Domestic Policy – Page 60 – The Wrongologist

The Crook Who Took America off the Gold Standard

Forty years ago on August 9, 1974, Richard Nixon resigned in disgrace rather than face Impeachment. Millions of words have been written about his crimes and misdemeanors. Some efforts at rehabilitation of his image occurred over the last week.

One thing we shouldn’t forget is that Nixon took us off the gold standard.

When Nixon entered office in 1969, America had been part of the international monetary system known as Bretton Woods since the end of World War II. Bretton Woods committed the US to backing every dollar overseas with gold. Thus, foreign countries had the right to exchange their dollars at the rate of $35 per ounce. All other currencies were fixed to the dollar, and the dollar was pegged to gold.

Nixon appointed Arthur Burns as Chairman of the Federal Reserve in 1970, with instructions to ensure easy access to credit since Nixon was going to run for reelection in 1972, and wanted a growing economy to help his case. Bloomberg Business Week says he gave Burns some blunt instructions: “You see to it, no recession”.

Despite Nixon’s instructions to Burns, the US went into recession in 1970, triggering a rise in unemployment to 6% (imagine that!), which was the highest level since the Korean War. The recession should have curbed inflation, but it didn’t. Burns was stumped. Business Week quotes Burns’ diary:

What the boys around the White House fail to see…is that the country now faces an entirely new problem—sizable inflation in the midst of recession…The rules of economics are not working the way they used to. Prices were going up even when factories stood idle—a seeming refutation of the economic rules.

Despite growing inflation, Nixon pressured Burns to further loosen monetary policy, driving even more inflation. Domestic inflation was mirrored overseas. Foreign governments bought dollars to continue their growing exports to the US, leaving their central banks filled with greenbacks. Meanwhile, America’s gold holdings dwindled to $10 billion, about half its 1960 level.

The gold standard now existed in name only, since foreign banks held far more dollars than the US held in gold at $35/ounce. This left the US dollar vulnerable to a run.

In 1971, Nixon appointed John Connally as Treasury Secretary. Connally asked the White House financial team for options to control inflation and solve the possible run on the dollar, while keeping the domestic economy growing. Burns wanted price controls; he also thought the US should devalue the dollar against gold (that is, raise the gold price above $35). Undersecretary for Monetary Affairs Paul Volcker believed this would be ineffectual, as other countries would simply devalue their currencies by the same percentage. Volcker thought the US should temporarily halt gold-dollar convertibility.

On August 12, 1971 Britain demanded that the US guarantee $750 million. The next day, Nixon summoned his advisers to Camp David to agree on a plan. The plan had two essential points. First, America would stop converting dollars to gold. Second, to combat inflation, US wages and prices would be frozen for 90 days.

On August 15, 1971 Nixon announced the plan that unilaterally terminated convertibility of the US dollar to gold, effectively bringing the 25-year Bretton Woods system to an end. This was called the “Nixon Shock”. The gold standard was abandoned, and the previously fixed exchange rates of the world’s major currencies began to float.

Many conservatives argue that we should return to a gold standard. Would that help or hinder the world economy?

A terrific economic history of the Great Depression is the 2010 Pulitzer Prize-winning “Lords of Finance: The Bankers Who Broke the World” by Liaquat Ahamed. Ahamed says that the gold standard was the principal cause of the depression. His thesis is that tying the amount of currency a country has in circulation to the amount of gold it holds becomes a strait jacket. The problem is that if you have a gold standard, your money supply is fixed by the amount of gold available. When economic activity exceeds the value of a country’s gold holdings, trade and economic growth are stifled, or you devalue your gold, causing inflation.

Of course, because of Bretton Woods, you couldn’t devalue your gold. So Nixon, an economic conservative, took two unthinkable steps in order to get re-elected. He implemented wage and price controls, and ended the dollar’s convertibility into gold.

Taking the world off the gold standard has facilitated the unprecedented economic growth of the past 40 years, since trade has grown much faster than the growth in world’s physical stock of gold.

Nixon’s price controls didn’t do much. The Consumer Price Index rose 4.4% percent in 1971, and 3.1% in 1972. When the controls were phased out in 1973, inflation rose to 6.2%. It was a shocking 11% in 1974.

