Category: Congress

Bigger Threat: ISIS or Congress?

What is behind the fear of ISIS in the West? The ISIS crisis in Iraq and its parallel in Syria challenges both governments as well as the status quo in the Middle East. But why would people believe that this band of fighters is an existential treat to the West? Attorney General Eric Holder shared his alarmism yesterday that the threat from ISIS is:

…more frightening than anything I think I’ve seen as attorney general

ABC News headlined “See the Terrifying ISIS Map Showing Its Five-Year Expansion Plan,” with the black flag of the Caliphate spreading like spilled crude oil across Africa, Central Asia, the Balkans, and Spain.

Lt. Gen. Joseph L. Votel, head of the Joint Special Operations Command, told the Senate Armed Services Committee last week:

There’s risks to allowing things just to try to resolve themselves, particularly when there are interests that could affect our country…

All of this jowl-shaking goes on while the Obama administration is tumbling to the fact that there is no on-the-ground military option for us. According to a classified report leaked to The New York Times, our top brass believe:

That only about half of Iraq’s operational units are capable enough for American commandos to advise them if the White House decides to help roll back the advances made by Sunni militants in northern and western Iraq over the past month

Since Iraq’s political deadlock doesn’t look like it will be broken anytime soon, the US can’t take Prime Minister Nouri al-Maliki’s Shiite-sectarian side in a war against Iraq’s Sunnis without real repercussions from the billion Sunnis around the world.

But how serious is the ISIS threat? Most estimates say they have a core of perhaps 10,000 soldiers and maybe another 10k of new recruits. They are fighting the Syrian Army, Iranian-backed militias, the YPG, the Peshmerga, Al Nusra Front, the Free Syrian Army, in addition to the “Iraqi army” and Iraqi Shiite militias.

Let’s remember that we couldn’t hold Iraq with 168,000 troops, and the most advanced military equipment on earth. So the chance that ISIS can seize or even temporarily hold portions of Baghdad with some fraction of 10,000 is zero. From Gary Brecher at Pando News:

ISIS is about as scary as your neighbor’s yappy Shih Tzu: all noise and no teeth. Let’s just sober up, for Christ’s sake, and remember we’re talking about a half-assed Sunni militia that couldn’t face up to Assad’s mediocre Syrian Arab Army and still hasn’t found a way to occupy Sunni Iraqi towns that were outright abandoned by the [Iraqi] Army

ISIS is spread quite thin, but the Pentagon’s report says that Iraq’s armed forces and security apparatus are so badly run, so infiltrated with Iranian-backed Shiite militiamen and informers from ISIS, that there isn’t much of an opening for greater US involvement. The report is based on the findings of six teams of American Special Operations forces who were tasked with assessing the Iraqi Army that America trained and equipped at a cost of more than $25 billion.

Yet, in a show of cognitive dissonance, James Dubik, the retired Army Lt. General who oversaw the training of the Iraqi Army in 2007 and 2008, said that Iraq’s security forces could make gains against ISIS even if only half its divisions were effective, but that an advisory effort was very important:

Even if half was whipped into good enough shape, that would be enough to turn the tide

At a July 3rd Pentagon news conference, General Dempsey noted that, while Iraqi security forces were capable of defending Baghdad, they were not capable on their own of launching a counteroffensive and reversing the ISIS gains. So today, the three factions—Kurds, Sunni Arabs, and Shia Arabs—are holding their own, consolidating their turf, not trying very hard to occupy the other groups’ territories.

This is an existential crisis for America?

Did we liberate Iraq, or did we destroy it?  If we destroyed Iraq, are we responsible for restoring the infrastructure to its previous capabilities? Taxing ourselves to restore Iraq might teach us that we shouldn’t attack countries that are not threatening us, but we can’t afford to pay that bill.

We have the most advanced military in the world, there is no real second place to us in military might. Yet as a nation, we are failing ourselves. We are down the global ladder when it comes to healthcare, public education, repairing our infrastructure and providing social services. We can’t get out of our own way on policy because of our divided politics. We are the global leader in incarcerating our own citizens.

Why do we look at ISIS and say that they are our existential threat?

Like Pogo said: “we have met the enemy, and he is us”.

 

Facebooklinkedinrss

Sunday Cartoon Blogging – July 13, 2014

“As things now stand, we could easily become the first people in history to lose democracy and its constitutional freedoms simply because we have forgotten what they are about”– Sam Smith

 

Young children illegals could reach nearly 100,000 this year:

COW Yosemite

On the other hand, perhaps Texas can be convinced to keep a few:

COW Fetus

Not that Texas wants them. All across Texas the fear of the diseased immigrant is reaching near epidemic proportions. Rep. Louie Gohmert (R-TX) said recently:

…we don’t even know what all diseases they have…Our health care systems can’t withstand this influx

Err, wrong again, Louie. According to the Texas Observer, UNICEF reports that Guatemalan kids are more likely than Texans to be immunized for most infectious diseases. Guatemala has universal health care. Vaccines are 100% percent funded by the government. Overall, 93% of kids in Guatemala, Honduras and El Salvador are vaccinated against measles. That’s slightly better than American kids (92%), and certainly it shows that there is no tsunami of sick crossing our border. BTW, according to the World Health Organization, neither Guatemala nor Honduras has had a reported case of measles since 1990.

Not so, here in America, where we have 500 measles cases this year. Why? Because, freedom.

In other news, Mr. Boehner has a lawsuit:

COW Lawsuit

 

The 38th time that the House Republicans voted to repeal the Affordable Care Act, they passed the Authority for [Employer] Mandate Delay Act. That demonstrated the House’s willingness to delay the employer mandate. Then the Health and Human Services Department did exactly that, delayed the employer mandate. Strangely, that is EXACTLY what the Speaker’s lawsuit will say is the reason to sue Mr. Obama. Some of the GOP want to impeach Mr. Obama. They basically view a mechanism that was built in to deal with abuses of power as a way to nullify election results that they don’t like.

