Our Sacrosanct Jobs Program

A news article this week brought to mind something British politician Tony Benn said, “I remember setting sail to South Africa for training [as a WW2 RAF pilot] and being part of a war aims meeting.  It was the most brilliant political meeting I ever attended.  One man spoke of the mass unemployment of the 1930s and said that if we could attain full employment by killing Germans, we could have full employment by building houses, schools and hospitals.”

The article is about a $643M contract with Bath Iron Works (BIW) for which Maine Senators Collins, a Republican, and King, an independent, got funding.  They say it will “allow the Navy to send another DDG-51 to sea when the Navy’s fleet needs to preserve important combat capabilities in support of our national defense.”  Democratic Representative Pingree said, “this is excellent news for the families who earn their living at BIW.”  A shop steward who represents BIW workers said, “the contract brings more stability to the company, which employs about 5,400 people.”

So, my representatives in Washington, the BIW workers and their families, local business owners, everyone around here is happy we’re going to build more of these ships that were “originally designed to defend against Soviet aircraft, cruise missiles and nuclear attack submarines.”

What struck me is, although we don’t think of Defense that way, it has grown into an enormous jobs program.  What’s more it’s a program whose rationale and scope we do not question.

President Reagan’s budget director David Stockman has points to make, however.  In The Ukraine, The War Party and the Pentagon’s Swamp of Waste he writes, “the $625 billion allocated to DOD this year amounts to a colossal destruction of economic resources for no benefit whatsoever to the safety and security of the American people.”

Stockman is angry, perhaps because “About three decades ago I called the Pentagon a “swamp of waste” during an off-the-record interview that ended-up on the evening news. Presently I ended-up in President Reagan’s woodshed–explaining that, well, yes, I did say that because it was in fact true.”   His article is excellent background reading.

I don’t feel emotional about this but I am equally determined to do what I can so we do question how we want to spend that $625B of tax revenue.  The current program does have some benefit — it provides a lot of jobs — but as Tony Benn realized, some of them could be different jobs.  Some could be jobs without the risk of being killed or maimed.

Defense spending has huge support.  There was a bi-partisan agreement to cut (sequester) federal spending this year.  Stockman notes that “Had every dime of the $55 billion sequester been implemented, this year’s DOD budget would have been roughly $600 billion … in 1989, the DOD budget was about $475 billion in today’s inflation-adjusted dollars.”   Even though DOD spending would have been up 25% from 25 years earlier, when the time came to make the cuts, Congressman Paul Ryan and others said making them would be tantamount to surrender.  So the cuts were not made.

What provoked Stockman’s article is, “Contrary to the bombast, jingoism, and shrill moralizing flowing from Washington and the mainstream media, America has no interest in the current spat between Putin and the mobs of Kiev.”

Echoing President Eisenhower’s famous warning when he left office sixty years ago, he says,  “The source of the current calamity-howling about Russia is the Warfare State–that is, the existence of vast machinery of military, diplomatic and economic maneuver that is ever on the prowl for missions and mandates and that can mobilize a massive propaganda campaign on the slightest excitement.”

Stockman is outraged that we believe the propaganda and by our hypocrisy: “We have invaded every country to our South–from the Dominican Republic to Guatemala and Panama and assassinated or overthrown dozens of  their leaders–all within the 60 year span since Nikita Khrushchev gifted Crimea to his minions in Kiev. So precisely which nearby borders are so sacrosanct and exactly who has done the more egregious violating?”

I’ve written before about our defense spending and military strategy over which “we the people” have no control.  President Reagan greatly accelerated spending on what was in fact a spurious rationale, it dropped and stabilized in the next decade, then it was driven to extraordinary new heights by President Bush based on a new spurious rationale.  The numbers below show our total defense spending, not just what is presented in the US budget defense line item but also the spending on “overseas contingency operations” i.e., the wars President Bush started in Iraq and Afghanistan.

Trends in US Military Spending

We might be encouraged by Congress’ refusal to approve President Obama’s recent desire to take military action in Syria except that (A) Congress is currently of a mind to refuse everything he proposes and (B) everyone in Congress always wants more military spending in their district.

Important as it is to make rational changes to our defense spending and decide what kind and size jobs program we want to fund, however, we first need a government that functions, one that could debate such questions, arrive at decisions and take action.

I’m still absorbing research about how we could get such a government and, following a break where I’m hoping for sun and heat, I will report back next month.

American Creationism

Astounded by those who believe the antichrist now reigns in the White House, I knew I must learn more about American fundamentalists.  I’ve been looking into creationism.  How many of us believe humans were created in the recent past, and why does that belief matter?

The first people came to North America about 14,000 years ago.  They came over the habitable zone that connected Siberia and Alaska in the exceptionally cold period 30,000 to 15,000 years ago.  In 2008 a linguist showed that languages spoken in Siberia, Alaska, western Canada and by the Navajo and Apache are related.  Now, from a just-published paper, we know those languages stem from an earlier one whose speakers lived for maybe 15,000 years in that now-disappeared habitable zone.  As the world warmed some of them migrated east to North America.  Others went west, back into Siberia.  I could not know any of that if I believed in creationism.  But would that matter?

The main categories of creationism, “young Earth” and Old Earth”, agree that mankind was created long after we know mankind came to North America, but young Earthers believe the universe was created at the same time as mankind while old Earthers agree with the scientifically accepted age of the Earth.

Asking when the universe began actually leads to no conclusion because the question presupposes there was a beginning.  Everything we see seems to have had a beginning but when we look closely we see that really, everything is changing and is made up of other things that are also changing.  We can’t actually identify beginnings.  I’ll say more about that another time .