So, as in all things Nixonian, there was a little good along with a lottta bad.

When Nixon said the words “I will therefore resign”, it felt to the Wrongologist that years of anti-war protesting had come to fruition. Ford, our first appointed President, then promptly pardons Nixon, and the merriment was stopped dead in its tracks.

Is GDP Growth Enough?

A strong 2014 Q2 GDP report came out yesterday, registering 4% annualized real GDP growth, better than what we have seen in several years. This is good news, but it is worth looking at it in the context of the full recovery of the US economy. The House of Debt Blog has a chart showing recoveries after every post WWII recession in the US, updated to include Q2, 2014:

The red line is the Great Recession, compared to our recovery from 9 other post-war recessions. The slight uptick at the end of the red line reflects yesterday’s GDP report. Despite this recent fun news, we remain in the weakest economic recovery in history. Reportage from the New York Times:

The US economy rebounded in the spring after a dismal winter, the Commerce Department reported on Wednesday, growing at an annual rate of 4% for the three months from April through June.
In its initial estimate for the second quarter, the government cited gains in personal consumption spending, exports and private inventory investment as the main contributors to growth. The increase exceeded economists’ expectations and further cemented their views that the decrease in America’s overall output during the first quarter was most likely a fluke tied in large part to unusually stormy winter weather as well as other anomalies.

The NYT says that first quarter numbers were also adjusted upward:

During the first quarter, output shrank by 2.1%, less than had been reported, according to the Commerce Department’s newly revised GDP figures, also released on Wednesday. The department had previously said first-quarter output decreased 2.9%.

Now for the issues in the data: (emphasis by the Wrongologist)

While the economy seems generally to be bouncing back from the recession, overall growth remains lackluster. Wages have failed to rise significantly, an area of concern that Janet L. Yellen, chairwoman of the Federal Reserve, noted when she appeared before Congress this month.

In fact, Doug Short at the DShort blog provides a very helpful series of charts on wages and hours for the private workforce. The Bureau of Labor Statistics (BLS) has been collecting these data since 1964. The BLS numbers provide excellent insights on the income history of the private middle class wage earner. First, average hourly wages adjusted for inflation have remained unchanged since the Nixon Administration:

But that isn’t the bad news. Average weekly hours worked have been declining since the Johnson Administration:

Finally, DShort multiplies the real average hourly earnings by the average hours per week. This produces a hypothetical number for average weekly wages of this middle-class cohort, currently at $694 — well below its $827 peak back in the early 1970s:

$694 per week equates to a $36,000 annual wage. Then the person has to pay taxes, social security, rent, etc. So, purchasing power has declined for the middle class worker. Tomorrow, the July Jobs Report comes out. Then we’ll see if the fun times continue.

In a consumer-driven economy where wages have failed to rise, there can be no sustained economic growth. Media reports say that the economy “rebounded”, that it “exceeded economists’ expectations”. But have economic conditions for average people improved? No, for them, this is a paper rebound, not a real one.

Tracking the economy of ordinary people continues to go unremarked and untargeted by lawmakers. The economic health of average people is an afterthought to the politicians, who consider it a vague byproduct of ‘GDP’ and ‘growth’. In the real world, GDP growth does not directly correlate with improvements in the average person’s well-being.

Workers desperately need more hours at better paying jobs. How does prosperity return if wages stagnate while wealth concentration continues?

Sunday Cartoon Blogging – July 27, 2014

A corporatist meme took a face plant this week. Bloomberg Business Week charted CEO pay vs. stock market return, based on data supplied by the executive compensation consultants, Equilar. It shows that there is very little correlation between CEO pay and company performance.

Equilar ranked the salaries of 200 highly paid CEOs against their company’s stock market return, and the scattering of data looks mostly random, implying that CEO performance appears to have little to do with CEO compensation. The graph plots the relative ranking of 2013 stock market return against the relative ranking of 2013 CEO total compensation. If you go to Bloomberg, the chart below is interactive. You can hover over a dot and see information on the CEO and company.

Bottom line: there’s essentially no link between how well CEOs perform and how well they are paid:

Based on this, it seems that corporate boards are unable to predict how well their chosen CEO candidate will do once on the job, since the trend line, which didn’t plot in this screen capture, shows that the correlation is ~1%. That explodes the myth that a primary metric used by company board compensation committees to justify CEO pay is stock market return.