Sarah Palin was up front with her view:

COW Palin

If the House votes to impeach Mr. Obama, the Senate would then rule on the validity of the charges. It takes a two-thirds majority in the Senate to remove a president from office. Even if the Senate goes to the Republicans, that isn’t happening. So maybe they should move on:

COW Impeach Hillary

 

Israel continues their drive towards Palestine:

COW Israel

 

Facebooklinkedinrss

Only Chumps Pay Taxes

Corporate America knows it has a problem when Fortune Magazine calls them out. Fortune has an article by Allan Sloane called “Positively un-American tax dodges.” The headline shows their opinion about large US companies who are moving their “headquarters” overseas to dodge billions in taxes, meaning the rest of us will have to pay their share. From Sloane: (brackets by the Wrongologist)

[There is] a new kind of American corporate exceptionalism: companies that have decided to desert our country to avoid paying taxes but expect to keep receiving the full array of benefits that being American confers, and that everyone else is paying for

One of the companies that is moving offshore is Medtronic, a Minnesota-based medical device manufacturer that is heading to Ireland. But only for tax purposes. The Irish Independent quotes Medtronic’s CEO:

Some people have misinterpreted the recent announcement that we are acquiring an Irish company and declaring our principal executives’ offices in that country to mean that we are leaving Minnesota… Nothing could be further from the truth. The Medtronic operating headquarters where I go to work every day will stay right where it is in Fridley, MN

This is called “Inversion” in tax law circles. Companies buy a foreign-headquarted firm and then make it the parent company for tax purposes. In their quest to maximize shareholder value, multinational companies have outsourced labor to lower-wage countries and shifted profits to subsidiaries in lower-taxed countries. If inversion mergers take hold, it will make matters worse. More from Fortune:

All of this threatens to undermine our tax base, with projected losses in the billions. It also threatens to undermine the American public’s already shrinking respect for big corporations

Here is a picture of how US after-tax corporate profits have grown over the decades:

Corp ATax profits 2014

Since the start of the Reagan era, except for the 2008 recession, it’s been a ride into the stratosphere for Corporate America. Corporations have successfully lobbied Congress for endless deductions and loopholes. From 2009 to 2011, the 280 most profitable companies paid just 18.5% in Corporate Taxes, about half the 35% statutory tax rate. In 1952, corporate taxes accounted for fully one-third of federal revenues, but in 2013 amounted to just under 10%.

And these guys think more is never enough. French economist Gabriel Zucman observes that:
• 20% of all corporate profits in the United States have moved offshore
• Tax avoidance costs the government one-third of the tax revenue it should be receiving from corporations

Zucman also found that $7.6 trillion of personal wealth is hidden in tax havens, which amounts to 8% of the world’s total personal wealth. He estimates the global tax revenues would increase by more than $200 billion if these tax avoidance practices were ended.

The issue is: (h/t Steve Pearlstein) Companies moving their tax jurisdiction want all the rights and privileges of being an American company without paying for the full complement of services that come along with doing business in America.

They want the security that a big military makes possible, one that allows them to operate in all of the advanced economies of the world. They want the world’s most enforceable patent system to protect their intellectual property. They want a fair and efficient judicial system to enforce contracts.

They want a well-educated workforce to design their products, often relying on basic research often done through an extensive network of government-funded institutes and laboratories. They want modern ports and highways and airports to ship products to market.

They require an efficient financial system to provide cheap and plentiful capital. They demand professional, credible regulatory agencies that can expeditiously evaluate products and ensure customers that they are safe and effective.

All of that takes lots of tax revenue. It has to include revenue from corporate income taxes that these firms think is their fiduciary duty to avoid.

It was bound to happen: The government that Corporate America bought for their exclusive use, just isn’t doing a good enough job, so the Corporatists are gonna leave.

Our tax systems must be reformed. We need to take the job of tax reform away from corporate lobbyists. We must make it harder for companies to use internal (“transfer”) pricing to avoid taxes. Companies should be made to book activity where it actually takes place. Barry Ritholtz mentions an idea in the Republican-sponsored Tax Reform Act of 2014 that “fixed” inversion: An annual tax of 8.75% on cash (and equivalents) held offshore, plus 3.5% a year on all other retained offshore earnings. The idea was to reduce the incentive to incorporate offshore by charging taxes on top of the charge by the other locality, be it Ireland or the Cayman Islands. It went nowhere.

Any new system needs to ensure that change results in corporations paying more in taxes with less collection/compliance expenses. The new system must be simpler than today’s.

As Jacques Leslie writes, “there is no economic, political or moral justification for tax evasion.”

 

Facebooklinkedinrss

Are We the People Becoming “We the Enemy”?

What’s Wrong Today:

“Either you are with us, or you are with the people.” That could be a quote from some government spy involved in domestic surveillance in the not-too-distant future.

In 1975, Sen. Frank Church, (D-ID) chaired the Senate committee that investigated illegal intelligence gathering activities by the Central Intelligence Agency (CIA), the National Security Agency (NSA) and the Federal Bureau of Investigation (FBI). In theory, prior to 9/11, only the FBI was able to conduct domestic surveillance.

Today, we know about the NSA’s role in domestic spying. In the post-9/11 world, the NSA has made all the new rules. The new rules it brought into existence are simple enough: Whoever you are and wherever you live, you are a potential target. No one is exempt from surveillance.

But the NSA is not alone.

