Why Is Socialism Doing So Darn Well in Deep-Red North Dakota?

Corporate Accountability and WorkPlace  

AlterNet / By Les Leopold

Why Is Socialism Doing So Darn Well in Deep-Red North Dakota?

North Dakota's thriving state bank makes a mockery of Wall Street's casino banking system -- and that's why financial elites want to crush it.

 

Photo Credit: Stutterstock.com

March 26, 2013  |  

 

North Dakota is the very definition of a red state. It voted 58 percent to 39 percent for Romney over Obama, and its statehouse and senate have a total of 104 Republicans and only 47 Democrats. The Republican super-majority is so conservative it recently passed the nation's most severe anti-abortion resolution – a measure that declares a fertilized human egg has the same right to life as a fully formed person.

But North Dakota is also red in another sense: it fully supports its state-owned Bank of North Dakota (BND), a socialist relic that exists nowhere else in America. Why is financial socialism still alive in North Dakota? Why haven't the North Dakotan free-market crusaders slain it dead?
Because it works.

In 1919, the Non-Partisan League, a vibrant populist organization, won a majority in the legislature and voted the bank into existence. The goal was to free North Dakota farmers from impoverishing debt dependence on the big banks in the Twin Cities, Chicago and New York. More than 90 years later, this state-owned bank is thriving as it helps the state's community banks, businesses, consumers and students obtain loans at reasonable rates. It also delivers a handsome profit to its owners -- the 700,000 residents of North Dakota. In 2011, the BND provided more than $70 million to the state's coffers. Extrapolate that profit-per-person to a big state like California and you're looking at an extra $3.8 billion a year in state revenues that could be used to fund education and infrastructure.

One of America's Best Kept Secrets

Each time we pay our state and local taxes -- and all manner of fees -- the state deposits those revenues in a bank. If you're in any state but North Dakota, nearly all of these deposits end up in Wall Street's too-big to-fail banks, because those banks are the only entities large enough to handle the load. The vast majority of the nation's 7,000 community banks are too small to provide the array of cash management services that state and local governments require. We're talking big bucks; at least $1 trillion of our local tax dollars find their way to Wall Street banks, according Marc Armstrong, executive director of the Public Banking Institute.

So, not only are we, as taxpayers, on the hook for too-big-to-fail Wall Street banks, but we also end up giving our tax dollars to these same banks each and every time we pay a sales tax or property tax or buy a fishing license. In North Dakota, however, all that public revenue runs through its public state bank, which in turn reinvests in the state's small businesses and public infrastructure via partnerships with 80 small community banks.

How the State Bank Creates Jobs

Banks are supposed to serve as intermediaries that turn our savings and checking deposits into productive loans to businesses and consumers. That's how jobs are supported and created. But the BND, a state agency, goes one step further. Through its Partnership in Assisting Community Expansion, for example, it provides loans at below-market interest rates to businesses if and only if those businesses create at least one job for every $100,000 loaned. If the $1 trillion that now flows to Wall Street instead were deposited in public state banks in all 50 states using this same approach, up to 10 million new jobs could be created. That would effectively end our destructive unemployment crisis.

No Bailouts for the BND

Banking doesn't have to be a casino. It doesn't have to be designed to create gambling opportunities so bank traders and executives can make seven- and eight-figure salaries. As BND president Eric Hardmeyer said in a 2009 Mother Jones interview:

We’re a fairly conservative lot up here in the upper Midwest and we didn’t do any subprime lending and we have the ability to get into the derivatives markets and put on swaps and callers and caps and credit default swaps and just chose not to do it, really chose a Warren Buffett mentality—if we don’t understand it, we’re not going to jump into it. And so we’ve avoided all those pitfalls.

As state government employees, BND executives have no incentive to gamble their way toward enormous pay packages. As you can see, the top six BND officers earn a good living, but on Wall Street, cooks and chauffeurs earn more.

• Eric Hardmeyer, President and CEO: $232,500
• Bob Humann, Chief Lending Officer: $135,133
• Tim Porter, Chief Administrative Officer: $122,533
• Joe Herslip, Chief Business Officer: $105,000
• Lori Leingang, Chief Administrative Officer: $105,000
• Wally Erhardt, Director of Student Loans of North Dakota: $91,725

The very existence of a successful BND undermines Wall Street's claim that in order to attract the best talent big banks need to offer enormous pay packages. Yet somehow, North Dakota is able to find the talent to run one of the soundest banks in the country? The BND is living proof that Wall Street's rationale for sky-high executive pay is a self-serving fabrication. (For more information on financial inequality please see my latest book, How to Earn a Million Dollars an Hour, Wiley, 2013.)

