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The Wrongologist

Geopolitics, Power and Political Economy

Saturday Soother, January 7, 2017

Happy Birthday today Kelly!! Other than that happy fact, little went right in America this week. Our Overlord, Donald I, rode to a presidential win by saying he would bring jobs back to America that have been lost to automation and offshoring by US companies.

But economists have said for years that creating jobs for low skilled Americans will be difficult. Here is further evidence that bringing back jobs may be tougher than Trump thinks. Salon reports that for men ages 25 to 54, the work statistics are poor:

For this group, labor force participation has sunk to 88.5% from a 1954 peak of 97.9%. Most of that loss has occurred among men who have a high school degree or less, according to a report this year by the Obama administration.

And there are interesting facts to consider where unemployed men are concerned. The NYT’s Upshot reports that the jobs that have been disappearing, like machine operator, are predominantly those that men do, while the occupations that are growing, employ mostly women. More from Upshot:

Of the fastest-growing jobs, many are various types of health aides, which are about 90% female. When men take these so-called pink-collar jobs, they have more job security and wage growth than in blue-collar work, according to recent research. But they are paid less and feel stigmatized.

Upshot quotes David Autor, an economist at M.I.T.:

The jobs being created are very different than the jobs being eliminated…I’m not worried about whether there will be jobs. I’m very worried about whether there will be jobs for low-educated adults, especially the males, who seem very reluctant to take the new jobs.

The issue is America’s culture of masculinity. Andrew Cherlin, a sociologist and public policy professor at Johns Hopkins says:

Traditional masculinity is standing in the way of working-class men’s employment…We have a cultural lag where our views of masculinity have not caught up to the change in the job market.

Why is it that men can get away with saying that they deserve better than women? Perhaps that is a rhetorical question. After all, we elected Donald Trump, who can get away with anything.

The Salon article had this snippet: (emphasis by the Wrongologist)

Health problems and the opioid epidemic may also be a major barrier to work, according to research by Alan Krueger, a Princeton economist and former Obama adviser. Nearly half of men ages 25 through 54 who are neither working nor looking for work, take pain medication daily.

Some of these men may have been injured on the job and were subsequently laid off. But some may also represent part of the huge increase in opioid use in America. They may be part of the increase in disability cases since the Great Recession: More than 10 million Americans received Social Security disability benefits in 2014 (most recent statistics). Benefits paid to disabled workers totaled $11.4 billion per month nationwide, a substantial increase from the $6.1 billion paid monthly in 2004. The top three states receiving disability benefits are West Virginia, Alabama and Arkansas.

We became this society honestly. Our politicians hold our corporations in high esteem. The corporations repay us by automating most jobs and shipping other jobs overseas. They do this with little or no responsibility to help displaced workers retrain, or find new work. They do this while asking for bigger tax breaks to remain domiciled in the US. They do this while blaming our education system for not providing trained, ready-to-work job entrants at no cost to them.

We just cannot count on them to be good corporate citizens.

Those on pain killers may or may not have disabilities that prevent them from working. But in any case, society does not owe unemployed working age men permanent, high paying manufacturing or mining jobs, despite whatever efforts Trump may make.

It is time for them to adapt.

We need a soother. Here is Grex Vocalis a Norwegian chorus formed in 1971. Grex Vocalis has reached the finals of the BBC contest “Let the Peoples Sing” three times. In this video they are performing “An Irish Blessing” (May the road rise to meet you) written by an American, James E. Moore in 1987, live at the Amadeo Roldán Theatre in Havana Cuba:

A Norwegian chorus performing an Irish tune, written by an American, in Cuba. That’s gotta be soothing.

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

Sample Lyrics:

May the sun make your days bright

May the stars illuminate your nights

May the flowers bloom along your path

Your house stand firm against the storm.

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Congress Is Back, And the Revolution Begins!