CEO pay isn’t the government’s business, but corporate governance is. When governance is based on something other than what shareholders are told, it is worth a look.

In other news, the immigration issue continued, with Texas Governor Perry’s grandstanding. He was joined by many in Congress and in the media, some of whom wanted to be sure that the Texas National Guard was armed against the threat implied by children illegally crossing our border.

Lady Liberty’s meditation on immigration is lost in the noise:

An alternative strategy might build sympathy for the kids’ plight:

In Obamacare news, courts made two opposite decisions using the same facts:

It was another week of some Advising but very little Consenting:

The loss of MH17 brought no new facts, just grandstanding here as well:

Gaza, along with Ukraine, show how missile use has changed in 45 years:

Friday Music Break – July 25, 2014

Today we say hello and goodbye to Black 47. The band got started in 1989 by Larry Kirwan and Chris Byrne. Its name comes from the traditional term for the summer of 1847, the worst year of the Great Irish Famine. They developed a niche, playing a combination of traditional Celtic music infused with Rap and other contemporary rock genres.

B47 is an unblinkingly political band, playing rock ‘n’ roll based on Irish roots, with songs covering topics from the Northern Ireland troubles to US civil rights, Iraq and urban unrest in contemporary New York.

Heart, intellect and a high value on freedom, is what Black 47 is all about. The Wrongologist has been a fan since the early 1990’s. The group will amicably disband on November 8, 2014, exactly 25 years after their first gig in the Bronx.

Right after 9/11, Black 47 appeared regularly at Connolly’s Pub in Manhattan, playing what Kirwan has described as intensely emotional shows in order to provide fans who had lost loved ones an outlet for their grief and loss. Those shows were channeled into their album New York Town.

But let’s go back to an earlier time. Here is “Green Suede Shoes” off their 1996 album of the same name:

Lastly, here is “Downtown Baghdad Blues” from their CD IRAQ. IRAQ came out in 2008 and was popular with troops serving in Iraq and it was written in part, from soldiers’ letters:

Here are the first and last stanzas of Downtown Baghdad Blues’ lyrics:

Got a buddy in Najaf, he’s playing it straight
Prays to the Lord Jesus Christ every night
Got a homey in Samarra goin’ up the wall
Every time he hear an Islamic prayer call
Me, I don’t care much for Jesus or Mohammed
They don’t stop bullets to the best of my knowledge
Later for the both of you, catch you in eternity
Hopefully, towards the end of this century

I didn’t want to come here, I didn’t get to choose,
I got the hup, two, three, four Downtown Baghdad Blues.

Mission accomplished, yeah, up on deck
Got no armor for my Humvee, left facin’ this train wreck
Shia don’t like me, want Islamic Revolution
Sunni say civil war is part of the solution
Maybe someday there’ll be peace in Fallujah
McDonald’s on the boulevard, Cadillac cruisin’
I’m tryin’ hard to keep this whole thing straight
But will someone tell me what am I doin’ here in the first place?

Did 9/11 Change Everything?

“He didn’t know what was defeating him, but he sensed it was something he could not cope with, something that was far beyond his power to control or even at this point in time comprehend.” –Hubert Selby Jr.

The Wrongologist has changed the blog’s “Quotes We Like” sidebar to add the quote above. The quote is from Selby’s Requiem for a Dream. He also wrote Last Exit To Brooklyn. These are two gritty American novels of their time and place. Exit was published in 1964 and presents a view of 1950’s Brooklyn NY. Requiem was published in 1978. Both were made into movies. Selby died in 2004.

