In his keynote speech Saturday morning at the Netroots Nation conference in Minneapolis, Sen. Al Franken noted the growing income disparity between the middle class and the rich, a trend that began in the late-1970s. The Minnesota Independent sat down with Sen. Franken to get some thoughts on that disparity and how the American middle class might once again benefit from economic growth.

Franken related a startling figure. “Between 1947 and 1977, we experienced three decades of incredible growth, growth that flowed to the middle class and as we grew, we grew together. Everyone benefited,” he said. “Income for the top fifth of Americans grew by 99 percent, and the income of those in the bottom fifth rose by 116 percent. I know that’s hard to believe. The wages of the bottom fifth grew more than the wages of the top fifth. Really. That happened.”

That trend has changed dramatically in the last 30 years.

As Mother Jones notes in its Plutocracy Watch feature, income grew 120 percent for the wealthiest 1 percent of Americans and 30 percent for the top fifth between 1979 and 2007. The bottom fifth, which had grown the most following World War II — by 116 percent — lost 30 percent of their income since 1979.

How does America get back to the middle class glory days between World War II and before the Reagan took office? Education is the key, Franken argues.

“We have to do a number of things one of which is educate our kids. And that’s why I’m so intent on making sure that the re-authorization of the Elementary and Secondary Education Act is done right,” Franken said. “It’s one area where it is absolutely crucial that we do it right for our future prosperity.”

The ESEA was originally passed in 1965 as a part of the War on Poverty, and was re-authorized in 2001 as the No Child Left Behind Act by President Bush and passed by a bipartisan Congress. It has become unpopular with both Democrats and Republicans who hope to make significant changes in its renewal this year.

“Education is so important; the nature of our economy is changing,” Franken said. “We really have to create an education system that prepares kids for this century’s economy. There is no way around it. We are more global and there’s nothing we can do about it.”

Franken also argued for a fairer tax code.

“I think that top marginal rates can go up for people over — I don’t know what the magical number is — it might be $350,000 instead of $250,000. Because when Clinton made it $250,000 it was 1993.

Another idea floated by Franken was making Social Security taxes more progressive by exempting the the first $10,000 in income. “There are all kinds of ways to change the progressivity of Social Security and fund it better,” he added.

He said that Republican proposals to jump-start the economy are detrimental to the middle class.

“It’s basically that you can never retire, unless you are one of the ones that made an incredible amount of money. They have this philosophy — I guess — of social Darwinism and survival of fittest,” he said.  “I don’t believe that at all. You know, Henry Ford said, ‘I want my factory workers to earn enough money to buy a Model T Ford.”

It was the philosophy adopted by Ford that helped create a burgeoning middle class.

“We have had the most growth during the period when we had the Great Evening, when the middle class was the strongest. It actually creates growth and greater disparity does not create growth.”

Rep. Tim Walz introduced legislation on Tuesday that would end tax subsidies for luxury yachts. The IRS provides breaks for taxpayers who own yachts that have kitchens and bathrooms and therefore could qualify as a residence — even if the taxpayers don’t live there full time.

“We’re going to have to make some hard decisions to tackle our national debt, but this isn’t one of them,” Walz said in a statement Tuesday. “Closing this tax loophole restores the Mortgage Interest Deduction to its original purpose: helping middle-class families realize the American Dream through home ownership.”

Walz introduced the bill along with fellow Democratic Reps. Mike Quigley of Illinois and Gary Peters of Michigan.

“We need to get the deficit under control, and that means simplifying the tax code and eliminating special interest tax giveaways like the Yacht Loophole,” Peters said. “Home ownership is part of the American Dream and we should encourage it, but yacht owners don’t need any special handouts, especially in the middle of a budget crisis.”