For now, I just want to add that belief in a beginning can be dangerous.  Why?  Because it implies an end which many fundamentalists imagine will be a cataclysmic sorting out of “people like me” into eternal bliss and “people like them” into eternal torture.  That reinforces our delusion that we and they are different, and encourages our hatred of “them.”

There is enough geological, genetic and other evidence to tell us approximately how long ago categories of things such as the North American continent and humans manifested.  Creationists discount that evidence.  Unlike scientists who are never more than confident about their conclusions, creationists are certain about what happened.  On what do they base their certainty?

Creationists calculate the origin of mankind from the Bible’s line of descent from Adam to Abraham cross-referenced with events such as the Temple of Solomon being built 480 years after the Exodus.  The genealogies may be incomplete and there is no certainty about dates of the cross-referenced events, so creationists differ about the exact creation date.  All place it between 6,000 and 10,000 years ago, each group being certain their date is correct.

Creationists are answering both when and how humans were created.  How many Americans believe both answers?  According to this Gallup Poll, four in ten Americans (40%) believe God created humans in their present form about 10,000 years ago.  An almost equal number (38%) believe we developed over millions of years in a process guided by God.  Another 16% believe we developed over millions of years without the involvement of a God.

In much the same way there is nothing definite to say about the ultimate origin of the universe, we also cannot know if the world was created by a God.  And unlike the origin of the universe, which scientists can at least investigate as far back as the Big Bang 14 billion years ago, we can only have beliefs about the existence of a creator deity.

What we’re left with that we can be confident about, based on an enormous body of evidence, is that humans were on this planet more than 10,000 years ago.  The creationist belief about that is simply incorrect.

What are the implications?  Most Christians around the world do not take a literal view of the Genesis creation narrative but as we’ve seen, many in the US do.  This matters because, unlike, for example, in Europe, political partisanship in the USA is highly correlated with fundamentalist thinking.

Views_on_Evolution

A high incidence of belief in creationism in the USA matters because unquestioning belief in religious ideas that are either unprovable or which require ignoring the facts is highly correlated with political partisanship.  Fundamentalist religion accustoms people to believe things that their reason would reject and ignore facts that would make their beliefs untenable.

The US media portrays a world “out there” where Islamic fundamentalists either rule or are striving to gain control.  What we do not see is that our own situation is not so very different.

This means we may, by democratic vote, choose to be governed by people who promise to lead us to a better future but who may in fact greatly harm us by acting on deluded beliefs.

What to do?  I’m now exploring where our fundamentalists live, why they believe as they do and why they reject science.  We must understand what their beliefs respond to, the root causes.  We can’t just bludgeon them into “the correct view.”

Surprised by the Antichrist

If you’re ever on I-84 near where it meets the Mass Pike, stop in at the Traveler Restaurant, be served a good diner-style meal by friendly waitresses and choose three free books.  I’ve been going there every chance I get since 1985.

What I found there most recently is Kevin Phillips’ 2006 American Theocracy.  In his 1967 book The Emerging Republican Majority Phillips showed how gaining Southern voters could propel the Republican Party’s revival.  He is now horrified by the result.

American Theocracy has three sections.  Phillips starts by reviewing how our dependence on oil led to our foreign policy and wars in the Middle East and ends by showing how our financial and business leaders got the Republican Party’s traditional principles of sound finance abandoned.  What surprised me is the middle section.  There he examines the rise of fundamentalist Christianity and apocalyptic expectations and shows how they shape our policies.

Phillips cites the statistics on Americans with a religious preference.  From 17% in 1776 it rose to 34% in 1850, 45% in 1890, 56% in 1926, 62% in 1980 and 63% in 2000.  We were established as a secular republic when fewer than one in five Americans had any religious preference.  More than three in five of us now has a religious belief.

Almost half (46%) of Americans now identify themselves as “born again” Christians.  And more than half (55%) in a 2004 Newsweek poll believe the Bible is literally accurate.

In the 2000 elections 87% of the “frequent-attending white religious right” voted for George W. Bush (GWB).  Only 27% of secular voters favored him.  I had no idea religious belief had such an impact.  I did recognize that when GWB characterized his invasion of Iraq as a “crusade”, that really was his view.  I should have realized, too, that a significant percentage of those who supported him also imagine we are now engaged in a holy war in the Abrahamic end time.

But I was entirely unprepared for this on page 260 “Some 40 percent of Americans believe that the antichrist is alive and already on the earth” even though I knew that under GWB, Saddam Hussein was identified as the antichrist.   Who, I wondered, is the antichrist now Saddam Hussein is no more?

In this 2013 Public Policy Poll Report I discovered that 13% of voters in the 2012 election believed President Obama is the antichrist and a further 13% was “not sure.”  Among voters for Romney 22% believed Obama is the antichrist while fewer than 3 in 5 believed he is not.  It may be yet more alarming that 5% of voters for Obama believed him to be the antichrist.

In that report we also see 58% of Republican voters believed “global warming is a hoax”, 33% believed “Saddam Hussein was involved in 9/11”  and 73% did not believe “Bush misled on Iraq WMDs.”

What to make of all this?  My assumption about the widespread lack of respect for facts and skeptical inquiry in America was mistaken.  The great problem is not the mechanics of our educational system but the purpose many want it to serve – certainty in the literal truth of the Bible.

I’ve written before about fundamentalism.  Our media tells us it’s a problem among Muslims, especially in the Middle East, where terrorists hope to kill us all.  But some American fundamentalists are also eager for war, perhaps because they fear our nation is in decline.

Fundamentalism results from fear when social, economic or political trends look like a threat to existence.  The desire for certainty in a way out grows overwhelming.  Everyone else must then embrace the same faith because belief in something that cannot be proved is a lot easier to maintain if nobody is expressing doubts.

