Category: Socializing Losses

Climate Talks

The climate is speaking to us, but is anybody listening? Here is what the climate is telling us:

50% of Forest Bird species will go extinct in 50 years
99% of Rhinos gone since 1914
97% of Tigers gone since 1914
90% of Lions gone since 1993
90% of Sea Turtles gone since 1980
90% of Monarch Butterflies gone since 1995
90% of Big Ocean Fish gone since 1950
80% of Antarctic Krill gone since 1975
80% of Western Gorillas gone since 1955
60% of Forest Elephants gone since 1970
50% of the Great Barrier Reef gone since 1985
40% of Giraffes gone since 2000
40% of ocean phytoplankton gone since 1950
70% of Marine Birds gone since 1950
97% – Humans & Livestock are now 97% of land-air vertebrate biomass, while 10,000 years ago humans were just 0.01% of land-air vertebrate biomass
1,000,000 – The number of humans, net, that are added to earth every 4½ days

But, you gotta admit, antibiotic resistant germs are doing really, really well!

Now, maybe you accept climate change as a reality. Or, you may be a climate change skeptic, or a climate change denier, but no one should misunderstand what the climate is telling us. Slowly, the world is seeing more greenhouse gases being emitted into the atmosphere, destroying ecosystems and encouraging global warming. The greenhouses gases can be caused by many different things, however, a lot of the earth’s greenhouses gases comes from various industrial businesses that burn hydrocarbon fuels. Some of these businesses have been asked to pay carbon tax as a result. The money from this tax gets contributed towards fighting climate change. Hopefully, more businesses will realize the impact they are having on the world and will look to lower the amount of carbon dioxide that they emit.

And, given the above, shouldn’t activists on all sides be discussing what can be done to stop the decline in flora and fauna? There cannot be a more important global problem that needs solving. Even Mr. Market should be working to help solve the die-off of species. Yet, we haven’t heard any ideas from him.

Here’s an idea: Getting human population growth and global GDP growth under control must be job one. Income inequality shouldn’t automatically prompt politicians to make calls for ever higher GDP growth, so that trickle-down will help the masses, since growing our way out of the die-off of species isn’t a viable long-term strategy.

You’d think politicians and economists would be asking: “Do we need to rethink our entire conceptual framework about population and economic growth?” Well, they aren’t interested in that thought.

They offer the same old thinking, just rearranged. If you want a Thanksgiving metaphor, your dinner plate is filled with turkey, dressing, mashed potatoes, and cranberry sauce. And you take your fork and mix them all up, but they’re still the same. Even when you put gravy over all of it, it’s still not new. But it looks new, if somebody doesn’t think too carefully about what’s behind the new analysis.

Here is a view of the political divide on global warming in the US from The Economist:

Pew Global Warming top priority

And the NYT reported that on Tuesday, Republicans undercut Mr. Obama’s pledge at the Paris Climate Summit by approving two measures that Obama is sure to veto. The vote was largely along party lines. After the votes, Sen. John Barasso, (R-WY) said: (brackets by the Wrongologist)

While the president is at this climate conference, the American people [believe] that [his pledge] has a very, very low priority…

When Republicans in the Senate think the American people see climate change as a low priority when the poll above says they actually think its a pretty big deal, you know why we can’t get at solutions to the die-off of species.

Isn’t it curious that intelligent, educated conservatives denigrate climate change and its consequences, as some kind of phony science? They must see that there are plenty of business opportunities, and fortunes to be made as a result of climate change. This would normally have their hearts all aflutter at the chance to put their money behind a few disruptive innovations. But they have no interest, and are simply standing pat on the problem.

They are not alone. The Economist says the climate change just ain’t a big issue globally: (emphasis by the Wrongologist)

A giant opinion-gathering exercise carried out by the UN finds that people in highly developed countries view climate change as the tenth most important issue out of a list of 16 that includes health care, phone and internet access, jobs, political freedom and reliable energy. In poor countries-and indeed in the world as a whole-climate change comes 16th out of 16.

It’s beginning to look like a few billion lemmings are just gonna follow their reproductive organs off a cliff.

And even if a few of today’s lemmings think they’re doing something new, for all of them together, well, things look grim.

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Monday Wake Up Call – November 30, 2015

Today’s wake up is for the American worker. While you were sleeping, corporate executives were piecing together an economy and associated tax regulations that allowed them to become America’s oligarchs.

The Center for Effective Government just came out with a study of CEO retirement funds. You already know the conclusion, but you didn’t know the facts:

• The 100 largest CEO retirement funds are worth a combined $4.9 billion. That’s equal to the entire retirement account savings of 47 million American families
• Nearly half of all working age Americans have no access to a retirement plan. The median balance in a 401(k) plan at the end of 2013 was $18,433, enough to generate a monthly retirement check of $104.