The Pentagon is looking into how to deal with civil unrest in the US. Launched in 2008, the Department of Defense’s (DOD’s) Minerva Research Initiative partners with universities to improve DoD’s basic understanding of the social, cultural, behavioral, and political forces that shape regions of the world of strategic importance to the US.

The Guardian reports that last year, the Minerva Initiative funded a project to determine ‘Who Does Not Become a Terrorist, and Why?’ The report conflates peaceful activists with “supporters of political violence”, who it sees as different from terrorists only in that they do not embark on “armed militancy” themselves. In 2013, Minerva funded a University of Maryland project in collaboration with the US Department of Energy’s Pacific Northwest National Laboratory to gauge the risk of civil unrest due to climate change. The project is developing models to anticipate what could happen to societies under a range of potential climate change scenarios.

The Guardian also said that independent scholars are critical of the US government’s efforts to militarize social science in the service of war. In May 2008, the American Anthropological Association (AAA) wrote to the US government noting that the Pentagon lacks “the kind of infrastructure for evaluating anthropological [and other social science] research” in a way that involves “rigorous, balanced and objective peer review”. The AAA called for such research to be managed instead by civilian agencies like the National Science Foundation (NSF).

Dr. David Price, a cultural anthropologist at St Martin’s University in Washington DC, has previously exposed how the Pentagon’s Human Terrain System (HTS) program, which was designed to embed social scientists in military field operations, routinely conducted training scenarios set in regions within the United States. Price reported that the HTS training scenarios “adapted COIN (counterinsurgency) for Afghanistan/Iraq” to domestic situations:

…in the USA where the local population was seen from the military perspective, as threatening the established balance of power and influence, and challenging law and order

Price identified a war game aimed at environmental activists protesting pollution from a coal-fired plant in Missouri. Some of the protesters were members of the Sierra Club. War game participants were tasked to “identify those who were ‘problem-solvers’ and those who were ‘problem-causers‘.” Next, they identified the rest of the population who could be the target of propaganda operations designed to move their “Center of Gravity” towards a set of viewpoints which were the ‘desired end-state’ of the military’s strategy.
Should we be viewing Minerva as a prime example of military ideology? Clearly, security agencies have no qualms about painting the rest of us as potential terrorists.

Here’s more: There is a lawsuit against alleged domestic US military spying, called Panagacos vs. Towery, in the US District Court in Tacoma, WA. It was filed against the Army, Navy, Air Force, Coast Guard and local law enforcement agencies in 2010, after it was discovered that an activist called “John Jacob” was actually Army intelligence agent John J. Towery from nearby Fort Lewis. Towery spied on and infiltrated the antiwar group Port Militarization Resistance (PMR), which blocked military shipments en route to Iraq and Afghanistan in 2007. It also accuses the cities of Olympia and Tacoma of coordinating with the US military to violate the First and Fourth Amendment rights of activists.

So, our military is engaged in domestic COINTELPRO (COunter INtelligence PROgrams). This also happened during the Vietnam War years. Back then, the CIA’s COINTELPRO used “boots on the ground” to neutralize the millions of anti-Vietnam War activists. Martin Luther King, Jr. was under 24/7 surveillance by the 111th Military Intelligence Group, in 1968.

Maybe we need to be paranoid, since republics can fall when they are undermined by their military establishment. Today, US has a mixture of extreme religiosity, ideological conflict in a polarized society, and a militarist culture in which soldiers (now called “warriors””) are worshiped.

This is a toxic brew. Fusion Centers, NSA spying, militarized police forces, criminalization of poverty, erosion of free speech, and now, war gaming against the American public, these are the actions of a fearful American power elite. We have a huge gap between the rich and poor, many areas are deeply racist, the last civil war still rankles with the descendants of some of the losers, and many citizens are armed to the teeth.

Think about this quote from Frederick Douglass:

Power concedes nothing without a demand. It never did and it never will. Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted with either words or blows, or with both. The limits of tyrants are prescribed by the endurance of those whom they oppress.

Facebooklinkedinrss

10% of Voting Age Americans Not Registered to Vote

What’s Wrong Today:

In early June, Pew Research published a study called Political Polarization in the American Public. It reported that Republicans and Democrats are more divided along ideological lines than at any point in the past two decades. They surveyed 10,000 adults nationwide and the headline result was that these divisions are greatest among those who are the most engaged and active in the political process. The political center is shrinking while those at the left and right limits are growing. Here is a graph from the report:

PEW Ideological Divide

Now, Pew gives us more reason to be concerned about the future of our politics. The latest Pew Research Center’s political typology report was published on June 28. It sorted voters into 8 cohesive groups based on their attitudes and values, providing us with a political field guide for the elections in November. One of the groups is called “Bystanders”. They are 10% of the voting-age population. Despite all of the movement we see above among other groups, Bystanders were also 10% of voting-age population in 2011. They are one group that will pay little, if any attention, to America’s midterm elections this November. From Pew Research: (emphasis by the Wrongologist)

Overall, 10% of Americans are what we call Bystanders, or the politically disengaged…None of this cohort say they’re registered to vote, and none say they follow government and public affairs most of the time (this compares with 48% of Americans overall). Virtually all of this group (96%) say they’ve never contributed money to a candidate running for public office

Bystanders are young: 38% are under 30, compared to 22% of the general public; 67% have a high school education (or less), vs. 40% of the general public. Nearly a third (32%) are Hispanic and 29% are not citizens.

Although Bystanders view the Democratic Party more favorably than the GOP, they have a mix of liberal and conservative attitudes. They are sympathetic to the plight of the poor, but as many say that government aid to the poor does more harm than good as vice versa. They express fairly liberal views on homosexuality and same-sex marriage, but 54% say abortion should be illegal in all or most cases.

