Politics – Page 52 – The Wrongologist

What America has Become

The world is talking about Ferguson MO. Yesterday, a group of SWAT forces in riot gear faced angry citizens who had gathered to protest the killing of Michael Brown. After nightfall, police deployed tear gas against the crowd, warning the protest was “no longer peaceful”.

“This is no longer a peaceful assembly. Go home or be subject to arrest,” police warned through a loudspeaker, shortly before shooting tear gas at the protesters. Police were also shooting rubber bullets while smoke grenades and tear gas canisters fell into the crowd.

Meanwhile, some of the protesters reportedly threw rocks and bottles at the police. The police also arrested reporters, an alderman, and a state Senator. The two arrested reporters, Wesley Lowery of the WaPo and Ryan Reilly of the HuffPo, were in a McDonald’s recharging their devices and writing up reports. They had identified themselves as reporters to the arresting officers. The WaPo reported that for the past week in Ferguson, reporters have been using the McDonald’s a few blocks from the scene of Michael Brown’s shooting as a staging area. Demonstrations have blown up each night nearby. But inside there’s Wi-Fi and outlets, so it’s common for reporters to gather there. The Police closed the McDonald’s. Both reporters were released after a short time in a holding cell. Both say they were assaulted.

So, this is what America has become. SWAT teams in Ferguson, in daylight, facing unarmed civilians:

And here is a short video loop taken by HuffPo reporter Ryan Reilly on Wednesday. HuffPo, in a statement, said: (emphasis by the Wrongologist)

Ryan, who has reported multiple times from Guantanamo Bay, said that the police resembled soldiers more than officers, and treated those inside the McDonald’s as “enemy combatants.” Police militarization has been among the most consequential and unnoticed developments of our time, and it is now beginning to affect press freedom.

Police are no longer seen as members of the community dedicated to “Protect and Serve”. They are becoming domestic soldiers. Local police departments throughout have the equivalent of tanks now. They have drones. They have automatic rifles, and planes, and helicopters, and they go through military-style boot camp training.

When it comes to the up-armoring and militarization of America’s police forces, this is completely run-of-the-mill stuff.

In June, the ACLU issued a report on how police departments now possess arsenals in need of a use. The Pentagon has handed out 600 mine-resistant ambush-protected vehicles, or MRAPs to them for essentially no cost, with plenty more to come. They’re surplus equipment, mostly from our recent wars, and perhaps they will indeed prove handy for a sheriff fretting about insurgent IEDs (roadside bombs) in New Jersey or elsewhere in the country.

The worst part of outfitting and training police officers as soldiers will be psychological. Give a man access to drones, MRAPs, and body armor, and he’ll believe that his job isn’t simply to protect and serve, but to eliminate danger.

If officers are soldiers, it follows that the neighborhoods they patrol are battlefields. And if they’re deployed in battlefields, it follows that the population is the enemy.

Let’s remember that this is America, not a war zone.

The militarization of police departments has been covered by the Wrongologist here. The New York Times has reported on all of the other free military gear – like machine guns, armored vehicles and aircraft – that police are receiving from the Pentagon. Since Sept. 11, 2001, the DHS has handed out $34 billion in grants to police departments across the country, many for the purchase of armored vehicles and weapons. This program has created a cottage industry of companies who make militarized equipment and take checks from local towns in exchange for military hardware.

From Greg Howard:

There are reasons why white gun rights activists can walk into a Chipotle restaurant with assault rifles and be seen as gauche nuisances while unarmed black men are killed for reaching for their wallets or cell phones, or carrying children’s toys.

Do the police actions in Ferguson look similar to police actions during the 1960s Civil Rights Movement? National Guard soldiers, tear gas, and fire hoses were the old way of keeping protestors in line, but now the police are the soldiers. They still use the tear gas, but MRAPs and stun grenades are the new methods of disorienting protestors.

The US Department of Justice (DOJ) needs to address why local police believe that it is appropriate to arrest reporters. The DOJ needs to address why local police can walk on the people’s right to peaceably assemble.

