Economic Policy – Page 28 – The Wrongologist

Monday Wake Up Call – June 29, 2015

Mylan, a generic drug maker based outside Pittsburgh, abandoned its status as a US corporation, gaining tax advantages by moving its headquarters to the Netherlands. The move reduced the taxes the company pays on profits from sales of drugs overseas, but Mylan continues to maintain most of its operations in Pennsylvania.

Mylan was viewed by some in Congress and the Obama administration as a symbol of corporate greed when they undertook a corporate inversion that placed profits above any commitment to its home country.

But now, Mylan is demanding that the US Federal Trade Commission (FTC) protect it from a hostile takeover bid by an Israeli company, Teva Pharmaceuticals. Mylan asked the FTC to examine Teva’s purchase of Mylan stock for possible violation of the requirement that large purchases of stock of US firms must be reviewed by antitrust authorities, because Mylan is still listed on the NYSE. The company claims that its principal office remains in Pennsylvania, which makes it a “US issuer” of stock for federal anti-trust purposes.

The irony of this is not lost in Washington. Rep. Chris Van Hollen (D-MD), the senior Democrat on the House Budget Committee said:

Mylan is trying to have its cake and eat it too…It is an intolerable abuse of a loophole when US corporations pretend they are based overseas in order to get out of paying their fair share and duck their responsibilities to the United States. It’s just plain hypocrisy when one of those same inverted companies claims that it is actually a US company because it needs the special protections US law gives to American companies.

Mylan may have a case. Its plea for help from the US government could pass legal muster but, the optics of a company that abandoned its US citizenship in order to pay less in federal taxes, and then seeking the protection of a federal agency is problematic.

Compounding the farce, Mylan is attempting its own hostile takeover of Perrigo, in order to stave off Teva.

Mylan’s unabashed lack of shame is impressive. Maybe the FTC’s decision-making on this case should take quite a while.

So, wake up Congress, and deal conclusively with corporate inversions! Our wake-up calls for the next few weeks will be songs about summer. We start with the Lovin’ Spoonful’s only #1 hit, “Summer in the City”:

For those who read the Wrongologist in email, you can view the video here.

Monday’s Hot Links:

The return trip often seems shorter than the initial trip, even though the distance traveled and the actual time spent traveling are identical. This is called the “return trip effect”. Two studies say it is real, but you already knew that.

Trucker jobs will be the first casualty of driving robots. Trucker salaries average $40,000/year. Most truck accidents are due to user error: Driving too fast, driving while tired, or driving while intoxicated. Robots don’t drink, don’t get tired, and won’t drive unsafely in order to get to a destination faster. Drivers will still be needed for inner-city driving (at least initially), but most long-haul operations will quickly vanish as soon as licensing is complete in most states.

Three years ago, Saudi Arabia announced a goal of building, by 2032, 41 gigawatts of solar capacity by 2032, slightly more than Germany has today. The Saudis burn about a quarter of the oil they produce—and their domestic consumption has been rising at 7% a year, nearly three times the rate of population growth. According to a British think tank, if this trend continues, domestic consumption could eat into Saudi oil exports by 2021 and make the kingdom a net oil importer by 2038.

Privail Diagnostics, has developed a simple, portable blood test that can detect the HIV virus (not antibodies) for the first time. That means an earlier diagnosis, and reduced infection rates. Privail’s at-home testing device is like a diabetes test, needing only one drop of blood. It shows the results in a color bar, like an at-home pregnancy test or digital output, like a diabetes meter. Invest at your own risk.

Hackers have apparently cracked the computer systems responsible for issuing flight plans to pilots of every airline. The apparent weak link? The flight plan-delivery protocol used by every airline. Ground computers calculate the appropriate flight plan for planes, and someone on ground approves the plan before distributing it to pilots. Pilots receive plans before taking off, as well as enroute, when a change occurs during a flight. Plans are uploaded to planes via a datalink. Once a hacker figures out those protocols, it is possible to issue a bogus flight plan. But, the industry says, not to worry.

Your thought for the week: Giving money to poor people is socialism, or even communism…..giving money to AIG or Goldman Sachs is capitalism, and that’s what made this nation grrrreat!!!

Technology Isn’t Creating Enough Middle Class Jobs

Yesterday we talked about how America is losing middle class jobs to technical outsourcing on our way to becoming a land of spreadsheets and flags. Today, let’s discuss another aspect of that; how technology continues to cost more and more mid-skilled jobs. We usually think of technology as a great panacea, making most of our processes more efficient. In fact, many of us can look back on the “sneakernet” of the 1980s and feel good about how far we’ve come with technology.