Asked about their interest in a number of topics,
• 73% of Bystanders say they have no interest in government and politics
• 66% say they are not interested in business and finance
• 66% think of themselves as an “outdoor person”
• 64% of Bystanders are interested in celebrities and entertainment (vs. 46% of the public)
• 35% call themselves a “video or computer gamer” (vs. 21% of the public)

Every aspect of our demography is being fundamentally transformed. Huge gaps have opened up in our political and social values, our economic well-being, our family structure, our racial and ethnic identity, our gender norms, our religious affiliation, and our use of technology. Are these people our future?

In the Pew survey, Bystanders were more likely than other political cohorts to answer “don’t know,” more likely to say they’ve “never heard of” the topic in question or to refuse to answer questions altogether.

So, taking away the 29% of Bystanders who aren’t US citizens and can’t vote, there are 71% of 10% of voting age Americans − some 7.1% of eligible voters − who could vote if they wanted to register. Or if they can register, since several states have added voter suppression laws since the Supreme Court decision in Shelby County vs. Holder last year.

What would it take to get them to pay attention politically? The 38% of the Bystanders who are Millennials are most likely to have common cause with the Democrats. If even half of them were convinced to register and were to vote blue in 2014 that would be a 2% boost for the Dems.

It might go a long way towards keeping the Senate with the Democrats in November.

Our last 4 presidential elections were based on negative messaging, by Republicans against Obama and by Democrats against GW Bush. We will not end the political polarization or bring the Bystanders into active citizenship until each party offers a positive vision with realistic programs backing it up.

We have to rebalance the social compact to better bind our young and old. Otherwise we will lose these young, less educated Americans who are more interested in celebrities than in the constitution.

In tomorrow’s world, yesterday’s math will not add up.

Facebooklinkedinrss

Transparency: OK for You, Not for Me

What’s Wrong Today:

Sometimes, good intentions get lost. Organizational rules and government laws are established with good intentions, and later, get watered down. We call this the “except me” option. The rules apply to everyone, except me, my company, my church, my political party.

Today let’s look at three examples of organizations saying the rules do not apply to them. The premise of Federal and state Freedom of Information Act laws is that government records should be open to the public, and their information subject to public review.

First, the Red Cross: Barry Ritholtz at Bloomberg warns us that the Red Cross doesn’t want you to know how they spend their money. The Red Cross is using a “trade secrets” exception as a pretext for hiding much of their activities. The story began with an article by Pro Publica about donations to the Red Cross for Superstorm Sandy, and what happened to the money:

Following Superstorm Sandy, donors gave $312 million to the American Red Cross. How did the aid organization spend that money? A year and a half after the storm, it’s surprisingly difficult to get a detailed answer

Pro Publica tried to get answers by filing a request with the State of New York for the information. They were rebuffed:

Just how badly [did] the American Red Cross want to keep secret how it raised and spent over $300 million after Hurricane Sandy? The charity…hired a fancy law firm (Gibson Dunn) to fight a public request we filed with New York State, arguing that information about its Sandy activities is a ‘trade secret’

That’s right, when asked where the money went, the Red Cross lawyered up. Isn’t it hard to believe that how a charity spends its money could be a trade secret? Yet, the Red Cross’ “trade secret” argument persuaded NY State to withhold the information. From Yves Smith: (brackets and emphasis by the Wrongologist)

The…New York State Attorney General [is] helping the Red Cross shroud its activities. Admittedly, Schneiderman has taken up an investigation of the Red Cross. However, when ProPublica tried to obtain a copy of the information that the charity sent to the Attorney General, the Red Cross’ law firm, Gibson Dunn, insisted that much of the material provided was a trade secret and thus not subject to disclosure under New York’s version of FOIA, the Freedom of Information Law, or FOIL

ProPublica published Schneiderman’s response. It shows how absurd some of Gibson Dunn’s arguments were. For instance, the charity wanted the second line of a two line title redacted. The first line was “American Red Cross.” What could the second line possibly be that Gibson Dunn would contend that it deserved secret status? The name of a legal entity? Why does the Red Cross need trade secrets? They are supposedly, not for profit. Why would they need “business strategies” when they are not a business?

Next, as police departments across the US militarize, a former good idea is now being used for a bad reason. The good part was the formation of Law Enforcement Councils (LECs), made up of various municipal police departments in a state or region. When these LECs were set up, the idea was to exchange information about policing techniques and to provide back-up when incidents on the ground exceeded a given town’s resources.

The bad part: The WaPo reports on how police departments use their LECs, often incorporated as 501 (c) (3) organizations, to avoid providing information on its SWAT team activities. These LECs exist throughout the US. As part of the ACLU’s recent report on police militarization, the Massachusetts chapter of the ACLU sent open records requests to SWAT teams across Massachusetts. It was told that the SWAT teams were part of a private company that was not subject to the Massachusetts public records law. From the WaPo: (emphasis by the Wrongologist)

According to the ACLU, the LECs are claiming that their 501(c) (3) status means that they’re private corporations, not government agencies. And therefore, they say they’re immune from open records requests

These agencies oversee police activities. They employ cops who carry guns, wear badges, collect paychecks provided by taxpayers and have the power to detain, arrest, injure and kill. They operate SWAT teams. But in Massachusetts, they say that because they’re incorporated, they’re immune to Massachusetts open records laws. 240 of the 351 police departments in Massachusetts belong to an LEC. While LECs are legally “corporations,” they are funded by local and federal taxpayer money, and are composed exclusively of public police officers. Jessie Rossman, an attorney for the Massachusetts ACLU:

You can’t have it both ways…The same government authority that allows them to carry weapons, make arrests, and break down the doors of Massachusetts residents during dangerous raids also makes them a government agency that is subject to the open records law

Massachusetts residents aren’t permitted to know how often the SWAT teams are used, what they’re used for, what sort of training they get or who they’re primarily used against. Sound OK to you?