The DOJ needs to do more than “monitor” the local situation.

And the mainstream media can be complicit in this too. The people who showed up at Ted Bundy’s ranch were called “supporters” and the protestors in Ferguson are referred to as an “angry mob”, even before any looting or violence started.

And thanks a lot SCOTUS, for deciding that we didn’t need the Voting Rights Act anymore because America’s racial problems are behind us. They aren’t.

Let’s close with a quote from William O. Douglas about oppression:

“As nightfall does not come at once, neither does oppression. In both instances, there is a twilight when everything remains seemingly unchanged. And it is in such twilight that we all must be most aware of change in the air–however slight–lest we become unwitting victims of the darkness.”

Our 4th Branch of Government

Everyone knows our government has 3 branches; the Executive, the Legislative, and the Judicial. That’s basic high school civics. But, it’s no longer true. The US government now seems to have a 4th branch: The national security apparatus, which has unfathomable power and reach.

From Tom Engelhard: (brackets by the Wrongologist)

New efforts at “reforms” will, at best, only modestly impede the powers of this [security] state within a state. Generally speaking, its powers and prerogatives remain beyond constraint by our judicial branch of government. It is deferred to with remarkable frequency by the executive branch and, with the rarest of exceptions, it has been supported handsomely with much obeisance and few doubts by Congress.

The national security apparatus is unelected. After last week’s mea culpa by Mr. Obama, apparently it has also moved beyond our Constitutional rules of checks and balances. You may recall that a report to the Senate Select Committee on Intelligence (SSCI) on the CIA’s Rendition/Detention/Interrogation (RDI) program, was held up by the CIA. Along the way, we learned that the CIA was improperly spying on the SSCI.

In March, CIA Director John Brennan said spying on the Senate was outside the realm of possibility, claiming:

As far as the allegations of, you know, CIA hacking into, you know, Senate computers, nothing could be further from the truth. I mean, we wouldn’t do that. I mean, that’s — that’s just beyond the — you know, the scope of reason in terms of what we would do.

Now we learn they did exactly that. The CIA Inspector General has found that:

CIA employees improperly accessed computers used by the Senate Intelligence Committee to compile a report on the agency’s now defunct detention and interrogation program,

On August 1st, the administration defended the CIA and Brennan’s actions. But Brennan DID obstruct the investigation, he leveled false charges at the Senate Intelligence Committee staff, filed those charges with Department of Justice, and then oversaw the process of redacting the damning CIA report.

From the Booman Tribune:

By any normal standard, John Brennan would be prosecuted for his actions. But he is being protected by the administration. I don’t think this is best explained by the idea that Brennan is doing a good job in other respects. He’s a major embarrassment to the administration and protecting him makes them look extremely bad. From the very beginning of his administration, I think President Obama has simply been afraid to take on the Intelligence Community.

And remember Mr. Obama’s rationale:

…we tortured some folks. We did some things that were contrary to our values. I understand why it happened…there was enormous pressure on our law enforcement and our national security teams to try to deal with this. And, you know, it’s important for us not to feel too sanctimonious in retrospect about the tough job that those folks had. A lot of those folks were working hard under enormous pressure and are real patriots…

He has clearly taken a side and it’s not that of transparency, or the Constitution. Or, do we live in a country where the President works at the direction of the head of the CIA?

Alternative Obama: If I’ve told you once, I’ve told you a dozen times, look forward, because if you look backward you’re going to learn from history and then how are we ever going to continue weakening your Constitution?

Alternative Alternative Obama: John Brennan has a gun to my head. Keeps reminding me of how much my Presidency looks like that of JFK. Worries about my safety…

That might explain his lack of political courage, but, political courage is exactly what is required if we are to get off the self-destructive path this country is walking. Sadly, we aren’t seeing that. Too many are scared that they might lose their jobs if the boss saw their political action. Too many are flummoxed by how easily Congress can be co-opted by money. Too many in our media are giving right-wing politicians a pass because it’s clear that they won’t change.