But technology has also reduced the number of middle class workers required, at a time when American wages are stagnant and benefits are falling for the remaining available jobs.

The meme used to be that if technology replaced workers, new jobs came along and net-net, more people were employed. Although things weren’t that simple, by 1900 if you were displaced, you could get another job because 99% of all jobs were still done only by humans.

Today corporations tell us that the knowledge economy can take as many workers as we can create, and since we can’t create them fast enough, technology firms need more of the H-1B visas we discussed yesterday. This is false. Facebook is touted as a prime player in the knowledge economy, but it only employs 5,800 to service 1 billion customers! Twitter has 400 million total users. It has 2,300 employees.

What is the value of Facebook and Twitter to the jobs economy? These are two of our very “best” success stories, and they only employ 8,100 workers. They have had a huge impact on society, but the total jobs they have created are only a rounding error in our economy.

Much of what we want to buy is produced in factories increasingly run with robots, and maintained and operated by small cadres of engineers. Increased sales of iPhones only add a few sales jobs at $12/hour in the US and not many new factory jobs in China. Also, keep in mind that globally, some 3 billion people are looking for work and the vast majority are willing to work for less than the average American.

We all know that technology is costing jobs, and by some estimates it could cost half of all current jobs in the next 20 years. So, we can expect an ever-greater number of unemployed chasing an ever-shrinking number of jobs that can’t be eliminated or simplified by technology. Thus, the prognosis for many medium and some higher-skilled workers appears grim. With this being said, technology is benefiting a lot of businesses and the way they operate. You’ll get a better understanding of it just by reading these Quotes about AI. Seeing as technology doesn’t look like it is going anywhere anytime soon, we might as well use it to our advantage in a business.

The oligarchs have seen these forecasts. That may explain their unwillingness to do anything serious to create effective jobs programs here at home. They don’t need to do anything, because there is a (virtually) infinite supply of skilled and unskilled workers in the overpopulated third world.

The issue is not technology, or robots, or restoring our manufacturing base. Nor is the issue better skills, or technology or outsourcing. We have too many people chasing too few good jobs.

Incomes will continue to stagnate, because automation does not threaten unskilled jobs. This is sometimes called “Moravec’s Paradox”, which says that, contrary to traditional assumptions, high-level reasoning requires relatively little computation, but low-level sensorimotor skills require enormous computational resources. The “Roomba” robotic vacuum cleaner is, despite years of development, just an expensive toy. It has had zero impact on the market for janitors and maids, yet, wages for American janitors and maids have fallen because of competition from the currently unemployed and newly arrived immigrants. While the Roomba aims to be a forward-looking cleaning solution, it still cannot compete with the manual vacuum cleaners, like Bissell’s, that still prove to be the preferred choice despite innovative attempts to move towards automation. See this link for Bissell vacuum cleaners – https://www.bissell.com/vacuums/upright-vacuum-cleaners/

If we forecast continuing technology breakthroughs (and we should), and combine that with the 3 billion people currently looking for work globally, we have to conclude that the planet is overpopulated if the goal is a growing global middle class.

This is why the quest for better technology has become the enemy of sustaining middle class growth in the developed world.

End Government Subsidies of Private Equity

We have written about taxpayer-funded corporate subsidies this week. Let’s talk about the Private Equity (PE) industry, where profit margins are pretty high. By PE we mean investing in assets that include equity securities and debt of operating companies that are not at the time of the investment, publicly traded. Having a number of streams of income coming from a variety of investments or income generating assets is one of the best ways to build wealth. You see, hPE is a re-branding of leveraged buyouts (LBOs) which were the way Wall Streeters built wealth in the 1980s.

In the past 35 years, we have seen a finance-led revolution that has generated fantastic wealth for PE managers. PE has in large part, helped create the growing chasm between America’s most wealthy and everyone else. This is shown in the disproportionate numbers of private equity and hedge fund principals in the top .1% of American wealth. That wealth doesn’t only come from just making a killing when the target company goes public or is acquired, it also comes from favorable tax treatments for the PE company principals and investors.

Although the PE industry is often held up as an exemplar of free-market capitalism, it is surprisingly dependent on government subsidies for its profits. In a typical deal, a PE firm buys a company, using some of its own money and some borrowed money. It then tries to improve the performance of the acquired company, with an eye toward cashing out by selling it, or taking it public.