Here is food for thought from David Weigel of the WaPo: (emphasis by the Wrongologist)

When the 115th Congress begins this week, with Republicans firmly in charge of the House and Senate, much of that legislation will form the basis of the most ambitious conservative policy agenda since the 1920s. And rather than a Democratic president standing in the way, a soon-to-be-inaugurated Donald Trump seems ready to sign much of it into law…

That plan was long in the making. Almost the entire agenda has already been vetted, promoted and worked over by Republicans and think tanks that look at the White House less for leadership and more for signing ceremonies

There is little reason for Republicans to seek bipartisan support for middle-of-the-road legislation. They will simply work as a hive to turn America into Kansas. You remember Kansas, the state that has such a terrible record of job creation and economic growth? Kansas governor Republican Sam Brownback launched the orthodoxy of Grover Norquist and the Koch brothers on the state. And Brownback and Steven Moore who helped Brownback with his disastrous legislative agenda, are both economic advisors to Trump.

We have seen lots of hand-wringing about how to stand up to the Trump agenda that will begin raining down on America on January 20th. Most calls to action are from single-issue activist groups that lack the resources to get media attention, or to make a difference.

But there is a clear need for collective action on national, state and local levels. And that movement needs a leader.

How about an anti-president? Maybe Bernie Sanders? When Trump governs by tweet, he would be countered by the anti-president. Americans might come to know that, while Trump and company are cutting healthcare, the shadow government led by anti-president Sanders and vice president Warren are passing and signing a national healthcare bill.

When Trump cuts taxes on the rich and corporations, the shadow government is raising taxes on the rich and penalizing corporations that locate overseas to avoid paying tax at home.

When Trump appoints an anti-abortion, pro-Citizens United Supreme Court Justice, the shadow government appoints someone who is for social justice.

This can begin to build a consensus about what Trump is doing wrong.

We don’t have a parliamentary system, but, most Americans have no idea about political theory, or political facts. So, few will realize that a shadow government isn’t consistent with our Constitutional system!

And the new shadow government MUST not contain Pelosi, Schumer, or any of the geriatric Democrats in the House and Senate. That will de-legitimize the effort.

On New Year’s Day, Wrongo and Ms. Right attended a Baroque music concert at an old Congregational church in Washington CT that dates from 1741. Within a beautiful program, we heard a piece by the Italian composer, Domenico Zipoli. Zipoli has an interesting history. He studied with Scarlatti, he became a Jesuit, and worked as a missionary and died in 1726 in Argentina at age 38. Zipoli’s music was a revelation to us. Here is Zipoli’s “Elevazione” for oboe, violin, organ and cello. It was wonderful to hear it in a place with a good pipe organ.

The “elevation” is the point in the Catholic mass when the chalice and host are presented to the congregation. The performance lasts for eight+ minutes, much longer than what Wrongo prefers to present to you, but it is achingly beautiful, so please have patience.

It may be the perfect antidote to the shenanigans we will be seeing from the Trump administration, and we may need to watch it daily for a few months:

It begs the question, why was the 18th century blessed with so many great composers while the 21st century was given Justin Bieber?

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

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How Do You Solve a Problem Like Ohio?

Our industrial heartland has withered away, in that there are fewer manufacturing jobs than ever, while manufacturing revenues have never been higher. Forty years of promises by politicians have come to nothing: These people are victims of a world order in which corporations have either exported or automated those jobs, with no responsibility to workers. It is left to the towns of Middle America and the federal government to clean up their mess.

This world order we live in today was born in 1980, with Thatcher and Reagan. According to Ian Welsh, the world order made a few core promises:

If the rich have more money, they will create more jobs.

Lower taxes will lead to more prosperity.

Increases in housing and stock market prices will increase prosperity for everyone.

Trade deals and globalization will make everyone better off.

Those promises were not kept, and in America’s Midwest, economic stress is now the order of the day. That stress has contributed to rising rates of drug addiction and falling life expectancy.

Understandably frustrated, Ohioans and other Midwesterners gave Donald Trump a victory in November. His win has refocused attention by pundits and pols on the plight of our failing de-industrialized areas. While we have economic growth, we also have growing inequality. Here is a graphic illustration of the problem, comparing the US with the EU:

The Economist reports that from 1880 to 1980, the incomes of poorer and richer American states tended to converge, at a rate of nearly 2% per year. The chart above shows that the pattern no longer exists. This causes us to ask if the shift of resources and people from places in decline to places that are growing is simply taking longer to adjust, or has the current world order failed our people? In econo-speak, the gains in some regions should compensate those regions and towns harmed by the shift, leaving everyone better off.

