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The Wrongologist

Geopolitics, Power and Political Economy

Stimulus Money is Going to Churches

The Daily Escape:

View of Mt. Rainer from Reflection Lake WA – 2018 photo by NathanielMerz

Here is the 7-day look at the national numbers for COVID-19:

The rate of growth in deaths as a percentage of cases continues to rise, while the rate of increase in cases picked up slightly on 4/6, although overall, it is slowing vs. 7 days ago. Testing is still growing, although the rate of growth in tests is now about equal to the growth in cases.

A little-noticed part of the $2 trillion stimulus package allows the federal government to provide money directly to US churches to help them pay pastor salaries and utility bills. From NPR: (emphasis by Wrongo)

“…the $2 trillion economic relief legislation…includes about $350 billion for the Small Business Administration (SBA) to extend loans to small businesses facing financial difficulties as a result of the coronavirus shutdown orders. Churches and other faith-based organizations are among the businesses that qualify for aid under the program, even if they have an exclusively religious orientation.

So, we’re not simply speaking of not-for-profit subsidiaries of churches such as charities. The Trump administration is saying churches themselves will qualify for direct loans. Apparently, the program is based on the average monthly payroll of a church school or the parish, which is extrapolated to eight weeks. The cost of maintaining staff for that period becomes the loan amount.

From the SBA’s statement:

“Faith-based organizations are eligible to receive SBA loans regardless of whether they provide secular social services….No otherwise eligible organization will be disqualified from receiving a loan because of the religious nature, religious identity, or religious speech of the organization.”…

The SBA’s regulations currently exclude some religious entities. Because those regulations bar the participation of a class of potential recipients based solely on their religious status, SBA said it will decline to enforce those subsections and will propose amendments to conform those regulations to the Constitution.

The SBA is quoting a 2017 Supreme Court decision, Trinity Lutheran v. Comer, which was the first time the Court said the government is required to provide public funding directly to a religious organization. Chief Justice Roberts wrote for the majority in the 7-2 decision. The key argument was that Trinity Lutheran faced discrimination solely because of its identity as a church. That, the Court decided, was discrimination. From the opinion:

“There is no question that Trinity Lutheran was denied a grant simply because of what it is….A church.”

The grant was for refurbishing the church’s playground.

But in this case, the SBA is offering direct funding of religious entities with money provided by tax dollars from the rest of us. We’re likely to see this in the courts soon.

This isn’t the first time that the Trump administration provided funds directly to churches, synagogues, mosques and other religious organizations. In 2018, the Federal Emergency Management Agency (FEMA) changed its rules to make houses of worship eligible for disaster aid.

First Amendment watchers have reacted. Alison Gill, legal and policy vice president of American Atheists said:

“The government cannot directly fund inherently religious activities….It can’t spend government tax dollars on prayer, on promoting religion [or] proselytization. That directly contradicts the Establishment Clause of the First Amendment.”

If they want Federal funds, shouldn’t they pay Federal taxes?

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We’re In Uncharted Territory

The Daily Escape:

Sunset, Factory Butte, UT – photo by goat_chop56

Blog reader David K. emailed:

“Now, what do we common folk do?  Start our “victory gardens” and shelter in place?  Volunteer to help our local farmers raise food? Hoard?  Wish I had a great idea, because I agree that our leaders don’t have a clue how to respond.”

That gave Wrongo pause. What do those of us who aren’t part of the “smart money” crowd supposed to do, particularly if what we’re facing is a worldwide depression? John Pavlovitz frames the existential issues quite clearly:

What happens if the stores run out of essentials for good?
What if you run out of money to stockpile them?
What if your neighbors stop sharing with you?
What if the government won’t help you?
What might you do then?

Politicians say we’re at war, but as Kunstler says: “At least in wartime, the bars stay open. That’s how you know this is a different thing altogether from whatever else you’ve seen in your lifetime.”

We’re attacked by a novel virus that’s created a completely novel social and economic situation. By definition, we aren’t prepared for an abrupt crash of both our social fabric, and our economic well-being.

Our politicians have no answers, despite most of them having been around for the 2007-2008 Great Recession. The Fed hasn’t done us any favors since then, either.

Last Saturday, Wrongo said that we’re crossing a threshold between what we know and an unseen future. Our traditional systems are no longer capable of keeping society and the economy on an even keel. Nobody really knows how deep and how harsh this will get, but the situation presents two questions:

  • How much disorder will we have to endure?
  • What does the world look like when this thing is over?