Wall Street Is Gunning for Bank of North Dakota

As you can well imagine, our financial elites would love to see this successful (socialist!) bank disappear. Its salary structure and local investments makes a mockery of Wall Street's casino banking system. But the bigger threat comes from the possible spread of this public banking concept to other states. Already, there are 20 or so state legislatures that are exploring state banks. Collectively, more public banks would pose an enormous threat to the $1 trillion in state and local bank deposits that now run through Wall Street.

But elite financiers also stand to lose much more. In the 49 states without a public bank, there's no safe place to turn for loans to rebuild schools and finance other public infrastructure projects. That creates an enormous opportunity for Wall Street firms to hook localities on expensive bond programs -- like capital appreciation bonds, which can lead to repayments equaling 10 times the original loan. Investment bankers and advisers also make enormous fees by selling expensive, high-risk financial schemes to state and local governments (read an investigative report here). But such schemes are useless in North Dakota where the state bank provides the capital the state needs for a fraction of the long-term costs.

Trade Agreements: Wall Street's Weapon of Mass Destruction

Clearly, from Wall Street's perspective, the North Dakota bank must go, and all other state efforts to replicate it must be thwarted. Wall Street's stealth weapon may be lodged within the latest corporate trade agreement called the Trans-Pacific Partnership (TPP), which currently is being negotiated in secret. We already know that Wall Street is seeking to remove all tariff restrictions that prevent the U.S. financial services industry from doing business in countries like Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The biggest banks also want the treaty to eliminate "non-tariff" barriers including regulations that create "unfair" competition with state-owned financial enterprises.

Depending on the final language, it is possible that the activities of the Bank of North Dakota could be ruled illegal because "foreign bankers could claim the BND stops them from lending to commercial banks throughout the state," according to an analysis by Sam Knight in Truthout. How perfect for Wall Street: a foreign bank can be used as a shill to knock out the BND.

The Public Bank Movement

A small but highly dedicated group of financial writers, public finance experts and former bankers have formed the Public Bank Institute to spread the word. Working on a shoestring budget, its president Ellen Brown (author of Web of Debt), and its executive director Marc Armstrong, a former wholesale banker, have become the Johnny Appleseeds of public banking, hopping from state to state to encourage legislatures to explore state-owned banks.

The movement is gathering steam as it holds a major conference on June 2-4 at Dominican University in San Rafael, CA featuring such anti-Wall Street hell raisers as Matt Taibbi and Gar Alperowitz, along with Brigitte Jonsdottir, a member of the Icelandic parliament, and Ellen Brown.

Is America Up For This Fight?

Since the crash, the financial community has largely managed to wriggle off the hook. In fact, fatalism may be replacing activism as we sense that maybe Wall Street is simply too big and too powerful to change. After all, the big banks seem to own Washington, as too-big-to-fail banks are permitted to grow even larger and more invulnerable to prosecution and control.

But this new public banking movement could have legs, especially if it teams up with those fighting for a financial transaction tax (see National Nurses United.) Most Americans remain furious about how financial elites profited from the crisis -- before, during and after -- while the rest of us pick up the tab. Americans know deep down that Wall Street is the predator and we are the prey.

The state-owned and operated Bank of North Dakota proves that it doesn't have to be that way. This is the time to fight for public state banking in a big way.
You game?

Les Leopold is the executive director of the Labor Institute in New York, and author of How to Make a Million Dollars an Hour: Why Hedge Funds Get Away with Siphoning Off America's Wealth (J. Wiley and Sons, 2013).

The Democrats' Democracy Problem

THE WASHINGTON POST

WHAT WOULD WILSON DO?

The Democrats' Democracy Problem

By Ronald D. Asmus

 

Sunday, June 17, 2007 

Democrats today have a problem with democracy. We have lost our voice on the issue of promoting democracy abroad -- which means that what was once a core Democratic foreign policy idea is being ceded to the GOP.