It is like a circular firing squad – as more and more Americans arm themselves with automatic weapons, the police see this as a reason why they need more and better military-grade weapons. And more secrecy.

Finally, our Congress at work: The National Journal reports that Congress decided to stop reporting Members’ trips that are paid for by private parties:

It’s going to be a little more difficult to ferret out which members of Congress are lavished with all-expenses-paid trips around the world after the House has quietly stripped away the requirement that such privately sponsored travel be included on lawmakers’ annual financial-disclosure forms

The move, made behind closed doors and without a public announcement by the House Ethics Committee, reverses more than three decades of precedent. Gifts of free travel to lawmakers have appeared on a Member’s yearly financial form dating back to the late 1970s, after the Watergate scandal. National Journal uncovered the deleted disclosure requirement when analyzing the most recent batch of yearly filings. They quote Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington:

This is such an obvious effort to avoid accountability…There’s no legitimate reason for it

Free trips paid for by private groups must still be reported separately to the House’s Office of the Clerk and disclosed there. But they will now be absent from the chief document that reporters, watchdogs, and members of the public have used for decades to scrutinize lawmakers’ finances. Last year, members of Congress and their aides took more free trips than in any year since the influence-peddling scandal that sent lobbyist Jack Abramoff to prison. There were nearly 1,900 trips at a cost of more than $6 million last year, according to Legistorm, which compiles travel records.

Now, none of those trips must be included on the annual disclosures of lawmakers or their aides.

There you have it: 3 examples of smart people, all ‘sponsored’ in whole or in part by we the people, who believe that the rules shouldn’t apply to them. These organizations are reducing transparency at a time when trust in public entities is at or near all-time lows, despite rules or laws on the books that argue against the very loopholes they say they need.

What about you and me is so scary to the Red Cross, the Massachusetts police, and Congress?

Facebooklinkedinrss

Republicans Want To Repeal Obscure Tax Law

Reuters reported last week that the Republican National Committee (RNC) approved a resolution that adds the repeal of an Obama administration law to its 2014 platform. The law is designed to crack down on offshore tax dodging.

The legislation that the Republicans are targeting is called the Foreign Account Tax Compliance Act (FATCA). What is FATCA? According to Wikipedia, FATCA requires US citizens, including individuals who live outside the US, to report their financial accounts held outside of the US, and requires foreign financial institutions to report to the IRS about their American clients.

Although FATCA was passed by Congress in 2010, it will go into effect on July 1, 2014. It requires foreign banks and investment funds to report to the IRS all assets they hold that exceed $50,000 belonging to US citizens – whether those citizens are living in America or abroad.

The genesis of the law was a 2010 tax-avoidance scandal involving a Swiss bank. One result of FACTA was that last August, Switzerland signed a separate treaty with the US, ending a longstanding tax dispute between the two countries, that gave the IRS unprecedented access to
Swiss accounts held by Americans and US green card holders.

Banks in most tax havens are planning to abide by the new rules because of hefty fines (the IRS can withhold 30% of dividends and interest payments due to the banks from US accounts) since failure to comply with these regulations could seriously impact banks’ ability to do business in America. A successful indictment could bar the bank from the US marketplace. Because of that threat, FATCA is driving a rapid expansion of a network of bilateral, tax-related information-sharing agreements, negotiated by the US Treasury and its overseas counterparts amid heightened global concern about tax dodging.

So, do Republicans want to allow rich individuals and wealthy companies to continue to hold money in off-shore banks without subjecting these monies to federal taxes? Apparently,
and they also want to attract votes and funding from Americans living abroad. The US expatriate community is violently opposed to the law, and some have legitimate concerns about losing
their banking relationships in the foreign country where they live. Their banks are concerned that the costs of flagging the accounts of Americans and maintaining separate reporting formats for them may too high for the less-than-$50k accounts that the US is not interested in. In 2013, nearly 2,400 expatriates gave up their US citizenship or turned in their green cards, some at
least, in an effort to avoid US taxation.

Reuters quotes Solomon Yue, an RNC official from Oregon:

I see FATCA just like Obamacare…It will attract American overseas donors

So, Republicans are eager to use FATCA as a campaign and fundraising issue against the Democrats in the Congressional mid-term elections in November. Repeal seems unlikely, but another issue that raises the political temperature could help defeat Democrats.

The RNC has set up a petition site at MoveOn.org that has about 2200 signers, quite a few from overseas. They have also set up a Repeal FATCA site. Here is a quote from the disinformation available there:

All this supposedly is justified by FATCA’s claim to “recover” lost taxes of less than $1 billion per year – enough to run the government for about two hours. (In fact, the way the U.S. Treasury plans to enforce FATCA, it would probably lose more money than it would take in!)

The Republicans seem to be saying that we don’t need $1 billion if it causes increased tax payments. Politically, it seems strange that this issue should become a hot issue for the Republicans, who are taking a beating in the polls over their stand on income inequality.

On the other hand, US wealthy individuals (Mitt Romney) and corporations that are able to use tax havens and have been able to hide behind account secrecy, would be very happy to see Mr. Boehner take up a bill to repeal FATCA. Foreign banks, many of which contribute to US political campaigns would also like to see the bill repealed

No one is asking the rich to pay unfairly – they already get all kinds of tax breaks − but
to encourage tax evasion seems to be far beyond the Republican’s usual pale.

How about having the rich simply pay their fair share and watch the federal deficit which they
are so concerned about, fall, without requiring Americans to give up food stamp subsidies or funding for long term unemployment benefits? So next time you hear Republicans talking about cutting the deficit, ask them why they are for tax evasion as opposed to tax compliance.