But we will inevitably do harm if we imagine we are fundamentally different and have mortal enemies.  Only misery can result.

What to do?  We must calm and clear away the fears.

Everything we do, say and think boosts or shrinks fear in the world.  A butterfly could alter the path of a hurricane or prevent its occurrence — the flapping of wings is one of so many tiny forces on the atmosphere.  It’s the same with human moments of love or hate.

Protecting Against the Opulent Minority

The first post in this series noted our Constitution’s intent to “protect the minority of the opulent against the majority.”  The economy then was subsistence farming in many areas, commercial agriculture in others, especially the South.  The opulent minority were great landowners and most everyone else was poor.  There was no middle class.

If we were drafting a Constitution now we would also seek to protect the minority in the middle from excessive influence based on great wealth.  The distribution of incomes throughout society would be an important indicator of whether that influence had grown excessive.

In this research paper Emmanuel Saez shows how,”the top decile share [of pre-tax income] has increased dramatically over the last twenty-five years [and] in 2012 is equal to 50.4 percent, a level higher than any other year since 1917.”  But it’s not just that the top 10% gets more than half of all income, the top 1% gets close to a quarter.

saez-UStopincomes-2012-top-decile

And the very greatest gains go to the top  0.01%, i.e., one in one hundred of the one percent.  That was 16,068 folks in 2012 with annual incomes over $10,250,000.  We might imagine most of that income was stock market gains but as the chart shows, while a large and fluctuating amount was from capital gains, that tiny minority also got extraordinarily higher income from what we think of as wages.

saez-UStopincomes-2012-top-0.01

Is that OK or are we seeing excessive influence?  This report from the Pew Research Center indicates that 55% of Republicans consider our economic system fair to most people and “four-in-ten Republicans termed the gap either a small problem (22%) or not a problem at all (18%).”   Three in five Democrats said the gap is a very big problem.  Billionaire Tom Perkins, who feels he’s being treated the way Nazis treated the Jews, considers those who believe inequality has gone too far are the problem.

A growing body of research indicates that high inequality is in fact harmful to both an economy and a society.  An obvious issue is if most of society’s income goes to a small minority, economic activity slows and everyone suffers.  Less obvious is the impact of what society’s income is not used for — government ceases to serve the majority.

One example.  The ongoing study reported here shows the USA is now 33rd among nations in internet download speed, almost equal with Russia while Romania is two and a half times as fast.  We’re 43rd in upload speed while Kazakstan is half again as fast.  How did that happen?  We let cable and telecom companies merge their way to oligopoly or even monopoly.  They have little incentive to invest in better service because they have little competition.

Imagining that private businesses automatically deliver the best results, we don’t notice that government regulators have been captured by corporations and consequently provide negligible oversight.

In previous posts I explored how deregulation of our financial sector led to economic meltdown from which we have not yet recovered.  Deregulation has in recent decades been shaped throughout our economy by the opulent minority.  We should therefore expect them to get the benefits.

Several factors contributed.  Getting elected now costs so much that politicians must depend on very wealthy patrons, which means they get legislative and regulatory changes they want.  The Republican party used to be funded chiefly by upper middle-class professionals, the Democrats by labor union members.  Both are now funded increasingly by corporations, their executives, and a tiny minority like the Koch brothers whose wealth is greater than the bottom 40% of all Americans combined.

Why has the rest of society taken no action?  Partly because they haven’t noticed what is happening.  Also, as US economist and social scientist Mancur Olson explained it in his 1965 book about Public Goods and the Theory of Groups, if everyone in a group would benefit from some change, individuals in the group are better off waiting for others to do the work.  And large groups are at a disadvantage because their cost to organize is higher.  The result is that large groups are less able to act in their common interest than small ones; and the corollary is, a minority can dominate the majority.

That is how the 99% in general and the middle class in particular allowed themselves to be disenfranchised — both our major major parties are now dominated by the opulent minority.  So, does that mean those who are not among the opulent minority should form a third party?

French sociologist Maurice Duverger observed in the 1950s that third parties rarely succeed in “winner takes all” systems like ours.  Ross Perot, for example, got zero electoral votes in 1992 despite getting 19% (almost one in five) of the popular vote.  Fewer than 40% of voters wanted a pro-wealthy governor in Maine’s last gubernatorial election but two progressive candidates split the vote.  That resulted in a governor the majority does not want.

The only third party that has succeeded in the US replaced an existing major party.  The Republican Party replaced the Whig Party just before the Civil War.  How?  The Whig platform was economic reform and federally funded industrialization, but with no clear position on slavery.  Federal infrastructure and schools did not have enough appeal for Southern voters so they realigned with pro-slavery Democrats.  Northern progressives saw Whig candidates failing and switched to the increasingly vocal anti-slavery Republican Party, which became progressive.

Do we have any potentially successful third parties in the USA now?

The largest at this time is the Libertarian Party.  They got 1% of the vote in the 2012 elections.  They position themselves as more socially liberal than Democrats and more fiscally conservative than Republicans.  They favor much lower taxes, no welfare, gun ownership rights, decriminalizing drugs and so on.  Their belief, like Jefferson, is that liberty can survive only in small, homogeneous societies, a romantic fantasy at best.  Today’s world is too complex.  We and all our competitors have succeeded only with strong central governments.

Next is The Green Party, part of a worldwide movement advocating ecological wisdom, social and economic justice, grassroots democracy, and nonviolence and peace.  Their best result at the national level was 2.9M votes or 2.74% of the total in the 2000 presidential election when Ralph Nader ran against unappealing major party candidates.  That gave the election to the one he disagreed with more strongly.  The Green ideal is noble but their platform does not stimulate the passions of a majority.