In a Salon article in 2000, Selby is quoted about Requiem:

The dream I’m referring to in the book, of course, is the great American dream: prosperity, property, prestige, etc. And the fact that it’ll kill you dead. Striving for it is a disaster. Attaining it is a killer. It takes many forms, and the results are not happy. It’s not a feel-good thing

Selby continues:

‘Requiem’ is about the cancer of that dream…Of course, there are a lot of people who are successful who work very hard. They’re not all George W. Bush. But the point is they’re misguided. That’s not what life is about. We believe, probably more than anywhere, that life is getting all this material stuff. It’s a case of misguided ambition and desire

We can take this further. Today, America doesn’t know what is defeating it. America senses that it can’t cope, that there are things happening that are beyond our control or comprehension:
• We can no longer solve our domestic problems
• We are powerless to deal with the Malaysian airline disaster in Ukraine
• We can’t resolve the tri-partite struggle in Iraq
• We can no longer restrain Israel in its non-proportional response to Hamas
• We are no longer on the same side as our long-term Middle East allies, Saudi Arabia and Egypt
• We can’t figure out a non-military response for China’s initiatives throughout Asia

In fact, we no longer have a non-military response to any foreign problem. The power strategies that we employed throughout the 1950’s, continuing down to the end of the Soviet Union no longer work. Back then, we played chess, moving pieces across the board. We used whichever proxies or allies were at hand, we overthrew elected governments, thereby violating our own ideology. We supported and installed dictatorial governments. We promised freedom and prosperity, while helping to deliver hegemony, based on our military intervention, or the threat of it.

Today, we have no answers, only posturing from all of our leaders. We have become the kind of people who criticize, not the kind of people who can solve problems.

We are no longer king-makers in the third world, the neo-conservative approach of use of military power cannot stand in the face of asymmetric warfare and the devastating superiority of IEDs to up-armored military vehicles.

From Ian Welsh:

Deny the fruits of western ideology to those who reach for them, and of course they will turn against you. Pervert them even within your own countries by undermining your own democratic principles and by concentrating wealth and income in the hands of a few, while impoverishing the many; make it clear that modern neo-liberal capitalism doesn’t spread prosperity to even the core nations, and you have set up one of the preconditions of not just hegemonic collapse, but of internal collapse of a civilization

And here is Welsh’s money quote:

People who do not believe in the genuine goodness of what they are fighting for, hardly fight for it at all

That is what we see in Iraq. More importantly, that is what we see in America. Today, no one believes in the genuine goodness of what they are fighting for, be they job-hunting Millennials, unreconstructed 1960’s liberals, or today’s money-grubbing Republican and Democrat politicians.

When you no longer know how to solve problems, you turn to what is easy. You buy the next shiny object, you live through the lives of the rich and famous. Snark and incivility replace facts and discussion.

There was a display in the 9/11 Museum that showed a piece of debris about 3’ high by 6’ wide and 12’ long. It was rusty and seemed to be sedimentary in nature, visibly comprised of metal, concrete, and wires. It is actually part of 5 floors of the Trade Center, compressed by weight and softened by intense heat. Nothing of the desks, computers, phones and people are distinguishable in this artifact. The Museum calls it a “composite”. It brings home the destructive power of the falling towers on 9/11:

Photo is from before the “composite” went on display

After the Towers’ fall, the news media said that 9/11 changed everything, and we believed it. But changes to our view of the world, and its view of us, had started long before that. We stopped learning about geopolitics in the 1960’s, substituting false analogies and military aid to local strongmen for true knowledge of how to change the world.

Since then, we have been compressed by the heat and weight of events we cannot understand. If you think about it, our decline after 9/11 came because we panicked, spent all of our money on pointless wars, and gave up our core values in the name of an illusion of safety, and pure vengeance.

So, yes, America doesn’t know what is defeating it. America senses that there are things happening that are beyond its control or comprehension.

But these things are knowable, and fixable. Hopefully, by Americans.

Sunday Cartoon Blogging – July 20, 2014

“No one can terrorize a whole nation, unless we are all his accomplices.” ― Edward R. Murrow

Your aspiring blogger visited the 9/11 Memorial in lower Manhattan yesterday. It was very moving and quite crowded. A striking thing was remembering how uniform the reactions of other countries were. They all felt badly for America, many offered help.

Our citizens were very united, showing sympathy for the families of the people lost on that day, working together to search for possible survivors, supporting George Bush in his attack on Iraq.

We are paying a huge price around the world for invading Iraq and Afghanistan. We no longer have the sympathy of the world, many nations no longer trust us, and quite a few have become our enemy. Our overreaction to 9/11 here at home, from the Authorization for the Use of Military Force (AUMF) to the Patriot Act, to the rampant excesses of the NSA, to the financial disaster of going to war while we cut taxes, have left us divided at home. Our foreign policy is reactive, while we have no domestic policy.