Hopefully, someone will ask Mr. Boehner why repealing a law that will promote the harboring of hidden money and continued tax avoidance is in our best interest. We know it is a key loophole for Mr. Romney. So Mr. Speaker, please tell us again why repealing laws is more important that strengthening them? They were passed for a reason. Maybe you should start pushing for our laws and regulations to be followed, rather than repealed.

Many other countries are striving for better education, better healthcare, a more engaged attitude about our planet and environment, a willingness to regulate guns and business with an eye toward the best interests of the people.

Thanks to US conservatives, we’ve headed in almost the opposite direction.

For Republicans, as long as rich people don’t pay more, undermining our country is okay. There’s just no restraining Republicans if the restraint we need involves the rich. And if responsible politicians try, the conservatives cry, “government overreach” or “socialism.”

But that’s just a red herring, an excuse so that they can continue to pillage America
for all they can get.

Facebooklinkedinrss

Postcard from Cuba, Part III

Cuba’s Future and its Relationship with the United States

The Wrongologist did not become an expert by spending 7 days in Cuba. Just like all countries, Cuba is a complex set of equations. A few truths did emerge though:

Ideology and Intellectual History:

Cuba is organized around the intellectual legacy of Jose Marti. Statues of Marti and quotes from his writings are everywhere in Cuba, including in many homes and public buildings. He was 42 when he died in battle against Spanish troops at the Battle of Dos Ríos, in May, 1895. After his death, one of his poems from the book, “Versos Sencillos” (Simple Verses) was adapted to the song “Guantanamera“, which has become the definitive patriotic song of Cuba.

The Wrongologist was struck by a quote on the wall of the Hogar Materno he visited in Old Havana. Here is his translation:

When you struggle for your country and life, division and rivalry are crimes – Marti

Those are words to live by. For Cubans, the revolution was not an event; it is a national continuous improvement process that is still moving forward, 55 years after the overthrow of the dictator, Batista. Here is a billboard just outside of the Jose Marti International Arrivals building that makes the point:

Cubans have internalized the ideology of the Revolution. It comes through in their speaking in a matter-of-fact way,
similar to the way Evangelicals speak about being Christians. This is not an equivalency; while Cubans are somewhat religious, the Revolution is a part of Cuban life, both in practical and ideological ways.

Cubans are steeped not only in the ideology of the July 26th Revolution, but in the writings of Marti and Che Guevara. Che was an Argentine Marxist revolutionary and is a common symbol of rebellion and global insignia in popular Cuban culture.

Here is a
photo of a wall in Old Havana. Che played a central role in training
the militia forces that repelled the Bay of Pigs Invasion and in bringing the Soviet
missiles to Cuba, precipitating the 1962 Cuban Missile Crisis. He was executed by
Bolivian troops in 1967 after he joined their revolution.


 

 

Havana’s Revolution Square is the political and cultural center of the city; it is the site where Fidel Castro has addressed the Cuban people, occasionally with more than 1 million people participating.

The Square has a 55’ tall statue of Jose Marti at its center. The Square is surrounded by buildings housing the major ministries of the Cuban government, including the Communist Party, Armed Forces, Communications, and Economic and Planning, the National Theater and the Jose
Marti Library.

Here is a photo of the Informatics and Communications Ministry in Revolution Square:

The Cuban Revolution was a turning point in Cuban/American relations. In August 1960, the Eisenhower administration froze all Cuban assets on American soil, severed diplomatic
ties, and tightened its embargo of Cuba. The embargo, called “the blockade” by Cubans, is the longest-lasting single foreign policy in American history. It remains in force today, although there have been efforts, notably by the Obama administration, to loosen it in recent years.

What is the status of Cuba’s economy?

According to the Council on Foreign Relations, the economy is  divided into the following revenue streams:

  • Export of Healthcare Services – as described in the Wrongologist’s Postcards from Cuba -Part II, Cuba earns $9 billion/year in hard currency by exporting health care services.
  • Nickel − Cuba has the third-largest nickel reserves in the world. Nickel is the country’s biggest material export, bringing in roughly $2.7 billion in 2007
  • Tourism − Now the economy’s 2nd largest source of revenue, tourists–primarily from Canada and the European Union—brings more than $2.7 billion into the country.
  • Remittances − Academic sources estimate remittances total more than $1 billion a year, most coming from families in the US. If limits on remittances are lifted, this figure could increase substantially.
  • Sugar − Sugar was long the primary industry in Cuba, but production has plummeted due to outdated factory equipment.
  • Foreign investments − Cuba receives hundreds of millions of dollars in foreign investments from China,
    Venezuela, and Spain.

Food security is a major problem for Cuba. According to the Miami Herald:

Cuba saw a steep and unexplained drop in the harvest of vegetables and fruit in the first three months of the year [2013] despite government reforms to increase production in a country that spends more than $1.5 billion on food imports

Overall agricultural production, not counting sugarcane, dropped by 7.8% in the first quarter of 2013 compared
to the first three months of 2012. But some sectors saw far bigger plunges. Plantains dropped by 44.2%, potatoes by 36% and citrus by 33.9%. Part of the decline is attributed to Hurricane Sandy, which slammed into the eastern city of Santiago de Cuba on Oct. 25. Eastern Cuba is known for its fruit production.

This grim outcome is despite President Raúl Castro’s 2007 campaign to increase domestic food production by leasing fallow state lands to private farmers, hiking the prices
that the government pays for agricultural goods and easing state controls on the distribution networks. Food production on the island dropped in 2011 to pre-2007 levels and dropped again in 2012, when agricultural food prices were
reported to have spiked by about 20%.

Cuba now imports an estimated 80% percent of the food its people consume, at a cost of more than $1.5 billion per year. This
is hardly a sustainable scenario, and while there does not appear to be starvation in Cuba, food shortages remain a problem.