Loopholes for yacht owners also exist in state law and, in general, Republicans have resisted efforts to close those loopholes. In California, Republicans rejected a similar effort in 2008. In 2010, in Missouri, a bipartisan bill was offered to repeal tax breaks for yacht owners, but the Republican controlled Legislature adjourned without taking up the bill. Republicans in Texas this year have proposed a tax breaks for yacht owners and it’s already passed key committees.

Closing the federal loophole has been tried before: Republican Senator John Danforth of Missouri offered a bill in 1987 to close it, but was not successful.

A 2004 estimate of the cost of the tax breaks was more than $1 billion.

The Minneapolis Federal Reserve officials said Thursday that the region can expect an increase in employment and little change in unemployment rates in 2011. Businesses in the region are optimistic about an economic recovery, they added, and the Fed’s model for personal income showed an increase is expected in 2011.

“Optimism is back,” Toby Madden, regional economist at the Minneapolis Fed, said in a statement Thursday. “After two years of overall pessimism, businesses expect increased sales, employment and profits. In addition to the survey results, our statistical model predicts increases in income and employment.”

In a video presentation he said, “The mild economic recovery currently underway is expected to warm up in 2011.”

Rob Grunewald, associate economist at the Fed said that businesses are more hopeful for 2011. “Employment levels are expected to increase in all states in the district but unemployment numbers are expected to stay the same. Meanhwile small wage increases are expected.”

The Minneapolis Fed serves Montana, North and South Dakota, Minnesota Western Wisconsin and the Upper Peninsula of Michigan.

“In Minnesota expect the pace of employment growth to remain the same,” said Grunewald. “Unemplyment rates will remain above historical averages in all states” in the region.

Madden added, “According to the Minneapolis Fed’s forecast models, overall personal income should grow faster in 2011 than 2010. The largest gains are in Minnesota and South Dakota.”

Additionally, the economists said that the overall picture for agriculture in the region looks good.

Here are the video presentations the Fed put out this week:

Rep. Michele Bachmann appeared on CNN’s The Situation Room with Wolf Blitzer on Saturday to talk about the tea party and cutting the nation’s budget. Blitzer pressed Bachmann to name programs that could be cut to bring down the federal budget deficit, but she declined, saying only that spending levels should be rolled back to 2008 levels.

Bachmann also said the tea party would not likely field a 2012 presidential candidate because it’s too financially prohibitive to create a new political party. But if the GOP doesn’t cut spending the tea party will abandon the them, she said.

Here is Bachmann’s and Blitzer’s exchange on cutting the budget:

BLITZER: Give me one big ticket cut that would you make, $1 billion, $5 billion, $100 billion. Where would you find the money available to deal with the deficit?

BACHMANN: Well, number one, just go back to spending levels of ’08.

BLITZER: Give me a specific example.

BACHMANN: That’s 25 percent of the federal budget. Remember, the federal budget was no lean, mean machine when President Obama took over. In his tenure, less than two years’ time, he has driven up the size of the federal budget almost 25 percent.

BLITZER: There’s a specific cut you would make?

BACHMANN: Take every –

BLITZER: Department of Education?

BACHMANN: Every increase that he took, go back to the –

BLITZER: Department Of Energy? Give me a specific.

BACHMANN: OK. But go back — I am. Go back specifically to where we were with the budget in ’08. That was not a paltry budget. Go back exactly where we were, that solves a lot the problem.

BLITZER: No specific cut you would prose right now other than go back to the 2008 levels?

BACHMANN: Back to the 2008 level, because one thing — we can do across the board cuts, but I don’t think that’s prudent, because there are legitimate projects that have to be done.

Bridges have to be built. Water treatment systems built. I think we don’t want to cut off our nose to spite our face, we have to be smart about this.

BLITZER: You’re basically saying, just have an across the board cut to the 2008 levels?

BACHMANN: No, no. Go back to where the spending priority was in 2008. Start there to begin with because we have to check the driver of spending. Go back to ’08, from there, then we can take the time to go through the budget and find out which priorities we want.

BLITZER: Is there a priority you want to cut?

