a kind of theater. And that's what we're seeing now.

BILL MOYERS: When you see these people in the theater of television, you call them the insurrectionists, in your book, what do you think motivates them?

SAM TANENHAUS: One of the interesting developments in our politics, in just the past few months, although you could see signs of it earlier, is the emergence of the demographic we always overlook in our youth obsessed culture: the elderly. That was the group that did not support Barack Obama. They voted for John McCain. It was also the group that rose up and defied George W. Bush, when he wanted to add private Social Scurity accounts. It was a similar kind of protest.

BILL MOYERS: There's a paradox there, right? I mean, they say they're against government and yet the majority of Americans, according to all the polls, don't want their government touched. You know, there were people at these town hall meetings this summer, saying "Don't touch my Medicare." You know, keep the government out of my Social Security.

SAM TANENHAUS: Yes. This is an interesting argument. Because it's very easy to mock, and we see this a lot. "Oh, these fools. These old codgers say the government won't take my Medicare away. Don't know Medicare is a government program?" That's not really what's going on, I think. I think there's something different. A sense about how both the left and the right grew skeptical of Great Society programs under Lyndon Johnson, and the argument was everyone was becoming a kind of client or ward of the state. That we've become a nation of patron/client relationships. And a colleague of yours, Richard Goodwin, very brilliant political thinker, in 1967 warned, "We all expect too much from government." We expect it to create all the jobs. We expect it to rescue the economy. To fight the wars. To give us a good life". So, when people say, "Don't take my Medicare away," what they really mean is, "We're entirely dependent on this government and we're afraid they'll take one thing away that we've gotten used to and replace it with something that won't be so good. And there's nothing we can do about it. We're powerless before the very guardian that protects us."

BILL MOYERS: So, how do you see this contradiction playing out in the health care debate? Where what's the dominant force that's going to prevail here at the end? Is it going to be, "We want reform and we want the government involved?" Or are we going to privatize it the way people on the conservative side want to do? The insurance companies, the drug companies, all of that?

SAM TANENHAUS: I think what we'll see is a kind of incremental reform. Look, we know that health care has become the third rail of American politics, going back to Theodore Roosevelt. The greatest retail politician in modern history, Bill Clinton, could not sell it. But here's another thing to think about. In the book I discuss one of the most interesting political theories of the modern era, Samuel Lubell's theory of the solar system of politics. And what he says is what we think of as an equally balanced, two-party system, is really a rotating one-party system. Either the Republicans or Democrats have ruled since the Civil War for periods of some 30-36 years. And in those periods, all the great debates have occurred within a single party. So, if you go back to the 1980s, which some would say was the peak of the modern conservative period, the fight's about how to end the Cold War, how to unleash market forces-- were really Republican issues.

Today, when we look at the great questions -- how to stimulate the economy, how to provide and expand and improve a sustainable health care system, the fight is taking place among Democrats. So, in a sense what Republicans have done is to put themselves on the sidelines. They've vacated the field and left it to the other party, the Democratic Party, to resolve these issues among themselves. That's one reason I think conservatism is in trouble.

BILL MOYERS: You write in here that they're not simply in retreat, they're outmoded. They don't act like it, you know?

SAM TANENHAUS: They do and they don't. What I also say in the book is that the voices are louder than ever. And I wrote that back in March. Already we were hearing the furies on the right. Remember, there was a movement within the Republican Party, finally scotched, to actually rename the Democrats, "The Democrat Socialist Party." This started from the beginning. So, the noise is there. William Buckley has a wonderful expression. He says, "The pyrotechnicians and noise-makers have always been there on the right." I think we're hearing more of that than we are serious ideological, philosophical discussion about conservatism.

BILL MOYERS: How do you explain the fact that the news agenda today is driven by Fox News, talk radio, and the blogosphere. Why are those organs of information and/or propaganda so powerful?

SAM TANENHAUS: Well, there's been a transformation of the conservative establishment. And this has been going on for some time. The foundations of modern conservatism, the great thinkers, were actually ex-communists, many of them. Whittaker Chambers, the subject of my biography. The great, brilliant thinker, James Burnham. A less known but equally brilliant figure, Willmoore Kendall, who was a mentor, oddly enough, to both William Buckley and Garry Wills. These were the original thinkers. And they were essentially philosophical in their outlook. Now, there are conservative intellectuals, but we don't think of them as conservative anymore-- Fareed Zakaria, Francis Fukayama, Andrew Sullivan, Michael Lind, the great Columbia professor, Mark Lilla-- they've all left the movement. And so, it's become dominated instead by very monotonic, theatrically impressive voices and faces.

BILL MOYERS: Well, what does it say that a tradition that begins with Edmund Burke, the great political thinker of his time, moves on over the years, the decades, to William Buckley, and now the icon is Rush Limbaugh?