The Wrongologist visited a predominantly farming area in Pinar Del Rio and saw a farm that did not use agricultural chemicals, relying instead on organic fertilization and pest control.

One issue that leads to inefficiency is the reliance by small independent farmers on animals for plowing. Here is a tobacco farmer in Pinar Del Rio:

The lack of tractors is very obvious in this agricultural region that is less than 2 hours from Havana. Most tractors that we did see were Soviet-era imports.

 

What are the issues that prevent normalization of US-Cuba relations?

  • Human rights violations − In March 2003, the Cuban government arrested 75 dissidents and journalists, sentencing them to prison terms of up to 28 years
    on charges of conspiring with the United States to overthrow the state. There are reports that the government has in recent years used other tactics
    besides prison, including firings from state jobs and intimidation, to silence opposition figures. Despite a 2005 UN Human Rights Commission vote that condemned Cuba’s human rights record, Cuba was elected to the UN Human Rights Council in 2006.
  • Guantanamo Bay − Cuban officials have seized on the US prison camp as a “symbol of solidarity” with the rest of the world against the United States.
  • Cuban exile community − The Cuban-American community in southern Florida traditionally has heavily influenced US policy with Cuba. Both political parties fear alienating a strong voting bloc in an important swing state in presidential elections.

According to the BBC, Edward Alex Lee of the US State Department said: (brackets by the Wrongologist)

The United States is ‘very open’ to building a new relationship with Cuba but that any improvement should go hand-in-hand with more political freedom [in Cuba]

Lee went on to say that the two countries had held “very constructive” talks on migration and other issues last week, but he declined to give any details of what he called “substantial progress”. Lee added that the
two nations would seek to continue their negotiations:

Despite our historically difficult relationship…we have been able to speak to each other in a respectful and thoughtful manner…

So maybe there is hope that normalization of relations can take place. Most Cubans that the Wrongologist talked to about this feel it will happen in about 3 years. This may be unconsciously tied to their estimate of when Fidel Castro
will die. Perhaps they believe that the attitudes of Cuban-Americans who control much of America’s agenda regarding Cuba will soften when Fidel dies.

According to the Pew Research Center, there are about 1.9 million Cuban-Americans in the US. 70% of Cuban-Americans live in Florida, making them the most geographically concentrated of the 12 largest Hispanic origin groups.

We know that the younger generation of Cuban-Americans voting bloc took a major shift toward the left during the 2012 election. According to Dan Moffett, an immigration writer:

According to exit polls by Bendixen & Amandi International, President Obama got 48% of the exile community’s vote and Republican candidate Mitt Romney received 52%. Four years before, when Obama ran against John McCain, he got only 35% of the Cuban-American vote

Polling done by Bendixen & Amandi was trying to measure the generational shift within the Cuban community. The pollsters found that President Obama in 2012 won 60% of the votes of those Cuban-Americans who were born in the United States. Romney, meanwhile, won 55% of the vote among Cuban-Americans who were born in Cuba.

However, politicians remember that in 2004, John Kerry was able to get only 29% of the state’s Cuban-American vote in losing to George W. Bush. In 2000, Bush got about 75% of the bloc’s vote in defeating Al Gore. Cuban-Americans were
the difference in Bush winning Florida, and Florida was the difference in his winning the White House.

Conclusions:

Thinking that Cuban-American relations could be normalized within three years or when Fidel Castro dies is overly optimistic. It’s really a bit silly that the US continues to hold a cold war grudge against Cuba. The US could most readily help the people of Cuba by opening up trade between the two countries. A communist government with horrible human rights record hasn’t stopped America from dealing with China, so why not trade with Cuba? (Not that the Wrongologist is a supporter of communist governments or states that lack commitment to human rights)

How can trade with Cuba be wrong because the country is communist, but trade with China and Vietnam is vital to economic progress and a spirit of international harmony?

The US is happily in bed with the “democracy” that is Saudi Arabia, but cannot abide the Cuban state? Our hard line position is more about those Cuban-Americans who feel that the embargo will eventually return the houses that they abandoned 55 years ago when they left Cuba for Miami.

That isn’t about ideology, or about the human rights of the Cuban people.

It’s time we change our strategy. Our policies haven’t broken the Cuban government in 55 years, so it may be time to give up the sanctions and help ourselves and the Cuban people.

The alternative is for the US to cede that relationship to China.

The US State Department is not afraid of a “special relationship” between Venezuela and Cuba, but a “special relationship” with China will remind our old guard political realists of the terribly flawed geopolitical position the US had when the Soviet Union made Cuba into an economic client.

Yet, Cubans should be careful what they wish for. Fast food restaurants, more high-rise hotels and golf courses may create tin shack shanty towns when American developers are allowed into Havana.

Good luck to the Cubans, lovely people, and a lovely country.

(This is the final installment of the 3-part series on the Wrongologist’s visit to Cuba.)

Facebooklinkedinrss

It’s Just A Suggestion, But…

Would Gun Insurance Help?

Not insurance that pays to replace stolen firearms, but liability insurance for the damage that is done by firearms. Over the past few days, there have been many suggestions about mandating such insurance as a way of:

  • Paying for the damages done by people irresponsibly using (storing, playing with, or loaning) their guns
  • Reducing gun ownership by increasing the costs associated with it

Can we agree that guns as weapons are inherently dangerous to society? Can we agree that gun owners should bear the risk and true social costs of gun ownership?