But that is a political and financial lie promulgated by the very corporations that benefited, and by their political and economist cheerleaders.

With economic decline, some towns and cities became poverty traps. A shrinking tax base means deterioration in local services (think Detroit). Public education that might provide the young with new skills and thus opportunities, fails. Those that remain are on government subsidies or hold low-wage service jobs, or both. It is impossible to tell these citizens that the decay of their home town is an acceptable cost of the rough-and-tumble of the global economy.

Politicians are short on solutions. Since housing costs have risen sharply in towns and cities that are growing, underemployed Americans are less likely to move, and those who do, are less likely to head for richer places. Enrico Moretti of the University of California, Berkeley and Chang-tai Hsieh of the University of Chicago argue that our GDP could be 13.5% higher if this wasn’t the situation in America.

But if moving isn’t an option, what can be done to improve the outlook for those who are left behind?

Would more government subsidies help? Prosperous tax payers already support poorer ones. Subsidies for health insurance costs with Obamacare, as well as industrial tax incentives provide some cushion, but they are not likely to deliver long-run economic recovery, and they have not stemmed the growth of populist political sentiment.

To be fair, many people in Ohio and elsewhere want good jobs, but without having to move too far to get them. That may be impossible.

In the 19th century, the federal government gave land to states, which they could sell to raise proceeds for “land-grant universities”. Those universities, including some that are among our finest, were given a practical task: to develop and disseminate new techniques in agriculture and engineering. They went on to become centers of advanced research and, in some cases, hubs of local innovation and economic growth.

Politicians and academic economists might disdain a modern-day version of the program, one that would train workers, foster new ideas, and strengthen weakened regional economies.

But if our politicians do not provide answers, our populist insurgents will.

Time for a Christmas song. Here is Elvis with “Santa Claus Is Back in Town & Blue Christmas”, from his comeback special on NBC. This was recorded over six days in June, 1968 and aired on December 1, 1968. Elvis flubs “Santa Claus is Back in Town”:

Despite his flub, he does get this line right:

You don’t see me comin in no big black Cadillac

Kind of like out-of-work Ohioans.

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Sunday Cartoon Blogging – December 11, 2016

We are seeing the shape of Trump’s cabinet, and it’s clear that we will soon be working for idiots who used to be in sales. So, it’s time for some definitions: What are Kleptocracy and Kakistocracy?

Kleptocracy is a government where the rulers (kleptocrats) use their power to exploit the people and natural resources of their country in order to extend their personal wealth and power.

Kakistocracy means a state or country run by the worst, least qualified, or most unscrupulous citizens. The word comes from the Greek words kakistos (worst) and kratos (rule), with a literal meaning of government by the worst people.

Posted for your reference, in case something happens after January 20th that requires you to know about either term.

Trump’s commitment to renewable energy was on display in his Boeing tweet:

cow-hot-air-force-1

His cabinet, er, his junta:

cow-general-election

We’ve had high-ranking military men serve in high positions in our government since the beginning of the country, starting with George Washington through Andrew Jackson, Ulysses S. Grant, Dwight D. Eisenhower, through Colin Powell.  But Trump is surrounding himself with an awful lot of them, and some of them have had issues with both their temperament and civil liberties. Just like the man hiring them.

Any issue with so many generals? The NYT offers this:

cow-7-days-in-may

Man of the Year is questioned, but it is real my friends:

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Trump’s EPA will be his undoing in the next election:

cow-mistletoe

Pearl Harbor is hardly remembered:

cow-pearl-harbor

It’s another Family of Trump voters having quality time at home. Never have so many known so little about so much.

I’m stepping through the door, and I’m floating in a most peculiar way…and the stars look very different today:

cow-john-glenn

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Sunday Cartoon Blogging – December 4, 2016

Quite the week. Trump makes Cabinet appointments, he tweets about taking citizenship away from US flag burners exercising freedom of speech, he takes a call from the president of Taiwan, and gets a formal protest from China.