SAM TANENHAUS: Well, in my interpretation it means that it's ideologically depleted. That what we're seeing now and hearing are the noise-makers in Buckley's phrase. There's a very important incident described in this book that occurred in 1965, when the John Birch Society, an organization these new Americanist groups resemble -- the ones who are marching in Washington and holding tea parties. Essentially, very extremist revanchist groups that view politics in a conspiratorial way.

And the John Birch Society during the peak of the Cold War struggle was convinced, and you're well aware of this, that Dwight Eisenhower was a communist agent, who reported to his brother Milton, and 80 percent of the government was dominated by Communists. Communists were in charge of American education, American health care. They were fluoridating the water to weaken our brains. All of this happened. And at first, Buckley and his fellow intellectuals at NATIONAL REVIEW indulged this. They said, "You know what? Their arguments are absurd, but they believe in the right things. They're anti-communists. And they're helping our movement."

Cause many of them helped Barry Goldwater get nominated in 1964. And then in 1965, Buckley said, "Enough." Buckley himself had matured politically. He'd run for Mayor of New York. He'd seen how politics really worked. And he said, "We can't allow ourselves to be discredited by our own fringe." So, he turned over his own magazine to a denunciation of the John Birch Society. More important, the columns he wrote denouncing what he called its "drivel" were circulated in advance to three of the great conservative Republicans of the day, Ronald Reagan, Barry Goldwater, Senator John Tower, from your home state of Texas, and Tower read them on the floor of Congress into the Congressional record. In other words, the intellectual and political leaders of the right drew a line. And that's what we may not see if we don't have that kind of leadership on the right now.

BILL MOYERS: To what extent is race an irritant here? Because, you know, I was in that era of the '60s, I was deeply troubled as we moved on to try to pass the Civil Rights Act and the Voting Rights Act of 1965 by William Buckley's seeming embrace of white supremacy. It seemed to me to taint-- to leave something in the DNA of the modern conservative movement that is still there.

SAM TANENHAUS: It is. And one of the few regrets Bill Buckley ever expressed was that his magazine had not supported the Civil Rights Act--

BILL MOYERS: Really?

SAM TANENHAUS: …but you may remember that in the late '70s, he supported a national holiday for Martin Luther King--

BILL MOYERS: Yeah, I remember that.

SAM TANENHAUS: …where someone like John McCain did not. I once heard Buckley give a lecture -- brilliant lecture in New York City -- about the late '90s in which he talked about the importance of religion in American civil life. And it was Martin Luther King who was the object.

BILL MOYERS: What changed him? I mean, because he was writing in the National Review about, endorsing the White Supremacy scheme of the country at that time.

SAM TANENHAUS: Well, he actually did that, Bill, a little bit earlier.

BILL MOYERS: '50s?

SAM TANENHAUS: '50s. He did more of it. In the early '60s, even a great thinker and writer like Garry Wills, who was still a part of the "National Review," though he supported the civil rights movement, thought it might weaken the institutional structures of society, if it became too fervent a protest. Now, what the Republican Party did was to make a very shrewd political calculation. A kind of Faustian bargain with the South. That the southern whites who resisted civil rights legislation-- Aand as you know, Lyndon Johnson knew, when he signed those bills into law, he might lose the solid south as it had been called, the Democrats might lose them for a generation or more. And yes, the Republicans moved right in, and they did it on the basis of a state's rights argument. Now, however convincing or unconvincing that was, it's important to acknowledge that Republicans never-- conservatives, I should say, northern Republicans are different-- but conservatives within the Republican Party, because the two were once not, you know, identical-- thought that a hierarchical society and a kind of racial difference-- a sense of racial difference, established institutionally, was not so bad a thing. They were wrong. They were dead wrong. But that sense of animus is absolutely strong today. Look who some of the great protestors are against Barack Obama. Three of them come from South Carolina, the state that led the secession. Joe Wilson and Senator DeMint, Mark Sanford who got in trouble. These are South Carolinians. And there's no question that that side of the insurrectionist South remains in our politics.

BILL MOYERS: When you heard Joe Wilson shout out, "You lie," and you saw who it was, did you think "the voice of conservatism today"?

SAM TANENHAUS: No. I thought "This man needs to read his Edmund Burke." Edmund Burke gave us the phrase "civil society." Now, people can be confused about that. It doesn't mean we have to be nice to each other all the time. Bill Buckley was not nice to his political opponents. What it means is one has to recognize that we're all part of what should be our harmonious culture, and that we respect the political institutions that bind it together. Edmund Burke, a very interesting passage in his great book, the "Reflections on the Revolution in France," uses the words "government" and "society" almost interchangeably. He sees each reinforcing the other. It is our institutional patrimony. When someone in the floor of Congress dishonors, disrespects, the office of the President, he's actually striking-- however briefly, however slightingly-- a blow against the institutions that our society is founded on. And I think Edmund Burke might have some trouble with that.