There’s no excuse for the people who tortured or, who lied to Congress, even if they were under ‘enormous pressure’. They knew the difference between right and wrong. And the fact that John Kiriakou is in prison for revealing that the US tortured, while Cofer Black, David Addington, John Yoo, John Brennan and Jose Rodriquez, all of whom played a role in the torture program roam free, shows that our political elite’s ethics are upside-down.

Holding individuals, particularly direct actors (like torturers) and advisers who engineered the torture program accountable before the law would not destroy the effectiveness of the CIA or the security state. Those who violated the law should be prosecuted. But those who did not violate the law should be free to conduct operations on behalf of the US. They shouldn’t be made to feel that they are weakened or wronged.

In response to the related question that often arises: “What? Do you want the CIA to be looking over its shoulder or consulting a lawyer every time it needs to get something done? The answer is: “Of course”.

We should expect nothing less than that from every elected official from the President down to local mayors, police chiefs and commissioners. Particularly from those who have the statutory authority to harm others.

It is difficult to imagine today that what sounded like poetry at the first Obama inauguration is now mockery. Sadly, it’s not about unfulfilled expectations of more hopeful things; we understand the political dynamic at work in Washington. It is that among his “achievements” has been the further weakening of our constitutional rights through his compliant treatment of the emergent 4th branch of government.

Sunday Cartoon Blogging – August 3, 2014

For those on vacation, or without access to the Interwebs, here is a summation of this week’s wrong:
• The Senate couldn’t pass a bill to impose taxes on companies that move overseas
• The House didn’t vote on Mr. Boehner’s immigration bill because Sen. Ted Cruz blocked it
• We brokered a 72-hour cease-fire between Israel and Hamas that lasted 90 minutes
• The Times of Israel took down a blog post that made a case for genocide
• Mr. Obama admitted that we torture

That’s not a lot of humor to work with, but here are the best. Congress hurries to not finish their work:

Ted Cruz driving baby Boehner:

Genocide of Palestinians is contemplated in the Times of Israel:

Yochanan Gordon framed his premise as “a question for all the humanitarians out there”:

Prime Minister Benjamin Netanyahu clearly stated at the outset of this incursion that his objective is to restore a sustainable quiet for the citizens of Israel. We have already established that it is the responsibility of every government to ensure the safety and security of its people. If political leaders and military experts determine that the only way to achieve its goal of sustaining quiet is through genocide is it then permissible to achieve those responsible goals?

Umm, wasn’t that the excuse Nazis gave the world about Jews, Gypsies, and Homosexuals?

And Mr. Netanyahu told the White House not to force a truce with Palestinian militants on Israel. He apparently advised the Obama administration “not to ever second guess me again” on the matter.

So, it looks increasingly like we need a 3-State solution:

In yesterday’s speech, President Obama said “We tortured some folks” and that “we shouldn’t be too sanctimonious”. The President:

It is important for us not to feel too sanctimonious in retrospect about the tough job those folks had… A lot of those folks were working hard under enormous pressure and are real patriots…That needs to be understood and accepted. We have to as a country take responsibility for that so hopefully we don’t do it again in the future.

Apparently, some people didn’t agree:

"We tortured some folks." Nope. Actually the CIA and the military did that. Don't try to put that shit on the rest of us, Obama.

— onekade (@onekade) August 1, 2014

What would cause Mr. Obama to make this “apology” for torture? Has he lost touch, or is he living in a bubble of intelligence advisers that he can’t or won’t fire?

This is reminiscent of the way that J. Edgar Hoover controlled (or intimidated) presidents in what we used to think was another age. Who, or what, is making this president say such crap, and not take what are to most of us, obvious actions?

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?

Military Sales Complicate Our Middle East Strategy

The Hill quotes President Obama’s impromptu press conference on July 16:

We live in a complex world and at a challenging time…And none of these challenges lend themselves to quick or easy solutions, but all of them require American leadership. And as commander in chief, I’m confident that, if we stay patient and determined, that we will, in fact, meet these challenges.

