Data from the Bureau of Labor Statistics confirms that claim. According to the BLS, labor productivity gains averaged 2.8 percent a year between 1949 and 1973 -- compared to 1.4 percent in the 1980s, the golden age of LBOs; 2.1 percent in the 1990s; and 2.5 percent in the Bush years. In other words, the supposedly complacent years of "welfare capitalism," when union power was at an all-time high and Wall Street sharkers were kept in check by heavy-handed regulation and tax rules, was when American workers were also most productive.

Perhaps the bigger problem with Brooks' idolatry of private equity, though, is that it's hard to know what, exactly, its role has been in influencing productivity. Workers can become more productive for a variety of reasons: Because their skills improve; because they utilize new technologies; because they are well-managed and highly motivated; or because they are forced to do more work than they did before.

For example, productivity gains in the 1990s and in early 2000s might be best explained by the advent of the Internet and other technologies that made workers more efficient -- just as many new technologies came on the scene in the postwar era. The recession of 2001 also led to cost cutting and restructuring that pushed workers to do more during the subsequent Bush years. 

As for the motives driving companies to boost productivity, having a Gordon Gekko breathing down your neck could certainly be one incentive. But owners might also just want to make more money for it's own sake; or logically utilize the latest labor-saving technologies; or see the benefits of improving management and human capital of their workers; or be responding to competition.

It's one thing to measure the impact of private equity firms on the companies they take over, as researchers have done. It's quite another to make big claims about  their broader impact on the economy, either positive or negative.

The story as it now stands, though -- with insiders enjoying an edge over ordinary investors -- supports a broader narrative depressingly familiar to most Americans: Which is that the stock market is a rigged game.

Evidence that the little guy is apt to be burned by Wall Street has been piling up since the dotcom boom. After the crash of the Nasdaq in 2000, we learned how the Internet stock bubble was designed to favor insiders: How Wall Street firms and investors scored big on tech IPOs for companies with no profits; how investment bank analysts like Henry Blodget publicly touted dubious Internet stocks in ways that helped their banks' bottom line but misled investors; and how, after the bubble burst, we learned that top tech executives at doomed firms had dumped much of their stock when it still had value, making a fortune, even while urging Main Street investors to hold onto their shares.

Investors got screwed big time again just a few years later when the banks bundled subprime mortgages, ratings agencies turned a blind eye to the risks of these securities, and anyone who bought this crap ended up losing their shirt. The broader crash of the market, courtesy of Wall Street risk addicts, also wiped out trillions in stock value.

Some of the revelations of how insiders raked over investors during this episode have been stunning, like how Goldman knowingly peddled out junk to its clients and allowed a top hedge fund manager to profit at the expense of other investors.

Oh, and let's not forget about MF Global, a more recent shameful episode, in which a Wall Street brokerage basically stole $1.6 billion from customer accounts that, by law, it was never supposed to touch.

The mishandling of Facebook's IPO doesn't seem all that malovent to me, based on the information that's come out so far. It's not clear there was a deliberate and self-interested effort to keep small investors in the dark about earnings projectsion, as much as just bad management of the process.

Still, it fits a pattern. Which is that Wall Street can't be trusted to act in the interests of Main Street.

After the dotcom crash, and the frauds at Enron and Worldcom, there was bipartisan agreement that stronger regulation was needed to ensure public faith in financial markets and thus keep the capital flowing that business requires to grow. Sarbanes-Oxley was the result, signed by President Bush. No such consensus existed after the bigger crash of 2008 and a pitched battle is now being fought to stop Dodd-Frank from ever being implemented.

All this is weird. Conservative apostles of supply-side theory say that want to do everything possible to facilitate capital formation and make more money available to grow the economy. But they are hostile to one of the most basic ways of ensuring a robust stock market: Which is to guarantee that the game isn't rigged against investors.

The article outlines in very specific, eloquent, and compelling terms what is wrong with current federal mandates for early childhood programs. The critique is drawn from the work of the Defending the Early Years coalition, a group whose "principal concern is defending children’s right to play, grow, and learn in an era of so-called standards and accountability."

As the Post piece states, DEY's concern is that:

...Federal Race to the Top policy mandates on early childhood education are undermining education practice that research tells us is in the best interest of young children’s optimal development and learning. 

Here is DEY's logic:

1. Current standards are not based on knowledge of child development — both how children learn and what they learn.

The standards require that children learn specific facts and skills — such as naming the letters — at specified ages. This has led to more teacher-directed “lessons,” less play-based activity and curriculum, and more rote teaching and learning as children try to learn what is required. Yet decades of research and theory tell us that young children learn best through active learning experiences within a meaningful context. Children develop at individual rates, learn in unique ways, and come from a wide variety of cultural and language backgrounds. It is not possible to teach skills in isolation or to mandate what any young child will understand at any particular time.

2. Current policies support an over-emphasis on testing and assessment at the expense of all other aspects of early childhood education.

Already strapped for time and money, schools turn valuable attention and resources toward preparing teachers to administer and score tests and assessments rather than meet the needs of the whole child. As teachers strive to raise test scores, they increasingly depend on scripted curricula designed to teach what is on the tests. We know, however, that children learn best when skilled and responsive teachers observe them closely and provide curriculum tailored to meet each child’s needs. Standardized tests of any type do not have a place in early childhood education, and should not be used for making decisions about young children or their programs. Individualized assessments of each child’s abilities, interests and needs provide teachers with the information they require to individualize teaching and learning. 

3. Cumulatively, current policies are promoting a de-professionalization of teachers.

The growing focus on standards and testing disregards the strong knowledge base early childhood teachers have. It undermines teachers’ ability to teach using their professional expertise, to provide the optimal, individualized learning opportunities they know how to offer. Instead, teachers are often required to follow prescribed curricula taught in lock step to all children. At the same time, more teachers without strong backgrounds in early childhood education are being hired, increasing the dependence of teachers on standardized tests and scripted curricula.

The full article is worth reading, especially as it talks about ongoing efforts -- including a large scale teacher survey -- to continue to understand the impact of policy mandates on the work of early childhood educators.

But there is also an important implication that needs to be mentioned regarding socioeconomic inequality.

Last week, the U.S. Commerce Department sided with the solar companies and ruled that Chinese solar product imports were being sold below the cost of production and imposed tariffs of 31 percent to 250 percent on the imported products. In response, China lodged a complaint at the World Trade Organization over the decision and its Ministry of Commerce ruled yesterday that renewable energy subsidies in five U.S. states violate free trade rules. As one analyst stated, while every country provides subsidies to certain industries, “The absurdity is the scope and depth of the subsidies in China. . . You’re competing against a sovereign when you’re talking about the Chinese solar industry. It’s economic warfare.”

The problem with China’s solar industry is not that there is strong government support. Indeed, we have argued again and again that the U.S. needs to significantly increase its support for the solar industry and renewable energy, in general. The problem is that the level of support the Chinese government is providing distorts the market by making the price of its products artificially low. The danger is that the low cost drives competitors out of business and Chinese products will reach complete market domination. At which point, China will have complete control over price and the cost of solar products could skyrocket overnight.

In some respects, conservatives should be at the front line of this trade fight. Unlike other red herrings, like Solyndra, the China example is a clear case of what happens when too much government intervention distorts market conditions. Yet, people like Representative Cliff Stearns have thrown in the towel and declared, “We can’t compete with China to make solar panels and wind turbines.” The irony, of course, is that Stearns’ home state is the second largest producer of solar energy in the country.

So, what will come of this trade war? Imposing tariffs on imported solar products only works if domestic solar production is able to meet demand, otherwise solar becomes prohibitively expensive, which doesn’t help anyone. The solar industry is showing strong growth, but the uncertainty of future tax credits and government support leaves the future growth of the industry in question. The only way we can compete with China is to stop politicking and start supporting industry growth through renewable energy targets, which create steady demand, and continued government support through policies like feed in tariffs.

Fighting this battle through a trade war is to no one’s benefit.

The 2012 manual for administrators and teachers involved in the fourth-grade tests says that NYS Science Performance Test is meant "to serve as a basis for determining students’ needs for academic intervention services in science." The test is designed to measure the content and skills contained in the Elementary-Level Science Core Curriculum, Grades K–4. It has two parts, a written test and a performance test.

The Written Test consists of multiple-choice and open-ended questions and requires about one hour to administer. The Performance Test (Form A) consists of hands-on tasks set up at three stations and requires about 75 minutes to administer.

Here is a question from the 2011 written test:

It rained on a hot summer afternoon and a puddle formed. After several hours, the puddle was gone. Which two processes made the puddle form and then disappear?

A precipitation followed by evaporation

B deposition followed by evaporation

C precipitation followed by runoff

D deposition followed by runoff

The hands-on portion of the 2012 test involves setting up stations along prescribed diagrams. The three stations are named: Measuring Objects and Liquids, Electrical and Magnetic Testing, and Ball and Ramp. At each station, test administrators are supposed to print out the diagram and fold it on the dotted line and tape it to the bottom of the station so that the diagram faces the student.    