BILL MOYERS: There's long been a fundamental contradiction at the heart of this coalition that we call "conservative." I mean, you had the Edmund Burke kind of conservatism that yearns for a sacred, ordered society, bound by tradition, that protects both rich and poor, against what one of my friends calls the "Libertarian, robber baron, capitalist, cowboy America." I mean, that marriage was doomed to fail, right?

SAM TANENHAUS: It was. First of all, this is absolutely right, in the terms of a classical conservatism. And here is the figure I emphasize in my book is Benjamin Disraeli. What he feared-- the revolution of his time, this is the French Revolution that concerned Edmund Burke-- half a century later what concerned Disraeli and other conservatives was the Industrial Revolution. That Dickens wrote his novels about-- that children, the very poor becoming virtual slaves in work houses, that the search for money, for capital, for capital accumulation, seemed to drown out all other values. That's what modern conservatism is partly anchored in. So, how do we get this contradiction?

BILL MOYERS: Why isn't it standing up against turbo-capitalism?

SAM TANENHAUS: Well, one reason is that America very early on in its history reached a kind of pact, in the Jacksonian era, between the government on the one hand and private capital on the other. That the government would actually subsidize capitalism in America. That's what the Right doesn't often acknowledge. A lot of what we think of as the unleashed, unfettered market is, in fact, a government supported market. Some will remember the famous debate between Dick Cheney and Joe Lieberman, and Dick Cheney said that his company, Halliburton, had made millions of dollars without any help from the government. It all came from the government! They were defense contracts! So, what's happened is the American ethos, which is a different thing from our political order-- that's the rugged individualism, the cowboy, the frontiersman, the robber baron, the great explorer, the conqueror of the continent. For that aspect of our myth, the market has been the engine of it. So, what brought them together, is what we've seen in the right is what I call a politics of organized cultural enmity. Everybody--

BILL MOYERS: Accusatory protest, you call it.

SAM TANENHAUS: Accusatory protest. With liberals as the enemy. So, if you are a free-marketeer, or you're an evangelical, or a social conservative, or even an authoritarian conservative, you can all agree about one thing: you hate the liberals that are out to destroy us. And that's a very useful form of political organization. I'm not sure it contributes much to our government and society, but it's politically useful, and we're seeing it again today.

BILL MOYERS: It wasn't long ago that Karl Rove was saying this coalition was going to deliver a new Republican majority. What happened? It finally came apart. Why?

SAM TANENHAUS: Well, I believe it had come apart earlier than that. I really think Bill Clinton's victory in 1992 sealed the end of serious conservative counterrevolution. We forget that election. It seems like an anomaly, but consider, Bill Clinton won more electoral votes than Barack Obama, despite the presence of one of the most successful third party candidates, H. Ross Perot, another Texan, in American history. But that's not the most important fact. The most important fact is that George H. W. Bush got less of the popular vote in 1992 than Herbert Hoover got in 1932. That was really the end. But what happened was the right was so institutionally successful that it controlled many of the levers, as you say. So, what happened in the year 2000? Well, the conservatives on the Supreme Court stopped the democratic process, put their guy into office. Then September 11th came. And the right got its full first blank slate. They could do really whatever they wanted. And what we saw were those eight years. And that is the end of ideological conservatism as a vital formative and contributive aspect of our politics.

BILL MOYERS: Why?

SAM TANENHAUS: Because it failed so badly. It wasn't conservative. It was radical. It's interesting. Many on the right say, "George Bush betrayed us." They weren't saying that in 2002 and 2003. He was seen as someone who would complete the Reagan revolution. I think a lot of it was Iraq. Now, I quote in the book a remarkably prescient thing. The very young, almost painfully, 31-year-old, Benjamin Disraeli wrote in 1835, he said you cannot export democracy, even then, to lands ruled by despotic priests. And he happened to mean Catholic, not Islamic priests. But he said you actually have to have a civil society established in advance. He said that's why the United States had become a great republic so shortly after the Revolution. We had the law of English custom here. You see? So, we were prepared to become a democracy. There were conservatives who tried to make that argument before the war in Iraq. Francis Fukayama was one, Fareed Zakaria was another-- they're both well outside that movement. There were people in the Bush Administration who tried to argue this -- they were marginalized or stripped of power. What America saw was an ideological revanchism with all the knobs turned to the highest volume. The imperial presidency of a Dick Cheney and all the rest. And we saw where we got.

BILL MOYERS: Here's another puzzle. Back to what we were talking about earlier. You say in "The Death of Conservatism" that, "Even as the financial collapse drove us to the brink, conservatives remained strangely apart, trapped in the irrelevant causes of another day, deaf to the actual conversation unfolding across the land." And the paradox is, it seems to me, they are driving the conversation that you say they don't hear.