The key to this strategy is debt: the PE firms borrow to invest since, just as with your mortgage, the less money you put down, the bigger the potential return on investment. But debt also increases the risk that companies will go bust, so early on, the amount of debt PE firms employed was conservative.

That has changed in the last 10 years. After using debt to buy them, many PE funds now have their portfolio companies borrow even more. They then use that money to pay themselves “special dividends.” This allows them to recoup their initial investment while keeping the same ownership stake.

Before 2000, big special dividends were not common. But between 2003 and 2007, PE funds took more than $70 billion out of their companies. These dividends created no economic value-they just redistributed money from the company to the private-equity investors.

As an example, in 2004, Wasserstein & Company bought the mail-order fruit retailer Harry & David. The following year, Wasserstein and other investors took out more than $100 million in dividends, paid for with borrowed money. In 2011, Harry and David defaulted on its debt and dumped its pension obligations on the US government. And when an investment goes bankrupt, there are more fees, and maybe more tax write-offs for the PE partners.

Taxpayers are left on the hook. Interest payments on that debt are tax-deductible, and when pensions are dumped, a federal agency, the Pension Benefit Guaranty Corporation (PBGC) picks up the company’s pension liability. That means taxpayers are on the hook for those unfunded pensions.

And the money that PE dealmakers earn is taxed at a much lower rate than normal income, thanks to the US tax code’s carried interest loophole, which permits that income to be taxed at capital gains rates.

Most do not know that the single largest source of investment capital in PE funds is government pension funds. According to Preqin, a database company that tracks investment in PE, approximately 30% of capital in US PE funds is contributed by government pension funds. Government pension funds are usually called “public” pension funds, administered by government employees and governed by officials who are directly elected by the public or appointed by elected officials.

A key point about the power and reach of PE. They have more than $3.5 trillion under management. Assuming normal leverage (30% equity) that gives them $11.7 trillion in buying power. That’s about 40% of the value of publicly-traded firms in the US. Think about the political clout they have by investing government pension money. Not only do PE firms own a huge portion of America’s productive businesses, unlike the diffuse ownership of public companies, they control them outright.

So, PE is a government-sponsored enterprise, both via tax subsidy and via funding. We taxpayers are helping them to fabulous paydays, thanks to our Congress Critters.

If PE firms are as good at remaking companies as they claim, they shouldn’t need tax loopholes to make their money. If we capped the deductibility of corporate debt, and closed the carried-interest loophole, it would not prevent PE firms from buying companies or improving corporate performance.

But it would add to our tax revenues, and that might keep a bridge or two from falling into a river during rush hour somewhere in America.

“The American Dream: You have to be asleep to believe it.” -George Carlin

Monday Wake Up Call – June 1, 2015

How many hours does it take to make rent at the minimum wage? The National Low Income Housing Coalition looked at the number of hours minimum-wage employees have to work per week in each state just to rent an apartment and survive financially. Their headline conclusion is there is no state where a minimum wage worker can earn enough to make the fair market rent for a two-bedroom place on 40 hours a week. West Virginia tallied the fewest hours at 63 to make the average fair market rent. Hawaii was 175 hours. California, Maryland, New Jersey, New York and Washington, DC were all over 130 hours. So, no chance to get an average place for a family while working 40 hours. Here is a chart from their report:

The Wrongologist would have preferred if the study had used median rents rather than average rents. The red bars show the gap in hourly wages between the state’s minimum wage and the cost of an average two bedroom place. This is another artifact of the Great Recession. Let’s recap what has happened since it ended:

• The percentage of people employed in the US has never recovered
• All income gains went to the top 1%
• There has been a huge bull market in stocks, despite stagnant income for all but the top few

If we don’t wake up, America will be a banana republic, with the emphasis on the “banana”, since the “republic” is already dying. The US will be small enclaves of massive wealth run by a few oligarchs. Think of it as Manhattan, a few square miles where the Corporations and their top employees reside, surrounded by a sea of low wage cast-offs.

None of this is inevitable. We could increase wages, we could rebuild our decaying infrastructure. This approach is dismissed as “Keynesian” by our right-wing brothers. The only kind of Keynesian stimulus they will accept is military Keynesianism. It’s not that peaceful Keynesian stimulus doesn’t work, it’s just that they won’t benefit from it. They see war as prosperity. China is next in their battle sights.

Wake up America, time is running out to keep us on a course that avoids our demise as a middle class economy. The next election may be the most important in our lifetimes. Here is today’s wake-up call, Amy Speace, a folk singer featured in a NYT Money section article. Here is her song, “Spent,” about trying to make rent:

Sample lyric:
We’re head over heels,
In over our heads,
We borrow and steal
To pay the rent.
How are we gonna save any money
When it’s already spent?