Here is what the "measuring station" looks like: 

Source: The University of the State of New York Grade 4 Elementary-Level Science Test, Performance Test. Form A. Station DiagramsHow wonderfully mechanistic and well-organized. If only it all proceeded like clockwork, giving educators diagnostic tools that they could immediately use as "a basis for determining students’ needs for academic intervention services in science." 

Is the testing system set up to achieve this goal? Probably not.  

Full disclosure:  I've been active for many years in the efforts to close Indian Point, because it's dangerous in design and operation, and within 50 miles of 22 million people, unlike any other American reactor.  Those efforts have included litigation to force IP to stop taking three billion gallons of water a day from the Hudson River and returning it in polluted form, efforts to make the NRC adopt a real and workable http://www.policyshop.net/home/rss-comments-entry-16428830.xmlFrackingSustainabilityfracking and silicosisfracking healthosha and frackingsilica poisoningsilicosisAnna PyciorThu, 24 May 2012 15:30:00 +0000http://www.policyshop.net/home/2012/5/24/fracking-work-is-risky-business.html809840:9514124:16416084Natural gas extraction (fracking) isn't only risky for the environment, it's dangerous for workers.

As the AFL-CIO, Mine Workers of America and Steelworkers of America said in a new letter to federal regulators, working in oil and fracking is risky business. On-the-ground employees in this industry are over seven times more likely to die in a work-related accident. Between 2003-2009, there were 27.75 deaths per 100,000 workers. 

The health risks posed to workers are present at multiple steps in the fracking process. In order to extract the natural gas, silica sand is mixed with water and chemical additives. Workers and machines then drill into the shale rock and inject the sand and water mixture under very high pressure. Massive quantities of sand are used and workers are at risk of high levels of exposure during multiple points of the fracking process. 

This kind of exposure to silica puts humans at risk of developing crippling conditions, including silicosis and lung cancer. To make matters worse, the fracking industry is adding new jobs (though not as many as they would like to believe), which in turn exposes increasingly inexperienced workers to these risks. 

In the letter, these major unions urges the Occupational Safety and Health Administration, National Institute for Occupational Safety and Health and the Mine Safety and Health Administration to take immediate action and issue a joint “hazard alert” that identifies the occupational safety and health hazards in the fracking industry, with a special focus on silica exposures. 

There is precedent for federal intervention to help Americans suffering from silica poisoning. In 2000, Congress included compensation of silicosis victims on Federal nuclear testing sites in the Energy Employees' Occupational Illness Compensation Program Act of 2000.

Fracking is no doubt a dicey political issue. Federal regulators should set aside any other controversies surrounding fracking and act to protect the industry workers from preventable harm. 

Sometimes private equity firms rescue troubled companies, pump in new capital and management talent, and make them better and more productive -- saving or creating jobs along the way.

Other times, though, today's LBO artists buy companies, load them with debt, suck them dry, and accelerate their path to bankruptcy. The bad things private equity firms do are pretty bad; just read Josh Kosmen's book, The Buyout of America.

That private equity is a mixed bag seems to be the consensus of academic scholars who have closely studied this industry, as discussed today in a Times background story by Julie Creswell. The ever balanced Matt Miller made pretty much the same point in a piece yesterday in the Washington Post.

Should the two-faced nature of private equity make us all feel better? No. On the contrary, this shows the essential problem with today's financial sector: Practices and products that can play a productive role in the economy can also play a destructive role. Derivatives, of course, have become the most famous example. Once upon a more innocent time, derivatives were mainly used by those in the commodities world to hedge against price fluctuations. Then, in the age of the greed, they were increasingly used as casino chips -- and became, ultimately, what Warren Buffett called "financial weapons of mass destruction," helping to bring down the U.S. economy in 2008.

So, too, with leveraged buyouts and corporate debt. In an ideal world, these are great tools for creating a more productive economy: Borrow money, buy an underperforming company, use more debt to invest in that company, create a better company that employs more people, and then sell it or pay down the debt with higher profits.

And often enough things go that way. But, because we don't live in an ideal world, often they do not -- as profit hungry financial engineers engage in a far less savory game.

Private equity is a fair target in this election because Americans are rightly tired of enduring the downsides of the financial sector. If we learned anything from the crisis of 2008, it's that the instruments of modern finance are too powerful to be a mixed bag. The meltdown of the MF Global and the huge trading loss of JP Morgan have been other reminders of how, when things go wrong, they can go very wrong.

The ultimate goal of Wall Street reform should be to force the financial sector to stick with good practices. What we need is a much smaller, more boring, and -- yes -- less profitable financial industry. It may sound "anti-business" to say that Washington needs to downsize finance, but actually business will do a lot better in an America where Wall Street risk-taking doesn't periodically crash the economy and where Wall Street firms don't firms don't scoop up all the brighest young college and MBA grads and harness their talents to structuring debt deals and whatnot.

Private equity is one corner of finance that needs to change, but which so far has escaped much scrutiny. Reining in this sector, so it focuses just on truly productive behavior, would involve a number of steps -- such as changing the tax treatment of debt and closing the carried-interest loophole that makes private equity so profitable. So far, few politicians are offering a clear reform agenda to stop the "vampire capitalism" of private equity firms. But we need such an agenda.

Which is one more reason it's good to be having a debate about Bain Capital.

The Chairman of the Commodity Futures Trading Commission is Gary Gensler, a former Goldman Sachs partner with deep experience in government service. Many progressives resisted his appointment in 2009, fearing that he would be subservient to industry interests. Nothing could be further from the truth. Gensler has worked tirelessly to implement the Dodd-Frank Act mandate that the CFTC assume the regulatory responsibility for the $30 trillion per year swaps markets. Regulation of derivatives, called by Warren Buffet “financial weapons of mass destruction,” became Gensler’s mission.

Controlling the enormous risks in this market is critically important. The staff of the CFTC, working with fervor that can only be elicited by inspired leadership, has turned out more than 50 regulatory initiatives in a little over 18 months. At the same time, Gensler set a new standard for regulatory transparency, hosting countless meetings and a succession of roundtables in which industry representatives and advocates of the public interest could debate the ongoing rulemaking. If you are interested, just go to the CFTC website and view any of these events.

Gary Gensler is a dedicated public servant, open with his views as only a person who is thoroughly confident and certain of his or her ethics can be.

So Senator Shelby of Alabama chose to attack Gensler using the style of a totalitarian bully, seeking to intimidate with lies so extreme that they just might persuade the casual listener. The contrast with the coolly confident and meticulously honest Gensler is astounding.

The exchange concerned the JP Morgan Chase trading debacle. The level of aggression and misrepresentation is the very best indication that this episode is potential political dynamite for the Republican Party. After all, the main experience of its presidential candidate is a career in the most predatory form of capitalism. He and the congressional Republican have advocated the repeal of financial reform law.

It is not that JP Morgan Chase lost two, three, five or more billions of dollars, depending on the final count. It is that the loss occurred via a “hedging” operation in a department that was tasked with eliminating risks. If a hedge is truly risk reducing, and nothing more, the bank cannot lose money on it. The whole episode calls into question the integrity of bank trading behavior. How on earth can Jamie Dimon and his bosom buddy Senator Shelby be believed when they proclaim that the banking industry should be trusted to monitor their own behavior? (I assume they are bosom buddies since the second largest source of campaign cash for the Senator is JP Morgan Chase.)

Shelby asked Gensler how he had learned of the JP Morgan Chase trades, and Gensler replied that he had first seen them in press reports. The Senator went after this like a pit bull, berating Gensler for the failures of his agency to oversee the markets and the gross inadequacy of the Dodd-Frank Act. Gensler pointed out that the relevant portion of Dodd-Frank had not yet been implemented by final regulations, but the Senator simply ignored the point and kept pounding.

It should be no surprise that Senator Shelby ignored the implementation process. Chairman Gensler has spent more than a year trying to steer his agency between the Scylla of congressional Republicans and the Charybdis of the banks’ countless lobbyists and attorneys. Senator Shelby’s colleagues in the House hold the purse strings and have starved the CFTC of cash. The agency simply lacks the resources to do its assigned duties without proper funding. If Gensler’s agency fulfills its statutory mandate by promulgating proper rules, it risks further punishment at the hands of the Republicans via the budget.

But the Senator’s attack can be analyzed differently. The motivation may not simply be animosity to regulation of the financial interests that contribute so generously to the Shelby campaign effort. By criticizing Chairman Gensler and his agency, Senator Shelby shifts the discussion away from Jamie Dimon, the financial sector figure who is most closely associated with resistance to regulation under the Dodd-Frank Act. In a twisted way, Shelby pounds the table and complains of lack of oversight (that is to say, oversight that is being actively frustrated by his party), all in order to further the goal of industry to avoid oversight.