SAM TANENHAUS: Well, you know, they have many mouths, Bill, but they don't have many ears. The great political philosopher, Hannah Arendt once said, in one of her great essays on Socrates, whom she wrote about a lot -- that the sign of a true statesmen, maybe particularly in a democracy, is the capacity to listen. And that doesn't simply mean to politely grow mute while your adversary talks. It means, in fact, to try to inhabit the thoughts and ideas of the other side. Barack Obama is perhaps a genius at this. For anyone who has not heard the audio version of "Dreams from My Father," it's a revelation. He does all the voices. He does the white Kansas voices, he does the Kenyan voices. He has an extraordinary ear. There's an auditory side to politics. And that capacity to listen is what enables you to absorb the arguments made by the other side and to have a kind of debate with yourself. That's the way our deliberative process is supposed to work. Right now, at a time of confusion and uncertainty, the ideological right is very good at shouting at us, and rallying the troops. But, you know, one of the real contributions conservatism made in its peak years, the 1950s and '60s, I think as an intellectual movement, is that it repudiated the politics of public demonstration. It was the left that was marching in the streets, and carrying guns, and threatening to take the society down, or calling President Johnson a murderer. Remember it was William Buckley, who said, "We're calling this man a murderer in the name of humanity?" It was the conservatives who used political institutions, political campaigns, who rallied behind traditional candidates produced by the party apparatus. They revitalized the traditions and the instruments and vehicles of our democracy.

But now we've reached a point, quite like one Richard Hofstadter described some 40 years ago, where ideologues don't trust politicians anymore. Remember during the big march in Washington, many of the protestors or demonstrators insisted they were not demonstrating just against Barack Obama, but against all the politicians-- that's why some Republicans wouldn't support it. They don't believe in politics as the medium whereby our society negotiates its issues.

BILL MOYERS: What do they believe in?

SAM TANENHAUS: They believe in a kind of revolution, a cultural revolution. They think the system can be-- what some would say hijacked. They would say maneuvered, controlled, that they can get their hands back on the levers. An important thing about the right in America is it always considers itself a minority position and an embattled position. No matter how many of the branches of government they dominate. So, what they believe in is, as Willmoore Kendall, this early philosopher said, is a politics of battle lines, of war.

BILL MOYERS: So, here, at this very critical moment, when so much is hanging in the balance, what is the paradox of conservatism as you see it?

SAM TANENHAUS: The paradox of conservatism is that it gives the signs, the overt signs of energy and vitality, but the rigor mortis I described is still there. As a philosophy, as a system of government, as a way all of us can learn from, as a means of evaluating ourselves, our social responsibilities, our personal obligations and responsibilities. It has, right now, nothing to offer.

BILL MOYERS: Now, they disagree with you. They think you have issued a call for unilateral disarmament on their part-- that brass knuckles and sharp elbows are part of fighting for what you believe in, and therefore, you're calling for a unilateral disarmament.

SAM TANENHAUS: Well, you know, that's what Richard Hofstadter called the paranoid style, is when it's always living on the verge of apocalypse. That defeat is staring you in the face, and the only victories are total victories. Because even the slightest victory, if it's not complete, means the other side may come back and get you again. This is not serious responsible argument. Much of my book is actually about the failures of liberalism in that noontime period of the 1960s. And many of the conservatives simply ignore that part of the argument.

BILL MOYERS: How to explain this long fascination you've had with conservative ideas, and the conservative movement. Why this fascination?

BILL MOYERS: Well, I think it has been the dominant philosophy, political philosophy in our culture, in America, for some half-century. What particularly drew me first to Chambers and then Buckley is the idea that these were serious intellectuals, who were also men of action. Conservatives have kind of supplied us in their best periods-- the days when NATIONAL REVIEW and COMMENTARY and THE PUBLIC INTEREST were tremendously vital publications, self-examining, developing new vocabularies and idioms, teaching us all how to think about politics and culture in a different way, with a different set of tools. They were contributing so enormously to who we were as Americans. And yet, many liberals were not paying attention. Many liberals today don't know that a great thinker like Garry Wills was a product of the conservative movement. It's astonishing to them to learn it. They just assume, because they agree with him now, he was always a liberal. In fact, he remains a kind of conservative. This is the richness in the philosophy that attracted me, and that I wanted to learn more about, to educate myself.

BILL MOYERS: The book is THE DEATH OF CONSERVATISM. Sam Tanenhaus, I thoroughly enjoyed this conversation. Thank you for joining me.

SAM TANENHAUS: Oh, it's my great pleasure to be here.

MAN: And yet we are being told that a government bureaucrat is going to tell us whether we need to get the blue pill or the red pill.

WOMAN #1: You guys are absolutely incredible, do you think congress can hear us?

WOMAN #2: We need to stand up as a nation and uphold the principles of freedom, liberty and justice for all our people.

BILL MOYERS: As those conservative protesters were leaving Washington, members of the country's largest body of unions, the AFL-CIO were arriving in Pittsburg for their annual convention. They elected the former coal miner Richard Trumka to be their new President and heard from the man they had worked hard last year to send to the White House.

