By: Mike Krauss
Bucks County Courier Times
The collapse of the American middle class continues.
While administration officials and members of Congress running for re-election peddle bogus unemployment statistics and claims of recovery the way Wall Street peddled worthless mortgage securities, another tidal wave of home foreclosures is rolling past the subprime borrowers and deep into the once credit worthy.
As CNBC’s Diana Olick reported, almost 8 million Americans are now behind in their mortgage payments. The real estate industry monitor, Irvine Housing blog reported that one bank alone, “Bank of America, which currently forecloses on 7,500 homes every month will see that number rise to 45,000 by December 2010.”
No wages and low wages are taking a fearful toll in the U.S.
Based on the official Department of Labor unemployment rate of 9.7 percent, there are 14.8 million unemployed. But add in those who have stopped looking for work, or are getting by on part time work, and the dimension of the catastrophe comes into view. The AFL CIO puts it at 25.5 million Americans.
A sobering analysis in The Atlantic magazine recently described how long term, widespread unemployment is resulting in “a slowly sinking generation, a remorseless assault on the identity of many men; the dissolution of families and the collapse of neighborhoods.” The author concluded, “(Americans) are living through a slow-motion social catastrophe.”
To arrest this collapse, America needs jobs. It is the most urgent national priority.
Jobs create taxpayers and tax revenue, a demand for goods and services and more jobs. Jobs reduce the costs of unemployment, welfare and health care. Jobs shrink the deficit and debt. Jobs keep families in their homes, protect children and maintain communities. Jobs create hope.
America needs jobs. Infrastructure on a massive scale – the forgotten promise of both political parties in 2008 – is the place to start. Millions can be trained now for jobs in infrastructure and the supply chain of goods and services.
Partnerships of community colleges and the private industry which will need the new hires can provide the training.
The growing legion of the unemployed who are already better educated and trained – veterans coming home to no job, recent college graduates – will find jobs in the management and professional services required to support a large scale, long term infrastructure initiative.
America needs jobs, but it does not need to wait for Washington to create them. There is an alternative.
While almost every state in the nation is in dire financial straits and slashing spending for the needs of people, North Dakota is posting $1 billion surpluses. Since 2000, the state’s GNP has grown 56%, personal income is up 43%, and wages up 34%.
How does North Dakota manage to swim against the tide? The answer is that North Dakota is the only state with its own bank. Apart from returning about a third of a billion dollars to the state’s general fund in the past ten years, it has invested in businesses, infrastructure, start-ups and education.
The bank has on its books all the assets of the state, which are leveraged to create new credit and investment. Most states have similar assets to put in play.
For example, the State of California owns about $200 billion in real estate, roughly $62 billion in investments and has more than $100 billion in projected 2010 revenues. Reasonably leveraged, that asset base could support almost $4 trillion in loans – a river of new credit and investment.
California is instructive because the City of Los Angeles is now asking the feds for a loan guarantee backed by a voter approved sales tax – not another unfunded hand out – to get going on an ambitious plan to expand an electric rail line. The Washington Post reported that this project will create 150,000 jobs.
This is the scale of job creation America needs. But Washington has no such program to help California or any other state. Again as reported in the Post, efforts to create a National Infrastructure Bank have gone nowhere since first proposed in 1994.
There are no photo-ops for check-bearing members of Congress, just that boring banking stuff.
A State Bank of California could provide the loans, loan guarantees or direct investment needed by LA. State banks all over the nation could do the same.
The implication is revolutionary. The American people can bypass Wall Street and Washington and get on with a decentralized, locally directed recovery of the nation's stolen prosperity.
Even if smaller states such as Pennsylvania or New Jersey (where this column appears) had access to only one tenth of California’s state assets, it would generate $400 billion in credit and investment in each.
Pennsylvanians can rebuild unsafe bridges, crumbling highways and dilapidated water treatment facilities, renovate parks and cherished national monuments to world class status, modernize transportation systems, transform waterfronts, blighted urban neighborhoods and abandoned small town centers, build or renovate schools and health centers - and put people to work on the scale required.
The idea is catching fire. The legislatures of half a dozen states are taking steps to create a state bank. As of today, candidates in Florida, Oregon, Illinois, California, Washington State, Vermont, and Idaho have platforms which contain this game changing proposal.
Americans need jobs. They do not need and cannot afford to wait for Washington to create them.
State banks now!