It is fascinating that politicians like Shelby reference the protection of future generations to evoke fear of deficits, yet seem perfectly willing to expose the next generation to the potential of a new Great Depression. That outcome was avoided in 2008 by throwing trillions of dollars in cash and guarantees at the problem. The next time the banks inadvertently cause the financial system to seize up there may not be sufficient resources to jumpstart the system.  

It sort of makes one wonder what it would have been like for a Soviet citizen to make sense of the Orwellian doublespeak spewing from Stalin’s government.

Rational and respectful treatment by Republicans of this admirable public servant, Gary Gensler, can only be hoped for in a time beyond the election horizon. But, far too often, progressives have misdirected their criticisms of flaws in financial reform in Gensler’s direction. The CFTC’s effort to implement Dodd-Frank is far from flawless. I, personally, spent over a year working on dozens of comment letters on proposed rules, pointing out concerns both large and small.

Nonetheless, Gensler deserves the support of progressives. He is a bulwark protecting the policy of Congress expressed in the Dodd-Frank Act. Under circumstances in which one party actively seeks to restore the deregulated casino that banking had become prior to the financial crisis of 2008, nit picking Chairman Gensler is an unwise path.

Defenders of private equity say that piling up debt is nobody's idea of a good business model. People like David Brooks, who yesterday depicted private equity firms as heroic reformers of a bloated business sector, seem unable to imagine that "vampire capitalism" could yield much of a payday.

But, of course, if we have learned anything over the past few decades, it's exactly the opposite: predatory behavior with no productive purpose often does pay in an era of advanced financial engineering and perverse incentives. The leveraged buyout artists of the 1980s famously discovered this and made vast fortunes. Private equity firms, the rebranded heirs to the LBO movement, have found the same thing and one path to riches, it turns out, is by creating bad debt.

The financial reporter Josh Kosman has documented how this works in great detail in his book on private equity, The Buyout of America. Kosman covered the private equity world up close for years as a writer and editor for Buyouts Newsletter, The Deal, and Mergermarket.com. He had exceptional access to leaders in the private equity world and a ringside seat to numerous private equity deals.

A key point that Kosman makes in his book is that, in fact, it can be quite profitable for private equity firms to drive the companies they take over into debt, regardless of whether those companies then end up bankrupt. By taking over companies and having them borrow a lot of money, private equity firms create a pile of cash, some of which they can direct their own way in the form of management fees and dividends. And because interest on the debt is tax deductible, the consequences of reckless borrowing can be kicked down the line. This is exactly what happened with some of the companies that Bain Capital took over. Bain managed to make a huge return on its investments even in cases where companies failed. Creation of new debt made those profits possible.

David Brooks scoffs that "banks would not be lending money to private equity-owned companies, decade after decade, if those companies weren't generally prosperous and creditworthy." But, again, if we have learned anything in recent decades it is that financial institutions are happy to hand out easy money when well-connected insiders who stand to profit are pushing hard for that cash and somebody else can be left holding the bag. We learned that from the S&L scandal, when banks made billions in bad loans so insiders could profit and taxpayers paid the tab; we learned that from the Long-Term Capital Management meltdown when a bunch of "genuises" lost a fortune in borrowed money and almost wrecked the financial system; we learned it from the Internet bubble, when venture capitalists invested in anything with a .com suffix, cashed out after IPOs, and clueless investors took the hit; and we learned this hard lesson yet again from the real estate bubble.

Borrowing lots of money and incurring bad debts is not how real businesses make money in a normal world. But we don't live in such innocent times. Modern American capitalism is rife with sophisticated financial intermediaries who exploit flaws and complexity in the system, as well as insider connections, to make profits off of predatory behavior -- which brings us back to why the attacks on Bain Capital are both accurate and fair.

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We’ve debunked this idea before and now, a new report shows how when gas prices increase, transit ridership increases. Intuitively, that makes sense as a cost saving measure and, if finances were the only issue, transit ridership would decrease in step with gas prices. However, the report found that when people start taking public transportation, they continue to do so even after gas prices decrease due to the numerous benefits it offers. This finding shows that people want to take public transportation, even when they have the option to drive.

The problem with increased ridership, however, is that because we have continually underinvested in public transit, the transit system gets easily overloaded with even a slight increase in ridership. And, as the recent transit bill debacle showed, increasing investment in transit, let alone expanding transit networks will be an uphill battle. The House and Senate met in conference committee for the first time yesterday to try to resolve their differences on reauthorizing the transit bill. Earlier this year, the Senate passed a bill that retains support for public transportation, while the House was unable to pass a transit bill and instead passed a placeholder that allowed it to go to conference committee.

Yet, even with the Senate provision, which maintains funding at current levels, public transportation receives far less support than roads and highways and its effectiveness is further impeded by the chronic underinvestment in our existing infrastructure. A recent bi-partisan report found that the U.S. would have to invest an additional $134-$262 billion per year until 2035 to maintain and improve our existing transit system.

Instead of relying on Congress to do the right thing on its own, the key to building a reliable, extensive public transit system may be to keep gas prices high. High gas pricess would increase demand for transit, and therefore increase pressure on decision makers to finally begin to invest in a long-term investment and expansion of our transit networks. One way to increase gas prices would be to increase the gas tax, which would also provide more money for transit. Currently, the federal gas tax is 18.4 cents a gallon-- the same as it was in 1993 and it is not providing enough revenue. Every penny increase in the tax generates $1.8 billion in revenue so even an increase of a few cents would generate billions of dollars for infrastructure repair and investment.

While the increased gas prices will cause some financial hardship on working families, the benefits of taking public transportation could offset any increased costs. Some estimates find a savings of more than $10,000 for households that take transit at least once a day. Of course, this plan isn’t perfect, as it would disproportionately burden households that have no access to transit. But, we have to start somewhere. Driving less, in general, is better for the planet and for our health. If higher gas prices make people drive less, that’s one benefit that shouldn’t be easily dismissed.

The more typical plan is to buy an underperforming company, make it more "efficient" and profitable, and then sell it for more money. Brooks thinks this model is unequivocally good and, even, that it has helped save American business:

Forty years ago, corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond. But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations.The process was brutal and involved streamlining and layoffs. But, at the end of it, American businesses emerged leaner, quicker and more efficient. Now we are apparently going to have a presidential election about whether this reform movement was a good thing.

But the part of the story that Brooks leaves out is that workers have been the big losers in this process, while management and shareholders have been huge winners. Some of the strategies for creating more efficiency have been just unbelievably pernicious for employees. For example, many companies avoid hiring workers full-time with benefits -- instead hiring them as temps, firing them after a certain period, and then hiring them again. Or companies avoid paying overtime through "just in time" scheduling practices that it make it difficult for workers to plan their lives, as Demos documented in a report last year.

Union busting has been another important strategy. As Amy Traub has written here, "analysis of union elections from 1999 to 2003 revealed that when workers attempted to organize a union, 96 percent of employers mounted a campaign against their effort. Three quarters of employers hired outside consultants."

Yet another strategy, of course, has been to pare back pension benefits and shift more healthcare costs to workers, or drop such coverage all together.

In short, a cornerstone of creating more efficiency has been to turn good jobs into bad jobs. That might be tolerable if so many bad jobs were created as to create a tight labor market that drove up the wages for these bad jobs, but this has not been the case. In theory, higher productivity might allow for companies to expand and hire more workers. In practice, greater efficiency often simply means a permanent need for fewer workers overall. Brooks himself notes that a study of private equity firms showed that the companies they take over and streamlined don't hire many new workers. "The overall effect on employment is modest."

If all these efficiency strategies were implemented soley as part of a life-and-death struggle of American companies to survive against foreign competition, that would be one thing. But many of these strategies were embraced by companies, such as retailers, who faced no foreign competition.

What Brooks seems to forget is that the story of capitalism, historically, has not just been about competition among nations for economic dominance. The story has also been about the competition between capital and labor. And some portion of what corporations have done in the past forty years has been aimed at prevailing in this latter battle. Private equity firms have tended to be on the side of capital in this battle, which is why attacking them is now fair game.

Partly as a result of the efficiency "reform movement" Brooks champions, the CBO reported last year that "average real after-tax household income grew by 275 percent between 1979 and 2007" for the top 1 percent, while for "60 percent of the population in the middle of the income scale. . . the growth in average real after-tax household income was just under 40 percent."

Of course, a variety of factors have driven inequality, but the ruthless focus on efficiency by corporations has certainly been an important factor. And it should be mentioned that executives supposedly so intent on squeezing all the bloat out of companies never squeezed so hard as to pare back their own compensation packages. On the contrary, the compensation bloat at the top of companies ballooned over the past forty years and huge new gaps emerged between the performance of executives and their pay --  most egregiously in the form of golden parachutes even when CEOs failed badly.