That wasn’t all. You missed it, but Congress passed HR 5732, the “Caesar Syria Civilian Protection Act”. The bill sets the stage for the implementation of a no-fly zone (NFZ) over Syria. It requires the administration to submit to the appropriate congressional committees a report:

That assesses the potential effectiveness, risks and operational requirements of the establishment and maintenance of a no-fly zone over part of all of Syria.

These Congressional chicken hawks may not realize that NFZs are a form of limited war. Politicians are usually the first to forget that limited wars only stay limited by mutual agreement. The military will tell you to never declare an NFZ unless you are entirely willing to fight a real air and ground war to enforce it. In the case of Syria, a No-Fly Zone would require the destruction of Syrian aircraft and missile systems from Day 1, probably leading to the death of Russians shortly thereafter. We could have a shooting war with Russia by the end of the first week.

Syria has over 130 air defense systems. A dozen or so are in the Aleppo area. Syria also has over 4,000 air defense artillery pieces and a few thousand portable infrared-guided missile systems. Russia has also located its advanced S-400 anti-aircraft missiles into Syria to protect their bases in Latakia Province. Those missile systems effectively give Russia control over Syria’s airspace, and for the US to impose a no-fly zone would require an air battle with Russia, which would all but guarantee the loss of a large number of US warplanes.

Over the last 25 years, there has been an evolving political infatuation with two pillars of “political airpower”: airstrikes and no-fly zones. Did we get the results our politicians promised?

Onward to cartoons. Trump goes to Indiana, gives Carrier tax breaks:

cow-carrier

It was great political theater, but it is a standard “socialize the losses” GOP play: tax breaks for jobs. The taxes earned from keeping the jobs never pay the cost of the tax credits.

Paul Krugman had a good observation:

cow-krugman-on-carrier

Fidel Castro dies:

cow-fidel-hell

Free speech isn’t well understood by the Orange Overlord:

cow-burn-this

Nancy Pelosi is reelected as Minority Leader. Many are pleased:

cow-pelosi

Mitt wants work, will say anything:

cow-mitt-agrees

 

 

 

 

 

 

 

 

 

 

 

 

Trump still has lots of posts to fill. Word is that former vice presidential candidate and Tina Fey impersonator Sarah Palin is on the list of possible Cabinet appointments.

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GOP Plans To Gut Dodd-Frank

Do you trust the banks and brokerage houses to govern themselves? Do you think that reducing banking regulations will help the economy, or your personal financial situation? Before you answer:

  • Remember that the economic meltdown of 2008 was caused by overreach by the financial industry.
  • Remember that it took the next eight years to climb out of the Great Recession and return to pre-2008 employment levels.

Dave Dayen in the Fiscal Times points out that there will be a vote this week in the Congress that will say a lot about how willing the Democrats in Congress will be to fight the deregulation avalanche that’s about to come crashing down on We the People. From Dayen: (brackets and emphasis by the Wrongologist)

As early as Wednesday, the House will take up H.R. 6392, the Systemic Risk Designation Improvement Act. This bill would lift mandatory Dodd-Frank regulatory supervision for all banks with more than $50 billion in assets, meaning those financial giants would no longer be subject to blanket requirements regarding capital and leverage, public disclosures and the production of “living wills” to map out how to unwind [the bank] during a crisis.

The intent of the new regulation authored by Blaine Leutkemeyer (R-MO), isn’t about helping the biggest banks, but the relatively smaller regional players, firms like PNC Bank, Capital One and SunTrust. An estimated 28 institutions would be affected. The eight “global systemically important banks” would remain subject to the standards: Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, Bank of New York Mellon, Morgan Stanley and State Street Bank.

But the so-called regional banks are not small operations. These 28 regionals have combined assets of about $4.5 trillion. It is useful to remember that in the 2008 crisis, regional banks like Washington Mutual and Wachovia also came crashing down.