All this is happening in an election year, when the entire government and the political parties’ power structures are vulnerable, and could change. We are facing a new reality, for which no one has any answers.

Politics being what it is, the White House and the Congress are trying to work together to come up with solutions. On Monday, Trump gave another press conference on COVID-19. During his talk, the stock market dropped nearly 3,000 points. It was the market’s worst day since Black Monday in 1987.

The smart money was behind Trump in order to get its corporate tax cuts, but now, they’ve voted with their money. And Trump’s starting to look a little bit like Herbert Hoover.

Sen. Mitt Romney (R-UT) floated Democrat Andrew Yang’s idea of giving every American $1,000. He was joined in principle by Sen. Tom Cotton (R-AK). We’ll see if this is just more Republican grandstanding, or if they actually back a real plan of support for working people.

With Trump, you can expect to see bailouts for several industries, including banks, airlines, casinos and cruise lines. Imagine: Casinos are asking for help from the guy who only knows how to bankrupt casinos.

Reuters reports that the US airline industry said that it needs $50 billion in grants and loans to survive the dramatic falloff in travel demand from the COVID-19 outbreak. This is just more socialism for America’s corporations.

Two thoughts: First, $50 billion is higher than the book value of all the airlines combined. Why should they have any of our money? Either Republicans are for free market capitalism, or they should just shut up. Most of these airlines have implemented stock buyback programs when they should have been building contingency funds instead.

Second, this $50 billion should be added to whatever Congress spends on small businesses that are forced to close due to quarantine, or on parents forced to stay home to take care of kids who aren’t going to school anymore. They’re the ones who are really hurting.

We’ve lived through a time of unprecedented affluence. We’ve told ourselves we deserved it all, that we were entitled to all that our country has provided.

But that’s most likely over, and it might not return in Wrongo’s lifetime.

We have to think about what must change if we are to have a functioning society and economy in the decades to come.

The list of all the things that we need to change is far too long to enumerate here. At a minimum, we need to reform capitalism, make health insurance universal and strengthen worker’s rights.

We have to do a better job of sharing the wealth. It we don’t do that voluntarily, our children’s children’s generation will come and fight us for what we have.

To protect our families and their future, we need to become even more active politically in order to make these and other changes happen.

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Taxes Aren’t Theft

The Daily Escape:

Humpback Whale, Tonga – Photo by Rita Kluge

Joseph Stieglitz has an op-ed in the NYT about saving capitalism from itself. He wants to re-brand capitalism as “progressive capitalism”: (emphasis by Wrongo)

“There is an alternative: progressive capitalism. Progressive capitalism is not an oxymoron; we can indeed channel the power of the market to serve society….The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society. We need regulations that ensure strong competition without abusive exploitation, realigning the relationship between corporations and the workers they employ and the customers they are supposed to serve. We must be as resolute in combating market power as the corporate sector is in increasing it.”

America has been debating the role of capitalism in our society since our beginnings. In 1790, John Adams published the Discourses on Davila in which he said that entrenched economic inequality would create a political oligarchy in America similar to what had already occurred in Europe.

The problem isn’t inequality. We’ve survived a permanent underclass, but until recently, it has been a statistical minority. But, we won’t survive today’s continuing erosion of the middle class. Stieglitz says:

“We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.”

He calls for:

“…a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.”

Call it progressive capitalism, capitalism plus, democratic capitalism, or whatever you want. At the core of any reform of capitalism is less corporate control over the levers of power, and a redistribution of wealth. Along with the growth in economic inequality and political impotence, so grows the myth propagated by the ultra-rich that higher taxes are a public theft of their hard earned fortunes, and are a threat to their personal freedoms.

Let’s spend a minute on the difference between positive and negative rights.

In the simplest terms, negative rights (most of the Constitution’s Bill of Rights) protect us from the government. They tell us what the government can’t do. The Constitution was designed as primarily a negative rights document, to maximize our individual liberty, and to protect us from the government interfering in our lives. They are most helpful to people whose rights are already protected.

Positive rights are different. They include things like the right to an education, and in some countries, the right to healthcare. Most of us define freedom as: freedom from hunger, freedom from ignorance, freedom from exploitation, freedom from poverty, freedom from hopelessness and despair. Very few positive rights are enumerated in the Constitution, with the exception of the right to have the government protect private property.