For those who read the Wrongologist in email, you can see the video here.

Today’s breakfast links:

Study shows human attention span now lags that of a goldfish. Who is behind the study? Microsoft, who wants to learn how modern technology impacts the attention span of people who use it. (Insert your own joke here)

Sudden loss of ice in Antarctica was large enough to affect Earth’s gravity. The ice loss causes small changes in the gravity field of the Earth, which were detected by a satellite mission, the Gravity Recovery and Climate Experiment (GRACE).

What do you get if you take the blades off a wind turbine? A better wind turbine. This new turbine is a hollow straw that sticks up 40 feet up in the air and vibrates like a guitar string when the wind blows. Its 50% cheaper than blade turbines, and while it is also 30% less efficient at capturing energy, a wind farm can double the number of bladeless turbines that occupy a given area. That’s a net energy gain of 40%. The company is Vortex Turbines. Invest at your own risk.

A new salt reactor will use spent nuclear fuel to make energy. This nuclear reactor generates 75 times the electricity per ton of uranium compared to today’s light-water nuclear reactors, since it burns 96% of its fuel, compared with only 4% in light-water reactors. The company is the venture-funded Transatomic Power. They hope to build a 20-megawatt demonstration reactor by 2020. With nearly 80,000 tons of radioactive waste in the US (and with 2,000 tons added every year), it could turn something toxic into something useful. Invest at your own risk. With this being said, it could be as simple as doing some research into something like uranium mining stocks and finding out about this sector in this particular industry. The more people know about investing, hopefully, the more clued up they will become and potentially make better decisions.

A PA newspaper published a letter calling for President Obama to be executed, but now they’re apologizing. The paper says: “We will strive to do better in the future.” Another example of our media’s inexorable descent. They are only sorry they got caught.

Here is a list of Zagat’s best brunches in Manhattan.

Maximizing Shareholder Value

The Guardian highlights a report by the International Monetary Fund (IMF) about the level of global subsidies paid by governments to the fossil fuel industry:

Fossil fuel companies are benefiting from global subsidies of $5.3tn (£3.4tn) a year, equivalent to $10m a minute every day, according to a startling new estimate by the International Monetary Fund.

That’s $5.3 trillion per year. The subsidy estimated for 2015 is greater than the total annual health spending of all the world’s governments. The subsidy is created by polluters not paying the many costs imposed on countries by the burning of coal, oil and gas. These include the harm caused by air pollution.

The IMF said that ending subsidies for fossil fuels would cut global carbon emissions by 20%. They argue that ending the subsidies would also slash the number of premature deaths from outdoor air pollution by 50%, or about 1.6 million lives a year.

It is difficult to get behind the IMF headline to the methodology that leads to their findings. They are basically estimating how much damage global warming is doing and listing that as a government subsidy. The benefits that fossil fuels have delivered to mankind are massive. The pro-fossil fuel argument is that if you could put a price on these things, it would outweigh the $5.3 trillion figure by many thousands of times.

That is true, but the argument misses the point. We need fossil fuels. We use fossil fuels. The issue is why are the costs socialized, while the profits are privatized?

This again highlights the moral and intellectual bankruptcy of the “Maximize Shareholder Value” movement in corporate governance. The 1970-era Clean Air and Water Acts and the 1980-era Superfund, TSCA, and RCRA Acts were among the first attempts to shift the costs of the socialized pollution costs back onto the corporate and municipality originators. Ironically, given today’s political environment, all of the major environmental acts (except the 1980 Superfund) were signed into law by Republican presidents Nixon and Reagan.

In the IMF report, China provided $2.3 trillion of the subsidies. The US was 2nd with $700 billion.

China will be focusing on reducing their pollution and other impacts as their society gets wealthier. Once people’s basic needs are met, they will be looking to improve their lot, and breathing in poisonous smog and living next to putrid water will not be high on their list of desires. As an example, it only took 25 years after the end of WW II for Americans to insist on an improved environment.

And all of the above ignores the costs of wars to keep the fossil fuel supply lines open, as well as the regular costs of our defense and intelligence establishments, and the destruction of democracy as necessary collateral damage.

All that for something we burn. Along with our tax dollars, that is.

Cartoon of the Day: The real truth about DC’s Think Tanks:
Links:

Hillary Clinton on Trade Agreement: “I have been for trade agreements, I have been against trade agreements.” Anybody want syrup with those waffles?