The American Banker says that the Financial Stability Oversight Council (FSOC), the new super-regulator charged with monitoring systemic risk, will be gutted by the Trump administration: (brackets and emphasis by the Wrongologist)

Because the FSOC is headed by the Treasury secretary…[a cabinet post selected]…by the White House, a Trump administration is unlikely to continue any of the council’s…priorities, including the designation of nonbanks or continued regulation of those firms already designated.

It is obvious that if this bill passes and is signed by President Trump, financial regulation will be relaxed, not by repeal, but through atrophy. Republicans want to replace any mandatory rules for regulation with discretionary ones. That way they can claim that they’re merely improving the system by putting the decisions in the hands of the experts instead of members of Congress.

A next step will be to hire regulators dedicated to turning a blind eye to what the financial industry does. The chair of FSOC is the Treasury Secretary. Trump’s candidates for Treasury Secretary include Steven Mnuchin, Trump’s national finance chair and the most likely choice for Treasury, who sits on the board of directors of CIT, a financial services company with more than $50 billion in assets. The Treasury Secretary will ensure that the rest of the FSOC board is made up of regulators and presidential appointees who share Trump’s laissez-faire philosophy.

President Obama will veto this bill if it passes the Senate before January 20th. But the Republicans plan to roll it out this week, instead of waiting for Trump to enter the Oval Office. They want to gauge just how much backbone Democrats have after their thumping in the election. More from Dayen:

This is really a moment of truth for those Democrats. If Republicans put up a big bipartisan vote in the House for this, the Senate will be more inclined to try to pass it down the road. And it will serve as a test case for Democratic resolve more generally.

Wall Street-friendly Dems have already endorsed tailoring Dodd-Frank rules to eliminate smaller regionals from the rules. This bill is a big change, and the question is whether Democrats play ball with Trump’s deregulation agenda, or will they recognize the harm it will cause?

This is an early test for those Dems whose seats are at-risk in 2018 and 2020.

Financial deregulation has rarely been a partisan political matter. Democrats and Republicans have typically worked together to roll back rules and loosen up the Wall Street casino.

HR 6392 could represent a return to those times, or it could be the moment when Democrats join together and say “no”, forcing Republicans to support the banking industry agenda on their own.

Party line resistance by Democrats could be in their longer-term best interest.

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Smart Guys, Smart Power

When we think of entrepreneurs involved in renewable energy, usually just one name comes to mind, Elon Musk, a smart guy who has given Tesla a new meaning. He just merged Tesla with Solar City.

But smart entrepreneurs in solar are emerging. The NYT wrote yesterday about Nicholas Beatty, a former banker who has covered about 25 acres of his farm in England with solar panels. This isn’t a new phenomenon, lots of farms have solar arrays both in the UK and elsewhere:

What’s new in Mr. Beatty’s field is a hulking 40-foot-long shipping container. Stacked inside, in what look like drawers, are about 200 lithium-ion cells that make up a battery large enough to store a substantial portion of the electricity the solar farm puts out.

The battery and its smart software give Mr. Beatty an advantage over other solar panel farmers. Power prices rise and fall depending on the supply and demand. The spread between the high and low price can be dramatic. By storing power in the battery, Mr. Beatty can feed it into the grid when prices are high:

The battery effectively takes power off the line when there is too much and puts it on when there is too little…

Improved industrial-sized batteries are a way of achieving that flexibility. Mr. Beatty’s battery storage system cost about $1 million, but could increase revenue for his solar farm by as much as $250k per year. Beatty is one of many entrepreneurs and businesses trying to play the fast-shifting electric power landscape. This is a capital-intensive business:

With about a dozen friends and family members…he spent £6.5 million ($8 .1 million) to build the solar farm in 2014. The solar panels…generate about £650,000 ($810k) in revenue a year…

Improved battery storage and its smart controlling software has been one of the two pillars required to make solar power competitive with non-renewable energy sources. The other is the cost of solar panels. Tesla has been working on both axis. They have built a solar demonstration project on the island of Ta’u in American Samoa that generates 1.4 megawatts of energy. The microgrid has 60 Tesla Powerpacks, the company’s large commercial battery with 6 megawatt hours of battery storage. These batteries can be fully charged with only 7 hours of daylight from 5,300 solar panels.