In 1995, democracy promotion was one of the three central pillars of President Bill Clinton's first National Security Strategy. Rereading the document today, with its call for "a more secure world where democracy and free markets know no borders," I'm struck by how the idea of expanding democracy's reach permeated official Democratic thinking a decade ago.

No more. Today, it's hard to say where the Democratic Party stands on the issue of promoting democracy. The party's 2004 presidential nominee, Sen. John F. Kerry, never spoke directly to the issue. When Senate Democrats issued their March 2006 national security blueprint, entitled "Real Security," it did not even mention the word democracy. Democratic think tanks in Washington churn out reports criticizing Bush administration policies and laying out Democratic alternatives on various matters, but few if any of them explain how -- or whether -- we would advance democracy abroad if we again won the White House.

You can look in vain for major legislative initiatives on the issue from Senate Majority Leader Harry M. Reid or House Speaker Nancy Pelosi; you have to strain to hear clear statements from our leading presidential candidates -- Hillary Rodham Clinton, Barack Obama and John Edwards -- or even to find a mention of democracy in their campaign Web sites' foreign policy sections. The party's leaders have gone quiet in the larger discussion about values, liberty and human rights; they seem to see no broader purpose for U.S. foreign policy other than self-interest and an end to the Iraq war. When democracy activists from around the world (including those from center-left parties) visit Washington, they often find it easier to get the time and attention of Republican senators than of their Democratic counterparts. Democracy promotion, they are sometimes told, has become "their" -- i.e., the Republicans' -- issue.

Woodrow Wilson, FDR, Harry S. Truman and John F. Kennedy must be turning in their graves. Using U.S. power to promote freedom and democracy was central to their foreign policies and legacies. Even Jimmy Carter, a far less successful Democratic president, can be proud of making human rights a major U.S. foreign policy objective. And Bill Clinton's interventions in the Balkans and drive to expand NATO were all about consolidating democracy in Europe's eastern half. There was a time, not too long ago, when Democrats were proud of their track record on democracy promotion -- and rightly so.

Is the party of Wilson abandoning Wilsonianism? Why have we gone mum on an issue that is so central to our own foreign policy heritage and past triumphs?
Part of the reason is President Bush. In Prague earlier this month, Bush won applause for calling "the advance of freedom and democracy" the "great alternatives to repression and radicalism." But his conflation of democracy promotion with the invasion of Iraq and the preventive use of military force has given freedom a bad name. The more ardently Bush talks about democratization abroad, the more Democrats seem to scamper in the opposite direction. In the zero-sum partisan world of today's Washington, the intense dislike of Bush and his Iraq misadventure has led many Democrats to reject their own foreign policy traditions.

Reinforcing this Democratic retreat on democracy has been the uneasy sense that pushing for more openness in some regions, especially the Middle East, may only empower our foes. Hamas won elections in the Palestinian Authority, and other Islamic radicals are eager to emulate their victory at the ballot box. And at home, the rise of the antiwar movement has amplified Democratic voices dubious about universal liberal values and the use of U.S. power to pursue them.

The net result? The Democratic Party is divided over whether it should return to the Clinton-era principles of liberal internationalism and reapply them to our increasingly dangerous post-9/11 world, or instead embrace a new, more limited form of cold-eyed realism based on a narrower definition of U.S. interests, a preference for stability and an abiding skepticism about whether pursuing democracy is a luxury we can afford.

It is time to stop blaming Bush for our inability to articulate a true alternative strategy for expanding democracy and human rights. Democracy promotion was a key issue long before Bush emerged on the national stage, and it will remain one long after he has retired to his Crawford ranch. Nothing is stopping us from coming up with our own updated vision of a principled, tough-minded liberal internationalism except our own confusion, cynicism and timidity. Indeed, such a vision is more important than ever. Americans are hungry for something different and inspiring after years of the Bush administration's bluster and blunders. And such an alternative is central to the task of rebuilding the nation's image and alliances.

Those who think the Democrats can't go wrong in 2008 should think again. In the early 1970s, the antiwar movement helped take the United States out of Vietnam and the GOP out of the White House -- for one term. It also saddled the Democratic Party with the albatross of an ambivalent attitude toward U.S. purpose and power that has taken decades to overcome. Let's not make the same mistake again.

