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The Wrongologist

Geopolitics, Power and Political Economy

FCC Says America Doesn’t Need Fast Internet

The Daily Escape:

Gibraltar, looking toward the Atlantic, 2016 – photo by Wrongo

The FCC has just said that Americans might not need a fast home internet connection. Instead, mobile internet via a smartphone might be all the public needs. From Ars Technica:

The suggestion comes in the FCC’s annual inquiry into broadband availability. Section 706 of the Telecommunications Act requires the FCC to determine whether broadband (or more formally, “advanced telecommunications capability”) is being deployed to all Americans in a reasonable and timely fashion. If the FCC finds that broadband isn’t being deployed quickly enough to everyone, it is required by law to “take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.”

Today’s Wrongologist column is for all of those people who said “both parties are the same, it doesn’t matter who you vote for”. Nothing like the “small government” folks at the FCC telling America what type of internet access we need.

During the Obama administration, the FCC determined that broadband wasn’t reaching Americans fast enough, particularly in rural areas. And, they did not consider mobile broadband to be a full replacement for a home (or “fixed”) internet connection via cable, fiber, or other technologies.

Last year, the FCC concluded that Americans needed BOTH home and mobile access:

34 million Americans, about 10% of the country, still lack access to fixed broadband at the FCC’s benchmark speed of 25Mbps for downloads, 3Mbps for uploads…

The FCC also concluded under then-Chairman Tom Wheeler that since home internet connections and smartphones have different capabilities and limitations, Americans should have access to both instead of just one or the other.

But now we have a Republican administration. Ajit Pai, the GOP’s new FCC Chairman, is poised to change that policy by declaring that mobile broadband with speeds of 10Mbps downstream and 1Mbps upstream is all anyone needs. This is a deep tongue kiss from the FCC to the broadband industry.

More from Ars Technica: (brackets by the Wrongologist)

This [Agit’s plan] would be the first time that the FCC has set a broadband speed standard for mobile; at 10Mbps/1Mbps, it would be less than half as fast as the FCC’s home broadband speed standard of 25Mbps/3Mbps.

In Europe you can now routinely get 250Mbps internet service, and higher speeds in parts of Asia. Good job FCC!

The changes were signaled in an FCC Notice of Inquiry, the first step toward completing a new analysis of broadband deployment. The document asks the public for comments on a variety of questions, including whether mobile broadband can substitute for fixed Internet connections.

Pai has previously made it clear that he thinks mobile broadband can substitute for fixed connections. In 2012, Pai’s first year as a member of the FCC board, he criticized the then-Democratic majority for concluding that mobile internet service can’t replace home Internet.

Those who work from home need faster speeds, and the number of “at home” workers is growing. Companies have learned that letting employees work from home gets them a lifestyle improvement by ending the weeks of their year spent commuting. Working from home also lets companies lower their commercial rents.

Consumer internet usage will increase. With the current costs of mobile data, an evening of Netflix delivered by smartphone will put the average US consumer over their data plan maximum. The data caps in most mobile plans are low, and the costs of overages are high. Reliability is another issue. The service is fragile in storms, and unstable under high volume usage, such as at large public gatherings.

Do you remember the good old days when we made fun of Russia and China for their quaint infrastructure? Now, Republicans are trying to pretend the future doesn’t exist.

Maybe America doesn’t need interstate highways, local roads might be good enough. Pai is playing to Trump voters: Why would they want anything faster than mobile? They get Trump’s Twitter feed, so what else to they need?

You don’t like this? Is it making you angry?

You should know what to do by now. Hint: It usually happens on a Tuesday.

Music appreciation: Today we hear “Hymn to Freedom” by the Oscar Peterson Trio. It was written in 1962 in support of the Civil Rights movement. Here it is live in Denmark in 1964, with Oscar Peterson on Piano, Ray Brown on Bass and Ed Thigpen on Drums:

Freedom from the FCC and the Ajit Pai’s of the world is what we need.

Those who read the Wrongologist in email can view the video here.

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IMF Reports US Standard of Living is Falling

The Daily Escape:

Haleakala Crater, Maui

Is it the best of times or the worst of times? This is no longer a partisan discussion. We have an economy in the midst of a long expansion, the third longest since 1850. The statistics say we are close to full employment. But, our mortality rate is moving in the wrong direction, and we have an opioid epidemic that is serious enough to cause jobs to go unfilled. The NYT reports that in Youngstown Ohio, middle class factory jobs go begging:

It’s not that local workers lack the skills for these positions, many of which do not even require a high school diploma but pay $15 to $25 an hour and offer full benefits. Rather, the problem is that too many applicants — nearly half, in some cases — fail a drug test.