Today, if there’s one enduring myth that drives US politics, it is the myth that the rich have earned their reward, through nothing but their own hard work and savvy. The rich want no income redistribution, which they call “socialism”, just as the fat cats said in this cartoon from 1912:

The Republicans in the 1930s called FDR a socialist. Now, as we are thinking about a New Deal 2.0, today’s Republicans want to again brand all Democrats as socialists.

Corporations and the 1% ignore how much they are helped by a system designed by them, and for them. They are contemptuous of government and public authority, which they say act as agents of the poor, attempting to extort the rich.

They forget that our government facilitates and protects their wealth. If not for the many Federal agencies that write regulations favorable to industry, the Federal Reserve, protectors of the banking industry along with others, there would be a lot less wealth for corporations and the 1% to aggregate.

Therefore, they should pay the most.

And remember, rural electrification was a federal project under FDR. The dams on the Columbia River made irrigation possible, opening up western lands to agriculture. The Tennessee Valley Authority (TVA) was the Green New Deal of its time, and was the basis for development of a modern Southeastern US. The railroads that opened up the West relied on government property provided to private companies (redistribution?) to develop.

Let’s decide to reform capitalism. First, by making it responsive to the positive rights that average Americans are longing for. Second, paying for that with much high taxes on corporations. If the loopholes created by savvy corporate tax lawyers remain on the books, let’s create a stiff Alternative Minimum Tax (AMT) for corporations.

Just like the AMT that Wrongo has had to pay for lo, these many years.

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The Long Battle to Reform Capitalism

The Daily Escape:

Poppies in bloom, Southern California – March 2019 photo by Leslie Simis. This annual explosion of color is enhanced this year by extraordinary rainfall

You can call the period in US history from FDR to Nixon “America’s social democratic era”.  A collection of politicians had hammered out the policies and regulations that became FDR’s New Deal in America. It became a period of post-war prosperity during which inequality narrowed, economic growth boomed, and optimism reigned.

The characteristics these policies shared were reciprocity and generosity. For the citizen, there was some form of social support that grew from Social Security in 1935 through the 1960’s with Medicare and Medicaid. In 1970, Nixon implemented the Environmental Protection Agency. There was also a willingness to care for the disadvantaged. Our Marshall Plan and our commitment to foreign aid are both great examples. The success of social democracy in the postwar era weakened the market’s power to act independently within our society.

But then things changed. Our government’s role became a helpmate for corporations, financial institutions, and their lobbyists. The result has been growing inequality between suppliers of capital and the suppliers of labor, even of highly educated labor, like teachers and professors. Economic growth slowed, and we have developed a permanent underclass that seems impervious to repair.

Yesterday, we talked about Economic Dignity, and how focusing on it might help solve inequality. Today’s market economics is partly based on the ideas of Jeremy Bentham and John Stuart Mill, economists who viewed human beings as supreme over the state. As individuals who would make rational decisions to maximize utility. It turned out to be incomplete, since it left out key dimensions of human psychology, like the individual’s need for social esteem or respect. In other words, they ignored economic dignity.

Couple that with Milton Friedman’s idea, that the mission of the firm is to solely maximize profits, that any responsibilities to its employees, consumers, or society should be ignored. Profit maximization at all costs has done great damage to American society. And conservatives and free marketers have married the ideas of these three economists, making the removal of government from markets their primary mission.

But what they call “the market” is really a bundle of regulatory (and non-regulatory) rules by which market activities operate. The mix of free and regulated market activities can be changed, even though capitalists say we shouldn’t change the rules, because it adds uncertainty to markets.

Just because in baseball, three strikes and the batter is out, or with four balls, there is a free pass to first base, doesn’t mean it has to be that way. It could be five strikes and you’re out, or three balls is a walk.

As an example, we tend to fight unemployment with “trickle-down” solutions. That means we bribe the rich and corporations to hire more. But, the bribe is always bigger than the payrolls that are generated.

We could fight unemployment with fiscal policy, such as infrastructure spending by the government. It would employ many, possibly hundreds of thousands, and there would be no need to pay any entity more than was warranted by the tasks at hand.

America needs a return to what economist Paul Collier calls the “cornerstones of belonging”— family, workplace, and nation, all of which are threatened by today’s market driven capitalism. That means capitalism has to return to the ethics of the New Deal. Joseph Stiglitz, Nobel laureate in economics, says: (parenthesis and emphasis by Wrongo)

Over the past half-century, Chicago School economists, (including Milton Friedman) acting on the assumption that markets are generally competitive, narrowed the focus of competition policy solely to economic efficiency, rather than broader concerns about power and inequality. The irony is that this assumption became dominant in policymaking circles just when economists were beginning to reveal its flaws.