The microgrid facility can fully power the island of 600 residents for 3 days on battery power. It is expected to save the island 109,500 gallons of diesel per year or $8 million in fuel costs. Ta’u previously relied on diesel fueled generators for power.

Cost of solar energy per kilowatt or megawatt hour has been uncompetitive for a long time, but that is changing. And most countries and most US states now are willing to purchase power from independent generators, like Mr. Beatty in the UK. The Economist has this chart of the relative costs of sources of energy:

price-of-solar

All of this means that American farmers could open a new revenue stream by becoming smart solar power generators. Farmers own large acreage in sunny locations. They have a deep understanding of farming, another capital-intensive business. They understand that farming is a climate-dependent enterprise, another factor in common with solar power generation.

A key factor is whether their state allows interconnection with the power grid, and whether the state’s program to pay the independent power generator for power sent to the grid at an economic rate.

Let’s hope that Donald Trump’s fascination with coal doesn’t lead to bad policy. The Economist reports that Trump has promised to make more public land available to miners; but access to coal reserves isn’t their problem. Coal employment peaked in the 1920s, and today, fewer electric utilities want to use coal. If he intervenes on behalf of coal, he will be actively handicapping renewables and natural gas. If Trump’s energy policy is focused on a few unprofitable coal-mines, China will take a commanding lead in batteries, solar panels and wind turbines. That wouldn’t be so smart.

We are at a time when the cost of solar energy has dropped dramatically, and with greater economies of scale, it will fall even further.

It is past time for a few smart entrepreneurs to take up the disruption of the fossil fuel industry and its fellow travelers, the electric utilities.

 

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Who Moved My Cheese?

Some may remember the book by this name by Spencer Johnson, published in 1998. The underlying message of the book is “Don’t waste time fighting against change: accept that bad stuff will happen to you for no good reason and just keep moving”.

This outdated and simplistic message remains the message of the Democratic Party to the White Working Class (WWC). Donald Trump’s message is different. He offers them nothing but a dream, to limit immigrants working in the US and to cut off the US market from China. And since the WWC knows that more of the same isn’t going to work, they’re voting for Trump.

It is useful to remember that since our “Most Favored Nation” trade deal with China in 1979, we have lost 35% of all manufacturing jobs in this country.

The WWC thinks that the Democrats have not been able to do anything to help them keep their jobs. The reasons for failure can be at least equally shared by the Parties, but since Dems have said for years that they are the party of the working class, they are getting the greater share of the blame for 35 years of no results.

There are two issues that dominate the discussion: Illegal immigration and transition assistance when jobs are lost. Regarding Immigration:

  • The WWC knows that Dems need the political support of the Hispanic community, and that requires Dems to show sympathy with illegal immigration.
  • The WWC believes that illegal immigration has put downward pressure on job opportunities and wages in the trades, in restaurant and hotel work, and in service sectors where immigrants may be overly represented.
  • That’s why Trump’s stance on immigration is so popular with the WWC. They probably know in their hearts that kicking all the Mexican workers out, or building a wall is ridiculous. But the Democrat’s position on immigration is diffuse, and is viewed as “soft” on illegals by the WWC.

Despite anything the Dems say about retraining or “transition assistance”, the WWC knows that someone on job transition assistance can’t earn enough to support a family. Other problems:

  • Identifying the fields/industries that workers can train in that will produce stable, living wage employment is an inexact science. So, demand for retrained workers is often less than the supply for any given job type.
  • Businesses have been very successful at shifting the burden (and cost) of training displaced workers from themselves to society. This is helped along by a corporate critique that public and not-for-profit private schools are failing to maintain standards, and they can’t churn out sufficient grads with qualifications that meet the corporations’ highly specific requirements.
  • Hence the continuing financial opportunities for for-profit technical schools and for-profit universities, (can you say Trump University?)

And Ford Motor Co. just gave Trump a big wet kiss:

Ford Motor Co. says it’s moving all of its US small car production to Mexico…The company is building a new $1.6 billion assembly plant in San Luis Potosi, Mexico. It will make small cars there starting in 2018.