What looms above this reversal of principle is Iraq. Democrats who are disgusted with the fruits of Bush's reckless, values-based foreign policy must avoid the temptation to embrace a heartless, interest-based foreign policy devoid of values. The past few years teach us several lessons -- including that some things are true even if George W. Bush says them.

One key lesson is that trying to impose democracy at the point of a gun, without the right preconditions on the ground or a competent plan for the day after, is a recipe for disaster. But let's not forget the lesson of 9/11, either -- that the failure of Arab politics to produce decent, democratic governments helped spawn homicidal opposition movements such as al-Qaeda.

It was also a major error to walk away from Afghanistan after the 1989 Soviet withdrawal, thereby allowing the Taliban and al-Qaeda to seize power. And the cozy deals we have made with authoritarian regimes such as those in Egypt and Saudi Arabia may have looked good at the time, but they wound up fanning the flames of Islamic radicalism and stoking the strategic nightmare we now face.
Democracy promotion is often messy and hard. You need to work with authoritarian governments even as you try to encourage change in their societies; aid sent to democrats abroad can be wasted; elections don't always produce the results we'd like. Still, the long-term benefits -- as we see in Europe today -- are worth it. The answer to Bush's mistakes must be to develop a more realistic and credible democracy-promotion strategy, not to abandon the goal. 

Doing so is also smart politics. Democrats won last year's midterm elections by tapping into the public's disenchantment over Iraq, corruption and other issues. For the first time in decades, polls show the GOP's traditional advantage on national security issues evaporating. But this reflects a collapse in the public's trust of the Republicans, not any particular enthusiasm for the Democrats' ideas. Large parts of the American public still doubt our core convictions on foreign policy. Pointing out Bush's failures won't be enough to win the White House. The American public wants to know what we stand for if it is to entrust us with the ship of state in today's perilous world. 

ronasmus@yahoo.com
 
Ronald D. Asmus was deputy assistant secretary of state for European affairs during the Clinton administration. He is the author of "Opening NATO's Door: How the Alliance Remade Itself for a New Era."

Progressive 'Back to Work' Budget Wins Praise for Anti-Austerity Approach

Published on Thursday, March 14, 2013 by Common Dreams

Progressive 'Back to Work' Budget Wins Praise for Anti-Austerity Approach

'A reminder that we don’t need to cut teachers and school lunches when we can eliminate wasteful giveaways to fossil fuel corporations.'

- Jon Queally, staff writer

In the midst of ongoing hysteria about a 'non-existent deficit crisis' in Washington, the Congressional Progressive Caucus on Wednesday unveiled an alternative approach to destructive austerity economics by releasing their 'Back to Work Budget' plan for 2014.





Pushing back specifically on the dominant talking point of inside-the-Beltway elites, the budget challenges the idea that cutting programs, reducing corporate tax rates, and slashing investments is a pathway to economic prosperity. Its proponents argue the US does not have "a deficit crisis"—as those pushing for steep cuts suggest—but rather, "a jobs crisis."

Presented by CPC co-chairs Reps. Raúl M. Grijalva and Keith Ellison and backed by members of the caucus' Budget Task force—Reps. Jim McDermott, Jan Schakowsky, Barbara Lee and Mark Pocan—the plan describes how smart investments, not deep cuts to key programs, would create almost 7 million jobs over the first year of its implementation.

“Americans face a choice,” Grijalva and Ellison said. “We can either cut Medicare benefits to pay for more tax breaks for millionaires and billionaires, or we can close outdated tax loopholes and invest in jobs. We choose investment.”

They continue:

The Back to Work Budget invests in America’s future because the best way to reduce our long-term deficit is to put America back to work. In the first year alone, we create nearly 7 million American jobs and increase GDP by 5.7%. We reduce unemployment to near 5% in three years with a jobs plan that includes repairing our nation’s roads and bridges, and putting the teachers, cops and firefighters who have borne the brunt of our economic downturn back to work. We reduce the deficit by $4.4 trillion by closing tax loopholes and asking the wealthy to pay a fair share. We repeal the arbitrary sequester and the Budget Control Act that are damaging the economy, and strengthen Medicare and Medicaid, which provide high quality, low-cost medical coverage to millions of Americans when they need it most. This is what the country voted for in November. It’s time we side with America’s middle class and invest in their future.

Received as a breath of fresh air of economic sanity, the plan was praised by a variety of individuals and groups.