BARACK OBAMA: Thank you AFL-CIO!

BILL MOYERS: But all is not well with organized labor. Midway through the last century unions represented more than a quarter of America's workforce. That's fallen to about 12 percent today, when earning a living wage couldn't be harder. Just last week the Census Bureau reported that Americans are getting poorer, their median household income suffering the biggest decline since 1991. About 40 million people now live below the poverty line, with the poverty rate at an eleven-year high.

Where is organized labor? Why are unions so impotent when workers are so exploited? That's what I want to know from my next two guests. Bill Fletcher is a long-time labor and community organizer who was once an official of the AFL-CIO He now works for the American Federation of Government Employees, although he is here speaking for himself and not his organization. He is also the co-author of this new book SOLIDARITY DIVIDED: THE CRISIS IN ORGANIZED LABOR AND A NEW PATH TOWARD SOCIAL JUSTICE.

Michael Zweig has been at this table before. He is active in his own union, the United University Professions. He teaches at the state University of New York at Stony Brook, where he also runs the center for study of working class life. His most recent book is this one, WHAT'S CLASS GOT TO DO WITH IT: AMERICAN SOCIETY IN THE 21ST CENTURY. Welcome to both of you.

Bill Fletcher, we just heard in the earlier part of this broadcast, Sam Tanenhaus talk about the death of conservatism. Is it time to write the obituary of organized labor?

BILL FLETCHER: No. Not by no stretch. But organized labor remains in a crisis. And a low point very much of a low point right now. And the question for organized labor is whether or not it actually can become a class movement. A movement of workers. And not simply unions representing people in different workplaces.

Because I think that that speaks to some of the anger that's out there among workers who feel that they're unrepresented. That the society's crushing them. And they're looking for a vehicle. They're looking for someone to be their champion. Someone to channel their anger and if it's not unions, my fear is that these right wing populists are going to just grab onto this.

BILL MOYERS: Well, much of the anger we saw last week in that march on Washington were was came from ordinary people who are upset with what's happening in their own lives. But they're going toward the conservative movement and the Republican Party, not toward the unions.

MICHAEL ZWEIG: Well, who's leading them to the unions? Who's calling them to the labor movement? The problem is that I don't think that the labor movement can successfully organize in particular places without a context of a broad social movement that addresses the power of capital. Not just in the particular workplace, but in the society as a whole. And if there isn't that context of a social workers movement I don't think it's possible to go shop by shop and recover the strength of the labor movement.

BILL MOYERS: So, what's a union for if it can't improve the living standards of ordinary people?

MICHAEL ZWEIG: Well, it's for improving the living standards of ordinary people. It's certainly for that. But in order to do that, it has to have a broader agenda.

BILL FLETCHER: One of the things that struck me when I interviewed people that were active in the 1930's and '40s is that even if you if you were progressive, even if you weren't in the unions, you had a sense that the union movement or at least a good section of it was supporting progressive causes. That it was there. It was not just about organizing workers at a particular workplace. But that the unions were part of this broad effort of progress.

And the problem that's happened, and it's reflected in the these interesting polls. Where workers will say nonunion workers will say on occasion that the unions are good for their members, but they're not necessarily good for other people. And I feel like when I hear when I hear that, it's an incredible indictment on the kind of unionism that we have.

We have leaders now that are paying more attention to getting access to political leaders or holding hands with the head of Walmart. Rather than actually getting and inspiring workers, irrespective of whether they're our members right now. To engage in a struggle for justice.

BILL MOYERS: Those conservative protestors we saw are not afraid of confrontation. They're willing to use sharp elbows and brass knuckles in fighting for what they believe in. Why isn't labor more confrontational in behalf of those very people, the working people of this country?

BILL FLETCHER: Well, part of it is that there's I know people won't appreciate my saying this. But among many of the leaders, there's really a fear of losing respectability. I mean, you have leaders that have now gained these positions and they're really afraid that if they shake the table too much, that they will be excluded.

MICHAEL ZWEIG: What has happened is that the corporations and the corporate elite have structured what this country is, what's valuable, what's important, how we organize our lives. And labor has not come forth with an alternative set of values.

BILL MOYERS: But why haven't they? Now, that's

MICHAEL ZWEIG: Well, there I think because we used to have that. And all the labor movement did have that.

BILL MOYERS: Solidarity forever, right?

MICHAEL ZWEIG: Well, and the labor movement had a very militant, very aggressive stance in the '30s, '40s, '50s that challenged capital. That got tremendous benefits. You know, the labor movement is the people who gave us the weekend. Let's not forget. The labor movement is what…

BILL MOYERS: The eight hour day.

MICHAEL ZWEIG: Got us the eight hour day, and the social security, and all the other things that we think are so very important, but are just natural. That came out of a labor movement, but a labor movement that was led by people and was fueled by people who understood that there was antagonism. That there was a battle that they were involved in. This was not just, 'Let's sit down and have lunch and figure out what's the best thing to do for America.' This was, 'Here's a group of people who run the country and run businesses. And they have a certain set of interests. And they do not have our interests at mind at heart. They are not for us.'