The Fed’s regular Beige Book surveys of economic activity across the country in April, May and July all noted the inability of employers to find workers able to pass drug screenings.

So the best of times? Probably not. Bloomberg reports that the International Monetary Fund (IMF) looked at the US economy. This is what they see:

For some time now there has been a general sense that household incomes are stagnating for a large share of the population, job opportunities are deteriorating, prospects for upward mobility are waning, and economic gains are increasingly accruing to those that are already wealthy. This sense is generally borne out by economic data and when comparing the US with other advanced economies.

The IMF then goes on to compare the US with 23 other advanced economies in the Organization for Economic Cooperation and Development (OECD) in this chart:

The chart is a bit of an eye test unless it’s viewed on a big monitor, but its overall point is that the US has been losing ground relative to its past OECD reports by several measures of living standards. 35 countries make up the OECD. The members include all of Western Europe, Russia, Japan, Australia, and several developing nations like Korea and Panama.

This from Bloomberg:

And in the areas where the US hasn’t lost ground (poverty rates, high school graduation rates), it was at or near the bottom of the heap to begin with. The clear message is that the US — the richest nation on Earth, as is frequently proclaimed, although it’s actually not the richest per capita — is increasingly becoming the developed world’s poor relation as far as the actual living standards of most of its population go.

This analysis is contained in the staff report of the IMF’s annual “consultation” with the U.S., which was published last week. The IMF economists haven’t turned up anything shocking or new, it’s just that as outsiders, they have a different perspective than what we hear from our politicians and economists.

For example:

Income polarization is suppressing consumption…weighing on labor supply and reducing the ability of households to adapt to shocks. High levels of poverty are creating disparities in the education system, hampering human capital formation and eating into future productivity.

What is to be done? Well, the IMF report concludes:

Reforms should include building a more efficient tax system; establishing a more effective regulatory system; raising infrastructure spending; improving education and developing skills; strengthening healthcare coverage while containing costs; offering family-friendly benefits; maintaining a free, fair, and mutually beneficial trade and investment regime; and reforming the immigration and welfare systems.

In other words, they suggest substantial reform. It’s doubtful that America can take care of these things anytime soon.

The subtext to most of their suggestions is that other affluent countries have found ways to improve in these areas, while the US has not. We don’t have to look too far into the past to see when those countries were modeling their economies on ours. But today, on all sorts of issues, like taxation, labor markets, health care, and education, the opposite is now true.

One major difference between the US and the rest of the developed world is ideological: Voters and politicians in the US are less willing to raise taxes to finance a better life for our citizens.

Other wealthy countries have figured out how to raise revenue, provide quality education, help the the unemployed, reduce poverty, and keep their citizens healthier than America has.

We must catch up, or admit our time as the world’s indispensable economy is over.

Today’s music (dis)honors the turmoil in the White House. See ‘ya Mooch! Remember that in just six months, Trump has gone through two National Security Advisers, two Chiefs of Staff, two Communications Directors, two Press Secretaries, and two Directors of the FBI.

Here is “Disorder in the House” by the late Warren Zevon and Bruce Springsteen:

Those who read the Wrongologist in email can view the video here.

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Today’s Conservatives’ Southern Roots

The Daily Escape:

Vasconcelos Library – Mexico City

From The Atlantic’s Sam Tannenhaus:

…the most populous region in America, by far, is the South. Nearly four in 10 Americans live there, roughly 122 million people, by the latest official estimate. And the number is climbing. For that reason alone, the South deserves more attention than it seems to be getting in political discussion today.

Ain’t demographics great? Tannenhaus continues:

The South is the cradle of modern conservatism. This, too, may come as a surprise, so entrenched is the origin myth of the far-westerners Barry Goldwater, Richard Nixon, and Ronald Reagan as leaders of a Sun Belt realignment and forerunners of today’s polarizing GOP. But each of those politicians had his own “southern strategy,” playing to white backlash against the civil-rights revolution—“hunting where the ducks are,” as Goldwater explained—though it was encrypted in the states’-rights ideology that has been vital to southern politics since the days of John C. Calhoun.

Tannenhaus is reviewing Nancy MacLean’s Democracy in Chains, and using it as a jumping off point to explore the roots of modern conservatism. Why does all this matter today? Donald Trump.

Tannenhaus points out that Trump won the South bigly:

Lost amid the many 2016 postmortems, and the careful parsing of returns in Ohio swing counties, was Donald Trump’s prodigious conquest of the South: 60% or more of the vote in Alabama, Arkansas, Kentucky, Oklahoma, Tennessee, and West Virginia, with similar margins in Louisiana and Mississippi.