BACHMANN: That I want to cut?

BLITZER: From 2008, is there something from 2008 that you would cut beyond that 2008 level?

BACHMANN: I’ll give you one example going back to when President Bush was in office. I disagreed with President Bush on no child left behind. I thought it was a failure, and it failed, a failed opportunity. In that bill the federal government ramped up spending more than we had ever seen.

BLITZER: For the Department Of Education.

BACHMANN: Department of Education.

BLITZER: So you would cut that?

BACHMANN: You could start there.

BLITZER: That’s a specific cut.

BACHMANN: Start there.

BLITZER: More cuts down the road to discuss. Michele Bachmann, thank very much for coming on.

BACHMANN: Thank you, Wolf.

And on the tea party movement, Bachmann said Republicans have to give the tea party what they want or they may go elsewhere:

BLITZER: Let’s talk about the tea party. Our brand new CNN Opinion Research Corporation poll just out today shows this. In October, the unfavorable number for the Tea Party Movement was 37 percent. It’s now gone up to 42 percent. A slightly bigger number as far as unfavorable attitudes towards the Tea Party, what’s your sense? Why is this happening?

BACHMANN: Well, it’s interesting, because they were so wildly successful at the polls just a couple of weeks ago. I think they’ll continue to be. I think it really depends upon how they’re being portrayed in the media.

I think that will affect polls, but clearly, people who are part of the Tea Party recognize it’s not a political party. It’s really just a set of ideas that have more to do with limited government, making sure taxes don’t go up and making sure that government lives with its mean. That’s essentially the Tea Party.

BLITZER: It was by all accounts widely successful although significant failures in Delaware, Nevada and some other states where there was a real strong Tea Party candidate who lost.

BACHMANN: You can’t win them all, but they are phenomenally successful, considering they are not a political party. They have no money behind them. There’s no organization, no hierarchy. It’s a brand and group of people coming together.

BLITZER: Do you think it will change?

BACHMANN: In what way?

BLITZER: If the Republican establishment doesn’t do what the Tea Parties wants it to do, do you see the possibility as the Tea Party emerging as real political party, as opposed to a movement?

BACHMANN: I think if the Republican Party decides to big government, big spenders then you’ll see a significant shift away from the Republican party. I don’t that right now.

The vibrancy and the verve in the last election was energized from the Tea Party and that energy was infused into the Republican Party. The people who are disaffected Democrats and Independents voted for the Republican, because they didn’t – they were rejecting the big government policies that were coming out of Washington.

BLITZER: Because some have already suggested, you know what? Looking lady to 2012, a Tea Party candidate as opposed to a Democratic candidate or Republican candidate is a possibility. In other words, a strong third party.

BACHMANN: I doubt it. I really doubt it. I think you’ll see the two-party system intact. It just two years from now, the presidential – the clock has started ticking on that race.

I don’t think we’ll see — you’d have to have a rise of an entire political party infrastructure. There’s so much that goes along with that. I just don’t think that we’re going to see that happen.

Republican gubernatorial candidate Tom Emmer released a new television ad on Wednesday called “Balance.” In it he vows to “limit the growth in state spending to the amount of taxes we collect, so government does not spend money we don’t have.” It’s the third television ad by the campaign this election season.

The Minnesota Constitution prohibits the state from running a deficit.

Campaign Manager Cullen Sheehan said in a statement accompanying the ad, “Tom Emmer is the only candidate to release a detailed, fully balanced budget – and it’s a budget that requires government to live within its means. He knows that it is time for government to balance a budget the way Minnesota families do, and that our children deserve to inherit something other than our debt.”

The unemployment rate for blacks was 20.4 percent in the region — the second highest in the country after Detroit — while unemployment among whites was 6.6 percent. The difference in the two rates, 13.8 percent, is the highest in the country by 3 percent. Memphis had the next highest disparity at 10.5 percent.