Stiglitz says we need the same resolve fighting for an increase in corporate competition that the corporations have demonstrated in their fight against it. We’ll need new policies to manage capitalism.

It means higher taxes on profits.

It means paying workers more.

It means rebuilding public assets like roads.

It means teaching students to be both technically capable, and grounded in their values.

Speaking of needing to teach our students, if you think we’re not in a rigged game, think about one “USC student” who is part of the admissions fraud scandal, Olivia Jade Giannulli. She was on the yacht of the Chairman of USC’s Board of Trustees when she heard about it.

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Trump Says Dems Are Socialists

The Daily Escape:

Sulfur Skyline Trail, Jasper NP Alberta, CN – August 2018 photo by MetalTele79

Trump wants to run against socialism in 2020, so he’s trying to paint the Democrats as socialists. At the Conservative Political Action Conference, Trump brought up “socialism” four separate times:

“Just this week, more than 100 Democrats in Congress signed up for a socialist takeover of American health care.”

“America will never be a socialist country — ever.”

“If these socialist progressives had their way, they would put our Constitution through the paper shredder in a heartbeat.”

“We believe in the American Dream, not in the socialist nightmare.”

Steve Benen notes that Senate Majority Leader Mitch McConnell (R-KY), indicated that the Voting Rights Bill passed by the House as HR-1 was a “radical, half-baked socialist proposal”. Benen goes on to say:

“There’s nothing “socialist” about automatic voter registration. Or curtailing partisan gerrymandering. Or requiring officials to use “durable, voter-verified” paper ballots in federal elections.”

Or making Election Day a national holiday.

Perhaps the GOP is redefining socialism as: Any legislation or policy that would diminish the power of the far right, or diminish the wealth differential enjoyed by their business elites.

An NBC News/Wall Street Journal poll showed that just 18% of Americans had a positive view of socialism, 50% had a negative view, and 26% had a neutral view. Most of the skepticism about socialism comes from older American generations. People who are nearly Trump’s age grew up fearing nuclear war. They saw the Soviet Union as an existential threat to the US.

OTOH, Axios reports that 73% of Millennials and Gen Z think the government should provide universal health care. They will make up 37% of the electorate in 2020. And Gallup found that Americans aged 18 to 29 are as positive about socialism (51%) as they are about capitalism (45%).

Vilifying socialism might be a winner for the GOP, unless the Democrats hammer home a series of ideas. First, that Social Security and Medicare aren’t socialism or socialized medicine. Second, that we socialize corporate losses all the time. The taxpayers bailed out banks, capitalists and speculators 10 years ago. We also bailed out GM and Chrysler.

We bail out corporations that do not pay for “externalities”. Externalities are the indirect costs incurred because of actions taken by someone else. Think about pollution. When a manufacturer can make its decisions based on their bottom line, it makes sense for them to dump waste into our rivers or air, pushing the costs of cleanup onto society as a whole.

Today’s GOP is pushing quickly to gut regulations in order to protect the industries of their big donors from paying the cost of these externalities.

Third, reforming capitalism isn’t socialism.  Reform is necessary for the economic future of the country. The current neoliberal form of capitalism dominates both our economy and our thinking about economic success. And in the past 40 years, we’ve changed the rules of the game for corporations. We’ve moved the fifty yard line much closer to the capitalists’ goalpost than it was during FDR’s time.

And corporations and capitalists have been running up the score in the economic game ever since.

Neoliberal capitalism has made selfishness an economic and moral good. One result was that improving our economic security, or our social safety net, can no longer be discussed in our society.

The Green New Deal document directs the government to provide all Americans with:

(i) high-quality health care,
(ii) affordable, safe, and adequate housing,
(iii) economic security; and
(iv) access to clean water, clean air, healthy and affordable food, and nature.

These goals are within America’s capabilities, but they come with costs, costs that will not be willingly paid for by corporations, or by “public-private partnerships”. They will only come about with direct government intervention, primarily by implementing policies that encourage them, and by a new tax policy that finances them.

Nothing in the above requires state ownership of corporations, so we don’t have to talk about socialism.

Our market economy should remain, but capitalism needs to be different, because its current track cannot be sustained if we want to contain and correct income inequality, or deal with climate change. Today’s capitalism is creating concentrations in most industries, driving out the little firms. Price gouging is an issue, particularly with big Pharma.