And we need to look at Trump’s Cabinet: 10 Cabinet appointees are from the South, including Attorney General Sessions (Alabama) and Secretary of State Tillerson (Texas).

MacLean’s view is that modern conservatives draw on Southern resistance to 1954’s Supreme Court decision in Brown vs. Board of Education. After the New Deal, conservatives pushed back hard against the expanding federal government. Tannenhaus says:

But it was an uphill battle; the public was grateful for Social Security. Brown changed all that. More than the economic order was now under siege…A new postwar conservatism was born, mingling states’-rights doctrine with odes to the freedom-loving individual and resistance to the “social engineering” pursued by what conservative writers in the mid-1950s began to call the “liberal establishment.”

MacLean focuses on James Buchanan, a Virginian, and a Nobel Prize-winning economist, who argued that the crux of the desegregation problem was that “state-run” schools had become a “monopoly”.

Buchanan argued for privatization of schools. If local towns and cities limited their involvement in education to setting minimum standards, then many kinds of schools might flourish. Each parent “would cast his vote in the marketplace and have it count.”

Sounds like Betsy DeVos.

But, Buchanan wasn’t done. In his book “The Calculus of Consent” (1962), he argued that politicians were looking out for themselves, and they could do real damage that citizens were unable to avoid. The high-priced programs they devised were paid for by taxes, and citizens had little choice but to pay them. Reinforced by the steep progressive tax rates of the time, he called it licensed theft. Not long after Buchanan’s book, Medicare was passed, then the War on Poverty, and then the Great Society— each another example of social engineering delivered by the liberal establishment.

Buchanan’s ideas live on today. The right believes that liberal values cost us our liberty.

Today’s Freedom Caucus is Buchanan’s ideological descendant. They believe they are the guardians of liberty, that drastic measures, like shutting down the government, or defaulting on the national debt are legitimate uses of political power that serves their higher objective. More from Tannenhaus:

This is what drives House Republicans to scale back social programs, or to shift the tax burden from the 1% onto the parasitic mob, or to come up with a health-care plan that would leave Trump’s own voters out in the cold.

Conservatives and Libertarians say that “government is trampling our way of life”. That sets people against government programs, even when the specific program doesn’t need to be attacked. Consider Medicaid. It is attacked as both social engineering and a gift to minorities, even though the majority of those benefiting from it are elderly or white.

Conservatives and Libertarians prefer “individual choice” for poor elderly, or children who can’t afford healthcare. A broadly-based social safety net isn’t consistent with their ideological purity.

They fail to see the value of government as a moderating force in markets.

Accordingly, their thinking cannot advance human society in any meaningful way.

Today’s tune: “Revolution” by The Beatles recorded in September 1968. It was released as the B-side of the “Hey Jude” single in late August 1968, and we hear the live studio version from a month later:

Takeaway Lyric:

You say you’ll change the constitution
Well, you know
We all want to change your head
You tell me it’s the institution
Well, you know
You better free you mind instead

Those who read the Wrongologist in email can view the video here.

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Saturday Soother – July 8, 2017

The Daily Escape:

Marble Caves, Patagonia – photo by Clane Gessel

Any idea which investor-types are the largest buyers of US stocks? It is the corporations themselves, buying back their own stock. They are followed by Exchange Traded Funds (ETFs). Here is a graphic:

From Bloomberg:

The entities shoveling more money into the stock market than any other this year, as has been the case for the past few years, remain corporations. Buybacks are on pace to reach nearly $550 billion, or $150 billion more than ETFs.

None of that cash is going into new markets, new products, R & D, or innovation. The buyback is equivalent to the CEO saying: “I’ve got no idea what we should be doing to improve profits or market share”.  Arne Alsin at Forbes said this:

For most of the 20th century, stock buybacks were deemed illegal because they were thought to be a form of stock market manipulation. But since 1982, when they were essentially legalized by the SEC, buybacks have become perhaps the most popular financial engineering tool in the C-Suite tool shed. And it’s obvious why Wall Street loves them: Buying back company stock can inflate a company’s share price and boost its earnings per share — metrics that often guide lucrative executive bonuses.

Alsin suggests that buybacks are big because we’re in a period of technological disruption. New industries like cloud computing, electric cars, and streaming video are rapidly changing the world. But older companies are slow to adapt, and rather than investing in R & D (or simply holding onto cash) the corporate boards of legacy businesses are bolstering stock prices the only way they know how: buying back their stock.

Alsin offers Hewlett-Packard as an example:

In the last decade, the company has invested $47 billion in stock buybacks — which is nearly double the company’s current market capitalization. That risk is senseless. HP knows they are facing existential threats from upstart competitors, but instead of paying out dividends or letting cash accrue on the balance sheet, HP is choosing the riskiest option.