In addition, 73% of Fortune 500 firms have also set up special tax-deferred compensation accounts for their executives. These are similar to the 401(k) plans that some Americans have through their employers. But average workers face limits on how much pre-tax income they can invest each year in similar plans, while the plans the F500 provides to their top executives do not. They are free to shelter unlimited amounts of compensation in their retirement funds where their money can grow tax-free, until retirement.

But for the average employee? The GAO says that 29% of workers approaching retirement (aged 50-65) do not have pension or retirement savings in a 401(k) or IRA. While according to a study by the Schwartz Center at the New School, 55% of those aged 50-64 will be forced to rely solely on Social Security (which averages $1,233 a month).

The current rules mean that if CEO’s slash worker retirement benefits, they can boost corporate profits and thereby, stock prices. And since much of executive compensation is tied to the company’s stock price, these rules (and company practice) create a powerful incentive for CEO’s to choose their pocketbooks over those of their employees.

We are talking about market power. The CEO’s and their firms have little to fear from Mr. Market. In turn the rising wealth at the top buys growing political influence, through campaign contributions, lobbying, and the rewards of the revolving door between government jobs and those in the private sector. Political influence in turn is used to write the rules of the game—the tax laws we are speaking of here, antitrust laws, deregulation, union-busting—all in a way that reinforces income concentration.

The result is a feedback loop between political power and market power that created, and now maintains, a vicious circle of oligarchy.

Well, time to wake up from a snooze that allowed our politicians and the largest corporations and their CEOs to turn our country and economy into their private sandbox.

To help with today’s wake-up, here is Rage Against the Machine, the gone but not forgotten band, with Zach de la Rocha on vocals and the superb Tom Morello on guitar. They are performing “No Shelter”, written in 1998:

https://www.youtube.com/watch?v=6NEoesmnYU4

Sample Lyrics:
Empty ya pockets son, they got you thinkin’ that
What ya need is what they selling
Make you think that buying is rebelling
From the theaters to malls on every shore
Tha thin line between entertainment and war

Chained to the dream they got ya searchin’ for
Tha thin line between entertainment and war

There be no shelter here
Tha front line is everywhere
There be no shelter here
Tha front line is everywhere

American eyes, American eyes
View the world from American eyes
Bury the past, rob us blind
And leave nothing behind

Just stare
Just stare
Relive the nightmare

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

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Soon, Antibiotics Won’t Work

It’s estimated that more people will die from bacterial infections than from cancer by 2050. Two disparate factors are driving this. First, scientists in China say they’ve identified a gene that makes common, dangerous bacteria resistant to “last-resort” antibiotics called polymyxins. The mutated gene, called mcr-1, was found in the Enterobacteriaceae germ in both pigs and people in South China, according to a report published in The Lancet.

Study author Jian-Hua Liu, a professor at South China Agricultural University in Guangzhou, China, said:

The polymyxins (colistin and polymyxin B) were the last class of antibiotics in which resistance was incapable of spreading from cell to cell…

The new gene was found on mobile forms of DNA that are easily copied and transferred between different bacteria. According to the researchers, this suggests a much greater potential for the gene to spread and diversify in different types of bacteria.

Liu went on to say that the discovery points to the emergence of a gene which can create multidrug resistance that:

is readily passed between common bacteria, including E. coli and the Klebsiella pneumoniae germ, which can cause deadly pneumonias or bloodstream infections.

We have all heard that extensive use of antibiotics in agriculture may contribute to this resistance gene. Liu’s team said that pigs were more likely than people to have bacteria with mcr-1 gene-related colistin resistance. That suggests that the resistance originated in animals and then spread to people.

The discovery bodes ill for public health worldwide. Timothy Walsh, Professor at the University of Cardiff in Wales, told BBC News: (emphasis by the Wrongologist)

All the key players are now in place to make the post-antibiotic world a reality. If MCR-1 becomes global, which is a case of when not if, and the gene aligns itself with other antibiotic resistance genes, which is inevitable, then we will have very likely reached the start of the post-antibiotic era.

According to the Review on Antimicrobial Resistance, drug-resistant infections could kill an extra 10 million people across the world every year by 2050 if new antibiotics are not found. That’s 350 million people lost. By 2050, this could cost the world around $100 trillion in lost output: That’s more than the size of the current world economy, and roughly equivalent to the world losing the output of the UK economy every year, for 35 years. Here is a graphic representation of the scale of the problem:

Anti Mocrobial Resistance

The second factor driving this disaster is our Bad Corporate Citizens. There are two classes of these bad actors. The food conglomerates that feed antibiotics to animals raised for meat, so that pig farmers can make more profit, and the Big Pharma companies that spend their intellectual calories on corporate inversions (such as Pfizer is doing in its merger with Allergan) rather than on antibiotic research. As David Cox reports about drug company research:

They’re happy to sell existing antibiotics, but they’re not interested in researching and developing new ones.