What can the Pant Suit say about this that would go beyond what the Pant Load will certainly say? And if she did, would WWC people believe her?

On the macro level, our current capitalism has turned to technology to produce much of what is needed with far less human labor input than ever before. That leaves job growth (and job opportunity) in only the low-skilled, low-paid “service” jobs; or in highly advanced, specialized jobs requiring very advanced training/skills/talent.

This means that the dogma of Endless Economic Growth, which we have accepted since the Industrial Revolution, is dead. Along with killing that, we need to kill off the current organizing principle of our economic system, where humans exist solely to fulfill the needs of businesses.

Work helps us find our place in society. It is something that we see as having an inherent value, something that fills a basic human need, similar to food and shelter. But our current economic system no longer recognizes that, and our economy provides little opportunity for fulfilling that basic need for a large portion of American citizens, including many in the WWC.

The idea of government deploying under-utilized labor to build and repair our infrastructure, or to re-tool our country to reduce carbon emissions would be a step that might return the WWC to jobs and a place in society. It would cost a ton.

But the idea that the government would create demand is too socialist for most politicians to accept, despite the fact that the rest of the tools just haven’t worked in 35+ years.

Tell me again why Bernie Sanders was a terrible choice.

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Pentagon Can’t Account for $6.5 Trillion

Let’s take another break from the cacophony of the presidential campaign to provide some insight into a Pentagon report that the mainstream media barely covered.

The Inspector General (IG) of the US Department of Defense (DoD) issued an audit report on July 26, stating that the DoD cannot account for $6.5 trillion in total funds, of which, $2.8 trillion is “missing” from the last fiscal quarter. According to the IG’s report: (brackets by the Wrongologist)

Army and Defense Finance and Accounting Service [DFAS] Indianapolis personnel did not adequately support $2.8 trillion in third quarter adjustments and $6.5 trillion in year-end adjustments made to Army General Fund [AGF] data during FY 2015 financial statement compilation…We conducted this audit in accordance with generally accepted government auditing standards.

The IG also said that the DoD agrees they received these funds, agrees the funds are gone, and claims not to have records of where the money went. This doesn’t mean that the money (or equipment and supplies) was embezzled, but without accounting records, the Pentagon just doesn’t know what happened to it.

This isn’t a new problem. On September 10, 2001, then Sec Def Donald Rumsfeld reported that the DoD could not find $2.3 trillion of our tax dollars. After the next day’s al Qaeda attack, the Pentagon and the Congress lost focus on this problem. From the Fiscal Times:

Starting in 1996, federal agencies were mandated by law to conduct regular financial audits. However, the Pentagon has NEVER complied with that federal law. In 20 years, it has never been able to account for the trillions of dollars in taxpayer funds it has spent. An increasingly impatient Congress has demanded that the Army achieve “audit readiness” for the first time by Sept. 30, 2017, so that lawmakers can get a better handle on military spending.

But the IG report says (pg. 21), that they are not likely to comply:

Until the Army and DFAS Indianapolis correct these control deficiencies, there is considerable risk that the AGF financial statements will be materially misstated and the Army will not achieve audit readiness by the congressionally mandated September 30, 2017, deadline.

If this was your bank, and they agreed that they had received a large deposit from you, agreed that they had no idea where it was, and had no plans to refund it, you would sue and move to another bank.

Since this is the Pentagon, you can’t do either. Congress has been allowing the Pentagon to get away with this travesty for decades. Heads should roll at the Pentagon, but where is the Congressional oversight?

Sorry, this is gross negligence, and it isn’t excused because it is done by our “warrior” class who are only trying to keep us safe.

Think about it, $6.5 trillion lost is the equivalent of embezzling $1 billion a day for 18 years. Another way to look at the issue, is that the Pentagon can’t account for around $86 million in our tax dollars per hour. That means the Pentagon misplaces enough of your tax dollars every day to deliver every American free health care.

Now, they almost certainly didn’t lose or steal that much, but they shouldn’t have so much dough to play with until they learn how to account for what they get.