The joke hit the mark, but Comedy Central’s satirical pundit had it backward, Tammy quickly noted. It was low- and middle-income consumers paying high penalties and fees who were subsidizing his credit card perks. That’s why the nation needed regulation to rein in the abusive practices of “an entire industry is built on gotcha tactics – designed to keep people in debt at a very high cost.” Within weeks, President Obama signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act into law, ending many of the tricks and traps used by credit card issuers.

The law was enacted three years ago today, and new Demos research finds that it’s working as intended to save households money.

We find that the Credit CARD Act is helping households pay down balances faster, with a third of low- and middle-income households that carry credit card debt reporting that new disclosures have caused them to pay down their balances faster. The Act is also helping households avoid excessive fees and interest rate hikes: the percentage of surveyed households paying late fees plummeted from 53 percent in our 2008 study to just 28 percent today. The proportion seeing an interest rate hike as a result of late payments also fell.

The conclusion? Credit cards are a better, fairer financial product for American consumers as a result of the CARD Act. And while Colbert’s income bracket wasn’t part of our sample of low- and middle-income households, the law’s ban on abusive practices likely keeps him from getting ripped off as well.

There, however, a drawback: Demos' new report, “The Plastic Safety Net” also finds that consumer protections alone can’t remedy the deeper problems of lagging wages, high unemployment, and a fraying public safety net that are causing low- and middle-income Americans to rely on their credit cards to make ends meet and cope with emergencies. But we’ll explore those findings in a future post: for today, it’s Happy Birthday Credit CARD Act! It’s good to have something to celebrate.

But the more intriguing question about Cook's compensation is not whether he is should be paid so much; it is how he can be paid so much? What are the forces that allow a single executive to extract so much value from a company, albeit even a wildly successful company? How is it that Apple's employees couldn't get a bigger slice of the pie or the government couldn't skim off more in taxes?

The answer, simply put, is that we live in a golden age of capital -- an era more akin to the Robber Baron era than the postwar decades of America's not so distant past. Apple likes to position itself as embodying all that is new and cutting edge; but, in the economic sphere, it is turning back the clock.

Over a century ago, capital was dominant, in large part, because corporations didn't have to worry about two pesky nuisances: taxes and strong labor laws. Prior to the creation of personal and corporate income taxes, as well as the estate tax, the federal government raised most of its revenues from import tariffs -- a burden mostly borne by ordinary Americans. Men like Carnegie and Rockefeller basically paid no taxes, allowing their fortunes to reach mammoth size. These same Robber Barons benefited from weak labor regulations, as the minimum wage and the 40-hour work week weren't invented until the 1930s. Other irritants -- like worker safety laws, employer social insurance contributions, and environmental standards -- also were largely non-existent during the Gilded Age, which further helps explain why it was so gilded.

We tend to think of the world as drastically different today, and hear endlessly about the tax and regulatory burdens on corporations, but actually the clock has been turned back much more than many people realize -- and Apple has helped to lead the way.

As the New York Times recently reported, Apple has been a pioneer of tax avoidance -- using offshore tax havens to dodge billions in taxes. Partly as a result, the company has built up over $100 billion in cash reserves, much of which is stashed overseas -- bolstering the company's stock value (which drives Tim Cook's payday) and laying the groundwork for future profitability by underwriting new offshore investments, as reported here.

Now, of course, Tim Cook is much more heavily taxed than the CEOs of a century ago. But he and Apple are far less taxed than would have been the case a half century ago -- a time when government was stronger and offshore tax havens were not yet invented. In 1955, corporate taxes made up 27 percent of all federal revenues, or 4.3 percent of GDP. Now, it's more like 8 percent of revenue and 1 percent of GDP.

Thanks to globalization, the clock has also moved backwards on labor costs. Sure, the U.S. has all sorts of labor laws that it didn't used to have. But those laws don't matter much if you don't make stuff here. Apple's main concern are China's labor laws -- a country that didn't even have a minimum wage law until 2004. And while the minimum wage has gone up recently in many parts of China, it's still not much more than $200 a month for most workers -- or around $1.25 an hour.

As the New York Times documented, Apple products are made in sweatshop conditions, just not in America. An independent investigation, undertaken after the Times' expose, revealed that contrary to claims by Apple's apologists, the wages it pays (via Foxconn) are not adequate for its workers to meet their basic income needs. Apple is getting rich, in large part, because its workers are so poor -- a business model that Dickens once explained so vividly. In fact, Tim Cook was paid as much in 2011 as 81,000 of Apple's Chinese factory workers put together, according to an analysis by Isaac Shapiro of EPI.

Given the success of Apple's fantastic products, Cook would be destined for a large payday in almost any scenario. But that payday is as big as it is because capital is now able to sidestep many of the constraints on its profits. Making 21st century gadgets in a 19th century economic framework: Now there is a formula for success.

Despite one of our favorite American myths about the stay-at-home mom—that she flits from yoga class to lunch date to mani-pedi appointment or, for that matter, that she could be epitomized by someone whose husband’s net worth is about $200 million—mothers who don’t do paid work are actually poorer, on average, than employed mothers. They also tend to be younger, Latina, and foreign-born, according to the latest census numbers. They’re less likely to have graduated from high school or attained a bachelor’s degree. In short, these are not the Ann Romneys of the world. And both their relative lack of education and wealth in turn contribute directly to their heightened depression and stress.

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The rational behind the provision is that the disclosure of this information will help reverse the “resource curse”, where some energy and mineral rich nations are plagued by high levels of corruption, conflict and poverty. Advocates in favor of the provision argue that the rule will help citizens hold their governments accountable because they will see how much money is being paid by the oil and minderal companies for natural resource extraction. 

Not surprisingly, the American Petroleum Institute, the oil-industry’s front group, is heavily lobbying the SEC to provide wide exemptions to the disclosure provision. Most recently, the special interest group seized upon a recent executive order that calls for more international regulatory harmony to claim the Dodd-Frank disclosure rule would make the industry either violate foreign laws that ban disclosure or prevent operation in those countries that ban disclosure.

Arguing against API's claim, one of the provisions main sponsors, Senator Ben Cardin, rightly pointed out that any exceptions would create a “race to the bottom” that would encourage other countries to enact reduced transparency laws and also make the U.S. lawmaking process subservient to foreign governments. This last point is particularly important when we think about the countries from which much of our oil and minerals come and their troubled records on democracy and transparency.

API’s lobbying must be paying off to some degree, as the SEC is more than a year late in issuing a final rule. This delay prompted Oxfam America to sue the agency to force it to issue the final rule. However, if it turns out that API is ultimately successful in watering down the rule, it will be yet another example of the poisoning influence of money in the political system. API spent nearly $6 million in just the first three quarters of last year on lobbying -- money well spent if they succeed in forcing the SEC’s hand.

But the bigger puzzle here is why Booker, despite his reputation as a smart guy and his close links to the Obama campaign, would be so unfamiliar with the details of the attack on private equity that he would label them "crap" -- when, in fact, the factual record bears out the harsh assessment of Bain Capital and private equity more broadly.

The Obama ad about the steeel company in Kansas City, GS Technologies, that Bain owned has drawn a lot of fire for being unfair, but PolitiFact recently did a long analysis of the ad and concluded that its claims are "mostly true."

Josh Kosman, a New York Post reporter who wrote a book on private equity and looked closely at the GS case, also has written that the ad is "largely accurate." Bain did saddle the company with too much debt, as the Obama campaign charges, and got its own payday before walking away and letting the company collapse. Kosman quotes the former CEO as saying “a better capitalized GS could have ridden out the currency crisis and been a gold mine.”

I've seen this dark side of private equity up close: my former publishing house, Harcourt -- a very profitable education publisher that also had a distinguished trade book arm -- was bought by an Irish private equity firm and a greedhead named Barry O'Callaghan. Harcourt was merged with Houghton Mifflin to be part of a larger publishing empire that O'Callaghan was assembling. Instead, the debt burden was too great once the financial crisis came along and the whole mess is now in bankruptcy court. Harcourt has been gutted along the way.

Now, to be sure, maybe Bain Capital isn't the only reason that GS Technologies went bankrupt -- like so many other steel companies in the face of foreign competition. But this episode does stand at odds with Romney's claims to be an economic miracle worker, and that's the bigger point. As Obama said today, as reported by the Los Angeles Times:

“My opponent, Gov. Romney -- his main calling card for why he thinks he should be president is his business experience. He’s not going out there touting his experience in Massachusetts. He’s saying, I’m a business guy. I know how to fix it. And this is his business,” Obama said. “When you’re president as opposed to the head of a private equity firm, your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot.”

Obama, who as recently as last week was raising money for his campaign at the home of a New York private equity firm executive, said there were people “who do good work in that area,” and can help identify opportunities for new jobs and industries.

“But understand that their priority is to maximize profits. And that’s not always going to be good for communities or businesses or workers,” he said.

This is the message that you'd think Booker would have been able to articulate. And instead of bashing the attack on private equity, he should have tutored David Gregory and viewers on how exactly these firms can hurt workers and the economy.