Professor William Fenical at the Scripps Institute of Oceanography in San Diego discovered a new antibiotic capable of attacking the bacteria MRSA, a hospital superbug. However, most large pharmaceutical companies abandoned their antibiotic programs by 1995. And even though we know that animals raised with no antibiotics are less likely to contain drug-resistant bacteria than those routinely given antibiotics, about 80% percent of antibiotics sold in the US are given to animals raised for food production.

So, we have a perfect storm brewing: To enhance corporate profits, we give antibiotics to animals, weakening the value of those antibiotics in controlling human disease. And we look the other way when the big drug companies use innovation to avoid taxes, while saying that research into new antibiotics is “too risky” for their shareholders.

Again, the strategy of big business is “privatize the gains, socialize the losses.” And maybe when you get sick, the doctor will only be able to prescribe you a pork chop.

The world needs a new capitalism. Mr. Market isn’t going to fix this.

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Veterans Day: 11/11/2015

In his latest book, The Last of the Presidents Men, Bob Woodward reveals a previously unreported memo from 1972 in which Nixon writes Kissinger, saying that a years-long bombing campaign in Vietnam had produced “zilch,” even as he pitched the exact opposite message to the American public. He wrote that the day after giving an interview to Dan Rather, declaring that the bombing of North Vietnam had been “very, very effective”. Nixon’s note said:

K. We have had 10 years of total control of the air in Laos and V.Nam. The result=Zilch. There is something wrong with the strategy or the Air Force.

Nixon then increased bombing, dropping some 1.1 million tons in 1972 alone — more than in any single year of LBJ’s presidency. From Woodward: (brackets by the Wrongologist)

[Nixon] Us[ed] Vietnam to enhance his re-election prospects…breaking perhaps the most sacred trust for a commander in chief.

All these years later, it is hard to believe that anything Nixon did could surprise us, yet there it is.

Since the 1970’s, a meme among conservatives is that the reason we lost in Vietnam was a lack of will, brought on by liberals and war protesters. But thinking that the primary reason we lost Vietnam was that liberals stabbed America in the back is ridiculous. You may remember that in 1968, Nixon said he had a “secret plan” to end the Vietnam War. He had no plan, and by 1972, when he sent the note to Kissinger, he knew he was losing the war.

In total, the war stretched on for 7 years after the announcement of Nixon’s “secret plan” to end it.

Today we hear that feckless leadership is causing us to “lose” in Iraq, Afghanistan and Syria. This comes from a few career military, and many, many Republican Chicken Hawks, who continue to raise the specter of Vietnam.

On Veterans Day, let’s remember that Vietnam, Iraq, Afghanistan are all places where our boys bled and died on foreign soil. All are places where our money was recycled to the war profiteers, and where we left behind zero ability to foster the “democratic” way of life that our politicians wanted to bring to those nations.

And what about the “sacred trust?” Politicians break the sacred trust to its citizens and soldiers all the time, if there is an opportunity to spread the gospel, secure the oil, or beat the “enemy”. War profiteering for private corporations, socialized losses for the people. US soldiers dead or maimed for life. Their families robbed of optimism, their memories an open wound.

THAT is the sacred trust in ruins. That is the legacy of Vietnam, Iraq and Afghanistan on this, and on all Veterans Days.

And do the Chicken Hawks take care of our veterans after the fact, once they come home? They do not. The CH’s “cut taxes” mantra means that more money for the oligarchs has to come from somewhere. So, they try to cut social programs, because war profiteers (including those in Congress) can’t make any money off government-run, not-for-profit social programs.

Veterans have been with us since before the founding of the Republic. To observe this Veterans Day, here is a reasonably obscure song by Bob Dylan, “’Cross the Green Mountain.” It appeared on the soundtrack of the film, “Gods and Generals,” a Civil War film that was entirely financed by Ted Turner as a pet project.

The song speaks to the horror faced by soldiers in the Civil War. Dylan’s Civil War tale could be about any war, as his worn-down singing captures the essence of a soldier pining for home while reflecting on what may be his last battle, his last moments in life. Below is the abbreviated version of the song that was used as the official music video:

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

That gives you a taste, but if you want the whole thing, the full 8 minute song was part of Dylan’s Bootleg Series #8: “Tell Tale Signs,” and you can view it here.

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The Republican “Free Stuff” Meme

At the last Republican presidential debate, Chris Christie (R-NJ) characterized the Democratic candidates’ debate as:

A parade of, ‘I’ll give you this for free; I’ll give you that for free’.

