Bush Crash Hurting Many Local Governments

WASH POST In Illinois' Cook County, women in poor neighborhoods no longer have access to free mammograms from two mobile vans testing for breast cancer. In Michigan, hikers will find about 20 campgrounds closed, and scientists are ending their studies of fish populations in the Great Lakes. In New Jersey, state workers are being laid off, and at least one town is canceling its traditional Fourth of July fireworks. And in California's San Fernando Valley, Everardo Orozco, 53, who has AIDS, exhausted his medical benefits and can no longer afford the drugs that are keeping him alive. . .

State budgets have been hit hard by a worsening national economy, including rising costs for energy and health care. In addition, fallout from the subprime mortgage crisis -- declining home sales, deflated property values and mounting foreclosures -- has caused a slide in states' anticipated tax receipts. Revenue from property taxes, sales taxes and real estate transfer taxes is affected.

At least half of the nation's states are facing budget shortfalls, some of them severe, and policymakers in most of the states affected are proposing and passing often-painful measures to trim costs and close the gaps. Spending on schools is being slashed, after- school programs are being curtailed and teachers are being notified of potential layoffs. Health-care assistance is being cut for the elderly, the disabled and the poor. Some government offices, such as motor vehicle department locations, will start closing on weekends, and some state workers are receiving pink slips.

IMF Says Mortgage Crisis Largest Financial Shock Since Great Depression

GUARDIAN, UK America's mortgage crisis has spiraled into "the largest financial shock since the Great Depression" and there is now a one-in-four chance of a full-blown global recession over the next 12 months, the International Monetary Fund warned. The US is already sliding into what the IMF predicts will be a "mild recession" but there is mounting pessimism about the ability of the rest of the world to escape unscathed, the IMF said in its twice-yearly World Economic Outlook. Britain is particularly vulnerable, it warned, as it slashed its growth targets for both the US and the UK. The report made it clear that there will be no early resolution to the global financial crisis.

"The financial shock that erupted in August 2007, as the US sub-prime mortgage market was derailed by the reversal of the housing boom, has spread quickly and unpredictably to inflict extensive damage on markets and institutions at the heart of the financial system," it said.

After warning earlier this week that the world's financial firms could end up shouldering $1 trillion worth of losses from the credit crunch, the IMF said it expects the US to achieve GDP growth of just 0.5% this year, and 0.6% in 2008, with the housing crash getting even worse.

Smashing Capitalism!

By Barbara Ehrenreich, HuffingtonPost.com
Posted on August 22, 2007
http://www.alternet.org/story/60506/

Somewhere in the Hamptons a high-roller is cursing his cleaning lady and shaking his fists at the lawn guys. The American poor, who are usually tactful enough to remain invisible to the multi-millionaire class, suddenly leaped onto the scene and started smashing the global financial system. Incredibly enough, this may be the first case in history in which the downtrodden manage to bring down an unfair economic system without going to the trouble of a revolution.

First they stopped paying their mortgages, a move in which they were joined by many financially stretched middle class folks, though the poor definitely led the way. All right, these were trick mortgages, many of them designed to be unaffordable within two years of signing the contract. There were "NINJA" loans, for example, awarded to people with "no income, no job or assets." Conservative columnist Niall Fergusen laments the low levels of "economic literacy" that allowed people to be exploited by sub-prime loans. Why didn't these low-income folks get lawyers to go over the fine print? And don't they have personal financial advisors anyway?

Then, in a diabolically clever move, the poor - a category which now roughly coincides with the working class -- stopped shopping. Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market into another Arctic-style meltdown. H. Lee Scott, CEO of the low-wage Wal-Mart empire, admitted with admirable sensitivity, that "it's no secret that many customers are running out of money at the end of the month."

I wish I could report that the current attack on capitalism represents a deliberate strategy on the part of the poor, that there have been secret meetings in break rooms and parking lots around the country, where cell leaders issued instructions like, "You, Vinny -- don't make any mortgage payment this month. And Caroline, forget that back-to-school shopping, OK?" But all the evidence suggests that the current crisis is something the high-rollers brought down on themselves.

When, for example, the largest private employer in America, which is Wal-Mart, starts experiencing a shortage of customers, it needs to take a long, hard look in the mirror. About a century ago, Henry Ford realized that his company would only prosper if his own workers earned enough to buy Fords. Wal-Mart, on the other hand, never seemed to figure out that its cruelly low wages would eventually curtail its own growth, even at the company's famously discounted prices.

The sad truth is that people earning Wal-Mart-level wages tend to favor the fashions available at the Salvation Army. Nor do they have much use for Wal-Mart's other departments, such as Electronics, Lawn and Garden, and Pharmacy.

It gets worse though. While with one hand the high-rollers, H. Lee Scott among them, squeezed the American worker's wages, the other hand was reaching out with the tempting offer of credit. In fact, easy credit became the American substitute for decent wages. Once you worked for your money, but now you were supposed to pay for it. Once you could count on earning enough to save for a home. Now you'll never earn that much, but, as the lenders were saying -- heh, heh -- do we have a mortgage for you!

Pay day loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May 21st cover story on "The Poverty Business," BusinessWeek documented the stampede, in the just the last few years, to lend money to the people who could least afford to pay the interest: Buy your dream home! Refinance your house! Take on a car loan even if your credit rating sucks! Financiamos a Todos! Somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were being offered.

Personally, I prefer my revolutions to be a little more pro-active. There should be marches and rallies, banners and sit-ins, possibly a nice color theme like red or orange. Certainly, there should be a vision of what you intend to replace the bad old system with -- European-style social democracy, Latin American-style socialism, or how about just American capitalism with some regulation thrown in?

Global capitalism will survive the current credit crisis; already, the government has rushed in to soothe the feverish markets. But in the long term, a system that depends on extracting every last cent from the poor cannot hope for a healthy prognosis. Who would have thought that foreclosures in Stockton and Cleveland would roil the markets of London and Shanghai? The poor have risen up and spoken; only it sounds less like a shout of protest than a low, strangled, cry of pain.

Barbara Ehrenreich is the author of thirteen books, including the New York Times bestseller Nickel and Dimed. A frequent contributor to the New York Times, Harpers, and the Progressive, she is a contributing writer to Time magazine. She lives in Florida.

© 2007 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/60506/