How about the Modern Whig Party?  They pitch themselves as “a pragmatic, common sense, centrist-oriented party where rational solutions trump ideology and integrity trumps impunity.”   Their goal is to represent those who are “unrepresented by the current political structure, fiscally responsible yet socially tolerant” because “American Liberalism and Conservatism are exhausted ideologies.”

But it’s not that the ideologies are exhausted: the problem is they are not at this time being represented by our major parties.   What to do?  History and logic tell us no third party will succeed in the US unless we change our “winner takes all” electoral system, which our elected representatives have every incentive not to do, so we must make one of the existing major parties represent the minority in the middle, or what would be better for everyone, rational fiscally responsible progressives.

The opulent minority achieved their goal by taking over the Republican Party in opportunistic alliance with those who want their understanding of Christian teachings to govern law and public policy, and those opposed to a strong central government.  That leaves the Democratic Party which, like the pre-Reagan Republican Party, has no clear focus and is therefore a takeover candidate.

I will explore in a future post how that might be done (and the Constitutional barriers).  One possibility is via an issue that is not supported by either major party, like ending slavery in the 1860s.  Another is to act when misery is so great that dramatic change is unavoidable, like the Great Depression in the 1930s.  A mass movement with charismatic leaders is necessary in any case.  That works even in societies less democratic than ours, e.g., the 1989 Czech Velvet Revolution and “color revolutions” in the former USSR, the Balkans, North Africa and elsewhere.

We can either identify a major change that enough people passionately want, or wait for enough people to be in enough misery.  Let’s work on the first approach.

Nation States and Multinational Corporations

What has changed and does it matter?  I’m considering this comment on the first post in this series “Corporations need to compete on a global scale so they must have huge resources, which makes them more and more powerful.  The relationship between corporations and government is critically important.  Corporations define society in many ways while government is responsible for infrastructure, regulation, and oversight for the good of the whole society.”

The rise of highly mobile multinational corporations (MNCs) is the big change.  It matters because they are not subject to the laws of any one nation yet their decisions about production, working conditions and wages have global environmental and societal impact.

The world’s largest business (by revenue), Wal-Mart, did not even exist until I was 18.  It now has over 2M employees, operates in 28 countries and its $476B revenue exceeds GDP of the 25th largest country, Norway, as well as the  $375B shipping industry that carries 90% of world trade.  If Wal-Mart was a country, it would be China’s 6th largest export country.

Older MNCs tend to be resource extractors — the 2nd through 7th largest businesses and 15 of the top 30 are oil and gas companies.  It is because of them (and contention over the Holy Land claimed by Jews, Muslims and our Christians) that the US government devotes enormous resources to protecting Middle East regimes and transportation of their product.

Those oil and gas companies are successors to the Honorable East India Company (EIC) which traded opium from India for tea from China to Britain.  That trade was 3-way because China’s rulers wanted nothing Britain had to offer: they didn’t want opium either but the Chinese people did so the Brits shipped it in by force.  The EIC was more abusive than oil companies, but both depend on their government’s military superiority.

Newer MNCs require less military support because they are more mobile.  They depend more on communication technology for logistics and branding, on favorable tax and trade agreements, and on capital investment.

Capital reveals more than revenue, and comparing revenue to GDP is misleading, anyway, because GDP is value added, which is revenue minus (broadly defined) costs.  Revenues of the 100 largest corporations are about 20% of world GDP, but their value added is not 20% but 4.3% of world GDP.   The growth of MNC revenue and value added is more suggestive.  Revenue of the world’s 200 largest corporations grew 17% from 1983 to 2005 while value added for the top 100 MNCs grew 23% between 1990 and 2000.  The higher growth rate of value added hints at the profound underlying change.

Capital assets of the world’s 50 largest corporations increased by 686% between 1983 and 2001.  Meanwhile, the value of all non-residential assets in the USA increased by 77 %.  That indicates a dramatic concentration of productive assets in the world’s largest corporations.

The result of that increase in corporate investment?  Profits of the world’s 50 largest corporations were 11 times higher in 2005 than 1983 while employment was 2.3 times higher.  The increase in capital assets enabled them to increase profits over 4 times faster than employment.  What made that possible was the extremely low cost of borrowing engineered by the Federal Reserve in response to the economic recession that resulted from uncontrolled speculation following the deregulation of finance.

But does any of this matter?  The purpose of corporations, after all, is to seek profits with limited control by governments.  That view in the USA is relatively recent, however.  Until the Civil War, US corporations were accountable to serve the public good.  Their charter could be revoked for failing to serve the public interest and was valid only for a time, e.g., 20 years in Delaware.  It was only in 1886 that corporations were given legal rights similar to individuals.  They then became accountable to the public only by being subject to the law.

The first law allowing one corporation to own equity in others was in New Jersey in 1889.  New York, Delaware and others followed, removing more restrictions to attract big corporations.  New Jersey continued to lead and by 1900 had 95% of the nation’s large corporations.  Anti-trust laws later led to the break up of several large corporations and their power was also mitigated by labor unions.

Anti-trust enforcement was greatly relaxed starting in the 1970s along with other forms of deregulation.  Following the fall of the Soviet Union, a “Washington consensus” emerged that aligned the World Bank, the WTO and etc with free trade and privatization.  Trade barriers fell with international trade agreements.  Corporations then began getting preferential treatment by nations, just as US states did a century before.

Businesses traditionally grow by increasing sales volume while reducing labor costs and replacing labor with machines, which is easiest for businesses with the greatest access to capital.  They also grow by distributing additional kinds of goods via existing channels and brands.  And conglomerates grow via managerial efficiency, financing flexibility, and political power.

Newer highly mobile MNCs have the additional advantage of cheap foreign labor, increasingly by contracts, and less costly foreign environmental laws.  Short-term contracts and no large capital investments enable them to move quickly to other countries for even lower costs and to shift responsibility for labor practices and environmental standards to subcontractors.