Buybacks are the result of several converging forces: pressure from activist shareholders; executive compensation programs that tie pay to per-share earnings and share prices that buybacks can boost; increased global competition; and fear of making bets on products and services that may not pay off.

This financialization of non-financial firms increasingly crowds out other types of investment, to the detriment of lower level employees, whose jobs are less secure. It can hurt long-term investors, who hold these stocks in their 401(k)s and pension plans.

Serving customers, creating innovative new products, employing workers, and taking care of the environment are not the objectives of these firms.

So think carefully about the companies you invest in, or buy from.

Enough worrying for this week! Time to unstress. Grab a cuppa Vermont Artisan Coffee & Tea Company’sDarkest Roast”, $11.25/lb. (It is available in decaf), settle into your favorite chair, and listen to “Ashokan Farewell” performed by Jay Ungar and Molly Mason Family Band, live in the Folk Alley studio at WKSU 89.7 FM. WKSU is Kent State’s college radio station:

Wrongo supports Folk Alley, and recommends that everyone should. Ungar composed Ashokan Farewell in 1982. It is written in the style of a Scottish lament. Ungar sometimes introduces it as:

A Scottish lament written by a Jewish guy from the Bronx.

Ungar says that Ken Burns heard the song in 1984, and asked to use it in his (then) upcoming PBS series, “The Civil War”. The original version and a few other versions are heard 25 times in the show, for a surprising total of 59 minutes and 33 seconds of the 11-hour series. For the non-math majors, that is 9% of the show!

Those who read the Wrongologist in email can view the video here.

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Retail Stores Are Closing Fast

The Daily Escape:

Cougar with Radio Collar – Griffith Park, Los Angeles, via Nature Photography

Retailers are closing thousands of stores and going bankrupt at a rate not seen since the Great Recession, and tens of thousands of people are losing their jobs as a result. Retailers blame Amazon and other online vendors, and e-commerce sales are booming. While some brick-and-mortar retailers are doing well, many are losing money. The Atlantic reports that:

Overall retail employment has fallen every month this year. Department stores, including Macy’s and JC Penney, have shed nearly 100,000 jobs since October—more than the total number of coal miners or steel workers currently employed in the US.

Wolf Richter has the following chart showing the nature of the problem for retail stores:

But the e-commerce industry won’t rescue out-of-work retail employees. Most warehouses are regional, and located far from residential areas, which means they might not be within a reasonable commuting distance for displaced workers. By contrast, retail stores are typically located near residential centers. E-commerce warehouses also employ fewer people than retail stores, since the warehouses are increasingly automated.

Yves Smith offers this idea: (parenthesis by the Wrongologist)

One of the reason so many real world retailers are hitting the wall so hard is that private equity leverage and asset stripping made them particularly vulnerable. While the losses to online retailers would have forced some downsizing regardless, the fact that so many are making desperate moves in parallel is in large measure due to the fact that…their private equity (PE) overlords have made them fragile.

That’s a new angle for evaluating Amazon’s performance: it’s not that retailers are closing because Amazon is expanding, but Amazon is expanding because retailers are closing. Jeff Bezos should be thanking the PE firms for looting the retail industry.

The Federal Reserve’s low interest rates also made it easier for Private Equity funds to load these retailers up with debt. Management could borrow more money than necessary, pay themselves cash bonuses, and claim “interest rates are low; making payments will be easy“.

They would even show you the math. Of course, that math assumed that store sales would continue climbing in the future. If sales fell, high debt payments could quickly become an outsized burden.

The Private Equity all-stars often follow a particular deal model. After purchasing the retail company, the PE firm sells the real estate owned by the retail company to another entity (owned by the PE fund). Then the retail company makes lease payments to its new landlord. This splitting of the assets into an operating company and a property company allows the PE fund manager to make a cash distribution to its investors early on, producing a quick return on the deal. Later, the property company will be sold.

The problem with this approach is that businesses that choose to own their real estate are typically seasonal businesses, as all retailers are. Or they are low margin businesses particularly vulnerable to the business cycle, like restaurants. Owning their property reduced their fixed costs, making them better able to ride out bad times.

To make this picture worse, the PE firms often “sell” the real estate to itself at an inflated price, which justifies saddling the operating business with high lease payments, making the financial risk in the operating company even higher. Of course, those high rents make the property company look more valuable to prospective investors, who may fail to look close enough at the retailer who is paying the rents.