“If you listen to the budget debate in Washington too long, you almost start to believe that austerity is inevitable, and that the only choice left is how to allocate the suffering," said Ben Schreiber, a policy analyst for Friends of the Earth. "It is refreshing that the House Progressive Caucus has come up with a positive vision for moving the country forward. It serves as a reminder that we don’t need to cut teachers and school lunches when we can eliminate wasteful giveaways to fossil fuel corporations."

Schreiber specifically welcomed inclusion of a carbon tax on fossil fuels and compared it to the woefully inadequate and industry-friendly approach laid out in the GOP budget presented by Rep. Paul Ryan on Monday. “The Back to Work Budget would allow us to make polluters pay for the damage they are causing, while using the revenue to invest in the clean energy technologies of the future—rather than continuing our addiction to dirty energy, as proposed in the Ryan plan yesterday," he said.

"Financial speculation taxes can raise substantial revenue to counteract devastating spending cuts," said Micah Hauptman of Public Citizen. "The automatic, across-the-board “sequestration” cuts began to take effect two weeks ago. And while most people have not experienced the disastrous consequences of these cuts, it is likely that they will shortly, as funding to emergency response and disaster relief programs are slashed, food inspections are reduced and public safety is compromised."

Writing at In These Times, Ian Becker assessed the budget's approach by writing:

With corporate profits already back up to record highs, the budget's strategy of public investing and corporate belt-tightening--for instance, modernizing 35,000 public schools rather than providing a $25 billion stock option loophole for Wall Street--don't seem bold, so much as commonsensical.

Key aspects of the budget proposal include:

Job Creation

• Infrastructure – substantially increases infrastructure investment to the level the American Society of Civil Engineers says is necessary to close our infrastructure needs gap
• Education – funds school modernizations and rehiring laid-off teachers
• Aid to States – closes the recession-caused gap in state budgets for two years, allowing the rehiring of cops, firefighters, and other public employees
• Making Work Pay – boosts consumer demand by reinstating an expanded tax credit for three years
• Emergency Unemployment Compensation – allows beneficiaries to claim up to 99 weeks of unemployment benefits in high-unemployment states for two years
• Public Works Job Programs and Aid to Distressed Communities – includes job programs such as a Park Improvement Corps, Student Jobs Corps, and Child Care Corps

Fair Individual Tax  

• Immediately allows Bush tax cuts to expire for families earning over $250K
• Higher tax rates for millionaires and billionaires (from 45% to 49%)
• Taxes income from investments the same as income from wages

Fair Corporate Tax

• Ends corporate tax bias toward moving jobs and profits overseas
• Enacts a financial transactions tax
• Reduces deductions for corporate jets, meals, and entertainment

Defense

• Returns Pentagon spending to 2006 levels, focusing on modern security needs

Health Care

• No benefit cuts to Medicare, Medicaid, or Social Security
• Reduces health care costs by adopting a public option, negotiating drug prices, and reducing fraud

Environment

• Prices carbon pollution with a rebate to hold low income households harmless
• Eliminates corporate tax subsidies for oil, gas, and coal companies

GETTING AMERICANS BACK TO WORK

So far and according to Dave Johnson and Bill Scher at the Campaign for America's Future, the most troubling aspect of the 'Back to Work Budget' is the absolute poverty of the media coverage surrounding it.

Writing ahead of the budget's release, Scher wrote:

For the past 24 hours, the media has dutifully reported on the budget proposal from Rep. Paul Ryan, even though everyone knows it is extremely unlikely to become law.
That’s fine; it’s not the media’s job to short-circuit debate. It’s the media’s job to report factually on the ideas proposed in Congress, so the public can weigh in before Congress votes.

Today, another budget will be proposed by the Congressional Progressive Caucus, the “Back to Work” budget. It probably won’t become law either. But it deserves every bit of media attention that Ryan’s budget gets.

But as the day followed and Johnson tracked coverage via web news searches, what did he find? As expected: Nothing. Or almost nothing. As of his writing he'd found 72,000 hits looking for stories on "Paul Ryan Budget," but searching  for "Back to Work Budget" only two—one from Huffington Post and one from Raw Story.

It's safe to say a search Thursday will yield better results. But for the moment, austerity remains the mainstream media's darling.
Read the budget's executive summary here (pdf).

Enjoy this infographic:







Watch Rep. Keith Ellison introduce the budget here:

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