The people deserve whatever regime they endure.

This should be unendurable.

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Capitalism, It’s Not You, It’s Me

There is a meme that has gone global since the early days of the Occupy movement. Here it is as a wall graffiti from Greece that uses the same meme we first saw in NYC in 2011:

Capitalism Lotek

Just kidding capitalism, it really is you.

The artist is a Greek who styles himself as Lotek. The name Lotek is derived from the short story (and later, a film) by William Gibson called Johnny Mnemonic. The story is set in 2021, in a world ruled by corporations. An anti-authoritarian gang that are called Lo-Teks, fight the power. They are in fact not low tech at all, but are high tech hackers. Sound familiar?

Greece is surely a place at war with neoliberalism and free market capitalism. So is it also time for us to reconsider capitalism?

Consider this from Mark Blyth in Foreign Affairs:

An inherent tension exists between capitalism and democratic politics since capitalism allocates resources through markets, whereas democracy allocates power through voting.

The compromises both systems have struck with each other over recent history shapes our contemporary political and economic world. Blyth observes:

  • In the three decades that followed World War II, democracy set the rules, taming markets with the establishment of protective labor laws, restrictive financial regulations, and expanded welfare systems.
  • Starting in the 1970s, a globalized, deregulated capitalism, unconstrained by national borders, began to push back.

And today, capital markets and capitalists are setting the rules, and democratic governments follow them.

Some background: Cutting taxes in the 1980s caused government revenues to fall. Deficits widened, and interest rates rose as those deficits became harder to finance. At the same time, conservative govern­ments, especially in the UK and the US, dismantled the regulations that had reined in the excesses of the financial service industry since the 1940s.

The financial industry began to grow unchecked, and as it expanded, investors sought safe assets that were highly liquid and provided good returns: the debt of developed countries.

This allowed governments to plug their deficits and spend more, all without raising taxes.

But the shift to financing the state through debt came at a cost. Since WW II, taxes on labor and capital had provided the foundation of postwar state spending. But, as govern­ments began to rely more on debt, the tax-based states of the postwar era became the debt-based states of today.

This transformation had pro­found political consequences. The increase in government debt has allowed capitalists to override the preferences of citizens:

  • Bond-market investors can now exercise an effective veto on policies they don’t like by demanding higher interest rates when they replace old debt with new debt.
  • Investors can use courts to override the ability of states to default on their debts, as happened recently in Argentina
  • They can shut down an entire country’s payment system if that country votes against the interests of creditors, as happened in Greece in 2015.
  • Citizens United dictates who runs for office in the US, and in many cases, who wins.

Now that the financial industry has become more powerful than the people, should we blindly follow capitalism’s meme as the only way forward?

Free-market rhetoric hides the dependence of corporate profits on conditions provided for, and guaranteed by, governments. For example:

  • Our financial institutions insist that they should be free of meddlesome regulations while they depend on continuing access to cheap credit from the Federal Reserve.
  • Our pharmaceutical firms have resisted any government limits on their price-setting ability at the same time that they rely on government grants of monopolies through our patent system.

To use a sporting metaphor, it’s as if the best football team purchased not only the best coaches and facilities, but also bought the referees and the journalists as well. Those responsible for judging economic competition have lost all authority, which leaves the dream of ‘meritocracy’ or a ‘level playing field’ in tatters.

In our country, the divide between the business oligarchs, the political class and “the people” increasingly appears unbridgeable, marked by hostility and deep distrust. When people are told for a generation that government mustn’t make decisions that interfere with free markets, it is inevitable that people will lose faith in democratic governance, and in government’s capacity to help them solve their problems.

Capitalism in its current form no longer works for the people. We have seen a reaction in the start of movements by Occupy, by Bernie, and by others in Europe.

Remember that the greatest prosperity in living memory in the US came during the brief social democratic moment, in the 1950s and 1960s, when the constraints on business were the greatest.

More democracy and more economic justice are the necessary foundations for the path to a more prosperous, and sustainable economy.

A reformed capitalism must be a part of what emerges from that fight.

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