Companies with little debt generally can survive lower sales. They can engage in cost-cutting, maybe encourage some employees to retire early, etc. It’s easier to survive if they own their own property. But when you’ve got a lot of debt, and servicing that debt requires that sales continue to rise quarter after quarter without fail, then things become a LOT more fragile.

Trump claims he’s created 500,000 new jobs in his first 100 days. Notice that he doesn’t say what these jobs are, or where they were created. Certainly they weren’t in Retail. Or Coal. Or Steel. Those jobs aren’t coming back.

Here is Jonathan Richman with his 1990 song “Corner Store” which laments what towns have lost to the malls:

Those who read the Wrongologist in email can view the video here.

Takeaway Lyric:

Well, I walked past just yesterday
And I couldn’t bear that new mall no more
I can’t expect you all to see it my way
But you may not know what was there before
And I want them to put back my old corner store.

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United Airlines: Try Doing The Right Thing

The Daily Escape:

Kravica waterfall in Bosnia Herzegovina -photo by Vedrana Tafra

Wrongo needs to start by saying that he has nearly 800,000 lifetime air miles on United Airlines (UAL) and, after the forcible removal of a paying passenger, he will try to avoid flying them again.

You know the story: United Express in Chicago loads passengers on a plane heading to Louisville. Then four employees arrive, needing seats. United was unwilling to offer enough compensation to induce passengers to give up their seats, and ordered four passengers off of the aircraft. Three left, but one refused, saying he had to be in Louisville in the morning.

United officials called the Department of Chicago Aviation, (part of the City of Chicago), the type of government agency that you never even knew existed, to remove him. Officers grabbed his arms, dragged him screaming across the armrests and along the floor and off of the aircraft, apparently injuring him in the process.

Unusual situations like this test organizations and their leadership. The key information here is that UAL wanted to make space to carry their own staff. The flight was not “overbooked”, UAL wanted to take back seats of a few paying passengers to accommodate their own staff. Apparently, UAL had bungled its own logistics, and then looked to its paying customers to solve the problem.

Poor customer service like this exists because of corporate culture, and because the company rarely has to pay a price for it.

In Wrongo’s past, he managed 1000 employees who had technical support and/or customer service contact with the public. We had a mantra: Know when to Do The Thing Right, and know when to Do The Right Thing. 95% of the time, the job is to follow established procedures, to guide the customer to a pre-established solution that had been vetted, one that was company policy.

Our staff’s job was to “do the thing right” in those cases, to follow our processes.

5% (or less) of the time, our people would see something novel, outside the scope of established policy. Something that called for reaching an equitable solution that wasn’t in any manual.

Then, our employees needed to “do the right thing”.

These aren’t difficult concepts to instill, they are entirely consistent with most people’s personal experience, and usually with their views about fairness.

United should try empowering people to do the right thing, when going by the book fails the customer. Whatever it might have cost to compensate volunteers, it would have been far cheaper than what UAL will now pay to this passenger.

This also illustrates how America is changing: Large corporations are willing to use the police to enforce their policies. The passenger’s choice was to comply with police demands, or face physical intimidation, or worse. And Chicago’s sub-contracted police were too eager to jump into the fray.

We should ask: Did the injured passenger break any law by refusing to give up his seat? If that’s the case, the plane was filled with lawbreakers. If not, why was an element of the Chicago police doing UAL’s dirty work?

The Seventh Amendment of the Constitution guarantees a jury trial for civil cases in the federal courts:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved

The $20 amount is trivial in today’s economy. But that idea of a jury trial has been killed by corporatist judges on the Supreme Court, and other courts, and has been replaced the company’s terms of service. When you agree, it takes away most of your rights — disputes are resolved through arbitration that the corporation almost always wins. In this case, UAL’s terms of service gives them almost unlimited authority when dealing with its passengers, including a rule regarding “refusal of transport” (Rule 21) and “denial of boarding compensation” (Rule 25).

But that doesn’t justify bad corporate behavior. Or violence.

But, thanks to Congress’s bipartisan policy of ignoring anti-trust laws for several decades, just four firms now control the vast majority of domestic flights, and they don’t really compete with one another. This is from the DOT’s report on airline competition:

Less competition means you don’t have to worry as much about annoying people with delays or overbooked flights. It also means you can make a lot more money. There’s less pressure to cut ticket prices — even when the price of oil, an airline’s biggest cost, is plummeting — and it’s easier to introduce ever-more obnoxious fees and charges.

UAL isn’t worried about you sharing a video of a passenger being dragged off their plane, because you have no real choice when you fly from certain cities.

Ultimately, the responsibility to blunt this trend is ours. Replace Citizens United. Remove corporatist judges. Keep our police on a short leash.