Senator Marco Rubio said: (brackets by the Wrongologist)

It [the first Democratic debate] was basically a…debate about who was going to give away the most free stuff: Free college education, free college education for people illegally in this country, free health care, free everything.

Jeb Bush says that black voters should back him, since his:

…message is one of hope and aspiration, not one of division and get in line and we’ll take care of you with free stuff…

For the record, Medicare, Medicaid, Social Security, and unemployment have dedicated tax revenue streams. If we back out those funded benefits, all other elements of the so-called social safety net “free stuff” adds up to ~$405 billion, a fraction of the $1.2 trillion in “unfunded” Federal entitlements, and most of the rest goes to top income earners.

So, what do Republicans mean when they say “Free Stuff”? From Jared Bernstein:

There are at least three definitions of “free stuff.” The broadest would simply include all government benefits. A narrower version might apply only when people receive more in benefits than they pay in taxes. A third might refer to any net gain relative to the status quo.

Under any of these definitions, the Republican claims are misleading: they attack help for people who need it, while implicitly condoning tax subsidies for the wealthy. What the Republicans want us to focus on are public education, Medicaid, and direct cash assistance to the poor, but the government provides other subsidies, some of which the GOP seems perfectly happy to keep in place.

For example, Rubio and Bush want to cut capital gains taxes below the current level (Rubio would completely abolish them). But today’s reduced cap gains rate already provides a significant benefit to people who invest in assets (i.e., the wealthy). Then there are things like regressive housing tax breaks, about 70% of which go to those in the top 20%. In addition, 68% of the tax benefits for retirement savings and 64% of subsidies for individual retirement accounts (IRAs) accrue to the top 20%.

Can it be that government benefits for poor people are “free stuff”, while benefits for the wealthy are not?

Maybe Christie, Rubio, and Bush subscribe to the second definition described above: It’s “free stuff” if you receive more in benefits than you pay in taxes, but not if you pay more in taxes than you receive in benefits.

The third way to think about “free stuff” mirrors the most accepted concept of “free”. Bernstein asks:

Suppose, for example, that you opened your email today to find an unexpected $100 Amazon gift card. No matter how much money you had spent or planned to spend at Amazon, you would call this “free” money. Or imagine that you go out to dinner at a restaurant and a waiter decides to “comp” your dessert. Regardless of the overall price of your meal, you would likely consider that dessert item to be “free.”

Under this definition, “free stuff” from the government would be new benefits or reduced taxes relative to one’s current situation. Since the Christie, Rubio, and Bush tax plans all contain massive tax cuts, they would give away huge amounts of foregone tax revenue as “free stuff,” and unlike the “free stuff” proposed by the Democratic candidates – the GOP “free stuff” would go to their very wealthy patrons.

From the carried interest loophole, to drug patent law, to defense industry markups, to sweetheart deals for the oil industry, the total “free stuff” for the 1% dwarfs that available to the rest of us. Yet, the nattering nabobs of trickledown continue to target removing the scraps doled out to the 99%.

Social stability is the reason the rich should not begrudge the support given to those that are less fortunate in our society. The rich have the most to lose should the vast majority decide they have suffered enough, and we see an “off with their heads” moment.

Extra money in the hands of the 1% or the .01% just creates bidding wars for penthouse apartments that the 2% can no longer afford.

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You Say You Want a Revolution

The Nation describes Bernie Sanders’s “Political Revolution”: (emphasis by the Wrongologist)

When Sanders speaks of that political revolution, he is asking Americans—especially younger Americans like the crowds of Iowans in their teens and twenties who packed the Sanders bleachers in Des Moines’ Hy-Vee Hall for the Jefferson-Jackson dinner—to believe that electoral politics might actually change something. Sanders knows that won’t happen unless people who are frustrated and disengaged and disenchanted see him as a candidate who is distinctly different from the rest.

For Sanders, “Political Revolution” means a protracted, grassroots effort to fix a broken political, economic and social system. He says it will take millions of people to get involved and then stay mobilized after the election to bring about a political revolution.

That’s what Bernie Sanders’s campaign is all about.

So, if you agree that our politics is broken, shouldn’t we actually be working to fix the underlying problems? Without something that looks like a “political revolution”, fixing these problems is difficult if not highly unlikely. Consider the following:

• Capitalism as an economic engine has created unheard of levels of wealth, but since the 1980s, that wealth only accrued to those at the very top.
• Democracy is in trouble, because Capitalism needs a plutocratic system of government to operate.
• Democracy gets in Capitalism’s way because the interests of the people are not congruent with the interests of the corporations. They are often in direct competition.
• In order for corporations to keep their preferred position in this conflict of ideas, the voice of the people must be weaker than the voice of the corporations. Hence, Shelby County vs. Holder, Citizens United and the soon-to-be decided Evenwel v. Abbott.