“[T]he Minneapolis metropolitan area stands out as having the worst relative disparity,” the authors wrote. “The Minneapolis metropolitan area has a black-white unemployment ratio of 3.1 to 1. This means that blacks are 3.1 times as likely to be unemployed as whites. Additionally, the black-white difference in unemployment is almost 14 percentage points.”

The authors looked at levels of education as a possible reason, and ruled it out.

We can see that education is not the only explanation for the high relative unemployment rates of blacks by examining the unemployment rates for blacks and whites with similar levels of education in Minneapolis. In 2008 in the Minneapolis metro area, ACS data show that blacks with comparable levels of education as whites are much more likely to be unemployed. For example, African Americans with a high school diploma or GED were three times as likely to be unemployed as whites with the same level of education. Even if blacks had the exact same educational profile as whites in Minneapolis, they would still have a much higher unemployment rate (see also Austin 2008).

“Frankly, we don’t have leaders who are willing to make any courageous decisions,” Carlson told KARE 11. “One of the things we are going to discuss is how to get [Pawlenty] to comply with the law.”

“State law requires that he submit a balanced budget for the out years and he is — frankly — avoiding that law,” said Carlson.

Carlson said there were rumors that some people are considering taking Pawlenty to court, adding that part of the tour’s aim is to “demand that the governor do his job as stated by law: no evasion, no dancing.”

Here’s Carlson’s full exchange on KARE 11:

“I intend to form a Paul Revere tour this summer challenging the Governor, the Legislature, and the gubernatorial candidates to speak truthfully about this [problem], which threatens over 20 percent of our state’s general fund,” said Carlson, according to the Star Tribune.

“This Paul Revere tour will embrace all parts of Minnesota and resemble the drives I took as state auditor and governor. If other leaders want to join, we can get a bus or several buses and enjoy a good old fashioned campaign,” he added.

Rep. Keith Ellison. Photo: WDCpix

Rep. Keith Ellison is sponsoring a bill that would break up banks deemed too big to fail. The Safe, Accountable, Fair, and Efficient Banking Act of 2010 would set the limits on the size of deposit holdings that a bank can have.

Ellison and several Democratic House colleagues sent a letter to members of Congress on Thursday asking for support and pointing out that 63 percent of the gross domestic product is held by just six large financial institutions.

“The gigantic size of megabanks, and the perception in the marketplace that they are indeed too big for the government ever to permit them to fail, gives them a competitive advantage over smaller financial institutions that distorts the market and discourages competition,” wrote Ellison, along with Reps. Brad Miller of North Carolina, Ben Chandler of Kentucky and Steve Cohen of Tennessee. “The lack of competition in the banking industry, in turn, leads to ever-higher levels of risk in the system.”

The bill would restrict any bank from having more than 10 percent of the nation’s total insured deposits. It would also cap a bank’s liability to 2 percent of the national gross domestic product and establish a 6-percent equity minimum for bank holding companies.

“The six largest U.S. banks today have total assets estimated to be in excess of 63 percent of our national GDP,” wrote the House members. “The gigantic size of megabanks, and the perception in the marketplace that they are indeed too big for the government ever to permit them to fail, gives them a competitive advantage over smaller financial institutions that distorts the market and discourages competition. The lack of competition in the banking industry, in turn, leads to ever-higher levels of risk in the system.”

Here’s the full text of the letter:

Dear Colleague:

We’re writing to invite you to join us as cosponsors of legislation to restrict the leverage and size of the very largest banks and financial institutions in the United States.

The resolution powers in the financial regulatory reform bill that passed the House last year represent critical first-steps in addressing the problem of risk-taking by institutions that are “too big to fail.” But it has become increasingly clear that to make absolutely certain U.S. taxpayers are never again forced to rescue a giant financial institution, we must make sure that no market participant is so large that a failure would result in economic collapse.