Is Japan becoming extinct? The Japan Times wonders what the projected drop in the country’s population says about its future. They cite a report, “Local Extinctions”, which says that that 896 cities, towns and villages throughout Japan are facing extinction by 2040. Factoid: In 2013, 8.2 million of the more than 60 million homes nationwide were empty, and 40% percent of the 8.2 million empty homes were not being offered for sale or rent.

Here’s how much of your life the United States has been at war. The link shows a ginormous chart of how many years of your life were in wartime. For the Wrongologist, it is 43.8% of his life.

Millions of tiny spiders rained from the sky in Australia. Residents of Goulburn, Australia woke one day this month to find their town shrouded in silken webs, while millions of tiny spiders rained down from above. Apparently this is called “Spider rain.” It happens when large groups of arachnids migrate all at once, using a technique called “ballooning.” Creepy much?

After decades of maintaining a minimal nuclear force, China is re-engineering its long-range ballistic missiles to carry multiple warheads, or MIRVs. China has had the technology for decades, but the decision to put three or more warheads atop a single missile is recent. So far, China has declined to engage in talks with the US about their decision to deploy MIRVs. If America treats China like an enemy, then China WILL BE our enemy. Maybe that’s what the Pentagon and CIA want. They need something to justify their big budgets, and their secret slush funds.

See you on Sunday.

Monday Wake Up Call – May 18, 2015

The Amtrak accident in Philadelphia came hours before the House Appropriations Committee was due to meet to debate a transportation bill. Amtrak is a for-profit entity, but its board is appointed by the president, and it is entirely funded by the government, receiving roughly $1.4 billion a year in subsidies. It operates in the red, losing $227 million a year.

Congress has been considering tightening the purse-strings. The Senate has been slow to approve $7.8 billion in Amtrak funding that has been passed by the House. Much of the money would go to prop up sagging rails and refurbish rolling stock.

But John Boehner said discussing Amtrak funding in the wake of the crash was “stupid”. Boehner noted that the crash was caused by the train going too fast, not bad infrastructure. Republicans prefer to attack the national train system because only Democrats ride trains, not good truck driving folks. We should invest in modern high-speed trains to zip Americans around the country. We could also invest in a better safety infrastructure so that train wrecks don’t happen if they are the fault of the engineer or conductor. Instead, the rail industry and its Republican friends are pushing for the reduction of train crews on freight trains, which could cause more crashes.

Sadly, the Goldilocks Moment (when it’s “just right”) to discuss practical responses to a tragedy can be discerned only by Mr. Boehner. Yesterday was too early, and politicized the tragedy by pointing out how Republican policies and governance set the stage for eight people to be killed. At some point, John Boehner will tell us it’s now “too late” to get any legislation in the hopper.

Amtrak has received $45 billion in subsidies from the 1970’s to the present. That’s about one year’s taxpayer support for big oil. Democrats should absolutely push for greater Amtrak funding in the wake of the crash.

Don’t expect Boehner or any Republican to take any real heat for opposing this, but it makes their moral position on these issues completely clear.

Time to wake up America! Infrastructure upgrading is not anti-American. For your morning wake up call, here is the Veery Thrush, also called the Wilson’s Thrush:

For those who read the Wrongologist in email, you can view the video here.

Monday’s Hot Links:

The Antarctic’s Larsen “B” and “C” ice shelf’s are going away by 2020. NASA’s Jet Propulsion Laboratory says that the “B” shelf is now “approaching demise.” NASA adds that the ice shelf “is likely to disintegrate completely before the end of the decade.” But, global warming is a hoax…

A 10-year-old oil leak where an offshore platform toppled during a hurricane could continue spilling crude into the Gulf of Mexico for a century or more if left unchecked. No, it isn’t the BP leak. Taylor Energy Company owned the platform and has played down the extent and environmental impact of the leak. The Coast Guard provided a leak estimate that is about 20 times greater than one provided by the company. Quelle surprise! An American company tries to minimize its responsibilities.

A New Zealand company called Touchpoint Group is building a robot that will be angry all the time. The idea is to let angry customers speak to a machine instead of human call center agents. The robot will collect the data to better serve you with bullshit responses.

Inequality Watch: Scientists find alarming deterioration in DNA of the urban poor. Well, if you lived a life of constant worry over money and how you would pay your bills, raise your kids with enough food, clothing and self-respect, your DNA might deteriorate too!!!

Raul Castro says that Pope Francis may get him to return to religion. Mr. Castro said: “I will resume praying and turn to the Church again if the Pope continues in this vein.” This Pope may really be the Rightologist!