BILL MOYERS: For the working people.

MICHAEL ZWEIG: For the working people. We have to be organized and be a contrary force, a counterforce that's a real force. That isn't just a debating society. That doesn't just have resolutions that it passes.

BILL MOYERS: A real force to take on capital

MICHAEL ZWEIG: To take on capital.

BILL MOYERS: And power.

MICHAEL ZWEIG: And power.

BILL MOYERS: And why have they lost that?

MICHAEL ZWEIG: Well, because they got crushed.

BILL MOYERS: No one.

MICHAEL ZWEIG: Because the people who tried to do that. And the people who did do that were leftist. They were people who had a class analysis of society. Many of them were socialists and some of them were communists, but not all. But that sentiment, that understanding of the basic structure of society as divided by class interest. That there's a working class that's a majority of the population in this country. And they have interests. And they have a set of values that that convey those interests. That are very different from the corporations. They're very different from capital.

And if the people who held those views and mobilized the labor movement at an earlier point in our history. Those people were pushed out. And they were pushed out by the labor movement, internally, because there was great division and splits. And so then the labor movement got drawn into an era of cooperation. An era of, "Well, let's all sit down. And we'll all be reasonable. We'll all figure out what to do that's best for America." And it turns out America is not one thing. America is divided by these deep class antagonisms that we are now living with.

BILL MOYERS: And yet, working class has disappeared from the language. I mean, there..

BILL FLETCHER: We're all working.

BILL MOYERS: Yeah?

BILL FLETCHER: See, that's the thing. Palin used working class.

BILL MOYERS: Sarah Palin.

BILL FLETCHER: Sarah Palin used the term working class more than Obama did in the 2008 election. But her notion and those the notion of many other conservatives, when they use the term working class. They're not really talking about the same working class that we're talking about. They're not really talking about Latinos, African Americans, Whites, Asians. They have a certain sort of stereotypical idea of the White worker. But so, they will use that term. And that's the irony of our times. But I want to go back to one thing.

BILL MOYERS: Yeah.

BILL FLETCHER: I realized this waking up this morning. This is the 60th anniversary of when the Congress of Industrial Organization began a process of purging, wholesale, unions that were led by people on the left. And it is exactly what Mike was talking about. That these purges are came they followed the passage of the Taft-Hartley Act. Led to this incredible Cold War witch hunt against anyone to the left of the Attila the Hun.

So that the people that were the most militant, that had the most advanced views on organizing. Who were anti-racist, ended up being pushed out of organ the official organized labor. And were put pushed to the margins in many cases. And in some cases the unions were actually destroyed. The unions that remained in the CIO and then merged with AFL. adopted the view that Michael was describing. They adopted the sense that we had somehow come to peace in our time with capital. That we did have a place at the table. And that if we rocked the boat, outside of an occasional strike, that we will be excluded. We will be no longer relevant. And this purge, we are living with the legacy of that purge of the left.

MICHAEL ZWEIG: But see, this is a process that takes a long time to do. When this began in the 1940s and 1950s with this anti-communist witch hunt. And with this redirection of what labor should be about. There was the nice cop and the nasty cop in that. The nasty cop was the McCarthyite investigations. And the purging of the Left. But the nice cop was the invitation to come in and sit at the table and be reasonable.

BILL MOYERS: Lyndon Johnson. Come now, let us feast together.

BILL MOYERS: He'd say to the President of the National Association of Manufacturing. He would say that to the head of the AFL-CIO

MICHAEL ZWEIG: Over

BILL MOYERS: Under George Meany

MICHAEL ZWEIG: Over when George Meany was proud that he never walked a picket line. And he said so. And then when Lane Kirkland died, who was the President of the AFL-CIO. then you the Wall Street Journal had an obit for him. And under his little picture it said, "Lane Kirkland, anti-communist." That's what the labor movement was known for. It because they were able to push out a certain segment. But then to come in with another kind of leadership. An affirmative statement that "We are going to be cooperating now with the corporations and with the corporate elite. We are going to be like a junior partner at the table."

BILL MOYERS: But do you see any green spouts of confrontation, militancy, defiance growing on the Left, among unions, that we see on the Right?

BILL FLETCHER: Yes.

BILL MOYERS: Where?

BILL FLETCHER: Well, first of all, I think that the election of Richard Trumka has a great deal of potential. Because

BILL MOYERS: The new president of the AFL-CIO.

BILL FLETCHER: The new president of the

BILL MOYERS: Why?

BILL FLETCHER: Because Trumka comes out of a history of militancy. He you know, in terms of his vision of the United Mine Workers that he led. His emphasis on organizing. His clarity on the nature of the economic crisis that we've been facing. And what he has articulated so far. And all I can say, this is a hope, is the notion that we have to engage in that confrontation that you're describing.