That induces nations to set lower and lower workplace standards, minimum wages, environmental regulations and so forth to attract and keep these businesses.

Even without moving production facilities, MNCs can avoid taxation by incorporating in tax havens.  Corporate profits in tax havens rose 735% between 1983 and 1999, while profits in countries that are not tax havens grew only 130%.  And tax avoidance is not the only problem for national governments.

About a quarter of Wal-Mart’s employees in Massachusetts are enrolled in Medicaid or other publicly subsidized health insurance programs.  It is estimated that their use of food stamps, housing assistance, and other programs may cost 2 to 3 times as much more.  A recent House report estimates Wal-Mart employees require an average of about $3K a year in public assistance.  That shifts over $4B of Wal-Mart’s costs to US tax-payers and increases Wal-Mart profits by the same amount.

And environmental harm by MNCs is not just in 3rd world nations.  The NAFTA trade agreement between Canada, Mexico and the USA prohibits any “measure tantamount to nationalization or expropriation” of a foreign investor without sufficient compensation.  The U.S. Ethyl Corporation used that provision to sue Canada for its proposed ban on the gasoline additive MMT which contains a human neurotoxin banned in several U.S. states.  Canada paid Ethyl $13M, withdrew the ban, and published a letter stating there was no scientific evidence of harmful human health effects from MMT.

Since only individual nations can make laws, only national governments can make international trade agreements. They are the only agreements that govern the cross-border social and environmental practices of MNCs and that’s important because those practices have global impact.

Unfortunately, trade agreements are typically conducted by representatives who are appointed, not elected, which means they are not accountable for the agreements’ results.  What’s worse, meetings of the primary international trade agency, the WTO, are conducted behind closed doors.

And now, the Trans-Pacific Partnership (TPP) between the US, Japan, Australia, Peru, Malaysia, Vietnam, New Zealand, Chile, Singapore, Canada, Mexico, and Brunei Darussalam is being negotiated in secrecy even from Congress, the USA’s legislative body.

But in the most fundamental sense, nothing has changed.  Wal-Mart, giant electronics businesses, TBTF banks and others govern regulators now.  Giant oil and gas corporations have set foreign policies for close to a century.  Politicians have always been led by those who controlled great wealth.  So what should we do?

Add our voices to the mix.  Tell our representatives what MNC behaviors are against our interests.  Alert others to pressure their representatives.  What we must do, in other words, is continue to work so that democracy works.  How to go about that these days?  That will be the next post’s topic.

Will Politicians Doom Our Economy?

This Guest Post is a copy of comments by “Dryly 41” about Why the Economy Isn’t Doomed, an article whose theme is, “challenges have been with us before and have preceded eras of broadly shared prosperity?”

The article starts with the positives, “slowing health-care costs, rising college graduation rates, a shrinking federal budget deficit [and] we’ve finally become aware of just how lousy the past several decades were for the average U.S. worker.”   The greatest negative, it says, is intelligent technology from checkout machines to driverless cars that “may bring about profound declines in employment.”   But that technology might instead be the greatest positive if more of our workers have “the education to take advantage of these changes.”  The conclusion:  Economic growth could turn out to be high, its benefits could be felt throughout our society, and “government could promote such growth by spending on infrastructure, education, and research and development.”

There is at this time no prospect that our government will take the indicated action.  Dryly 41 has thoughtful things to say about that.

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We had banking panic/depressions in 1819, 1837, 1857, 1873, 1884, 1893 and 1907 before The Great Depression. The prevailing approach to finance was “laissez faire”.

The New Deal under FDR put an end to “laissez faire” and adopted a “strict supervision” approach to finance. They kept the 1927 McFadden Act restrictions on interstate branch banking that President Calvin Coolidge signed into law. The purpose of that legislation was two-fold. They wanted to protect small banks form large bank competition. But equally important they wanted to curb the economic and political power of large financial institutions.

The Glass-Steagall Act introduced deposit insurance to curb bank runs that plagued otherwise healthy banks. But they recognized the “moral hazard” that bankers would have with the use of what Louis Brandeis called “other people’s money” with the government guarantee. To deal with the “moral hazard” problem they separated commercial and investment banks, and restricted speculative activities that banks could engage in. To meet the fraud in the stock market they enacted the Securities Act and enforcement legislation.

It worked. At least until Ronald Reagan started the march away from “strict supervision” back to “laissez faire” by deregulating the Savings and Loan banks. Notwithstanding the disaster of 1,000 of some 3.200 S & L banks failing, the march back to “laissez faire” continued on a bi-partisan basis. Clinton, Rubin and Summers, Greenspan with Gramm, Leach and Bliley repealed the “strict supervision” measures designed to deal with “moral hazard” in 1999. Legislation was enacted to repeal the McFadden Act and the Bank Holding Company Act of 1956 restriction on interstate branch banking in 1994, which paved the way for Too Big Too Fail banks.

The 78 years and 11 months between October 1929 and September 2008 was the longest period of financial stability in our history.

So which do you prefer: “strict supervision” or “laissez faire”?

One might be more optimistic if it were recognized that our economic problems were caused by self-inflicted policies and we corrected them.

First: In 1946, the Gross Federal Debt amounted to 121.7% of GDP. The Truman administration reduced it to 71.4%; Eisenhower to 55.2%; Kennedy/Johnson to 38.6%; Nixon/Ford to 35.8%; and Carter to 32.5%.

Then came Ronald Reagan with “supply side” tax cuts.  His Budget Director said they were a “Trojan Horse” to reduce the top rates for the wealthy. Inequality began. The class war was declared. Eight years of deficits raised the Debt to 53.1%. Four more years of deficits under Bush I increased it to 66.1%.