The Museum is displaying a brick from Osama bin-Laden’s Abbottabad compound:

Makes you wonder what ELSE they brought back from the mission. In other news, nobody likes Dick Cheney’s bloviating about the Middle East:

The Malaysian Airliner disaster hurts the world, just like 9/11 did:

Keeping score in the Israel – Palestinian war:

What are we learning this time?

There were domestic issues to think about, like Obama’s transparency:

What’s The Matter With Kansas?

“Masquerading as a man with a reason
My charade is the event of the season
And if I claim to be a wise man
Well, it surely means that I don’t know” – Kansas, 1976

The state, not the group. In 2010, Republican and former US Senator, Sam Brownback was elected governor on promise of restoring the state’s economy. In 2012, he signed a massive tax cut into law, arguing that it would be a big boost the economy. Eventually, he hoped to eliminate individual income taxes entirely:

I think we can, I really do…The experiences in some other states have been that when you cut income taxes, your sales tax increase more than makes up for your income tax cut

Supply-side economics was the basis of his optimism. Tax cut proponents like economist Arthur Laffer insist that if you cut taxes deeply enough, the resultant boom in economic activity will boost revenues. It’s magic, painless. It’s what every politician wants. And Sam Brownback and the Kansas legislature went all-in: In 2012, the Kansas legislature:
• Cut individual tax rates by 25%
• Repealed the tax on sole proprietorships and other “pass-through” businesses
• Increased the standard deduction

In 2013, the legislature cut taxes again, passing a measure to gradually lower rates even more over five years. By 2018, the top rate, which was 6.45% in 2012, will fall to 3.9%. The Center on Budget & Policy Priorities (CBPP) has a nice summary of the tax changes.

So what happened after all those tax cuts? Revenues collapsed. Kansas reported that it took in $338 million less than expected in the 2014 fiscal year and would have to dip heavily into its reserve fund. From June, 2013 to June, 2014, all Kansas tax revenue plunged by 11%. Individual income taxes fell from $2.9 billion to $2.2 billion and all income tax collections plummeted from $3.3 billion to $2.6 billion, a drop of more than 20%. Keep in mind that these are actual year-over-year declines in revenues, not projected shortfalls in revenue. They come at a time when the national economy is recovering, and most other states are enjoying increases in tax collections. The cuts, largely benefiting the wealthy, cost the state 8% of the revenue it needs for schools and other government services. As the CBPP noted, that’s about the same economic effect as a midsize recession.

Yet, there were excuses from Brownback in the past few weeks:

It’s the price of creating jobs

Since the first round of tax cuts, Kansas job growth has lagged the US economy. So has Kansas personal income. While more small businesses were formed, many of them were individuals taking advantage of the newly tax-free status by redefining themselves as businesses, now allowed under the Kansas tax code. Kansas’ non-partisan Legislative Research Department estimates Brownback’s tax cuts will cost the state $5 billion in lost revenue by 2019. To put that in perspective, Kansas currently has an $8 billion annual budget.

As a result, Moody’s cut the state’s debt rating in April for the first time in at least 13 years, citing the tax cuts and a lack of confidence in the state’s fiscal management.

Kansas is required to balance its budget every year, so when its surplus runs out, further spending cuts will be necessary. The declining revenues have necessitated extensive cuts in state education funding, according to the CBPP.

Brownback is up for reelection, but given the problems with his economic program, he is having trouble in the polls. A recent poll by PPP shows that Brownback’s approval rating has plummeted. In the most recent poll of the race, Democrat Paul Davis leads Brownback by 6 points.

You don’t cut revenue based on a theory. If you cut revenues, you cut your expenses by the same amount. You don’t gamble on possibilities, you make sure you will be fiscally sound. By cutting revenues and hoping for a large return because a THEORY says it should happen, means Brownback was gambling with the future of the State of Kansas.

Has Brownback never heard the adage: “Don’t gamble what you cannot afford to lose?”

Some of those old adages are pretty sensible, while some governors are not.

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:

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.”

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.

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:

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.

The Wrongologist

Geopolitics, Power and Political Economy

Category: Domestic Policy