Democrats say “vote for us because we’re not as crazy as the Republicans” (even though they actually support the same corporate interests). The Dems will also offer you a few social policy crumbs that you should enjoy on your way to becoming the big losers in our latest Gilded Age. And those crumbs will expire when Republicans control all three branches of government.

The last political revolution began when Ronald Reagan was elected in 1980. That revolution has continued through two Democratic and two Republican administrations, for more than 35 years.

• It resulted in higher taxes for the middle classes which paid for lower taxes on the wealthy.
• It reversed progress toward voting rights, racial equality and equal rights for women, progress that was made in the 1960s and 1970s
• It has prevented universal health insurance.
• It led to increased terrorism and endless war.

So, it’s been a wild success! And it’s still going strong under its second Democratic president.

Bernie’s “political revolution” is to attempt to turn Democrats back to being the party of the people, to give Capitalism a conscience. The theory goes, if Democrats embraced Bernie’s point of view, people will vote in large numbers. If they vote in large numbers, change will come.

This is the fight Bernie is leading.

But Bernie has no real chance at the nomination, and if he got it, there is a high probability he’d lose the general election in a blow-out. And since he’s not doing the things he needs to build a constituency in Congress, or it other down-ticket races, his populism is unlikely to translate into a movement. America has to hit rock bottom for that to happen, and we’re not there yet.

OTOH, Hillary doesn’t seem to have a plan to win the House or Senate in 2016 either.

But the fact that it is unlikely that he can win doesn’t mean that Bernie and his supporters shouldn’t fight for his policies. He has already forced Hillary to recant a few illiberal positions. And his pursuit of right-leaning white working class voters could help forge a new populist coalition down the road. Poor white folks have been clinging to the GOP for the past forty-odd years, and they are still poor, and getting poorer.

They might be willing to embrace his populist economic message even while they hold their noses when they hear his social justice views.

So, when you hear about Sanders’ political revolution, it doesn’t sound so much like a revolution as a return to policies that had been in place for much of the 20th century, those policies that began during the FDR era.

What Sanders describes is a political restoration, not a revolution.

Little that he proposes is radical from the point of view of where the country was in the 1970s.

Back before the Regan revolution began.

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Special Privilege for Cuban Immigrants

Ever heard of the Cuban Adjustment Act (CAA) of 1966? It says that Cuban citizens don’t have to follow US immigration laws in the same way as other nationalities. If they pass a background check at the point of entry, Cubans are free to stay in the US, get jobs and pursue legal permanent residence after just one year.

The law has been maintained by nine US presidents and 25 Congresses, based on the argument that Cubans had to flee communism, making them political refugees in need of added protection. Although it has been reviewed by many presidents, including Mr. Obama in 2014, it remains in place.

But the special status for Cubans isn’t limited to a free pass into the country. In an example of anti-communism run amok, Florida politicians have gotten Congress to pass legislation that increased US government assistance to Cubans from handouts of powdered milk and cheese, to a multi-billion dollar entitlement.

Aid to Cuban immigrants — who are granted immediate access to welfare, food stamps and Medicaid — has ballooned from a $1 million federal allocation in 1960 to $680 million a year today.

How did Cubans become the only nationality with unfettered access to US government benefits? Florida’s Sun Sentinel has been writing investigative reports about Cuban privilege for some time. Today, we focus on their three-part series on extra benefits that accrue to Cubans. Part 1, Welfare to Cuba, covers the hidden news that Cuban immigrants are cashing in on US welfare and returning to Cuba, making a mockery of the premise that they are refugees fleeing persecution. Part 2, Cubans retire to Florida – with help from US taxpayers, covers the untold story of Cubans coming to Florida to retire. When they get here, they qualify immediately for food stamps and Medicaid. If they are over 65 with little or no income, they also can collect a monthly check of up to $733 in Supplemental Security Income (SSI) even though they never lived or worked here.

Part 3, Florida politicians protect special status for Cubans, shows how over the years, Florida politicians protected the special status given to Cuban immigrants, transforming US government assistance into a multi-billion dollar Cuban entitlement:

• Sen. Lawton Chiles (D-FL) successfully pushed an amendment guaranteeing Cuban immigrants’ eligibility for SSI, when Congress created the program in 1972.
• During the 1980 Mariel Boatlift, Florida’s congressional delegation got Congress to authorize $100 million in financial aid to the 125,000 Cuban migrants. And they also got Congress to create a special category for Cuban immigrants that made new arrivals eligible for government benefits for decades to come.
• Cubans were able to dodge the Clinton welfare reform in the 1990s. While other immigrants were barred from benefits for five years, Cubans could collect aid upon arrival. This was orchestrated by Miami’s Cuban-American members of Congress at the time, Ileana Ros-Lehtinen (R) and Lincoln Diaz-Balart, (R). Ros-Lehtinen is still in Congress. BTW, Diaz-Balart’s uncle is Fidel Castro.