Clinton raised taxes, had 4% unemployment, balanced budgets, and reduced the Gross Federal Debt from 66.1% of GDP to 56.4%.

Then Bush II had two rounds of “supply side” tax cuts in 2001 and 2003. V-P Cheney explained to Treasury Secretary Paul O’Neill: “Reagan proved deficits don’t matter.” When O’Neill continued to object over the second round Cheney fired him. Eight years of deficits raised the Gross Federal Debt from 56.4% of GDP to 85.1%, and left a crippled economy.

No mention in the article of “supply side” even though since Washington in 1789 no political party has inflicted this harm on the nation. It was not for some great national purpose like the Revolutionary War, the Civil War, WW I, or, WW II. All those trillions were borrowed to fund tax cuts for the wealthy who were most able to pay their fair share of taxes.

The most mysterious thing is how members of the media call Ronald Reagan and George W. Bush “conservative”. This was the most radical departure from traditional Republican tax and fiscal party in history. There is no way Calvin Coolidge, Herbert Hoover, Andrew W. Mellon and Reagan and Bush II are “conservative”.

We should consign “supply side” to the dust bin of history. It was quite harmful to the nation.

I wish I could be as optimistic as the author. Our political system is broken and it matters.

Campaign Finance and Corrupt Politicians

How did money become so important in our political system?  How does it corrupt politicians?  What can we do?

I’m considering the comment, “because money has become so important in our political system far too many politicians, at all levels of government, are corrupt” on the first post in this series.

State resources seem first to have been traded in an organized way by President Andrew Jackson.  Appointees after his 1828 election had to contribute part of their pay to his political machine.  By the 1850s political operatives were getting donations by threatening corporations with hostile legislation.  In the 1860s, parties were getting donations from very wealthy individuals like the Astors as well as mandatory contributions of part of the pay of federal employees.

The first federal campaign finance law was the 1867 Naval Appropriations Bill which prohibited soliciting contributions from Navy yard workers.

After political appointments were largely replaced by a permanent civil service in 1883 and the parties lost that important source of funding, they relied more on corporate and individual donations.  Vote buying became common and some donations were big enough to imply great rewards.  One Ulysses S. Grant supporter contributed a quarter of his entire campaign expenses in 1872.

Fund-raising was systematized for the 1896 election of President McKinley.  Banks were assessed by his campaign at 0.25% of their capital, corporations on profitability.  Business owners were happy to contribute to defeat McKinley’s populist rival, William Jennings Bryan.

Public outcry prompted McKinley’s successor, Teddy Roosevelt, to oppose corporate influence but he was suspected in his 1904 campaign of promising an ambassadorial nomination to a large contributor.  He then proposed, “contributions by corporations to any political committee or for any political purpose should be forbidden by law” but with no restriction on contributions from owners of corporations.

The 1907 Tilman Act prohibited corporations and interstate banks from making direct financial contributions to federal candidates but it was not enforced.  Disclosure and spending rules for House and Senate candidates in 1910, contribution limits in the 1925 Federal Corrupt Practices Act, an annual ceiling of $3M for political party spending and $5K for contributions in the 1939 Hatch Act, and extension of the Tilman rules to unions by the 1947 Taft-Hartley Act were all easily circumvented.

The 1971 Federal Election Campaign Act required broad disclosure of campaign finance and 1974 amendments established a central enforcement agency, the Federal Election Commission, as well as limits on contributions and spending but a 1976 Supreme Court decision struck down limits on spending as violations of free speech.

Further legislation was defeated until 2002 when the Bipartisan Campaign Reform Act sought to limit spending by large enterprises and wealthy individuals.  An Act proposed in 2010 to prohibit foreign agents and government contractors from election spending and require the sponsor of all political advertising to be disclosed was defeated.

The constitutionality of limits on election financing continues to be contested.  The US Supreme court ruled in 2010 that corporations and unions can not be prohibited from promoting the election of a candidate, which a Washington Post-ABC News poll found 80% of Americans oppose (Democrats 85%, Republicans 76%, independents 81%).

Should we expect a Constitutional amendment about campaign finance since four of five Americans oppose the Supreme Court ruling?  That depends on whether big spenders have enough control over who gets elected to defeat such an amendment.

Do big spenders have enough control?  How much money are we talking about?  Total spending on the 2008 federal election was $5.3B, of which $2.4B was on the presidential race alone.  Obama spent $730M and McCain $333M.  Obama’s top contributors included Goldman-Sachs $1,034K, JPMorgan Chase $848K, Citigroup $755K and Morgan Stanley $528K.

Spending on the 2010 midterm federal election totaled $3.6B with the average winner of a seat in the House spending $1.4M and in the Senate $9.8M.

Where does the money come from?  In 2010 roughly half came from large individual contributors.  Senate Republicans got only 42% from that contingent but were 20% self-financed.  The total from candidates’ own resources and large individual contributors ranged from 50% for House Democrats and 60% House Republicans, to 65% Senate Democrats and 62% Senate Republicans.

Small Individual Contributors Large Individual Contributors Political Action Committees Self-Financing Other
House Democrats 9% 47% 38% 3% 3%
House Republicans 14% 48% 24% 12% 3%
Senate Democrats 12% 53% 15% 12% 8%
Senate Republicans 18% 42% 12% 20% 8%

That makes campaign finance regulations extremely hard to change — half to two thirds of contributions are from very wealthy individuals and the cost to get elected is so great that those contributions are essential.

But is this corruption?  Politicians no longer directly pay for votes.  They pay for advertizing which, to be successful, depends on branding.  That means positioning a candidate as the only one with a solution to issues that represent voters’ every distress.