Everyone should agree that companies above a certain size must pay for the externalities they create. That they should also pay a larger share of their profits as taxes. And that they should pay a fee for domestic jobs lost to overseas locations.

2020 should be about those who want to reform capitalism, and how to do it. It shouldn’t be about Trump’s trying to paint Democrats as Soviet-era socialists.

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Reform of Capitalism Isn’t Socialism

The Daily Escape:

Graffiti in Greece by Lotek

The NYT reported that Rep. Tom Emmer (R-MN), chairman of the National Republican Congressional Committee, said: (brackets by Wrongo)

“Socialism is the greatest vulnerability by far that the House Democrats have…He added that he had also instructed his team to spotlight “all the [Dems] extreme wild ideas on a daily basis, on an hourly basis if it’s available.”

As we said yesterday, most Democrats are not socialists. They are for reform of capitalism. The problem is that our economic system is broken; it does not meet the needs of the vast majority of our people.

Capitalism has metastasized into a financialized cancer. Its growth-at-any-cost, profit-over-purpose ideology has wreaked havoc with the lives of millions of people. From Forbes:

“One example: For more than 400 years, 12.5 million Africans were kidnapped, enslaved and sold to build wealth and power largely for white men in the US, Europe and South America. The first enslaved Africans were shipped directly to the Americas in 1518, one year after Martin Luther nailed his 95 Theses to the door of Castle Church. The centrality and largely unconstrained profit motive in capitalism has been with us since the beginning.”

Today, corporations track our every movement. Algorithms manipulate us to buy things, or to vote certain ways. We’ve put outsized power into the hands of corporations. We have to ask: What do we need from capitalism in the 21st Century? Is it more of the same, or something different?

Capitalist Reform is about re-imagining the purpose of business and redefining its success. The doctrine of shareholder primacy must be the first to go. It needs to be recognized as a form of oppression of human nature since it doesn’t value our humanity.

According to a 2019 Politico/Morning Consult survey, 76% of registered voters want the wealthiest Americans to pay more. Politico also notes that a recent poll from Fox News shows that 70% of Americans supporting increased taxes for those earning more than $10 million, and 54% of Republicans also supported it. People are contemplating not just piecemeal tax increases, but a wholesale reversal of the Reagan-era shift in tax policy. The Economist reported that in 2016, more than half of young Americans no longer support capitalism.

There is an urgent need to push back against the widening economic inequality in the US. Taxing the rich is an easy answer, because so few of us are rich.

But, step one should be increasing corporate income taxes. Corporations’ share of total taxes paid has decreased to about 9% of total US tax revenue in 2017, from about 33% in 1952. How many stories like Amazon’s failure to pay anything in taxes on $11 billion in profits should it take to begin the task of closing corporate tax loopholes and increasing corporate income taxes?

Step two is to break up corporate concentrations. Wrongo addressed this here. The primary issue with corporate concentration is that it drives up prices. The fewer sellers, the fewer choices consumers have for goods and services, and thus, there is little pressure for big competitors to hold prices down.

Step three is to help workers. The share of profits that goes to workers must increase. This shouldn’t punish capitalists. Higher wages for workers means more business for American companies.

We were founded on republicanism as a public virtue: The Constitution implies that a citizen is duty-bound to abandon self-interest when it conflicted with the General Welfare. Capitalism has usurped republicanism by insisting that abrogation of self-interest violates the doctrine of “survival of the fittest,” and it’s also an attack on individual liberty.

We need to revive the understanding of public virtue. So, some form of “mixed economy” is in our future. It’s obvious to all except right wing ideologues that socialized medical insurance is in our future. But it is doubtful that a majority want to socialize production and distribution of America’s products and companies.

The task for Congress and the next president is to figure out what activities and/or economic sectors are best guided by tax and economic policy, and which are best left to “market forces”.

We’re a country where vast wealth is rewarded with tax cuts, loopholes, and endless ways to ensure that corporate dollars earn even more dollars. While average people are bankrupted because of a health crisis, and we value semi-skilled labor at $7.25 an hour.

Today’s capitalism is anti-democratic. General welfare and public virtue derive from a desire to improve the human condition. That needs to be the goal of political action to reform capitalism, and it needs to be hammered home again and again.

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Today’s Wages Have the Same Purchasing Power as in 1978

(Email publishing of The Wrongologist should be restored as Wrongo is using a different vendor, WordPress. Apologies to those who read in email.)