We have to do much more massive organizing. Particularly of the poor, the increasingly poor sections of the working class. So, I think that there's a vision here. And I can't overstate this issue of vision. Because it's not simply the technique of unions putting resources into organizing. People have to feel compelled that there's a vision of success, but a vision of a different kind of country. And indeed, a different kind of world.

MICHAEL ZWEIG: It's also a different understanding of how you do politics and how you exert power. It's one thing to say, "I'm the leader of an organization of eight and a half million workers. I'm the head of the AFL-CIO. We have eight and a half million members in our affiliates." And I'm going to sit down at a table. And I'm going to say, "I have eight and a half million members out there." It's another thing to have eight and a half million members out there, who are in the streets, who are not just sending in letters and not just signing petitions. But who are actively engaged in exercising power, in building power in the streets, in the communities, in the schools.

BILL MOYERS: And we don't see that happening. Why? Why isn't that happening?

MICHAEL ZWEIG: But see, I think that Rich Trumka understands something about the need to do this. And we'll see where this goes now. But, you know, it's hard to change culture.

BILL FLETCHER: Right.

MICHAEL ZWEIG: It's hard to change the way we understand how things should happen.

BILL MOYERS: You began by talking about class. The fact of the matter is there has been a class war for the last 30 years in this country.

MICHAEL ZWEIG: That's right.

BILL MOYERS: And the working class lost.

MICHAEL ZWEIG: That's right.

BILL MOYERS: So, if you've been defeated, where do you how do you come back?

BILL FLETCHER: Well, let me give two answers to that. One is that that in large part because of the Cold War witch hunts, actually even using the term class within organized labor.

BILL MOYERS: That's right.

BILL FLETCHER: For up until the mid-1990s led to people being condemned of being communist. I mean, it was absolutely absurd. So, it's the culture and the psyche that Mike is talking about, still infects many of the leaders, unfortunately. But I want to say that people are struggling. But you have the great--

BILL MOYERS: You mean that-- I know people are struggling just to make meet their daily needs. You mean--

BILL FLETCHER: Struggling and succeeding. Workers are fighting back.

BILL MOYERS: Where?

BILL FLETCHER: For example in the Smithfield Plant in…

MICHAEL ZWEIG: In North Carolina.

BILL FLETCHER: In North Carolina.

MICHAEL ZWEIG: Tar Heel, North Carolina.

BILL FLETCHER: Right.

MICHAEL ZWEIG: Was the biggest pork processing plant in the country.

BILL MOYERS: Mostly Hispanics. They were--

BILL FLETCHER: Black and Latino. And the United Food and Commercial Workers put resources. They had a brilliant strategist who was directing it. And they succeeded. It doesn't get a great deal of attention. The Communication Workers of America--

MICHAEL ZWEIG: It succeeded after 14 years.

BILL FLETCHER: Right.

MICHAEL ZWEIG: But the workers that were fighting for 14 years at Smithfield. Or the Communication Workers of America members in Texas or Mississippi that have been fighting for-- in the public sector for years. These fights are going on. What's missing though is this sense of coherence. That this is not simply a victory at Smithfield. Or a fight that's going on in Knoxville. But that this is a fight for social justice. And that is what--

BILL MOYERS: Meaning a fight for…

BILL FLETCHER: A fight for health care reform. A fight against a racial differentials and health care and education. A fight for housing. The policy towards the cities!

MICHAEL ZWEIG: But see, I think it's more than just a policy list. It's a fight for a different way of being a country. A fight to care for one another.

BILL MOYERS: Well, it used to be a fight--

MICHAEL ZWEIG: A fight to take care of one another.

BILL MOYERS: It used to be a fight to take on capital, right? Labor was a real force in trying to bring to tame the wildness of capital.

MICHAEL ZWEIG: Of capital. That's right.

BILL MOYERS: And we've seen what happened over the last few years when capital went wild.

MICHAEL ZWEIG: That's right.

BILL MOYERS: Without any kind of--

MICHAEL ZWEIG: That's right.

BILL MOYERS: Without labor, can the battle for social justice be fought and won in this country?

MICHAEL ZWEIG: I don't think so. You know, there's this story about the cat that goes and eats the mice at night. You know? And the mice get together and say, "What are we going to do? We have to save ourselves from this evil cat that's eating us up. And one night one mouse says, "I know what we're going to do. We're going to put a bell around the neck of that cat. Right. And when the cat comes, we'll hear the bell, and then we'll all run away and be safe." Great idea. Who will bell the cat? Right? Who's going to put that bell on that cat? Who's going to put the bell on capital in the United States? There's only one force. There's only one set of people who can do that. That's working people. That's the majority of the people in this country.