Since branding is largely impervious to facts it encourages ignorance, which is why people may vote for candidates opposed to their interests, but disturbing as that is, the great corruption is more subtle.

President Obama’s campaign was given very large contributions by Goldman Sachs and other “too-big-to-fail” banks.  Faced by our financial system’s meltdown, he would of course listen to executives of those banks.  We need not imagine he felt any obligation nor that they recognized their counsel to be self-serving.  Their experience led to their diagnosis and recommended solution.

All whose opinions were available to Obama came from essentially the same world, the world of finance.  All therefore saw the overwhelming need to save the TBTF banks.  As a side-effect, not necessarily something front of mind, that would also happen to restore their own wealth.

Of course, some politicians are corrupt.  Moral degeneracy may not be more common among politicians than in other fields, but politicians are immersed in temptation.  They are subject to constant, insidious and great pressure from the very wealthy.

So what should those who are not wealthy do?   This is not like working to enfranchise those who could not vote because of gender, ethnicity or lack of property.  There will be no end to the excessive impact of wealth at the center because power is inherently at the center, power is the source of wealth and wealth therefore inevitably flows toward the center.

Corruption can not be ended once and for all like not having the vote.   Working to get representatives for all of society is more like breathing, something we cannot stop if we want to remain alive.

The Appeal of Dishonesty and Bad News

Why are we content with dishonesty in the media, and why do we so avidly consume “news” about crime and tragedies?

I’ve been pondering the comment, “We no longer have news organizations dedicated to fair and balanced reporting that educates instead of indoctrinating the public” on the first post in this series.

The superficial answer is it’s what we’re accustomed to, what we grew up with.  Maybe we realize “the news” is not to make us less ignorant but to stimulate our emotions so we will want to buy things, as I explored in this post, but how does it work?

Let’s start with “balanced reporting.”  That means a balance between how things look from left and right in the sphere of domestic affairs.  More specifically, it means things are not presented in a way to polish the Democratic or Republican Party brands.

How about “indoctrinating the public?”  It is indoctrination when a proposed tax change is presented through the prism of a political party’s tax policy brand: when facts about the proposal are selected and highlighted based on how closely they align with ‘taxes bad,’ ‘soak the rich’ or some such slogan.

It is likely to be indoctrination when we see warfare and civil violence in other parts of the world.  Why?  Because the implication usually is that such things do not happen here, but they will if we don’t keep “those people” from coming here.

We have an idea of what makes us different: we are rugged individuals who take care of our own, we are freedom-lovers, we are can-do people.  The problem with labeling ourselves as Americans and assigning such properties to the label is it means we also characterize un-Americans.

Un-Americans might be Canadians, Mexicans, or stateless Islamic terrorists.   They might just have a funny accent and silly ideas about governance, they might sneak in and take our jobs, or they might come and blow us up.  At best they are harmlessly inferior, at worst our mortal enemies.

The problem is branding in a sphere where it is not a helpful convenience but a stimulus of hatred.  Branding saves us time when we buy things.  We don’t have to look at every can of soup because we’ll be happy with the brand we trust.

But what if we’re a Marlboro man?  That’s branding of a specific product, Marlboros, and a product category, cigarettes.  The Marlboro branding leverages our self-concept of rugged individualism, freedom-loving and so on.  It also leverages branding that makes us ignore tobacco’s impact on our health .

And the effects grow darker when we identify so strongly with the Democratic Party as to demonize Republicans or vice versa, or we become a crusading Christian or Muslim.

In fact, the problem begins when we become a partisan.  Joining with others to promote policies favored by a political party or interest group is not a problem.  That’s how democracy works, the least worst way we have yet found to govern.

Following the teachings of Buddha, Confucius, Jesus, Muhammad (alphabetical order) or others who gained wisdom is good because they help us grow better.

The problem begins when we believe there is something wrong with those who do not follow our practice.  That leads not to growing better but to hatred.

However, we’re still at a superficial level.  Why do we become partisans?  Why do we identify so strongly with our tribe, American, Democrat, Christian or whatever that we end up hating those we identify as members of a different tribe?

Why do we watch news that we know is less than honest, certainly not balanced, and that motivates us to hate (or envy) others?

Because we want our beliefs confirmed.  We want to feel we are not alone.  We want security.

Feeling our connection with others is good.  Mistaking that feeling for an idea about our nature, however, that is not good.  It gets us thinking, “I am one of those who are superior (or unfairly inferior) to others”  and then we start thinking it’s OK for us to attack them.

The ultimate root of the problem is our desire for security.

I asked, “how [can we] encourage more people to WANT honesty [in the media?]”  What each of us can do is speak up about harmful untruths and publicly debate legislative changes because that helps us recognize when we (ourself) don’t know or misinterpret some facts.

What I do not know is how we can educate ourselves to differentiate between facts and beliefs.  According to a 2001 Gallup poll, for example, about 45% of Americans believe “God created human beings pretty much in their present form at one time within the last 10,000 years or so.”  Whether or not we believe in a Creator is a belief — we cannot know.  We do know, however, that human beings were not created in their present form at one time within the last 10,000 years.

If we don’t see the difference between religious beliefs and facts we will also not see the difference between political or any other kind of beliefs and facts.

I will return to education in future posts.  There must be a way to motivate making it more effective.

Returning to the root problem and what each of us can do about that, we can recognize that ultimately there is no security.  We are both utterly alone and inextricably connected, not fundamentally different from those “over there.”  Every single one of us will end up old, weak and dead.  Unless we first grow sick.  Which could happen at any moment.

Ultimate safety doesn’t lie in beliefs about the rightness of “people like me” and the wrongness of others.  The only real security is being OK with the fact that there is no security and therefore nothing to worry about.  Recognizing that requires re-training, which I can testify is long and initially hard work but which I’ve seen in others is ultimately fruitful.