One of Florida’s justifications was that it should not have to shoulder the total costs of educating, housing and providing health care to thousands of new immigrants each year. So, after enshrining in law a mass migration to Florida, they outsourced the costs of the Cuban benefit program to taxpayers throughout the US.

The scamology is demonstrated by the Sun Sentinel’s investigation that found that Cubans are disproportionately represented among foreign-born recipients of SSI. In 2013, one in 10 Cubans was collecting SSI, compared to one in 25 immigrants from all other nations.

The Sun Sentinel found that the US policy of treating Cubans as refugees who require special treatment endures even as the rationale for it fades with the restoration of US-Cuba diplomatic relations. Many Cubans now come to America for economic opportunity, but they’re granted public support as victims of oppression, while frequently returning to Cuba, often staying there for months, while We the People keep paying.

Some elderly Cuban migrants move in with their grown children or relatives already here, but still receive US aid even though their families have the means to support them. The Sun Sentinel found:

• A couple with a toddler in south Miami-Dade County, with a combined annual income of $125,000, brought over the husband’s 67-year-old father, who then collected food stamps and $8,400 a year in SSI.
• A Miami Lakes woman and her husband took in her aging parents, who qualified for $7,200 a year in SSI. The family’s household income: $144,200.

Indications are that these are not isolated cases. Miami-Dade leads the nation among large counties in the percentage of people over 65 receiving SSI. About two-thirds of Miami’s elderly SSI recipients are Cuba natives.

You have probably noticed that the majority of Republicans (including all of the presidential candidates) are completely silent on this, a subject they would howl about if it were a preference for different immigrant group. And Marco Rubio and Ted Cruz have been direct beneficiaries of this law.

While Florida Dems also support the CAA, it is the Republican Party who defends it, and who does a good job of keeping public awareness the Act below the radar. That will continue, since Republicans hope to see Cubans vote as a bloc to help win Florida in 2016 and secure a GOP presidential win.

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Pope Francis on Capitalism

With the Pope starting his visit to the US, most focus will be on Conservatives’ support for the Catholic Church’s views against abortion and gay marriage. Conservatives are far less enthusiastic about Francis’ views about climate change and capitalism, both of which are covered in Pope Francis’ encyclical, Laudato Si’.

While the Wrongologist has not read Laudato Si´, he did read an extensive and thoughtful review by William Nordhaus in the NY Review of Books, who says the Pope thinks that the degradation of our environment is a symptom of deeper problems: rapid change, unsustainable over-consumption, indifference to the poor, and the decay of social values.

Nordhaus notes that the encyclical contains an extensive discussion of the features of markets and modern capitalism. It emphasizes dysfunctional tendencies and distortions, witness his criticism of excessive consumption:

Since the market tends to promote extreme consumerism in an effort to sell its products, people can easily get caught up in a whirlwind of needless buying and spending. Compulsive consumerism is one example of how the techno-economic paradigm affects individuals. [Paragraph 203]

And Francis’ criticism of the distorting effect of the drive for profit:

Once more, we need to reject a magical conception of the market, which would suggest that problems can be solved simply by an increase in the profits of companies or individuals. Is it realistic to hope that those who are obsessed with maximizing profits will stop to reflect on the environmental damage which they will leave behind for future generations? [Paragraph 190]

Nordhaus quotes Francis, who argues that profit-seeking is the source of environmental degradation:

The principle of the maximization of profits, frequently isolated from other considerations, reflects a misunderstanding of the very concept of the economy. As long as production is increased, little concern is given to whether it is at the cost of future resources or the health of the environment; as long as the clearing of a forest increases production, no one calculates the losses entailed in the desertification of the land, the harm done to biodiversity or the increased pollution. In a word, businesses profit by calculating and paying only a fraction of the costs involved. [Paragraph 195]

Francis singles out financiers for special disapproval:

In the meantime, economic powers continue to justify the current global system where priority tends to be given to speculation and the pursuit of financial gain, which fail to take the context into account, let alone the effects on human dignity and the natural environment…. [Paragraph 56]

The Pope criticizes capitalism’s push to make ultra-consumers of everyone:

This paradigm [consumerism] leads people to believe that they are free as long as they have the supposed freedom to consume. But those really free are the minority who wield economic and financial power. [Paragraph 203]

Pure capitalism ignores two major shortcomings of those economies run by Mr. Market: The first is the emergence of monopolies, or things like unregulated pollution, which distort market outcomes. The second is inequality of opportunities and income. And much has been written about rising income inequality, particularly by Seitz and Piketty, and Joseph Stiglitz.