Of course it is a complex time. But we make our lives much more complicated by the arms deals we make with other countries. In the last three years, the US has provided tens of billions of dollars in military weapons through Foreign Military Sales (FMS) to the United Arab Emirates (UAE); Qatar; Kuwait; and the Kingdom of Saudi Arabia (KSA).

Some are designed to protect against airborne missile retaliation and air attacks. For example, the US supplied Qatar ($9.9 billion), Kuwait ($4.2 billion), and UAE ($1.1 billion) with Patriot anti-missile systems and UAE also acquired a $6.5 billion theater anti-air defense (THAAD) system. The US also sold KSA $6.7 billion worth of KC-130 aerial refueling tankers, the UAE $4 billion and KSA $6.8 billion of munitions including “bunker buster bombs,” typically used to attack hardened targets like nuclear facilities (are you listening Iran?). Qatar received a $1.2 billion early warning radar; KSA $1.3 billion for 30 patrol boats for use in the Gulf of Hormuz; Qatar spent $3 billion on Apache attack helicopters used for special operations insertions. The list also includes Javelin missiles, F-18’s and F-16’s, and Sidewinder anti-air missiles.

Israel is the largest recipient of US Foreign Military Financing (FMF). For FY 2015, the President’s request for Israel adds up to about 55% of our global FMF funding. Annual FMF grants to Israel represent about 25% of the overall Israeli defense budget. We also agreed to sell Israel 19 F-35s in 2010, with options to increase that order to 75 planes. We have recently approved the only foreign sale of the V-22 Tilt-rotor Osprey aircraft to the Israelis for $3 billion.

Business Insider reports that we may have made our lives more complicated by weapons sales to Qatar. You probably are not aware that Qatar is one of Hamas’s reliable international partners:

Last week, Qatar closed the largest sale of American weaponry so far this year, purchasing $11 billion worth of Patriot missile batteries and Apache attack helicopters. The sale revealed that Qatar hasn’t exactly been lacking in strategic daring in the wake of its failed bet on Muslim Brotherhood-linked political movements throughout the Middle East.

Qatar is about the size of Connecticut. It has fewer than 300,000 citizens. The rest of its 2.1 million inhabitants are expatriates and foreign workers. Why does it need all these weapons?

The Israeli-Hamas fight shines a light on Qatar. The New York Times reported on the Qatari Emir’s 2012 visit to Hamas-controlled Gaza:

The emir, Sheik Hamad bin Khalifa al-Thani, pledged $400 million to build two housing complexes, rehabilitate three main roads and create a prosthetic center, among other projects, a transformational infusion of cash at a time when foreign aid to the Palestinian territories has been in free fall.

He was the first-ever leader of a country to meet with Hamas in Gaza. Business Insider quotes Jonathan Schanzer, the vice president at the Foundation for Defense of Democracies, who said that Qatar is “believed to be the primary financier of Hamas,” which has estimated annual operating expenses of around $1 billion. In June, Qatar attempted to transfer money for long-unpaid civil service salaries for Gaza-based Hamas members through the Arab Bank, a transaction that the Bank disallowed after apparent US pressure.

Qatar is arguably a counter-productive actor in the context of the biggest Israeli-Palestinian crisis since the Second Intifada of a decade ago. Business Insider reports that David Weinberg, a scholar at the Foundation for Defense of Democracies, said that Congress hasn’t been concerned enough with Qatar’s policies to put a hold on weapons sales, and it confirmed the Obama administration’s recent nominee as ambassador to Doha without controversy:

It’s not clear whether Congress has the stomach for a fight over these issues with an ostensible ally when…the administration seems to be vouching for Qatari conduct.

Yes, we vouch for conduct we can’t control, or in some cases, really influence. Why is it that the first thing our lawmakers think of is “send them more arms”?

The powder keg of the Middle East has been filled in part by our policymakers’ conflicted views of Middle East politics, but largely by the political influence of America’s military contractors.

Thanks to our Congress and President, it waits only for another spark to set it off. If and when that happens, count on someone in the administration or in Congress saying: “who could have anticipated THAT happening?”

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:

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.”

The Wrongologist

Geopolitics, Power and Political Economy

Category: Politics