I understand this virtuous cycle, which Silicon Valley especially exemplifies, as tightly networked entrepreneurs invest in each other, with the winners pulling up the aspirants. But here’s the thing: Even as we appreciate the cycle, let’s not confuse what’s happening in Silicon Valley with a solution to America’s jobs crisis.

On Friday, I made this point on CNBC’s “Closing Bell,” hosted by Maria Bartiromo. I noted that Facebook has just 3,200 employees with a market valuation of $100 billion and its success underscores the growing disconnect between corporate wealth and job creation. Big paydays for founders like Mark Zuckerberg have less and less to do with the creation of middle class jobs for everyone else, in contrast to earlier phases of American capitalism when rising yachts meant that other boats were rising. A simple enough point, I thought.

Also on the program was Andrew Rachleff, a former venture capitalist and professor at Stanford Business School. Rachleff is an interesting guy and he was making a good point that Facebook fortunes would help bankroll new startups. Rachleff has seen how this works first hand from his years in Silicon Valley.

I had no beef with Rachleff. But what did bother me is how Bartiromo. just couldn’t acknowledge my point that the wealth of Facebook was being shared very narrowly and that the new startups that Facebook richies underwrite as angels might not create many new jobs either (Instagream had just 17 employees when it was bought for $1 billion). Just maybe, I suggested, this indicated a problem with the U.S. economy. Bartiromo chided me for not celebrating a great success story of innovation.

The problem here is that she and I were having two different conversations. I totally agree that Facebook is a great company and that we should be happy about tech successes like this. I also know that there’s an interesting debate about where the new era of tech innovation is leading. I’m as fascinated as anyone by what is happening, and I’m a big admirer of visionary entrepreneurs like Zuckerberg who operate on the cutting edge. I want the Zuckerbergs of America to get rich from their ideas (although I do think it’s morally disturbing that Zuckerberg should be worth more than the bottom fifth of U.S. households and that his company benefits from big tax loopholes.)

But whether the tech boom is going to alleviate the misery of the bottom half of America is an altogether different matter. Clearly this is not happening, as I wrote on Friday, and somebody needs to say that. Facebook is not today’s version of GM. What’s good for Facebook is not necessarily good for America. Saying this doesn’t diminish the wonder of Facebook or call into question the rewards bestowed on its founders. It simply adds context. After all, last I checked, this country was still in the middle of the worst period of economic hardship since the Great Depression.

The bad news: The shift is mainly at the level of rhetoric and token policy changes. Nobody in the political mainstream is seriously proposing the kind of radical reform that would allow growth to occur.

Two weeks of interviews with progressive leaders in Europe -- academics, the left wing of labor and social democratic parties, NGO groups -- suggest a remarkable consensus on what needs to be done. You can see it in any of several manifestos from groups like Social Europe, the European Trade Union Confederation, Re-Define, Foundation for European Progressive Studies, Finance Watch, the British group Compass, among several others.

The elements:

Drastic debt relief for Greece, so that the Greek economy can begin to grow again, coupled with real tax reform in Greece so that wealthy Greeks begin paying taxes owed. This means cancelling a lot of the Greek debt. Yes, the previous Greek government cooked its books, but do you think the government of East Germany didn't? Yet that didn't prevent the West German government from pumping about a trillion dollars into the former communist state. Oh, but these people were Germans, not Greeks.

A makeover of the European Central Bank, so that it can lend directly to European countries, rather than using a subterfuge of low interest rate loans to Europe's commercial banks, which in turn buy government bonds. The problem with the present policy is that it is a house of cards that puts banks more deeply in debt.

Radical constraints on financial speculation, so that hedge funds and banks stop speculating against the bonds of weak countries and start financing the real economy. A combination of regulation and a financial transaction tax could achieve this.

Mutualization of sovereign debt through Euro bonds, so that weak countries are not made to pay exorbitant interest rates to finance crushing debt. This would also take a lot of the profit out of speculation. The behavior of money markets in the European depression is pro-cyclical -- it piles on vulnerable countries and deepens the slump. Government policy needs to be counter-cyclical.

Massive public investment financed at the European level, to improve green infrastructure and create jobs. This is a "supply-side" as well as a "demand-side" program. It improves productivity even as it boosts purchasing power

Suspension of the deficit reduction clause in the Stability and Growth Pact that requires EU member countries to move towards deficit reduction in a deep recession. The pact, in fact, has just such an escape provision, allowing countries to exceed the debt and deficit limits of Europe's Maastricht Treaty, which created the European Union, when they face an economic emergency. But Chancellor Merkel and the European Central Bank have been behaving as if that clause didn't exist, putting pressure on Greece, France, Italy and Spain to cut deficits in a deep slump.

The rhetoric has changed, but how many of these radical policy changes are seriously on the table?

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It seems that the bank’s Chief Investment Office was riven by discord and racked by disease, leading me to recall the fate of ancient Athens in the Peloponnesian War (perhaps this was also an echo of the Greek debt crisis that renders the Morgan loss even more ominous). The article portrays the recently-resigned head of the Chief Investment Office, Ina Drew, as a level-headed and competent manager who had successfully guided her operation through the financial crisis, helping to build the reputation of Jamie Dimon and JP Morgan Chase for risk management. The story speculates that Dimon’s confidence in Drew colored his assessment of the massive position that generated the current loss.

But Drew contracted Lyme disease in 2010 and took an extended leave of absence. While she was away, the heads of the New York and London Chief Investment Office operations fell into bickering over the amount of risk being compiled by the London desk, specifically the trades of Bruno Iskil (the so-called “London Whale” or “Voldemort,” depending on the specific tastes of the traders at competing institutions). The head of the London desk, Achilles Macris, supported Mr. Iskil and shouted down the warnings by Althea Duersten, his counterpart in New York. Even when Drew came back from her sick leave, she was unable to re-assert control. As we now know, Ms. Duersten had an excellent point.

If this makes you think of a better dressed, less tanned version of Jersey Shore, you are not alone.

So we are to believe that JP Morgan Chase really lost between $3 and $5 billion thanks to a tick bite? And we are to see Jamie Dimon as a boss whose faithful loyalty to a trusted employee blinded him to the truth. As I plowed through the article, I wondered whether this was a clever way to throw Drew and her crew under the bus in order to control damage to Dimon, the Dapper Don of Wall Street.

More importantly, to say that the blame for the JP Morgan Chase loss lay at the feet of Lyme disease and internal bickering is like saying that gravity is to blame for the death of the fellow hit by a falling piano while walking on the sidewalk. Gravity and dysfunctional interpersonal relationships were causal factors in each case. However, the blame lies with the systems that allowed each to affect the state of affairs. In the case of the piano, the system was a rope hoist. For JP Morgan Chase, it was its risk controls.

Sick leaves and turf wars occur in every organization. The story here is that JP Morgan Chase’s risk controls were so anemic that they were frustrated by the bickering of trading desk heads. Risk control systems lack the dramatic appeal of screaming arguments in transatlantic phone calls, but the effectiveness of these systems is far from trivial. Washington regulators are deep into the process of adopting rules mandated by the Dodd-Frank Act that promise to re-shape the financial services sector for decades to come. The prescriptiveness of these rules is influenced by the reliability of the risk control systems of the banks. The big banks, and especially JP Morgan Chase, loudly claim that their risk controls are so efficient that the rules need only to lay out some broad principles for guidance. There is no need to restrict bank behavior, they proclaim.

The recent episode illustrates that this assertion is nonsense. JP Morgan quickly pointed out that it had tweaked its value at risk metrics, claiming to correct the problem. But this is not an algorithm issue. The value of derivatives is a devilishly complex matter. Value at risk is a statistical evaluation based on historic price observations. It will always be the case that the huge number of factors influencing derivatives value will interact in unpredicted ways to defeat the utility of every statistics-based valuation device.

Corporate and household lending, the major permitted bailiwick of depository banks if the reforms embodied in the Volcker Rule are effectively implemented, is completely different. Default rates are much more accurately predictable using statistical calculations because the factors influencing derivatives values are so much more complex. Notably, recent academic research points out that flaws in statistics-based valuation models employed by the rating agencies to evaluate credit differences among the multiple tranches of mortgage-backed securities. (John Hull and Alan White, “”Ratings, Mortgage Securitization and the Apparent Creation of Value,” November 2011, available here.) These flaws led to the dysfunctional mortgage bond market that melted down in the crisis. The principles are precisely the same as those related to complex credit default swap positions.

The roles played by Lyme disease, turf wars and algorithmic shortcomings were largely irrelevant, though each intriguing its own way. The real story is that a major, too-big-to-fail bank, benefiting from FDIC insurance and access to the Fed window, should not be making speculative proprietary bets of mammoth proportions. Even assuming the accuracy of JP Morgan Chase’s claim to the best risk controls on the planet, the bank’s systems cannot calculate an incalculable outcome. The managers of banks seem unable to avoid believing that the systems measure the worst case outcome. They are seduced by “99.9%” confidence intervals, seemingly unable to comprehend that the math only measures what it is designed to do, and design is subject to the limits of knowledge and human bias. And statistics are not useful for predicting outcomes in complex, fluid systems.