Don’t just upload a video, organize your neighbors and vote!

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Is Taxing Robots a Solution to Fewer Jobs?

The Daily Escape:

(Slot canyon with dust devil – photo by Angiolo Manetti)

Yesterday, the Dutch voted in an election pitting mainstream parties against Geert Wilders, a hard-right, anti-Islam nationalist whose popularity is seen as a threat to politics-as-usual across Europe, and possibly, as an existential threat to the EU.

Wilders, who wants to “de-Islamicize” the Netherlands and pull out of the EU, has little chance of governing, as all of the mainstream parties have already said they won’t work with him. Given Holland’s complicated form of proportional representation, up to 15 parties could win seats in parliament, and none are expected to win even 20% of the vote. OTOH, polls show that four in 10 of the Netherlands’ 13 million eligible voters were undecided a day before voting, and there is just 5 percentage points separating the top four parties, so Wilders could surprise everyone.

As Wrongo writes this, the Dutch election results are not known, but PBS NewsHour coverage on Tuesday surfaced a thought about taxing robots. PBS correspondent Malcolm Brabant was interviewing workers in Rotterdam:

Niek Stam claims to be the country’s most militant labor union organizer. He says the working class feel insecure about their prospects because of relentless automation and a constant drive to be competitive. The union is campaigning for robots to be taxed.

Brabant then interviewed a worker:

Robots do not buy cars. Neither do they shop for groceries, which leads to a fundamental question: Who’s going to buy all these products when up to 40% of present jobs vanish?

This isn’t an entirely new idea. Silvia Merler, blogging at Bruegel, says:

In a recent interview, Bill Gates discussed the option of a tax on robots. He argued that if today human workers’ income is taxed, and then a robot comes in to do the same thing, it seems logical to think that we would tax the robot at a similar level. While the form of such taxation is not entirely clear, Gates suggested that some of it could come from the profits that are generated by the labor-saving efficiency…and some could come directly in some type of a robot tax.

The main argument against taxing robots is made by corporations and some economists (Larry Summers), who argue that it impedes innovation. Stagnating productivity in rich countries, combined with falling business investment, suggests that adoption of new technology is currently too slow rather than too fast, and taxing new technology could exacerbate the slowdown.

It can be argued that robots are property, and property is already taxed by local governments via the property tax. It might be possible to create an additional value-added tax for robots, since an income tax wouldn’t work, as most robots are not capable of producing income by themselves.

Noah Smith at Bloomberg argues that the problem with Gates’ basic proposal is that it is very hard to tell the difference between new technology that complements human work, and new technology that replaces them. Shorter Noah Smith: Taxation is so hard!

Why are Western economies stagnant? Why has wage growth lagged GDP growth? Automation is certainly a key factor, but rather than point the finger at the corporations who continually benefit from government tax policies, let’s just assign blame to an object, a strawbot, if you will. That way, we won’t look too carefully at the real problem: The continuing concentration of economic and political power in the hands of fewer and fewer corporations.

Automation isn’t the issue, tax laws that allow economic treason by corporations in their home countries are the issue.

Why is nationalism on the march across the globe? Because fed-up workers see it as possibly the only answer to the neoliberal order that is destroying the middle class in Western democracies.

Let’s find a way to tax robots. Something has to offset Trump’s tax breaks for the rich.

Now, a musical moment. Did you know that “pre-St. Patrick’s Day” was a thing? Apparently, some dedicated celebrators prepare for the day itself by raising hell for up to a week beforehand. With that in mind, here is some pre-St. Pat’s Irish music, with Ed Sheeran singing “Nancy Mulligan” a love song about his grandparent’s marriage during WWII, against the wishes of her parents, and despite their Catholic/Protestant differences:

Those who read the Wrongologist in email can view the video here.

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Why Trump Doesn’t Talk About Jobs Anymore

The Daily Escape:

(Bamboo after snowfall in January, near Kyoto. Photo by Hiroki Kondo)

During the 2016 presidential race, Trump campaigned on populist themes. Now that he is in office, it is clear that his policies will be neither populist nor popular, but strictly pro-business. The first clue was his choice of Cabinet members. Despite promising to “drain the swamp”, nobody realized that he could do that by making lobbyists pointless, as their clients are in charge of the government: The CEO of Exxon is head of foreign policy, a former Goldman Sachs partner heads Treasury, the daughter of a ship owner heads Transportation, a corporate raider is at Commerce, and so it goes.

Two months into his presidency, it is clear that the Trump economic policy is pro-business, not pro-jobs, or pro-little guy. If you still have doubt, the Republicans just rolled back a series of Obama-era worker safety regulations. The Senate voted 49-48 to kill a rule that required federal contractors to disclose and correct serious safety violations.