BILL FLETCHER: And unfortunately, many workers really do believe that they're in this fight alone. That they're being crushed not because of some the larger dynamic of capitalism. They're being crushed because they're not working hard enough. That they have overspent. That they are in too much debt. They're not understanding that the problem is not them. Even if they have problems. The problem is systemic. And this vision needs to be articulated. And it needs to come out of organized labor. To remind people the problem is not them.

We are in a system that is walking over working people. Hundreds of thousands if not millions of working people. And the working people need a voice. And they need a mechanism, as Mike is saying in order to say, "Yes, I'm part of this fight. And I'm prepared to fight for social justice."

BILL MOYERS: So, where are we? Martin Luther King talked about the arc of history bending toward justice. Is the arc of this present moment, bending toward justice?

MICHAEL ZWEIG: Well, you know President Obama in his campaign talked about the arc of history is long, but it bends towards justice. And it's long. It takes a long time. The emphasis there, you know, is seven-- what is it? From Seneca Falls in 1848 to the 19th Amendment in 1920 to get women the right to vote. The women's movement was 72 years. So, it takes a long time to get the eight hour day from 1886 in Hay Market to 1938. It's a long time.

So, is it bending towards justice? That's up to us to do. We have to go out there and bend that arc. It doesn't just happen. And the way to bend it is now to understand the importance of class. We have an African American president. That's a great advance for this country. We have an African American on the United States Supreme Court, Clarence Thomas. That's also a great advance for this country. Now the question is: which African American? And that question is a question of class.

Are they going to be an African American that's there to advance the interests of working people? Or are they going to be there to advance the interests of corporations? Which woman is going to be in the White House? Is it going to be Hillary Clinton? Or is it going to be Sarah Palin? Two women, just because they're a woman, that's great that they're there. And a representative of the success of the feminist and the women's movement to get to a position where a country can have that.

But that's not the-now, that's not the full question. Now we have a new question. What woman is going to represent what interest? Is it going to be the interests of working people or the interests of the corporations? And that test is a test of cap-of class?

BILL MOYERS: Do we know where Obama comes down on this?

MICHAEL ZWEIG: It depends where the working class is--

BILL FLETCHER: That's right.

MICHAEL ZWEIG: As an organized force. And Obama himself said, "I can't do this alone." He was campaigning on this progressive agenda and he said, "I cannot do this alone. I need a social movement." You know, that's what we have to push. And if corporate elites are we know they're pushing. And if there isn't any pushback, that's where he's going to go.

BILL FLETCHER: I think that his heart lies with working people. But I think that he believes fundamentally that he has to make sure that capitalism is functioning in a certain way. And that means that he has to pay attention to the corporate elites. And for that reason, what Mike raised is absolutely on the money. That we have to push him and point out to him that an economy should be serving working people.

An economy where you have an announcement that the recession is ending, but we have more than ten percent unemployment, probably between 10 and 20 percent unemployment. And you in addition, you have this structural unemployment in places like Camden or Flint. Where people are never going to work permanent jobs. That's no kind of economy. You know? And we don't need a president that is simply going to pay attention to making sure that the stock market is going up, while the rest of us are going down.

But I want to go back to one thing. I want to say about this arc. I sometimes get attacked, Bill, for being a prophet of doom or something. But which I think is an unfair criticism. But I'm worried. I really am. I think that we really are at one of those critical moments, when that arc could move towards barbarism. Not simply moving in a conservative direction.

When I see people bringing AR-15s to rallies with the President. When I see this insanity behind the Birther Movement. And questions about the President's citizenship. I realize that the strength of the irrationalist right is something that we have to contend with. And that these are people that could bring everything down in ways that could be quite catastrophic. So, I put it more in a different way. My hope is that the arc is moving towards justice. But I think that it will only successfully move there if we push it.

MICHAEL ZWEIG: That's right.

BILL FLETCHER: And that really does come down to what Mike was raising. That we cannot sit back and believe fatalistically in the inevitability of progress. The only thing inevitable is death. What we do will make the fundamental difference. If we push that arc in a certain way, we will have social justice. But we cannot that means among other things with the union movement, breaking with old ways of thinking, old ways of operating. And recognizing that there are people out there that are literally and figuratively dying for leadership, that wish a vehicle to speak for them. That really-- where the message resonates. That's our job.

BILL MOYERS: Bill Fletcher and Michael Zweig, thank you very much for joining me. This has been a very interesting discussion.

BILL FLETCHER: Thank you very much.

MICHAEL ZWEIG: Thank you very much.

BILL FLETCHER: It was a pleasure.

BILL MOYERS: That's it for the Journal this week. Remember to log onto our Web site at pbs.org, click on BILL MOYERS JOURNAL. There you can see a web-exclusive essay prompted by those protests in Washington, and you can hear more from the next generation of conservatives, as well as from some of the movement's stalwarts. You'll also be able to find out about the challenges facing the youngest American workers. That's all at pbs.org. I'm Bill Moyers, until next time.