January 29, 2010

First proposed in 1966 and named after Columbia University sociologists Richard Andrew Cloward and his wife Frances Fox Piven (today Piven is an honorary chair for the Democratic Socialists of America), the "Cloward-Piven Strategy" seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.

In this final article on the Cloward-Piven Strategy we take a look at recent efforts to overload the American system and way of life. There are three areas which stand out as precursors of economic collapse each making huge demands which could lead to national bankruptcy.

Any bank wishing to expand or to merge with another was required to first demonstrate that it had complied with all CRA requirements. Final approval for bank expansions or mergers could be held up or derailed entirely by complaints -- however frivolous or unfounded -- where community groups like ACORN or the Greenlining Institute accused a bank of having violated the CRA.

In response, terrified bank executives routinely agreed to appoint ACORN or the Greenlining Institute as their official "advisors" on CRA compliance, thereby giving the groups carte blancheto channel loans to their own hand-picked recipients.

The New York Post explains what happened next:

"As ACORN ran its campaigns against local banks, it quickly hit a roadblock. Banks would tell ACORN they could afford to reduce their credit standards by only a little -- since Fannie Mae and Freddie Mac, the federal mortgage giants, refused to buy up those risky loans for sale on the 'secondary market.'

"That is, the CRA wasn't enough. Unless Fannie and Freddie were willing to relax their credit standards as well, local banks would never make home loans to customers with bad credit histories or with too little money for a down-payment.

"So ACORN's Democratic friends in Congress moved to force Fannie Mae and Freddie Mac to dispense with normal credit standards. Throughout the early '90s, they imposed ever-increasing subprime-lending quotas on Fannie and Freddie….

"ACORN's intimidation tactics, and its alliance with Democrats in Congress, triumphed. Despite their 1994 takeover of Congress, Republicans' attempts to pare back the CRA were stymied….

"ACORN had come to Congress not only to protect the CRA from GOP [Republican] reforms but also to expand the reach of quota-based lending to Fannie, Freddie and beyond….

"[In June 1995] the Clinton administration announced a comprehensive strategy to push homeownership in America to new heights -- regardless of the compromise in credit standards that the task would require. Fannie and Freddie were assigned massive subprime lending quotas, which would rise to about half of their total business by the end of the decade."

This strengthening of the CRA's loan mandates, coupled with the authority that ACORN and other community organizations were given to intervene at yearly bank reviews, placed the activist groups in a position of great influence. Banks, eager to receive good reports from these groups (in order to avoid having their merger plans blocked or their lending practices challenged by the Justice Department), funneled immense sums of money to them. But the proliferation of risky loans to under qualified borrowers eventually caused Fannie Mae and Freddie Mac to suffer financial collapse in 2008. Many U.S. banks likewise folded.

This economic crisis led to the implementation of the Troubled Assets Relief Program (TARP), which Congress passed hurriedly into law in October 2008. TARP authorized the Treasury Secretary to purchase $700 billion worth of "troubled assets" from any financial institutions -- banks, savings associations, credit unions, security brokers or dealers, or insurance companies -- that were in deep fiscal trouble.

One of the stimulus bill's most significant provisions was its repeal of the essentials of the Personal Responsibility and Work Opportunity Reconciliation Act, the welfare-reform legislation passed by the Republican Congress and signed by President Clinton in 1996, which reduced the welfare rolls by two-thirds.

A Heritage Foundation report stated that 32 percent of the stimulus bill -- or an average of $6,700 in "new means-tested welfare spending" for every poor person in the U.S. -- was earmarked for such programs as Temporary Assistance to Needy Families; Medicaid; food stamps; the Women, Infants, and Children food program; public housing; Section 8 housing; the Community Development Block Grant; the Social Services Block Grant; Head Start; and the Earned Income Tax Credit. Said the report:

"But this welfare spending is only the tip of the iceberg.... Once the hidden welfare spending in the bill is counted, the total 10-year fiscal burden (added to the national debt) will [be] $1.34 trillion. This amounts to $17,400 for each household paying income tax in the U.S."

Another major example of increased welfare spending in the stimulus bill was Obama's "Make Work Pay" refundable tax credit. According to the Heritage Foundation:

"This credit represents a fundamental shift in welfare policy. At a cost of around $23 billion per year, this credit will provide up to [$400] in cash to low income adults who pay no income taxes. For the first time, the government will give significant cash to able-bodied adults without dependent children. Since most of these individuals have little apparent need for assistance, the new credit represents 'spreading the wealth' for its own sake. The lack of connection between this credit and 'economic stimulus' is evident in the fact that the first payments under the program will not be made until April 2010."

In their 2009 book, Catastrophe, political analysts Dick Morris and Eileen McGann provide some keen insights into the monumental significance of President Obama's $400 refundable tax credit:

"Under the guise of a stimulus package to bring the economy out of recession, the Obama administration is reworking the fundamental politics of our country, passing out checks like heroin to create a constituency addicted to public handouts, and concentrating the tax burden of paying for it all on a smaller and smaller number of Americans. A larger percentage of the American population is paying no income taxes at all and few other levies, making them unlikely to complain when taxes are raised on those who do. At the same time, they're getting checks from Washington as part of a concerted effort to build a constituency that supports big government and big handouts....

"[W]hen Obama's tax program is fully implemented, a majority of Americans will be exempt from paying any federal income taxes. And, instead of a tax bill, most of them will get checks from Washington every year.

"Under the guise of cutting taxes and 'making work pay,' Obama is effectively putting a majority of Americans on welfare....

"Obama has taken the refundable tax credit one step further, giving everyone who earns less than $190,000 a tax credit of $400 (or $800 for couples). And if they don't pay enough in taxes to use up the $400 credit, they will receive a check for the balance. If they pay no taxes at all, they will receive a $400 check in the mail....

"Obama's refundable tax credit is a permanent part of the tax code, an entitlement we'll have to honor year after year....

"The political ramifications of this policy will be enormous. Tax eaters will strongly outnumber tax payers, and those who are paying for our government will have little or no voice in what the government does." (Catastrophe, pp. 47-51)

The stimulus bill also called for a near doubling of federal spending on public education. In addition, analysts noted that a significant amount of the stimulus bill's disbursements would be used to pay illegal aliens working on construction projects funded by the legislation.

During the 10 months following the passage of the Stimulus Package, more than 4 million additional Americans became unemployed. Yet the Obama administration stated that it had "created or saved" more than 640,000 jobs.

But in 2009, the U.S. government enacted an Automotive Bailout that committed nearly $85 billion to help keep this unsustainable system afloat awhile longer, and preventing GM and Chrysler from declaring bankruptcy. In effect, this move nationalized the UAW's pensions, funding them with taxpayer money. The UAW, it should be noted, is a major financial contributor to the Democratic Party.

In January 2009 Orin Kramer, chairman of the New Jersey Pension Fund stated that U.S. public pensions, as a whole, were facing a deficit of some $2 trillion.

It's possible that with the election of Scott Brown in Massachusetts and Republican governors in Virginia and New Jersey may slow the progress of crises in America, but don't expect it to die. Barack Obama and those from the far left are totally committed to dismantle capitalism and the free-enterprise system in this country in any way or fashion possible.