It’s clear that industry CEOs can’t believe their good luck, despite having opposed Trump at every step before the election. He’s only asking them for some vague promises to add new American jobs in return. Acting normal when they are interviewed after leaving a Trump meeting must be the hardest part of their day.

Trump hardly mentions jobs anymore, because he knows there aren’t many. His bogey man of weak domestic manufacturing needs to be addressed: China’s total exports in 2015 were $2.3 Trillion. The US total exports in 2015 were $1.5 Trillion, second in the world.

And the total value of US manufacturing in 2015 was $6.2 Trillion and we are doing it with fewer people than ever before. Today, US factories produce twice as much stuff as they did in 1984, but with one-third fewer workers.

Trump’s carrot and stick approach with US companies is theater. He is now industry’s number one value creator: When he commended Ford for deciding not to build a new plant in Mexico, the price of its shares rose 4.5%.

Softbank shares went up 6.2% after being praised by Trump for investing $50 billion in the US. Softbank’s motive was simple: Softbank owns Sprint, who would like to merge with T-Mobile. The authority to permit this merger lies with the new head of the FTC, yet to be named by Trump. Trump’s positive tweets feed Softbank’s hopes that the merger will be approved.

The Trump presidency has begun in the worst possible way for all who believed he would be an activist in new jobs creation for the lightly skilled, the people who overwhelmingly helped to elect him.

If the opposition wants to take Trump down, they should stop talking about Russia, and focus on Trump’s record with jobs creation. He made big promises – a job for everyone. It will be a long time (if ever) before a significant number of new manufacturing jobs materialize. This is true because Trump’s plan is to cut the fat out of government, cutting so many jobs that he might never add enough to make up for those he eliminates.

His plan is to use the freed-up funds to do something splashy with infrastructure. This would allow him to boast significant job creation, while downplaying the lost jobs in government. If Trump can figure out how to take unemployed, 50+ year old white males living in small town West Virginia, and make them productive, employed workers, then he’s a genius.

Capitalism hasn’t changed. A subset of oligarchs led by Trump have seized control of the US government. They are “nationalists”. Another subset, the “globalists” lost control of the state.

OTOH, the American people would have lost regardless of who won.

This is being repeated around the industrialized world, from Brexit, to Marine Le Pen’s right-wing challenge in France, to far right challenges to Angela Merkel in Germany.

The chaos described in Naomi Klein’s Shock Doctrine: The Rise of Disaster Capitalism is engulfing the world.

In honor of those who still believe that Trumpy will solve the jobs equation, here is Alan Jackson with “Hard Hat and a Hammer”:

Those who read the Wrongologist in email can view the video here.

Sample Lyrics:

Lace-up boots and faded jeans
A homemade sandwich, and a half a jug of tea
Average Joe, average pay
Same ol’ end, same ol’ day

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Congress Greases the Skids for Exxon

(See below for the Daily Escape)

While America’s focus has been on the Orange Overlord’s blizzard of executive orders, and his public love-making with Putin, we were distracted from some of the actions by the GOP’s Congressional worms who are intent on chewing through our regulatory protections.

Did you feel burdened by a Security and Exchange Commission (SEC) rule requiring that American corporations doing business overseas reveal how much money they’re spending in foreign countries? This is called the Resource Extraction Rule, and apparently, it has been a terrible burden for Exxon and other oil firms.

VOX reported that, on the same day the Senate confirmed Rex Tillerson as Secretary of State, the House voted to kill a transparency rule for oil companies that Tillerson once lobbied against while CEO of Exxon Mobil. Now it’s on to the Senate and the Orange Leader for action:

Using the little-known Congressional Review Act, the House GOP voted on Wednesday to kill an Obama-era regulation that would require publicly traded oil, gas, and mining companies to disclose any payments that they made to foreign governments, including taxes and royalties.

The Resource Extraction Rule is part of the 2010 Dodd-Frank Act. Back then, senators from both parties included a provision requiring greater disclosure from mining and drilling companies’ activities abroad. The hope was to cut down on corruption in resource-rich developing countries by increasing transparency.

Over the past six years, the SEC tried to craft a rule that would give the legislation teeth. But the SEC’s first attempt at regulation was struck down by the courts in 2012. The rule didn’t actually get finished until June 27, 2016. As Charlie Pierce says: (emphasis by the Wrongologist)

In other countries, resource extraction is a polite way of describing corruption and bribery on a grand scale, and it’s also a dead serious matter for local activists who are trying to take on international corporations and their native plunderers in local government.