The Daily Escape:

Cliff Palace, Mesa Verde National Park, Colorado, as it might have looked at night in the 12th Century lit by camp fires. Mesa Verde is unique since it is the only NP that preserves the works of man – photo by Rick Dunnahoo

This is going to be a historic year, even when compared to 2018. And it’s starting out with a bang. The government is shut down, half the cabinet is empty, the 2020 presidential race has officially started, and the Democrats are taken over the House.

And that’s without whatever Mueller shoe will drop sometime in the year, or whatever Twitter atrocities Trump decides to commit. In other words, we’re going to have our hands full.

But today, let’s talk about how bad the economy is below the surface of the headline numbers. Debt is rising, and rising debt is supposed to be matched by rising income. It shouldn’t be a surprise that more income is required in order to service more debt. But so far, in the 21st century, for the bottom 90%, debt is growing while income is stagnating.

Pew’s Fact Tank has an analysis that speaks to this problem. Average hourly earnings for non-management private-sector workers in July were $22.65, 2.7% above the average wage from a year earlier. But in the years just before the 2007-08 financial collapse, average hourly earnings often increased by around 4% year-over-year.

And during the high-inflation years of the 1970s and early 1980s, average wages commonly jumped 7%, 8% or even 9% year-over-year.

However, after adjusting for inflation, today’s average hourly wage has about the same purchasing power it did in 1978. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.

Here is Pew’s chart demonstrating the problem:

Because there’s been little growth in wages, the growth in the standard of living for those below the 90th percentile has been largely fueled by additional consumer debt. The WSJ reports that consumer debt, including credit cards, auto and student loans and personal loans, is on pace to top $4 trillion in 2019, the highest in history. Debt allows you to furnish your home, pay for education, and get a car without having to save for them. In that way, it supports the growing economy.

But Pew also shows how most of the income gains went to those at the top of the food chain:

 

 

Among people in the top 10th of the distribution, real wages have risen a cumulative 15.7%, to $2,112 a week – nearly five times the usual weekly earnings of the bottom tenth ($426).

This lack of symmetrical growth in debt and income actually matters. At some point household borrowers will default in greater numbers than they do today. When those losses occur, the monetary system won’t be able to bail out debtors (or banks) this time around as handily as we did in 2008.

 

Sluggish and uneven wage growth is a key factor behind widening income inequality in the US. Another Pew Research Center report found that in 2016, Americans in the top tenth of the income distribution earned 8.7 times as much as Americans in the bottom tenth ($109,578 versus $12,523).

Compare that to 1970, when the top 10th earned 6.9 times as much as the bottom 10th ($63,512 versus $9,212).

There is no simple solution to get American workers back on the right track. At a minimum, it will take a political groundswell aimed at overturning the way the tax code favors corporations. Along the way we will have to displace the political power of our corporate oligarchs.

Government must be made to serve the public interest, not Mr. Market.

Democracy is the sole mechanism enabling our citizens to have political and economic agency. But, democracy will cease to matter in a corporate-controlled, globalized system of government influence.

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The Kids Are All Right

The Daily Escape:

Autumn in Larch Valley, Banff National Park, Alberta CN – 2008 photo by Andy Simonds

For the past few days, Wrongo has been writing about both ideas and people that could help to shape a reform of American capitalism.

We’ve talked about Bernie Sanders, Richard Murphy, Alan Curtis and Alexi Yurchak, and the Yellow Vests in France. Today, let’s focus on America’s youth, at least some of them:

More than 1,000 young people and allies flooded the Capitol Hill hallways and offices of Democratic representatives to demand that elected officials listen to their youngest constituents—as well as some of the world’s top scientists—and back the bold proposal to shift the US to a zero-carbon energy system by 2050 in order to save the planet from an irreversible climate catastrophe.

The protesters were mostly members of the youth-led Sunrise Movement, 800 of whom had attended a training on lobbying members of Congress and their staffers the previous evening. They carried signs reading, “Do Your Job,” “Back the Deal,” and “No More Excuses“. Here is a picture of them in the halls of Congress:

Before you get all crazy about the (apparently) professionally-made signs, here’s a web site where you can easily make them. More from Common Dreams:

Many also wore T-shirts emblazoned with the following message: “We have a right to good jobs and a livable future,” two key components of the Green New Deal, which would create 10 million jobs in the first decade by putting Americans to work building a green energy infrastructure…

At least 143 of the demonstrators were arrested as they lobbied in 50 congressional offices. But, they had an impact. The number of Democratic lawmakers now supporting a Select Committee on a Green New Deal has now reached 31, twelve of whom signed on this week. How it came together reveals how the Congressional Progressive Caucus (CPC), will use its growing membership.