So we must point out the harm untruths cause and even more important, eradicate our own false ideas.  There is no silver bullet against poison in the media.

We the (Easily Confused) People

We the people whose Constitution “promote[s] the general Welfare, and secure[s] the Blessings of Liberty” are easily confused.  We have the habit of trusting ideas about what things are and how they work.

We must trust our ideas in everyday life: we’d be paralyzed if we always had to figure everything out from scratch.  But we trust too far.  We tend not to notice facts that conflict with our ideas.

Fairleigh Dickinson University recently surveyed 1,185 respondents on which news sources they used and what facts they knew about current events.  The results are quite distressing.

On average, respondents correctly answered only 1.8 of 4 questions about international news, and 1.6 of 5 questions about domestic affairs.  On average, we don’t know or are wrong about more than half the facts of what’s going on.  Why?

Because news media do not aim to provide facts but entertaining opinions, especially about the stupidity of those with other opinions.

Media coverage of the survey was more eye-catching than analytical.  Left-leaning commentators trumpeted that those who watch FOX News got only 1.04 correct answers to domestic questions while those with no exposure at all to the news got 1.22, and they got only 1.08 correct answers to international questions while those with no news exposure got 1.28.

But do these survey results mean watching FOX News makes you more ignorant?  Do they mean watching MSNBC leaves you as ignorant as those who follow no news media?  Not exactly.

What the survey demonstrates, since liberals watching FOX News and conservatives watching MSNBC are much less likely to know the facts than those who follow no news media, is that our opinions, our preconceptions, our ideas lead us to ignore the facts.

Facts presented on FOX News are much less likely to be noticed by liberals.  Facts presented on MSNBC are much less likely to be noticed by conservatives.

Media Analysis Tables

How can we have a good future if the average American doesn’t know or is wrong about so much of what’s going on in the world?  We’ll vote for candidates who also don’t know or who lie about what’s going on and we’ll support the wrong policies.

What to do?  Why do news media leave us as ignorant as we would be without them, or more so?  Well, since most of their revenue comes from advertisers, they must provide what advertisers want – people motivated to buy things – and since buying is motivated not by facts but by stimulating emotions, the media stimulates emotions and anesthetizes intellects that might say, “do I really need that?”

However, an excitingly large 27% of “we the easily confused” now gets news from blogs or political websites.  Much of that content is also entertainment, it’s true, but this is a medium where we can contribute.  We cannot increase the factual content of the mainstream media but we can use blogs to disseminate facts, stimulate analysis and promote fact-based proposals for change.

And we can encourage media businesses beginning to find ways to serve those who want facts.  The Tampa Bay Times’ PolitiFact project, for example, notes that my State’s Governor’s assertion that “about 47 percent of able-bodied people in the state of Maine don’t work” is of “pants-on-fire” quality.

At the start of this topic I wrote: “Honesty in the media has always been problematic but the impact of today’s big media seems more powerful than in the past.”   There are now, however, so many other sources of facts and analysis along with media where I can debate what the facts suggest with folks whose preconceptions are different from mine.  That is a highly encouraging development.

How many of us must work at “disseminating facts, stimulating analysis and promoting fact-based proposals” to head us in a better direction?   Speculating about that is a waste of time.  Society’s direction will change for the better if every individual who cares about it does the work.

Democracy, the Least Worst Way to Govern

By: Guest Author – in response to Protecting the Minority of the Opulent Against the Majority

I’ve always liked that quote of Winston Churchill’s. I think his imperialist/monarchist/aristocratic self warred with his democratic side.

My conclusions about searching for the ideal forms of economic, social and government systems are based on recognizing the basic or crude nature of humans: self-interested above all, greedy, aggressive, power-seeking tempered somewhat, but not always, by familial or tribal affiliation (maybe even love). This leads me to believe that some form of capitalism will always win out over socialism.

Humans will amass money and privileges and power for themselves regardless of the form of government. The highest members of the communist party always had better jobs, housing and status then the comrades. Revolutionaries who lead revolts to bring dramatic change to “the people” often end up as dictators. Robert Mugabe is just one example, or the return of military rule to Egypt.

There will always be some form of class system as people like to be better off than their neighbors and be highly regarded for it. A reason why utopias, and pure communism, if there ever was such an animal, fail. Hybrids, like the various social democracies in Europe can succeed but are always being assaulted by the usual forces from the left and right.

The clever, innovative, ruthless will exploit others, like the workers, whenever they can get away with it. Those at the top want to stay there and will do everything in their considerable power to stay there. I think you’re right on about representative government being the only way that the unfettered opulent minority (including the utterly reprehensible Tom Perkins), can be controlled. They don’t need protection at all. They need laws and regulation to moderate what otherwise would be unchecked greed in keeping with human nature.

One hundred plus years ago, in the U.S. the opulent minority such as Ford, Rockefeller, Vanderbilt, Morgan, amassed huge fortunes doing whatever they pleased. Moderates and progressives passed a bunch of laws, including the income tax, and regulations on interstate commerce, food safety, antitrust to remove some power from these robber barons and restore a small part of equity to the economy. Later we brought in labor unions, New Deal social programs and even the Great Society. All pushed and protected by government.

Today the pendulum has swung in favor of the opulent. We need to get it to reverse its course and come back toward the majority.

Most of the rest of the world thinks that democracy with representatives of the citizens having voice and command is the best system. But built in are battles between various majorities and minorities because personal interests will always conflict.

I think we could make our current systems work better if we could return to compromise being considered the honorable way to rule and, secondly, get as much money as possible out politics. This means finding people far different from the type of Democratic and Republican leaders we have now.