Remember the Congressional Review Act (CRA). It is the mechanism the GOP will use to undo much of what the Obama administration did in the areas of corporate responsibility and environmental justice.

At its core, the CRA states that any “recent” regulation (the Act’s definition of recent means it only applies to those passed by the Obama administration after June, 2016) can be repealed by a majority vote of both houses of Congress. Any repeal vote taken by the Senate cannot be filibustered, and the list includes more than 50 Obama-era regulations.

So far, the Stream Protection rule that restricted coal companies from dumping debris and waste into nearby waterways has been revoked, along with the Social Security gun rule that prevented mentally impaired persons from buying guns.

Now, they’ve gutted the Resource Extraction rule.

Under the CRA, the SEC is barred from crafting a new rule that has “substantially the same form” as the repealed regulation. So, Congress has thrown a rose to the oil and gas and mining industries that will be difficult to reverse.

Despite GOP concerns, similar rules are in place in the European Union. Reporting by the United Kingdom, France, Norway and Canada shows $150 billion in payments to governments in more than 100 countries.

Sounds like something citizens should know about.

The GOP’s argument is that American oil and gas companies need to make these under-the-table payments, in order to compete in third world countries.

This is America under the GOP: We can’t afford to provide the world’s best education to our kids. We can’t afford to take care of our elderly, but we absolutely must have policies that allow Exxon and friends to bribe foreign governments.

 

The Daily Escape: The National Library of China, in Beijing’s educational district.

(Image by Tian-yu Xiong for the National Geographic)

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New FCC Chair Guts Net Neutrality

Today we premiere a new feature, the “Daily Escape”, a photo that hopefully will take you away from all that is wrong just now. Some photos will be by Wrongo, but most will be from professionals. They will not have any particular relevance to the topic of the day. They are here to help you pause for a moment, and go to a different place.

Today’s Daily Escape: George Peabody Library, Johns Hopkins University

Now, on to what’s wrong…

The principle that all Internet content should be treated equally as it flows to consumers is called “net neutrality”. Net neutrality looks all but dead under Trump’s new head of the FCC. From the NYT:

In his first days as President Trump’s pick to lead the Federal Communications Commission, Ajit Pai has aggressively moved to roll back consumer protection regulations created during the Obama presidency.

Mr. Pai took a first swipe at net neutrality rules designed to ensure equal access to content on the internet. He stopped nine companies from providing discounted high-speed internet service to low-income individuals. He withdrew an effort to keep prison phone rates down, and he scrapped a proposal to open the cable box market to competition.

Before he became FCC Chair, Pai served as an FCC commissioner, one of the Republican minority under the Obama administration. In that role, he opposed reclassifying broadband providers as common carriers, which allows the agency to regulate them like utility companies, a necessary step if the FCC was to enforce net neutrality rules. That reclassification might be next to go.

Today consumers can pay Internet service providers for a higher-speed Internet connection, but regardless of the download speed they choose, under new Chair Pai’s plan, they might get some content faster, depending on how much their content provider has paid the service provider.

Tim Wu at the New Yorker offered some insight: (emphasis by the Wrongologist)

With broadband, there is no such thing as accelerating some traffic without degrading other traffic. We take it for granted that bloggers, start-ups, or nonprofits on an open Internet reach their audiences roughly the same way as everyone else. Now they won’t. They’ll be behind in the queue, watching as companies that can pay tolls to the cable companies’ speed ahead

The new rule gives broadband providers what they’ve wanted for about a decade: the right to speed up some traffic at the expense of others. The motivation is not complicated. The broadband carriers want to make more money for doing what they already do. Never mind that American carriers already charge some of the world’s highest prices for a service that costs less than $5/month to provide.

In the large-scale server market, Internet traffic is nearly free. In that market, a terabyte of data costs about $1/month. That’s 1000 gigabytes/month, if you are not familiar with usage of that size.  The home user pays 10x to as much as 1000x more than that per month; $100 for 100 gigabytes of traffic is not uncommon. A recent offer from AT&T for 45 M/bit internet is $30/month, which includes 1TB of data/mo. So 1000 gigabytes costs $30, or $1 per 33 gigabytes, but, if you exceed ATT’s limit, the price goes up dramatically: You would have to pay $10 per each additional 50 GB.

No volume discount for you, but Netflix will get one.

Requiring access fees for faster service will be good for Netflix, since it won’t have to worry as much about competitive traffic, particularly from small companies. The ultimate result will be to lock in the current set of incumbents who control the internet, ushering in the era of big, fat, (and possibly) inefficient monopolies.

Republicans and big corporations like to say that they are against regulation because the free market should rule. That economic efficiency brings lower prices.

It is always a lie.

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