Here is an extra wake-up for you this spring morning. Unclear how this pose happened, but it is relaxing:

Sunday Cartoon Blogging – May 17, 2015

The “knowing what we know now” argument from the right wing talkers was all over the news this week. They are trying to help Jeb Bush walk back his brother’s decision to invade Iraq. It is a revisionist attempt to explain the past decisions of the Bush administration with the added benefit of indicting Hillary Clinton. After all, while a Senator from NY she voted to invade.

The reframe says that a decision based on “what we knew then” was righteous, that everyone who looked at the same information would have come to the same decision. These guys continue to defend the invasion, despite the fact that we know it was based on lies. Iraq was not a good faith mistake. Bush and Cheney didn’t sit down with the intelligence community, ask for their best assessment of the situation, and then reluctantly conclude that war was the only option.

They decided before the dust of 9/11 had settled to use it as an excuse to go after Saddam. As evil as he was, he had nothing to do with the attack. To make a case for the short little war they expected to fight, they deliberately misled the public, making an essentially fake case about Weapons of Mass Destruction (WMD) and insinuating that Saddam was behind 9/11. From Lambert Strether:

And we played whack-a-mole with one fake WMD story after another: The yellowcake. The drones. The white powder. Judy Miller. Curveball. Cheney at the CIA. As soon as we would whack one story, another would pop up. And then Colin Powell, bless his heart, went to the UN and regurgitated it all (to his subsequent regret). Only subsequently did we come to understand (from the Downing Street Memo) that “the facts and the intelligence were being fixed around the policy,” and that the reason it felt like we were playing whack-a-mole is that we were; Bush’s “White House Iraq Group” was systematically planting stories in our famously free press.

Yet the Neo-cons, including Jeb Bush, say they would still make the same decision.

Bush harkens back to a government that believed its own spin doctoring to the point where it wasn’t able to see the difference between a sales pitch and the hard evidence coming from the Intelligence community. Given the totality of the outcome of these decisions: America nearly bankrupted, hundreds of thousands dead, total conflagration in the Middle East, he spent the week dancing around, saying the intelligence was faulty, but everyone believed it. And saying while you wouldn’t do it now, you would have done it then, is moral depravity.

According to the neo-cons, Obama did it:

Jeb mansplains:

This week, Obama met with our ME “allies”:

Amtrak off the rails indicts America:

GOP’s new budget is springtime for the 1%:

Clay Bennett, Chattanooga Times Free Press

Trade Deal is still up in the air:

Truth or Spin?

Eye of the beholder: Baltimore in flames!

The only problem is the photo wasn’t taken in Baltimore. It was taken in Venezuela. But, Fox13 in Memphis, TN posted it as “Baltimore in Flames.” For those who saw Fox’s rendition of the story, the image is of urban devastation in Baltimore. A viewer recalled the actual event and called Fox out. Fox took the photo down after it racked up tens of thousands of views, saying: “Our team didn’t fact check the picture the way we should have.”

At the time, many commentators stressed the need for peaceful protests. It wasn’t long before some invoked MLK. You can always count on Wolf Blitzer:

I just want to hear you say there should be peaceful protests, not violent protests, in the tradition of Martin Luther King.

Sure, why not? Here is what a 38 year-old Martin Luther King Jr. already the winner of the Nobel Peace Prize, said to the American Psychological Association’s convention in Washington, DC:

Urban riots must now be recognized as durable social phenomena. They may be deplored, but they are there and should be understood. Urban riots are a special form of violence. They are not insurrections. The rioters are not seeking to seize territory or to attain control of institutions. They are mainly intended to shock the white community. They are a distorted form of social protest.

MLK said more: (emphasis and brackets by the Wrongologist)

But most of all, alienated from society and knowing that this society cherishes property above people, he [the Negro] is shocking it by abusing property rights…This may explain why most cities in which riots have occurred have not had a repetition, even though the causative conditions remain. It is also noteworthy that the amount of physical harm done to white people other than police is infinitesimal and in Detroit whites and Negroes looted in unity.

He also said:

It is incontestable and deplorable that Negroes have committed crimes; but they are derivative crimes. They are born of the greater crimes of the white society. When we ask Negroes to abide by the law, let us also demand that the white man abide by law in the ghettos. Day-in and day-out he violates welfare laws to deprive the poor of their meager allotments; he flagrantly violates building codes and regulations; his police make a mockery of law; and he violates laws on equal employment and education and the provisions for civic services.

