global safety nets fraying...

US public transit systems cutting service and raising fares

The deepest economic crisis since the Great Depression is having a devastating impact on mass public transit systems throughout the US. State tax revenues have suffered their worst decline in more than half a century, and more is still to come. Since state and local governments are legally required to balance their budgets, legislatures and governors are taking a sledgehammer to spending on everything from libraries to state parks to health, education and transit. Far from making up for these shortfalls, the austerity policies backed by the Obama administration and both parties are making matters worse.

Among the most dramatic examples of these cuts in terms of their broad impact are the slashes in service and increased fares for subway and bus transportation in cities around the country. Tens of millions of people are facing the immediate impact of these cuts, even as hundreds of thousands of transit workers face unprecedented attacks on their jobs, wages and benefits.

According to a report issued by the American Public Transportation Association (APTA), a lobbying and advocacy group consisting largely of transit agencies themselves, 84 percent of major transit systems have either cut service and raised fares in the last 18 months, or are considering such measures. Out of a total of 151 agencies surveyed, 59 percent have already cut service or raised fares, 69 percent have projected budget shortfalls, and 47 percent have either laid off employees or plan to do so.

When Karl Marx wrote in the Communist Manifesto that “a spectre is haunting Europe,” he did so on the eve of the revolutionary eruptions that began in Italy and France in 1848 and engulfed much of the European continent.

In recent days, a number of media commentaries have predicted a similar eruption of social unrest of revolutionary dimensions as a direct result of the worsening economic crisis. These warnings are accompanied by dire predictions that Europe will suffer the return of nationalist tensions, the emergence of fascist movements and even war.

Writing in the Financial Times May 24, for example, historian Simon Schama stated, “Far be it for me to make a dicey situation dicier but you can’t smell the sulphur in the air right now and not think we might be on the threshold of an age of rage.… in Europe and America there is a distinct possibility of a long hot summer of social umbrage.”

Schama notes that there is often a “time-lag between the onset of economic disaster and the accumulation of social fury,” but after an initial period of “fearful disorientation,” there comes the danger of the “organised mobilisation of outrage.”

This outrage will be directed against the super-rich and those seen to be responsible for the crisis, he writes, comparing “our own plutocrats” with the financiers so memorably targeted during the French Revolution of 1789 as “rich egoists.”

Despite a nearly-$1 trillion rescue operation, financial conditions in the eurozone continue to deteriorate. All the gauges of market stress are edging upwards and credit default swaps (CDS) spreads have widened to levels not seen since the weekend of the emergency euro-summit. Libor is on the rise and liquidity is draining from the commercial paper (CP) and money markets. According to the Federal Reserve, the total amount of (foreign banks) CP has shrunk 15 percent or $32 billion since late April. Central bank officials insist that there's no chance of another Lehman-type meltdown, but their actions don't match their words. Apart from the massive $920 billion EU Stabilization Fund, the ECB has beefed-up its liquidity facilities and is aggressively purchasing state bonds from struggling countries in the south. Without the ECB's assistance, the slow-motion slide into recession could turn into a full-blown market crash. Brussels has every reason to be worried.

From the Wall Street Journal:

"In the latest indication that European banks are in ill health, the European Central Bank warned late Monday that euro-zone banks face €195 billion ($239.26 billion) in write-downs this year and the next due to an economic outlook that remained "clouded by uncertainty....Europe's intertwined banking system remains stressed. Investors have hammered the sector, banks are stashing near-record amounts of deposits at the ECB—€305 billion as of Friday—instead of lending the funds to other institutions, risk-wary U.S. financial institutions are reducing their exposure to euro-zone banks." ("ECB Warns Write-Downs Could Reach $239 Billion" David Enrich and Stephen Fidler, Wall Street Journal)