However, it would be inaccurate to point solely to the depletion of resources or pollution as major causes of rising poverty. Instead, it is forces such as the labor-saving nature of new technologies like robots, rising imports from low- and middle-income countries, and the capture of our income taxing system by corporations and the wealthy that have distorted our markets.

Specifically, as economist Arthur Okun has written, markets do not have automatic mechanisms to guarantee an equitable distribution of income and wealth:

Given the chance, [the market] would sweep away all other values, and establish a vending-machine society. The rights and powers that money should not buy must be protected with detailed regulations and sanctions, and with countervailing aids to those with low incomes. Once those rights are protected and economic deprivation is ended, I believe that our society would be more willing to let the competitive market have its place.

So, as this week rolls out, expect to hear many voices on the right argue that Francis is an unrealistic economic fool. In particular, expect to hear George Will’s arguments this week in the National Review echoed by the media. Here is a representative quote from Mr. Will: (emphasis by the Wrongologist)

Francis’s fact-free flamboyance reduces him to a shepherd whose selectively reverent flock, genuflecting only at green altars, is tiny relative to the publicity it receives from media…He stands against modernity, rationality, science and, ultimately, the spontaneous creativity of open societies in which people and their desires are not problems but precious resources. Americans cannot simultaneously honor him and celebrate their nation’s premises.

See what George Will did there? He says that climate denialism is pro-science, while belief in climate change is anti-science.

Know the enemy by their arguments.

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Monday Wake Up Call – September 21, 2015

Are you familiar with the “Bad Bank” strategy? It is a new bank set up to buy the bad loans of a bank that has a significant amount of nonperforming assets. Those assets are purchased at market prices. If the assets remained on the original bank’s books, they would be forced to take big write-downs. So, the “good bank” sells the assets to the bad bank, and clears their balance sheet.

And the “bad bank” goes off to fail, be recapitalized, or liquidated. The shareholders and bondholders of the “bad bank” stand to lose money from this solution but its depositors will be bailed out by the government.

Occidental Petroleum (OXY) made a similar deal last November by spinning off California Resources, (CRC) and since then, most investors that bought into the deal got burned.

CRC held OXY’s oil-and-gas exploration assets in California. CRC is CA’s largest natural gas producer and its largest oil-and-gas acreage holder with operations in Los Angeles, San Joaquin, Ventura, and Sacramento. OXY was the big player in the Monterey Shale formation, which had been hyped as the largest reserves of oil in the US. But, in 2014, the US Energy Information Administration (EIA) downgraded the amount of OXY’s known reserves in CA. From Wolf Richter: (emphasis and brackets by the Wrongologist)

The LA Times spilled the beans last week [May 2014] that the EIA is set to severely downgrade the Monterey Shale in California in an upcoming report. Once thought to hold 13.7 billion barrels of technically recoverable oil, the EIA now believes only about 600 million barrels are accessible. Slashing technically recoverable estimates by 96% could be enough to kill off the shale revolution in California.

Six months later, OXY exited CA shale by spinning off 80.5% of CRC to OXY’s shareholders. CRC’s shares began trading on the NYSE on December 1, 2014. As part of the spinoff, CRC paid OXY a special dividend of $6 billion. To fund the dividend, CRC issued bonds totaling $5 billion and leveraged loans for the remainder. This debt now costs CRC about $330 million a year in interest.

Back in 2014, hedge funds were clamoring for energy spinoffs. They’d buy a big stake in the parent company and push the board to do a spinoff that entailed loading the spinoff up with debt to fund a fat special dividend back to the parent.

“Unlocking value,” is the Wall Street term for this kind of financial engineering. Wall Street then made sure that there were enough unwitting or yield-desperate buyers for the bonds. The hedge funds made their money, and moved on.

Then CRC reported its second quarter earnings, which showed a net loss of $68 million on revenues that had plunged 45% to $609 million. And on September 15, Moody’s slashed CRC’s corporate rating from Ba2 to B1, and the bonds from Ba2 to B2. All of it with “negative outlook”. Moody’s described CRC’s relatively high costs of production and interest costs totaling $31.71 per barrel of oil equivalent. It pointed to low oil prices that it didn’t expect “to improve materially in 2016.”

So in 2014, no investor realized that CRC’s reserves had been cut by 96%? Or, that their break-even cost per barrel was $31+?

This Cali deal is Straight Outta Enron.

Now the question is can CRC survive without having to resort to a debt restructuring, bankruptcy, and a total shareholder wipe-out?

These kinds of deals are best pulled off in a credit bubble. Low interest rates force some investors to chase yield, and the unwitting buyers that have these fruits of Wall Street’s labor in their portfolios are the ones who feel the pain. Wall Street will tell you that the dividend and spinoff were disclosed in advance, so it’s not “fraud” by the company. It’s just “stupidity” by yield-hungry investors.