If these risk metrics are going to be employed to justify putting the world economy at risk of another financial crisis and the depression that will likely follow on from it, the world, including Morgan, would be better off if the calculations were never run.

It is comforting to note that prohibiting proprietary trading by insured banks is far more achievable than a ban on getting sick and self-interested bickering over turf.

Technology companies deliver amazing products and services, and Facebook is a prime example of how breakthroughs in the tech sector can change how we live. But don't look to the tech sector to create the middle class jobs of tomorrow. Facebook illustrates this reality. Even as the company has become spectacularly successful, and vastly enriched individuals associated with it, it has generated relatively few jobs.

Facebook added just over 1,000 jobs in 2011, bringing its total work force to 3,200 employees. Indirectly, through the apps and other subsidiary components supported by Facebook, the company is estimated to have created between 53,000 and 129,000 jobs in the United States.

Even if Facebook doubles or triples its labor force with the new investment capital it raises from the IPO, it will employ vastly fewer people than any other U.S. corporation of a similar value in the range of $100 billion. For example, PepsiCo has 285,000 employees with a market value of $103 billion, according to Fortune. Abbott Laboratories employs 91,000 people with a market value of $95.6 billion. Walt Disney has 156,000 employees with a market value of $77 billion. Bank of America, with a market value of $102 billion has 284,000 employees. GM, with a third the market cap of Facebook, has 209,000 employees.

Facebook also has many fewer employees than older technology and Internet companies, showing how a new generation of tech firms may be able to generate greater wealth without large labor forces. Amazon has 56,200 employees and market value of $93.1 billion. Cisco has 71,000 employees and a market cap of $113 billion. Intel has 101,000 employees with a market cap of $114.6 billion.

Facebook is not the only new generation tech company with relatively few employees. Twitter, which is said to have a value of around $10 billion, has only 400 employees. Pandora has 530 employees with a market cap over $1 billion. Instagram, which Facebook recently bought for $1 billion, has just 17 employees -- or a market cap per employee of $83 million. Spotify, recently recently valued at $4 billion, has only a few hundred employees. Zynga, the much touted game making firm, has 2,846 employees. Linkedin, with a value just over $10 billion, has 2,116 employees. The picture is somewhat brighter when it comes to Groupon, which has over 11,000 employees, but that company seems more like an outlier among the latest tech successes.

Given these facts, it's no wonder that the unemployment rate in Santa Clara County, which encompasses Silicon Valley, is 8.2 percent -- a bit higher than the national average. The unemployment rate in San Jose, the biggest city in California and the third biggest city in California, is over 9 percent.

Facebook’s high valuation on the NASDAQ also speaks to a larger disconnect between corporate profits, stock prices, and the labor market during the post-recession recovery. According to a recent analysis from Northeastern University, in the first two years of the recovery, the Dow Jones Industrial average increased 49 percent, the Standard and Poor 500 index had increased 46 percent, yet real mean hourly earnings of all private sector workers had decreased 1 percent.

Put a different way, recent years have been fantastic for owners of capital – who are largely part of the top 20 percent of households, as noted – and terrible for workers. Facebook's IPO reflects this larger trend.

That, at least, is one way to interpret a recent Gallup poll:

The optimistic take: That the Randian view -- of the wealthy, superior producer  -- has not set the world on fire. With job growth stagnant, and wages that don't keep pace with inflation, it's a stretch to see the residents of the upper tax brackets (the people most likely to sign a paycheck) as a boon to the country. The pessimistic view, which I hold, is that the widening chasm between the rich and poor doesn't, for some reason, appear to bother people very much. To wit, what Tim Noah calls "the great divergence":

Thirty years ago, CEOs of America's largest businesses earned an estimated 42 times as much as their average employee. These days, that number has jumped to more than 200 times as much, by many counts.

We're feeling this close to home, too. Our beloved lawmakers in New York, hardly a bastion of conservative principles, lack the votes to hike the state's minimum wage from $7.25 to $8.25 an hour. Against such a grim backdrop, the constancy of the Gallup results -- the entrenched willingness to accept an increasingly two-classed system -- are a bit vexing. As the pollster observes, hope springs eternal:

Nearly 30 percent of Gallup's respondents (most of whom are on the younger side) believe it is at least "somewhat likely" they will one day be among the moneyed. It doesn't much matter that what constitutes rich isn't specified; at the very least, one assumes, it's a great deal more than our current monthly paycheck. It is disconcerting that such a large percentage of the population has such a pie-in-the-sky view of the future. It's a mindset, perhaps, that enables wise people to willingly yoke themselves to a trillion dollars in studen debt, on the presumption that one day it will disappear or even be manageable. (The recent New York Times story on student debt thoroughly punctures this idea.) Instead, we should probably acknowledge that we're almost certain to end up in the fleshy part of the wealth bell curve -- that massive space between the rich and poor -- and live our lives accordingly. Otherwise, we may be in for a rude awakening.

What's perhaps is less known, though, is that much of the wealth generated by Facebook may never be taxed at all because it will be donated to charity. Mark Zuckerberg has pledged to give away at least half of his wealth, as part of The Giving Pledge organized by Bill Gates and Warren Buffett. Zuckerberg has already begun giving away his money, most notably with a major gift to improve public schools in Newark. Co-founder Dustin Moskovitz has also pledged to give away at least half of his fortune.

The American tradition of philanthropy has yielded many positive benefits to the U.S. and to humanity, and the new philanthropists minted by Facebook are sure to do much good with their money. But a cautionary note is also in order as these vast new philanthropic fortunes come online: Philanthropy allows private individuals to use money sheltered from taxation to advance their own personal agenda for public policy, culture, science, and so on, and to exercise vastly more influence over society than ordinary citizens or voters can. In other words, all taxpayers are subsidizing the ability of the super wealthy to try to shape America or the world as they see fit.

Mark Zuckerberg’s gift to improve Newark’s schools shows the benefits and dangers of how the new wealth created by Facebook will be deployed in the public sphere. On the one hand, it’s positive that Zuckerberg is trying to help one of the poorest and most troubled school districts in America. On the other hand, the large size of the donation – $100 million, before matching gifts – cannot help but help shape the direction of school policy in Newark, which should more rightly be decided by the citizens of Newark. Education has traditionally been among the most democratic areas of American life. But that has changed in recent years as the result of large-scale philanthropy by donors like Bill Gates and Eli Broad, with these private individuals profoundly influencing public schools. Zuckerberg’s entry into this activity could exacerbate a troubling trend whereby ordinary citizens have diminished influence over crucial policy questions relative to wealthy philanthropists.

Facebook’s IPO will also put considerable political power in the hands of its shareholders, if the trajectory of other tech companies is any indication. Prior to Google’s IPO in 2004, its employees gave little money to political candidates. Such giving jumped dramatically after Google went public and its employees were among the top five groups bankrolling President Obama’s 2008 presidential campaign, ultimately giving Obama $814,540 according to OpenSecrets.org. (Google employees are again among the top five groups giving to Obama in the current election cycle.)

Facebook employees and directors are already using their wealth to try to influence electoral outcomes – donating $459,251 to candidates and party committees over the past three election cycles. COO Sheryl Sandberg alone has given $108,000.

Finally, Facebook can be expected to use some of the new funds raised by its IPO to expand its lobbying and PAC activity. The company’s spending on lobbying rose from $207,878 in 2009 to $1,350,000 in 2012. It is sure to increase further in coming years.

In short, the wealth of Facebook shareholders will allow them to have a much bigger say in U.S. politics than is available to most Americans, subverting the egalitarian ideal that lies at the heart of America’s democracy. And that is a problem.

The ability to cast a ballot that will be counted is a fundamental freedom that protects the other essential rights that Americans hold dear. The freedom to vote is how Americans, regardless of privilege or economic status, maintain the power to hold their elected representatives accountable for the decisions that impact their lives.

Demos’ Brenda Wright warns that:

Every generation has the obligation to ensure that our country is doing all it can to preserve and protect the freedom to vote. Unfortunately, over the past two years, many states have been going backward rather than forward, enacting new measures across the country that would prevent millions of eligible voters from registering and voting. It reflects an effort by powerful interests to avoid accountability by choking off access to the ballot.

Currently, our freedom to vote is jeopardized by both systemic weaknesses and direct attacks aimed at undermining the franchise.

Bureaucratic barriers block our freedom to vote with red tape. Our antiquated system puts the burden of registration on each individual, with unnecessarily restrictive registration deadlines. Approximately 51 million eligible Americans are still not registered to vote, according the Pew Center on the States. This represents one in four eligible Americans. In the 2008 election, 9 million eligible Americans were not registered because of residency rules or registration deadlines. The Voter Empowerment Act automates voter registration so the government bears the burden of registering its citizens.