The Caucus agreed with incumbent members who were willing to have a select committee so long as actual lawmaking authority remained in existing committees.

This wasn’t all due just to the kids. Rep.-elect Alexandria Ocasio-Cortez (D-NY) has spent the past few weeks wrangling support for the Green New Deal as well. The outcome was the result of a collaboration between the CPC leaders, Ocasio-Cortez, and the Sunrise Movement.

Wrongo doesn’t know if a Green New Deal is a good idea or not, but much of the message will resonate with voters. Who will be against “good jobs and a livable future”?

And Alexandria Ocasio-Cortez is showing that she has really good political instincts.

We should be happy that these kids are speaking from their hearts. They are practicing for when they will need the strength to fight the hard political battles of their generation. But, why aren’t we seeing a million parents fighting alongside their kids?

We also should remember how undervalued kids are in America: We under fund their schools. We are providing only low-wage service economy jobs for most of them when they grow up. We hardly care whether they are covered under a health insurance plan. We take them from their parents at the border.

No wonder they are learning to act, since we, their guardians, seem unwilling to act for them.

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Tax Abatements Are Killing School Budgets

The Daily Escape:

Egmont National Park, NZ – photo by vicarious_NZ

A new report shows that US public schools in 28 states lost at least $1.8 billion in tax revenues last year as a result of tax incentives granted to corporations. The study analyzed the financial reports of 5,600 of the nation’s 13,500 independent public school districts.

Good Jobs First examined the first full year of reporting under a new accounting standard for school districts, adopted by the Governmental Accounting Standards Board (GASB), the body that sets accounting rules for all states and most localities. The new rule, GASB Statement No. 77 on Tax Abatement Disclosures, requires most state and local governments to report annually on the amount of revenue they’ve lost to corporate tax abatements.

This is extremely important, since most local schools are very dependent on revenue from property taxes, but they rarely have influence over corporate tax abatements granted by their towns, and/or the cities or counties where they are located.

And local voters have had no way to see how much they are forced to pay in additional taxes that were lost to enrich the pockets of corporate employers.

Good Jobs found that the 10 most affected states could have hired more than 28,000 new teachers if they were able to use the lost revenues. Or, they could have avoided higher home property taxes, or provided their teachers with better resources, or higher pay.

States and cities have long used abatements and other tax incentives to lure companies, or to keep them from leaving, and/or to encourage them to expand locally. Often, those companies make their choice of location based on the quality of local schools and colleges.

These abatement deals are made by local politicians and are meant to boost local economic development. Their proponents say the lost tax revenue is worth it, because they grow the local economy. But it is difficult to know whether the benefits outweigh the burdens.

And until GASB 77, it has been impossible to see just how much a school system may have lost because of a company’s tax break. The new rule is especially helpful in understanding local schools finances, because it requires the reporting of revenue losses even if they are suffered passively by the school system as the result of decisions made by another body of government.

Of the five districts that lost the most, three are in Louisiana. Together, they lost more than $158 million, or $2,500 for each student enrolled. The School District of Philadelphia, which only last year regained local control from the state after climbing out of a deep fiscal crisis, lost the second most revenue at $62 million.

Overall, nearly 250 school districts lost at least $1 million each, and in four districts, tax abatements reduced classroom resources by more than $50 million.

But most school districts have not yet complied with Rule 77, which was implemented in 2015. Good Jobs First estimates that another $500 million of subsidies and abatements are currently unreported.

Most of us believe that our governments are supposed to govern in the interests of the “general welfare,” that when voters put people in positions of power, based on the legitimacy of our electoral process, is the limit of our responsibility as voters.

We accept that somebody has to say what the rules are, and then enforce them.

But in our neoliberal economic times, voters have to remember that our governments often act as wholly owned subsidiaries of the 1%. It takes suspension of belief to accept that our republic, ruled as it is by an oligarchy, is working for the general welfare of all of our citizens.

Why do we think that, our “governments”, all of which are subject to capture and ownership by the few, are going to somehow provide decency, comity, or fairness to all of us?

We need to abandon the article of faith that the free market, one without government oversight, promotes the best economic outcome for all of us.

Today’s inequality says the opposite.