Why do you care? These securities could easily be in your 401k, or in an ETF that you own directly, assuming that you are among the 48% of Americans that have investment accounts.

So it is time for We the People to wake up to Wall Street’s financial engineering and what masquerades as legalized robbery. To help with the wake up, here is John Lennon’s “Power to the People”:

You will note the nearly completed Twin Towers at the end of the video. For those who read the Wrongologist in email, you can view the video here.

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Union-Busting at Pantex

Never heard of Pantex? It is the nation’s only nuclear weapons plant. The full name of the company is Consolidated Nuclear Security (CNS) Pantex. CNS is a combination of a who’s who of major defense contractors, including Lockheed Martin, Bechtel, and Booz Allen Hamilton. CNS took over Pantex in March, 2014.

The company assembles, disassembles, and tests nuclear weapon components for the US military. They also manage the storage and surveillance of plutonium pits. (Plutonium Pits? In Texas?)

Pantex is a union shop, and on August 29, more than 1,100 workers went on strike over CNS Pantex’ demand for health care concessions. CNS is also seeking the elimination of defined benefit pensions for new union members. In a statement, Council President Clarence Rashada said:

Wages are not the issue. Benefits, sick leave, medical coverage, prescription drugs, those are the issues.

Since work at Pantex involves exposure to dangerous chemicals and substances, the union is pushing back hard against CNS who is also seeking to shift greater health care costs onto its retirees.

The strike is the first in 45 years at Pantex, and it comes 18 months after CNS took over.

Let’s remember that Texas is a right-to-work state, so the union left one entry gate to Pantex free of picketers to allow managers and other employees to enter the plant without any commotion.

This is right up Scott Walker’s alley. The union-busting Republican governor of Wisconsin is on the campaign trail talking about preventing federal workers from collectively bargaining, creating a national right-to-work law and eliminating the National Labor Relations Board (NLRB).

And the Pantex union-busting is abetted by the Department of Energy (DOE). The union blames the DOE, arguing that a DOE rule capping worker benefits has put CNS and Pantex employees in untenable positions. By rule, CNS can’t offer employee benefits that would exceed the industry average by 5%. However, the industry baseline also includes manufacturers of cell phones and car parts, so the DOE is comparing labor costs on consumer goods and nuclear weapons, probably an Apple™ to warheads comparison.

Effectively shutting down Pantex over a labor rule that only affects 10% of DOE contractors also speaks volumes about leadership and priorities at the National Nuclear Security Administration (NNSA), which supervises Pantex and CNS.

The Project on Government Oversight (POGO) reports that in the run-up to the government’s award of the Pantex contract to CNS, CNS claimed it could save taxpayers over $3 billion by cutting redundancies and consolidating management, but NNSA never validated the claim. POGO quotes from a GAO report about the NNSA’s evaluation of the CNS bid:

Did not clearly or completely describe expected benefits and costs…lacked key analyses and assumptions for cost savings estimates…[and] was also missing a description of the unquantified benefits CNS management might or might not offer.

So, maybe it’s a matter of “screw the government” by contractors big and experienced enough to know better. POGO says a series of recent reports have found that NNSA is skimping on upkeep for old buildings, using obsolete fire safety equipment at weapons sites, and relying on broken security sensors to protect uranium stockpiles.

CNS also runs the Y-12 facility at Oak Ridge TN, former home of the Manhattan Project. Y-12’s primary mission today is providing secure storage of nuclear material for both the US and other governments. The Bulletin of Atomic Scientists calls Y-12 a “Poster child for a dysfunctional nuclear weapons complex”, noting that although Y-12 has not produced weapons for 25 years, its annual budgets have increased by nearly 50% since 1997, to more than $1 billion a year.

POGO reported that the NNSA spent $50 million on new security systems at Y-12 but couldn’t find a way to get security guards and security sensors working in sync. The overhaul was a result of a July 2012 incident in which a then-82-year-old nun and two others broke into Y-12 to protest the production of nuclear weapons. They made it into the building where most of the US stockpile of highly enriched uranium is stored. The DOE Inspector General found:

Troubling displays of ineptitude in responding to alarms, failures to maintain critical security equipment, over reliance on compensatory measures, misunderstanding of security protocols, poor communications, and weaknesses in contract and resource management.

Follow-on security tests found that the guard force at Y-12 was cheating on evaluations.

You would think that if there’s one place where this cutting corners on safety and security would not be tolerated, it’s with nuclear weapons. CNS has demonstrated in its Y-12 and Pantex situations that competent nuclear weapons handling and security at nuclear weapons facilities should be governmental functions.

They are far too important to be left to a private contractor’s business decision.

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