One of the most common sense reforms is to allow eligible Americans to register to vote on the same day that they vote. Same Day Registration is available in nine states and Washington, D.C., and will be available in Connecticut in 2013. States with Same Day Registration have consistently led the nation in voter participation: average voter turnout was 7 percentage points higher in Same Day Registration states in 2008, and the top 5 states for voter turnout all gave citizens the option to register and vote on the same day. Experts have projected substantial increases in voter turnout, from between 4 to almost 9 percent, in states that have considered adopting Same Day Registration.

Allowing for Same Day Registration means the government is promoting citizen participation, rather than encumbering our fundamental freedoms. Two to 3 million registered voters were prevented from voting because of administrative problems in the 2008 election, which exceeded the popular vote margin of the 2000 and 2004 elections.

Our electoral system threatens the voting rights of hundreds of thousands of voters each cycle through byzantine and non-standardized voter roll purges. When these machinations lead to eligible voters being dropped from the rolls, or challenged, their right to vote can be denied on the basis of bureaucratic error or even malfeasance. Just this year, former US Representative Lincoln Davis showed up to vote in his home town and was told that he was no longer on the voting rolls. If it can happen to him, it can happen to anyone.

Some otherwise eligible American citizens are barred from voting because of past crimes, even if they have completed their sentences. This bill would help restore voting rights to all citizens who have been restored to society.

Voters continue to face underhanded attempts to keep them from the polls through tricks and deceptive practices, such as information being distributed calling on members of certain parties to vote on days after Election Day. Our electoral systems should not be open to manipulation, and our voting rights should not fall victim to those who wish to win power through underhanded attempts to stop opponents from voting. This bill protects voters by prohibiting despicable deceptive practices where fraudulent information is distributed to prevent people from voting.

Read our policy brief or more analysis of the Voter Empowerment Act and the importance of its reforms >>>

The largest minority group continues to be Hispanics, representing 16.7 percent of the population, or 52 million people, in 2011. Hispanics are also the the fastest growing population, increasing by 3.1 percent since 2010.

Over the next few days we will hear or read the obligatory cursory news coverage of this change.  As that happens it is easy to think "So what?"

So here's the "So What?" When we look at who has access to financial security, or who has hope for a stable economic future, African-Americans and Hispanics are in worse shape than whites. That means that the 1 out of 2 children born in 2011 to African-American and Hispanic families will face additional challenges to achieving that stability.

This newly released data isn’t likely to persuade those that equate climate advocacy to mass murderers, but the rest of us should be very, very worried. The change in weather patterns affects the economy in several ways. One, increasing temperatures negatively impact the agriculture sector because the seasons shift disrupting growth patterns, yields decrease, and land becomes less productive. Two, as we’re seeing now, changing weather patterns mean more drought for dry areas and floods in other areas. As an example of the problems this causes, we highlighted the danger facing low-lying states due to increased flooding and precipitation. In fact, climate change will impact nearly every aspect of the economy, as shown by a series of papers Demos recently released that looked deeper into the economic impact of climate change in several states.

At the same time, attacks on climate change and climate policy are ramping up. Beyond equating climate advocates to mass murderers, a coalition of right-wing groups are coordinating efforts to turn the American public against wind farms and the President’s renewable energy agenda. The Guardian obtained a confidential strategy memo that highlights ways to destroy the wind industry, including a national PR campaign to demonize the industry, setting up “dummy businesses” to buy anti-wind billboards, and a dedicated campaign to build public opposition to state and federal government policies that support the industry. Other efforts highlighted by the Guardian include:

•  A $6m election ad buy by the ultra-conservative group Americans for Prosperity attacking Barack Obama's support for wind and solar power.
• An email and telephone campaign by the ALEC and Americans for Tax Reform to repeal or alter clean energy mandates requiring electricity companies to get a share of their power from renewables (otherwise known as renewable portfolio standards).
• Supporting bills drafted by ALEC to overturn renewable portfolio standards, an effort we further detail here.

The right-wing cabal against clean energy is not only making us vulnerable to climate change, it is making our economy weaker by preventing us from engaging in a thriving sector and threatening our national security by keeping us dependent on unstable oil-producing nations.

The truth is that while we are behind in the clean energy race, we have great potential not only for clean energy development but also a thriving green jobs sector. How many months of record-breaking heat are needed before the nation wakes up to this reality?

The New York Times' Andrew Ross Sorkin (above, Credit/David A.Grogan) and Jim LaCamp

Fox News, of course, sets the standard for nonsensical rants. The most non-informative work is probably an interview by noted journalist Neil Cavuto of Jim LaCamp, a portfolio manager at Macroportfolio Advisors, but better known for his ready availability for conservative talk show appearances. Cavuto and LaCamp turned reality on its head by asserting that the JP Morgan SNAFU proves that Dodd-Frank Wall Street reform legislation does not work.  They agreed that reinstatement of Glass-Steagall would have been a better solution, “but that would have been too easy.”

That alone would have sent Jamie Dimon spinning in his grave, but for the fact that he is still alive (and well paid, thanks to the approval of his employment agreement by the JP Morgan Chase shareholders). One way to look at the Volcker Rule is as Glass-Steagall with far too many exceptions. The Cavuto/LaCamp proposition is not the kind of trade Dimon and his London traders would go for.

But Fox’s dynamic duo pushed on. They opined that the law merely put vague power in the hands of faceless regulators, increasing the number of cops on the beat that were so ineffective that they failed to spot the impending Morgan fiasco. First of all, I have had the pleasure of meeting many of the regulators and they each have faces. Many have families and pets and professional integrity, as well. But the ugly truth is that the congressional Republicans, with the help of some infuriatingly passive Democrats, have actually cut the budget of the CFTC -- an agency that is newly tasked with regulating the $30 trillion-per-year derivatives markets, among other things. This new work is a multiple of their prior responsibilities. The cynical tactic of starving the agency (whose incremental needs are actually quite modest, about 8 hours of cost of the war in Afghanistan) is designed by the heroes of Fox News to make certain that there will not be cops on the beat.

And how did Fox’s expert team ever get the idea that financial reform has ever gone into effect in any way meaningfully related to the shenanigans of JP Morgan Chase’s “Chief Investment Office?” The implementing rules are largely stalled because of the in terrorem tactics of the congressional budget process and the real and threatened lawsuits over picayune issues, each to be heard in the Bush-packed DC Circuit Court of Appeals. The banks’ bottomless pit of funds for lobbyists and litigators assures a slow and painful path to implementation.

Fox News is one thing, but the New York Times is quite another. It is true that the Times would never have put forth the bizarre rationale favored by Cavuto and his colleagues. But sometimes a lesser mischaracterization of the truth by a truly credible source can be far more damaging than a transparent rant.

Which brings us to the example of an article by Andrew Ross Sorkin. Since Mr. Sorkin has done some fine work in the past, I hope that he takes this as a compliment in that his missteps are particularly startling and so serve as effective pedagogical devices. He published an article that described the JP Morgan Chase trades in the context of the restrictions that would apply if the Volcker Rule legslation had been implemented already. The problem is that he seems to have accepted the widespread characterizations of the Volcker Rule naysayers rather than digging into the minutiae of the rulemaking.

In particular, he writes that the so-called “hedging” activity that was the source of JP Morgan Chase’s loss and embarrassment is inescapably preserved by the Volcker Rule’s exception for risk reducing hedges from the proprietary trading prohibition. Under the statute, a bank can hedge a risk position that was permissibly entered into originally. Sorkin approvingly quotes a former Morgan chief financial officer: “I don’t think you can hedge without taking a risk…The notion that you can very clearly draw a line between propriety risk-taking and hedging is a very difficult notion to implement.”

The proposed regulations do just that. There are three kinds of transactions that can logically be characterized as a hedge.

• A transaction can be the precise inverse of a position held by the bank. In this case, after the transaction is entered into, the bank would have no exposure under the original position.

• A transaction can offset some, but not all, of the risks associated with the original position and add no additional risk to the bank. The remaining risk is not new, but was on the books of the bank prior to the transaction.

• A transaction can offset some or all of the risks associated with the original position and add additional risk to the bank. This additional risk is also an opportunity to make profit. This additional risk and reward constitutes a new proprietary position, nothing more or less.

The Volcker Rule proposed regulations permit the first two activities but not the third. A permitted risk can be “hedged, but only of the purported hedge:

[d]oes not give rise, at the inception of the hedge, to significant exposures that were not already present in the individual or aggregated positions, contracts, or other holdings of a covered banking entity and that are not hedged contemporaneously…

As long as this principle survives the onslaught of bank lobbyists (and “significant” is not warped into another meaning through interpretation), it would be virtually impossible to lose money on a hedge. This is a massively important feature of the Volcker Rule regulations and the regulatory agencies should be complimented on their effort, not have their effort belittled.