And Dr. King closed with this:

These are often difficult things to say but I have come to see more and more that it is necessary to utter the truth in order to deal with the great problems that we face in our society.

Speaking truth, or showing photos that distort the truth?

Take another “truth”, the Republican’s emerging 2016 campaign idea: What matters is economic opportunity, not inequality. A Wall Street Journal poll asks the question:

Which concerns you more: the income gap between the wealthiest Americans and the rest of the country or middle and working class Americans not being able to get ahead financially?

The answer?
• Income gap between the wealthy and the rest of the country: 28%
• Middle and working class not being able to get ahead: 68%

People tend to share values, and they lean more towards equal opportunities than equal outcomes. But, these are linked through causation. That means we can’t increase opportunity without reducing inequality. If we have narrowly distributed growth, those with asset-driven incomes hold disproportionate power relative to those whose incomes depend on paychecks. So, measures that attempt to reduce the 1%’s economic “rents”, things like collective bargaining, higher minimum wages, trade policy that protects workers’ rights and wages, robust safety nets, and progressive taxation, are attacked by Republicans as counterproductive to growth and jobs.

The political selling of “equal opportunity” is a house of cards. Why would anyone be happy with just equal opportunity, if it means an equal chance to live in in poverty? The R’s seem to be comparing equal economic opportunity to one roll of the dice: Roll a six sided die, get a 1, and earn less than $20,000, roll a 6, and you earn more than $115,000.

It’s high stakes, but relax, you’ve got equal opportunity.

Here is a Red-Winged Blackbird for your moment of Zen. Saw the first of the year today in a Crab Apple tree on the vast land holdings at the Mansion of Wrong:

For those who read the Wrongologist in email, you can see the video here.

See you on Sunday.

Monday Wake Up Call – May 4, 2015

The 40th anniversary of the Fall of Saigon passed unnoticed by this blogger last week.

Wrongo was drafted in 1966. He was on orders for Vietnam twice, but managed to spend most of his service time in West Germany, running a nuclear missile unit. He lost many friends in Vietnam, but was home, and out of the service in time for most of the big protest marches of the 1970’s. By 1974-75, no one in the States truly expected a “victory”. The debate was, according to Richard Nixon, how to achieve “peace with honor.”

For Nixon, that meant selling America on the premise of “protecting the troops as they withdraw,” or, “securing the release of POW’s”, which Nixon used to extend the war for years.

Since the 1970’s there has been a meme among conservatives that the reason we lost in Vietnam was a lack of national will, brought on by liberals and the war protesters. We still hear this today from a few career military, and many Republican chicken hawks. But, the idea that the primary reason we lost Vietnam was a liberal stab in America’s back is ridiculous, when you realize that Nixon stretched out the war for 6 years beyond the announcement of his “secret plan” to end it.

And if you remember how rapidly the South Vietnamese regime collapsed when it was no longer being propped up by the US military, you know their argument falls apart.

Vietnam, Iraq, Afghanistan are all places where our boys bled on foreign soil. All are places where our money was recycled to our war profiteers, and where we left behind no ability to bring about the “democratic” way of life that some of us had wished for them.

War profiteering for private corporations, socialized losses for the people. US soldiers dead or maimed for life. This is the legacy of Vietnam, Iraq and Afghanistan. And do Chicken Hawks care about taking care of our veterans after the fact, here at home? They do not. Their mantra is cut taxes, cut taxes, cut taxes on the war profiteers. Cut social programs, because how can a war profiteer (including those in Congress) possibly make any money off a government-run non-profit social program?

Wake up America, time to throw the Chicken Hawks out of office! Today’s wake up song is “There’s A Wall in Washington” by Iris DeMent:

Sample Lyrics:
A boy, he traveled from far away
to walk the path ’til he finds that name
He reaches his hand up and traces each letter
He stares at the name of his unknown father
His heart is young and it’s filled with pain
in anger he cries out
‘Who is to blame for this wall in Washington
that’s made of cold black granite?
Why is my father’s name etched here in it
On this wall in Washington?’

Your Monday Hot Links:

Czech libertarians received 200,000 applications for citizenship of Liberland, a seven-square-mile microstate established between Serbia and Croatia. The economy will be based on a digital cryptocurrency. Libertarian paradise. What could go wrong?

Reuters says that China will crack down on strippers who perform at rural funerals. Apparently, the Ministry of Culture is taking aim at performances which corrupt “social morals”. Strippers at funerals?