The six largest U.S. banks today have total assets estimated to be in excess of 63 percent of our national GDP. The gigantic size of megabanks, and the perception in the marketplace that they are indeed too big for the government ever to permit them to fail, gives them a competitive advantage over smaller financial institutions that distorts the market and discourages competition. The lack of competition in the banking industry, in turn, leads to ever-higher levels of risk in the system.

There is no evidence that giant financial institutions perform any public service or market function that cannot be performed as well or better by smaller, and even substantially smaller, banks and financial institutions. To the contrary, all the evidence suggests that megabanks distort the market and impose substantial risk to the public. Further, the unprecedented size of the largest banks gives them enormous political power, including the ability to thwart appropriate financial regulation. As former Secretary of Labor Robert Reich correctly observed in a recent column, “the only competitive advantage to being a giant bank headquartered on Wall Street is to have the economic and political clout to get bailed out by American taxpayers when the next crisis hits.”

The SAFE Banking Act of 2010 would limit the size of megabanks by prescribing statutory limits on deposits, non-depository liabilities, and leverage. These steps would require several of the largest banks to, in effect, break themselves up to come in under the limits that this law would create. Specifically, the bill would:

• Impose a strict 10 percent cap on any bank-holding-company’s share of the United States’ total insured deposits;

• Reduce the maximum amount of non-deposit liabilities at financial institutions (to two percent of United States GDP for banks, and three percent of GDP for non-bank institutions);

• Set into law a six-percent equity minimum for bank holding companies and selected nonbank financial institutions, ending the extreme leverage that puts at risk the solvency of the entire financial system.

For more information about the SAFE Banking Act, or to become a cosponsor, please contact [removed for privacy] in Rep. Miller’s office.

Sincerely,

Brad Miller

Ben Chandler

Keith Ellison

Steve Cohen

Rep. Keith Ellison. Photo: WDCpix

Rep. Keith Ellison, along with Rep. Brad Miller, D-N.C., introduced legislation last week that would fix a problem in mortgage lending. The bill would eliminate conflicts of interest among large banks that prevent them from modifying troubled mortgages. The bill would prohibit a bank that owns a mortgage from owning a second mortgage on the home — a form of investment — which prevents that bank from modifying the original mortgage.

Miller said that most mortgages are owned by four banks: Bank of America, Wells Fargo, Chase and Citibank. “Servicers are required to act in the best interests of the investors who own the mortgages. In many, those four banks hold interests in other debt secured by the same home that would be affected by a decision to modify the mortgage or to foreclose, placing the banks’ interests in irreconcilable conflict with the interests of investors,” he said in a statement.

“The obvious conflict of interest between the investors and servicers may well be a factor in the failure of servicers to modify mortgages voluntarily,” said Ellison.

The Mortgage Servicing Conflict of Interest Elimination Act would give banks time to divest from the investments in home loans and allow them to make decisions on mortgages without running into conflicts of interest with the hope that more homeowners would be able to modify their mortgages and avoid losing their homes.

The report says that Minnesota has lost 58,800 jobs since 2001 because the Chinese government engages in currency manipulation (a charge the Chinese deny). Minnesota ranks sixth in job losses as a share of total employment, following New Hampshire, North Carolina, Massachusetts, California and Oregon.

“These findings document what we have been asserting for some time,” said AAM Executive Director Scott Paul in a statement last week. “China is undercutting the competitiveness of our manufacturers and undermining the earning power of American workers by routinely failing to honor its global and bilateral commitments.”

The EPI report ranked congressional districts by jobs lost. Three of Minnesota’s Congressional districts ranked in the top 50: Rep. John Kline’s district ranked 22nd, Rep. Tim Walz’ district was 26th, and Rep. Erik Paulsen’s was 31st.

“China’s cheating is causing America to lose more than just the capacity to make widgets in the one-sided trade arrangements with China,” said AAM’s Paul. “Sophisticated electronics and high-tech products that once were made in the United States are increasingly being made in China instead. We are losing more and more of these good jobs.”