News Shorts, Feb. 26-March 4, 2018
Democratic and Republican Lawmakers Blast Proposal to Sell Off Parts of TVA
Feb. 25, 2018—The Trump budget proposal for selling off the transmission lines of the Tennessee Valley Authority (TVA) came under immediate attack from both Democrats and Republicans. Senator Lamar Alexander, Republican of Tennessee, called it a “looney idea.” When President Obama made the same proposal in 2013, Sen. Alexander said, all he succeeded in doing was hurting the TVA’s credit rating and “threaten to increase electric bills for 9 million Tennessee Valley ratepayers.”
Former Tennessee Governor Phil Bredesen, a Democrat planning to run for Senate, and Tennessee Republican Congressman Chuck Fleischmann, also blasted the proposal.
The TVA was a signature program of the New Deal, announced by President Franklin Roosevelt in 1933 with the backing of leading Republicans such as Sen. George Norris of Nebraska. Initially financed by the Federal government, it has become self-sustaining primarily through sale of electricity. Although its bonds are backed by the Federal government, it currently receives no government funding, and any profits that are made go into the TVA itself, which functions as a regional development authority. TVA rates are low. Indeed, the TVA’s success in transforming its 7-state region from a poverty-stricken area subject to devastating floods and disease, has been a model for regional development worldwide.
Any sell-off would, as former Gov. Bredesen pointed out, amount to handing over an asset paid for by the residents of the region and the nation to private companies who would move to recoup the cost of their purchase by raising rates, and hurting the population of Tennessee. Any short-term gain of cash for the Federal government would be nullified.
The Trump “infrastructure plan” also called for selling off the transmission assets held by the Southwestern Power Administration, established in 1944, which operates 24 hydroelectric dams serving Arkansas, Oklahoma, and Missouri: the Western Area Power Administration, established in 1977, which operates 56 hydro-electric dams in Colorado, Montana, Arizona, Utah, and California; and the Bonneville Power Administration, established in 1937 to serve the Columbia River Basin, which operate 31 hydroelectric dams powering Oregon, Washington, Idaho, and parts of other Northwestern states.
U.S. Household Debt Hits New High
Feb. 25, 2018—The New York Fed’s Quarterly Report on Household Debt and Credit, issued this month, revealed that total household debt reached a new peak in the fourth quarter of 2017, rising $193 billion to reach $13.15 trillion. Balances climbed 1.6 percent on mortgages, 0.7 percent on auto loans, 3.2 percent on credit cards, and 1.5 percent on student loans this past quarter.
The NY Fed also noted that consumer credit (credit figures that do not include real estate debt) rose by $27.95 billion from the previous month, the largest increase in 16 years. That increase was about $10 billion more than what experts had predicted.
Year on year, consumer credit debt grew 8.83 percent. Revolving outstanding credit, comprised primarily of credit cards, increased at a 13.3 percent annual rate in November, while non-revolving outstanding credit, mainly student and auto loans, grew 7.2 percent annually. Many of the auto loans are subprime. Student loan debt has, in fact, been a growing bubble for many years.
As far as credit card debt is concerned, the increase is accompanied by a higher rate of default. As a result, the four largest U.S. retail banks report an almost 20 percent increase in credit card losses across the board during 2017.
“People are using their cards to get from paycheck to paycheck,” said Charles Peabody, managing director at the Washington-based investment group Compass Point, according to a report in The Financial Times. “There’s an underlying deterioration in the ability of the consumer to keep up with their debt service burden.”
To this should be added the corporate debt bubble which has been pointed out by financial analysts such as Nomi Prins, and has already resulted in an increase in corporate bankruptcies.
How does picture correspond to the official statistics proclaiming a U.S. recovery? To be blunt, it shows them to be a fraud.
Stock Market Volatility Rewards the Wall Street Sharks
Feb. 25, 2018—Estimates are that approximately $3 trillion dollars was lost by stock market investors in the dramatic market crashes of Feb. 2 and 5th. But who took those losses? It wasn’t the big Wall Street sharks.
A column by Matthew Cunningham-Cook in the Feb. 13 edition of In These Times takes up this issue in a trenchant analysis.
While this downturn may not spell an immediate crisis for capitalism, it does further reveal the rot at the core of the system,” Cook writes. “The largest financial firms can profit from sudden fluctuations in the market—while ordinary investors such as those with pension funds and 401(k)s are left holding the bag. This volatility in the market has allowed for more Wall Street ticks to suck at the hog of the roughly $27 trillion in retirement assets held by Americans.