Even Mitt Romney has overtly called for the repeal of the Dodd-Frank Act. This is irresponsibly dangerous. It is no trivial matter when the tireless efforts of the regulators are described as futile or impossibly cumbersome. There are plenty of defects in the new regulatory framework, but it beats the heck out of the dangerous deregulation that existed before.

One of the girls, noticing the bright sunlight streaming through the tall windows of the venerable office building, said, “I like it down here in Manhattan. I’d like to live here someday.”

And then they began talking, raising their hands politely when they wanted to be heard. As they spoke, there was an undercurrent of emotion that was disturbing. So I asked if they were generally happy with their lives. Only five raised their hands. When I asked the others why they were unhappy, they said because their neighborhood was not safe, because one or both of their parents had died, because there was no father in many of their lives, because their families were poor.

Several began to cry. One girl said she’d been raped when she was three years old. She looked down at the table and murmured, “I never feel safe.” Another said, “I saw someone on my block get shot. After that I didn’t want to go outside. When I go to school I always look at that spot where he was laying on the ground. It hurts to think about it.”

The kids spoke of drug dealers and gang members and people they had known who’d been shot and killed. Several of the youngsters, boys and girls, said they never wanted to get married because they saw domestic life as never-ending strife and grief. They spoke of 16-year-olds who were parents and adults without jobs and parties ruined by shootouts, with people running for cover as if they were in the Wild West.

“I don’t like my life,” said one girl. Another said she felt there was no purpose to her existence. One child who was weeping said she didn’t want to say why. “It’s too personal,” she whispered. “I can’t talk about it.”

We’ve failed these youngsters in so many ways. Too often their own parents have failed them, and the politicians at every level of government, and the general public, which is monstrously indifferent to the plight of the poor. There was nothing unusual about that group of youngsters from the Bronx. You’ll hear the same stories of grief and violence and deprivation on the South Side of Chicago, in South Los Angeles, in East St. Louis and Atlanta and Philadelphia and Newark. But the movers and shakers in media and government would rather swallow strychnine than confront this catastrophe head-on.

You won’t hear about it in the presidential race. Barack Obama can barely bring himself to say the word "poor." And Mitt Romney was famously dismissive about even the deepest concentrations of poverty. “I’m not concerned about the very poor,” he said. “We have a safety net there. If it needs a repair, I’ll fix it.” He later described his comment as a “misstatement.”

Fifty million Americans are poor and another 50 million have been characterized as “near poor,” which means they can feel the awful flames of poverty licking at their heels. That’s almost a third of the entire U.S. population. You’d think, in that context, it would be disconcerting to see the president yukking it up at the White House correspondents dinner with the likes of Lindsay Lohan, Kim Kardashian, Kate Hudson and George Clooney in the audience, and later raking in the dough at a $40,000-a-plate fundraiser at Clooney’s home in Los Angeles.

But that’s standard procedure in a country that has given up on its great promise of upward mobility and widely-shared prosperity. The Obama and Romney camps are planning to spend a billion dollars each, a truly obscene amount, in their fight for the presidency of a nation that is now unabashedly of, by, and for the rich.

Poor kids don’t stand a chance in this land of the plutocrats.

Credit: Helen Slottje for Shaleshock

The case study profiled on NPR highlights a number of issues. One, because cumulative impacts are not taken into consideration during the permitting process, communities end up with multiple polluting industries. In other words, each polluting industry is evaluated as if it were the only industry in a community and not by taking stock of all industries in the community. The result is that while each individual plant may not be creating an environmental burden, the cumulative impact of all the plants often result in significant environmental burdens. This flaw has long been highligted by environmental justice critiques of EPA procedures and makes it difficult, as in this case, to isolate what is causing the health problem.

At the same time, while it is true that there are several polluting industries in the community, the newness of the symptoms and health problems suggests that something toxic was recently introduced, like the new fracking wells. The negative environmental impact of fracking is well documented, from flammable tap water to contaminated groundwater supplies to earthquakes. Fracking uses a mix of chemicals, including ones that have proven to be toxic to animals and humans. And the problem is that we don't know what impact these chemicals are having. Federal rules for fracking have not been updated since 1988, which is long before the industry began using the high-volume fracking that is now so popular. States with high-volume fracking, like Wyoming, only began regulating the practice less than two years ago.

First of all, we must ask: how on earth could JP Morgan Chase have lost money on a hedge? Hedges are logically used to reduce risk. The bank might have lost money on the underlying risk because it did not completely hedge it. But, since it lost money on the hedge itself, the reported loss means that the transactions it calls “hedges” in fact added risk to the bank, over and above the underlying risk it started with. This incremental risk means that the purported “hedge” constituted a new risk position, even though it may have offset some (or even all) of the underlying risk.

The proposed rules implementing the Volcker Rule provision of the Dodd-Frank Act prohibit proprietary trading by banks that benefit from FDIC insurance and access to the Fed window for liquidity. The rules make an exception for a “risk reducing hedge” so long as the hedge “does not give rise, at the inception of the hedge, to significant exposures that were not already present in the individual or aggregated positions, contracts, or other holdings of a covered banking entity and that are not hedged contemporaneously.” If the JP Morgan Chase transactions conformed to this principle, the hedging transactions could not generate a loss on their own.

The only conclusion that can be drawn is that the transactions that JP Morgan Chase calls hedges actually piled more risk on the bank, and quite a great deal more risk it seems.

Opponents of the Volcker Rule, like Jamie Dimon, ridicule the concept that hedges must be risk reducing, not risk adding. This episode not only shows that they are dead wrong, but also provides an insight into the vehemence of their objections. If you can lose $2 billion on a position, it is clear that you can make similar amounts under different circumstances. The growing spotlight on the bank’s “chief investment office” illuminates the massive profits previously recorded by this operation, even though its mission was to mitigate risk, not to turn a profit. In fact, turning a profit should be seen as an indication that it was taking risk on board rather than mitigating it. Without risk, there is no reward.

Which brings us to the second broad implication of these events. Dimon’s crew has pounded on the complexity of the Volcker Rule implementation proposal. Almost all of the complexity relates to proposed rules’ required processes that monitor bank business units that are supposed to be non-risk taking. Monitoring is needed because the largest banks have turned these business lines into virtual hedge funds in their frenzy to exploit their oligopolistic dominance of markets. With these advantages, they can extract massive profits until, inevitably, hubris and greed entice them across the line of prudency. The symmetry of risk and reward means that large profit means that disastrous loss is just around the corner.

That is exactly what happened here. The first indication of the massive position taken on by the London Morgan trader Bruno Iskil, known in the market by his nom de guerre, “Voldemort,” was the widespread complaint by hedge funds that Voldemort was distorting certain credit default swap prices by dominating the market. (Which I wrote about last month.) Now, the hedge funds have exacted their revenge, trading furiously against JP Morgan Chase’s “chief investment office.”

Closing down specific trading desks that employ the word “proprietary” in their names is simply not enough. The risk-taking corporate culture permeates every area of the big banks. How else could a bank employee assigned to the boring task of reducing risk or serving the needs of customers make a bonus like their prop trader colleagues? Rigorous and comprehensive monitoring is essential, given the imprudent business practices to which the big banks are addicted.

And Dimon has relentlessly lobbied to restrict the reach of financial reform from non-U.S. operations. He argues that these operations do not affect the U.S. company and are sufficiently regulated abroad. That seems far fetched now.

Finally, the banks (along with a number of academics who are naïve or worse) smugly suggest that prohibiting specific bank activities is an outdated approach, rooted in the financial system of the 20th Century rather than the modern, high-tech global markets. They argue for allowing all forms of risk-taking, but making certain that the banks keep capital reserves on hand to cover the inevitable meltdown. These people are, to put it mildly, the overly simplistic thinkers. In order to calculate the amount of capital that must be reserved, the regulators must be able to measure the risk exposures created by bank activities. Professor Simon Johnson points out that JP Morgan Chase passed its stress test with flying colors and that the regulators had no inkling of the time bomb ticking away in Voldemort’s positions. No less an expert on the fiasco than Jamie Dimon himself characterized the trading tactic used by Voldemort as a “terrible, egregious mistake.” It should be noted that no one claims that Voldemort engaged in a rogue act. The mistake was the bank’s, not his alone.

It is abundantly clear that the megabanks routinely engage in trading activity, throughout their operations, that expose them to risks that neither they nor the regulators can possibly measure. It must be pointed out that it is widely believed that JP Morgan Chase’s risk management systems are the best in the business. To rely on the internal risk management systems of these banks or on the ability of the far less sophisticated measurement capabilities of the regulators who establish capital reserve requirements means that the next financial crisis will look like 2008, except that the resources needed to avoid complete failure no longer exist. It also means that the next crisis will happen soon.

The Volcker Rule, or the alternative approach of the SAFE Bank Bill introduced by Senator Sherrod Brown last Wednesday, simply must go into effect. Why on earth would anyone consider following the wisdom of Jamie Dimon on this question?