Statues of Snowden, Manning and Assange were unveiled in Berlin. All are considered heroes on the German political left for leaking US intelligence documents. The life-size statues will be going on a world tour, since they have fewer travel restrictions than the real people.

Want to carry a gun in your pants without risk of becoming a gelding? Try Thunderware, a holster designed to give you security while you pack heat near your meat. Is it pants stuffing? Is this for the guy who want you to think he has more down there than he really has? You be the judge. Gun fanatics bristle when people say that their attachment to guns is very phallic, yet they market Thunderware with a straight face.

Audi has announced that it is making synthetic diesel fuel from just water and carbon dioxide. In a bid to put an end to our fossil fuel crisis, Audi’s experimental diesel fuel is made from air and water. Called “e-diesel,” it has less sulfur and fossil-based oils, so it is more environmentally friendly. Audi claims an overall energy efficiency of around 70%. Sounds too good to be true and so far, they can only make 42 gallons/day. Invest at your own risk. If you have an Audi vehicle take a look at this VW service Melbourne as the provider also specialises in the same for Audis.

Moving the Goal Posts on Obamacare

Gallup has an informative chart about the declining percentage of uninsured in the US:

The percentage of uninsured Americans climbed from the mid-14% range in early 2008 and peaked at 18.0% in the third quarter of 2013. The uninsured rate has dropped sharply since Obamacare (the Affordable Care Act) took effect at the beginning of 2014.

It is possible to argue that an improving economy and a falling unemployment rate may have accelerated the steep drop in the percentage of uninsured over the past year. However, the uninsured rate is significantly lower than it was in early 2008, before the Great Recession, suggesting that the recent decline is due more to Obamacare than to just an improving economy.

From NY Magazine on this trend:

It is starting to look possible that this trend is not some random fluke that has happened six straight quarters but is somehow related to the enactment of Obamacare. So any day now, we can expect conservative politicians and intellectuals to begin publicly rethinking their analysis of this law.

They were correct. Here is the 2010-2014 short version of the Republican viewpoint on the ACA:

The ACA will not reduce the number of people without health insurance. Indeed, it might make this problem we don’t consider a problem, even worse.

Now that the ACA looks to be doing the job, the 2015 short version of the Republican viewpoint is:

Everyone knew that the ACA would result in a huge drop in the number of people without health insurance — what does that prove? Besides, how can we really know that it all isn’t a big coincidence?

This is called “Moving the Goal Posts”. Wikipedia says it means

To change the criterion (goal) of a process or competition while still in progress, in such a way that the new goal offers one side an intentional advantage or disadvantage.

Here is an example of moving the goal posts. From Cliff Asness: (emphasis by the Wrongologist)

In contrast, the rise in coverage is heralded by a myriad of Obamacare supporters as one of two major pieces of proof the law is working. But, how can something we knew before the fact be proof of anything?

Shorter: If we predict that something good will happen as a result of a new law, and that good thing happens, it doesn’t count as proof that the law served its purpose or was any good at all, unless Republicans say so.

The goal post movers also said Obamacare was a job killer. House Speaker John Boehner announced on March 17, 2010, five days before President Obama signed the ACA into law:

The President … continues to push his job-killing government takeover of health care that will hurt small businesses at a time when they need certainty, not more Washington tax hikes and mandates.

In 2011, House Republicans even passed the “Repealing the Job-Killing Health Care Law Act” — the first time that any piece of congressional legislation ever had “job-killing” in its title. Sadly for both Mr. Boehner and the House Republicans, we have added 12 million new private sector jobs since the bill was passed.

There is a new J.D. Power survey which looks at enrollee satisfaction with the ACA. It finds that people who signed up for insurance on the exchanges were slightly more satisfied (69.6%) than people with non-exchange plans, usually through employers (67.9%). People re-enrolling on the exchanges were 74.4% satisfied. New enrollees for 2015 were 5.5% more satisfied than 2014 enrollees, who endured the disastrous roll-out of healthcare.gov. So people like the subsidies and they like their actual insurance policies.

Think about it: ACA forecasted costs have been consistently revised downwards. The number of uninsured are dramatically lower. Satisfaction with Obamacare is higher, and it didn’t kill jobs.

It’s utter Tyranny.

Maybe that’s why the Senate’s top five Republican leaders have cosponsored legislation to extend Obamacare insurance subsidies until 2017. The extension will give Republicans more time to again move the goal posts.

They should try this one: Now that Republicans control Congress and most state governments, we have way fewer uninsured.

Conservative policies work!

The Wrongologist

Geopolitics, Power and Political Economy

Category: Economic Policy