We need a new vision of the role of government. But it isn’t really a “new” vision. It is simply a return to insisting on the “promotion of the General Welfare for all” as the paramount object of government.

Here’s another thought from Gordon Wood, in his book, Creation of the American Republic:

In a republic each individual gives up all private interest that is not consistent with the general good, the interest of the whole body. For the republican patriots of 1776 the commonweal was all encompassing—a transcendent object with a unique moral worth that made partial considerations fade into insignificance.

The last outcome that American revolutionaries wanted was to be ruled by oligarchs. But, here we are.

We need to reform our capitalism.

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We’re Too Short to be on This Ride

The Daily Escape:

Lion’s Head, Capetown South Africa, viewed from Tabletop Mountain – 2012 photo by Wrongo

A WaPo report said that Donald Trump discussed giving Janet Yellen another term as head of the Federal Reserve, but was concerned that she was too short. He thought that at 5 feet, 3 inches, she just wasn’t tall enough to get the job done.

Wrongo thinks Yellen’s performance was about the same as her predecessor, Ben Bernanke, and her successor, Jerome Powell. Shouldn’t the real question be: Do we know what’s wrong with our economy, and do we have people in place with enough strength and/or courage to fix it? They can also be short, as long as they have ability and vision.

And it isn’t only in the US: (brackets by Wrongo)

Income inequality has increased in nearly all regions of the world over the past four decades, according to the World Inequality Report 2018. Since 1980, the global top 1% of earners have…[garnered] twice as much of the global growth as have the poorest 50%.

More from the World Inequality Report: (emphasis by Wrongo)

Such acute economic imbalances can lead to political, economic, and social catastrophes if they are not properly monitored and addressed….Governments need to do more to keep society fair…Public services, taxation, social safety nets – all of these have a role to play.

We’re seeing a slow-rolling social catastrophe in the US. We’re seeing alienation across class, race, age and gender. We’re divided as never before, with the possible exception of the pre-Civil War period.

Aren’t we all too short to be on this ride?

Central banks play an integral part in the global economy, and their performance (including the Fed’s) during the 2008 Great Recession was for the most part, admirable.

But central banks can only use monetary policy to partially solve issues of economic inequality. The most robust solutions lie in fiscal policy. Fiscal policy is how Congress and other elected officials influence the economy using spending, taxation and regulation.

Take student loans. Many of our university students are simply being led to the debt gallows. Currently, 44.5 million student loan borrowers in the US owe a total of $1.5 trillion. Student loans are the fastest growing segment of US household debt, seeing almost 157% growth since the Great Recession.

From Bloomberg:

Student loans are being issued at unprecedented rates as more American students pursue higher education. But the cost of tuition at both private and public institutions is touching all-time highs, while interest rates on student loans are also rising. Students are spending more time working instead of studying. (Some 85% of current students now work paid jobs while enrolled.)

Student loan debt has the highest “over 90 days” delinquency rate of all household debt. More than 10% of student borrowers are at least 90 days delinquent. Mortgages and auto loans have a 1.1% and 4% 90-day delinquency rate, respectively,

And if the student loan can’t be repaid, it isn’t expunged by bankruptcy. In fact, students can’t outlive their debt. The feds can garnish social security payments to repay a student’s outstanding debt.

As young adults struggle to pay back their loans, they’re forced to make financial choices that create a drag on the economy. Student debt has delayed marriages. It has led to a decline in home ownership. Sixteen percent of young workers aged 25 to 35 lived with their parents in 2017, up 4% from 10 years earlier.

We are only beginning to understand the social costs of our politics. We are in the midst of a brewing social disaster. And these are self-inflicted wounds, fixable with different government policies. But, most of today’s politicians are too short to get on that ride.

So, how to solve the simultaneous equations of high poverty rates, income inequality and an impending social disaster?

It won’t be easy, and it starts with politicians admitting that our economy doesn’t work for everyone, and that it must be reformed. Then, we can move beyond the tired rallying cries of “more tax cuts” to a capitalism which incorporates a social consciousness that can get people on the track to better paying, and more secure jobs.

An April 2018 study of survey data from 16 European countries found that economic deprivation increased right-wing populist tendencies. Sam van Noort, a co-author of the report said:

Individuals who “feel economically less well-off” were more likely to be attracted by the far right…and radical right respondents are more likely to be male, subjectively poorer, less educated [and] younger.

This will also happen here, unless the voters have determination, and even the short politicians have courage.

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