Indeed, Cook goes on, the Wall Street sharks have been complaining mightily over recent years about the lack of market volatility. It’s markets’ movements up and down that feed their gambling profits.
Many of these powerful financial institutions [Goldman Sachs, JPMorgan Chase, Bank of America, et al.] have been betting that volatility will rise. The Wall Street Journal reported in April that `banks would suddenly be sitting on huge profits from their volatility insurance’ were volatility to increase. Low volatility in the stock market has hurt the revenue of trading desks such as those at Goldman Sachs by reducing opportunities to exploit spreads in prices. The largest banks have discretionary control over hundreds of billions of dollars in assets that, through selective buying and selling, can create added volatility in the market.
Cook proceeds to review how these big banks made out like bandits during the 2008 crash, especially Goldman Sachs. He concludes with several suggestions to stop the manipulation of the markets in their tracks. The most important one is the re-imposition of Glass-Steagall banking separation of commercial and investment banking—the long-overdue reform that is now languishing in Congress, for lack of brave political leaders to finally take on Wall Street on behalf of the general welfare.
Growth in U.S. Wind and Solar Power Signal Economic Devolution
Feb. 25, 2018—The great American System economists and statesmen knew what they were talking about, when they insisted that productivity of the economy depended upon investing to increase man’s power over nature, i.e. to invent and install ever more efficient machinery to produce the necessities of life. It was this concept that was responsible for the major steps in productivity in the U.S. economy, that made us the envy of the world.
In the current age, however, this concept has been thrown in the waste basket, as in the case of energy, where people are encouraged to eschew advanced energy production, such as nuclear power, in favor of reliance on Mother Nature—the sun and the wind.
The latest analysis by the Business Council on Sustainable Energy and Bloomberg New Energy Finance, published February 15 in the Sustainable Energy in America Factbook, underscores the disaster. It reveals that “renewable” energy (mostly wind and solar) now makes up 18% of the nation’s electricity production. Nuclear power, which is seeing a decrease in operating plants at an alarming rate, is at 19%. The data come from the Energy Department.
The numbers are stunning: over 18 gigawatts of renewables came on line in 2017, comparable to building nearly 18 nuclear power plants. Overall, renewables have constituted 55% of total capacity built in the past 10 years. Last year, non-hydro renewables represented 62% of new installations.
The report points out that to provide 1 GW of power output, comparable to one nuclear plant, requires 500 wind turbines, and 4.6 million (!) solar photo-voltaic panels. But that’s not enough, of course. Because the wind doesn’t blow all the time, and the sun doesn’t shine all the time, these facilities all require backup 24-hour energy plants to ensure continuous electricity production.
Trump Renews Disaster Aid to Puerto Rico; No Recovery in Sight
Feb. 25, 2018—On Feb. 23, President Trump extended disaster aid to Puerto Rico for continued collection of debris and emergency services on the island. The program was scheduled to expire on Feb. 26, six months after its first declaration. Under the terms of the declaration, Puerto Rico will be able to get 100% of its costs from the Federal government.
The debris collection program is extended for 90 days, and the emergency services for 60. It is under the emergency services program that water, food, and other immediate needs of a population devastated by lack of basic infrastructure for health and safety are being provided by FEMA and the Army Corps of Engineers.
As far as reconstruction goes, estimates are that anywhere from 20 to 30 percent of the island’s population continues to be without electricity. The Army Corps of Engineers still has 262 people on the island working on restoring power transmission; they are being supplemented by volunteer crews from various local utilities on the mainland. According to a Feb. 22 statement by the Army Corps individual in charge, Lt. General Todd Semonite, the huge undertaking of restoring power will continue for many weeks more. He hopes that 95% of the population will have power by the end of March.
The General pointed out that, due to its economic conditions, Puerto Rico had no prepositioned equipment to deal with the devastation from Hurricanes Irma and Maria. Equipment ordered from the mainland is still in the process of arriving.
What is missing, of course, is any plan for the Island’s real economic recovery, which would require hundreds of billions in investment in a totally new modern infrastructure. Such a prospect could only be accomplished by the establishment of a new national credit institution, dedicated to a nationwide economic development program, as outlined in the legislation you’ll find here.