Suggestion: Require both owners and sellers to purchase liability
insurance that is underwritten by private insurance companies according to the relative risk of the gun or the buyer. As John Wasik writes in Forbes:

When you buy a car, your insurer underwrites the risk according to your age, driving/arrest/ticket record, type of car, amount of use and other factors. A teenage driver behind the wheel of a Porsche is going to pay a lot more than a 50-year-old house wife. A driver with DUI convictions may not get insurance at all. Like vehicles, you should be required to have a policy before you even applied for a gun permit. Every seller would have to follow this rule before making a transaction.

This is where we take social economics beyond theory. Actuaries would work to understand which buyers/guns are most at risk to commit a gun crime, or to be used in a gun crime. Gun owners/buyers would then be underwritten according to age, mental health and place of residence, credit/bankruptcy record and/or marital status, whatever causal criteria turn out to be the most relevant.

Insurance companies have mountains of data and know how to use it to price policies, or in industry parlance, to reduce the risk/loss ratio. Wasik continues:

Who pays the least for gun insurance would be least likely to commit a crime with it. An 80-year-old married woman in Fort Lauderdale would get a great rate. A 20-year-old in inner-city Chicago wouldn’t be able to afford it. A 32-year-old man with a record of drunk driving and domestic violence would have a similar problem.

Moreover, the market would over time, become very efficient at weighing these risks, since insurers specialize in figuring out the odds of something going wrong and charging the appropriate amount for the risk.

And there’s a good argument that the damage caused by firearms gives the government a “compelling interest” to require insurance, the basic test for infringing the constitutional rights of our 2nd Amendment lovers.

If it seems like requiring insurance might be too expensive, remember that the social cost is already expensive: We pay a huge cost for firearms injuries, says the National Center for Biotechnology Information, a part of NIH. According to their study, most injuries are paid for with public funds. Mandatory insurance would shift that cost from a public tax burden to a private insurance burden borne by gunowners. Quoting from the conclusion of the referenced study:

96 % of the patients in this report had their costs of care covered by the government, because they had no primary insurance coverage.

There could be a possibility of lower taxes down the road, if medical costs paid by the government come down; the taxes needed to pay those medical costs could come down too.

Given that gun violence kills more than 30,000 Americans annually, it is harmful not only to our well being, but our economy, so using economic disincentives to moderate their use makes sense.

If you think that the idea of mandatory insurance is onerous, think again:

You can’t finance a home mortgage without homeowner’s and title insurance. If you haven’t got title insurance and are interested in getting some advice about it, you could contact an insurer like Bay Title Company for example to see what help they could give you. Insurance is needed for just about anything. Want to own a car? Most states require liability insurance. You can’t employ someone in most states without worker’s compensation or unemployment insurance.

The advantages of mandatory gun insurance include the following:

  • Responsibility is placed on the gun owner: The law would require firearm owners to take responsibility for their firearms. Insurance separates responsible firearm owners from irresponsible ones
  • Control remains in the private sector: Private firms will vet the buyer for proper acquisition of firearms, not the Government
  • 2nd Amendment rights are protected: Anyone can purchase firearms as long as they can get insured
  • Promotes registering of existing weapons: Unregistered weapons will not be insured so the owners will not be able to buy ammo for those guns
  • Those who are injured: Will receive some recompense for their injury

What about the economic burden on gun owners?

If the insurance is required by the gun, the cost may prevent some people from buying them. A buyer in the middle class or higher could easily afford insurance on multiple weapons. If insurance was required for each gun registered, it might discourage multiple purchases by high risk owners. It may make people more responsible when they store their guns: Stolen guns had better be from a broken-into gun safe or your policy renewal will be a lot more expensive; the same would probably happen to your rates if little Billy finds a loaded gun in the desk drawer and shoots his friend with it.

It probably means that poorer people won’t be able to afford the insurance, so it probably will not dramatically affect gun violence (or coverage for same) in inner cities. We know that people take the chance of driving without insurance all the time and it’s a lot easier for someone to hide an uninsured gun than to drive an uninsured automobile.

But, will it work?

Insurers underwrite risk: casualty loss, liability, health, auto, home and life insurance. If you’re looking into life insurance you’ll want to make sure you research as much as possible or get expert advice so you know the policy you’re going with is the best suited one for you. For those of you in Canada, the most trusted comparison site is arguably PolicyMe.com so that might be the place to start. For American citizens, there are similar comparison sites that you could use. I always think these are the best way to view prices. One thing to remember is that Affordable Life USA offers great Mortage Life Insurance. Just make sure you do your research before accepting the first quote. With gun insurance, instead of charging the highest premiums for overweight smokers, alcoholics with bad driving records and dangerous hobbies, the most expensive gun policies will be priced for those who are younger with histories of mental illness, divorce, criminal records or severe financial difficulties. Or, the highest prices will be for the kinds of weapons that kill the most people the quickest: A shotgun owner who has hunted for years without incident would pay far less than a first-time owner purchasing a semi-automatic.

People would have a financial disincentive to purchase the most risky firearms. They would have a financial incentive to attend gun safety classes and use trigger locks. Using insurance to drive outcomes instead of attempting to enforce widespread bans and confiscation may result in much of the behavior we seek, without another festering, divisive issue draining our society.

Requiring insurance will simply add the already known social costs to the actual manufacturing costs of a weapon. If the social costs go higher, price of owning a weapon will be higher; if the social costs go down, so will insurance costs.

The market will decide what the fair price will be.

Insurance can be used to effectively price the risk and costs of social harm. This idea falls short of immediately getting rid of the most dangerous weapons and it will not prevent the next Newtown, but we have to start somewhere.

The Constitution was ratified in 1789. We are the Founders now. These are our problems and we must come up with our own solutions. The 2nd Amendment does not fit perfectly with current circumstances. Gun ownership has become a bigger problem than any of the problems it was meant to solve. The British are NOT coming; Indians no longer threaten your little fort.

Buy insurance for each gun, or turn the gun in.

Facebooklinkedinrss