Category: Tax Policy

Is Ending Income Inequality a “Radical” policy?

The Daily Escape:

Mount Robson & Berg Glacier, BC, Canada – June 2019 photo by DrTand the women

New York Magazine’s Eric Levitz writes: (brackets and emphasis by Wrongo)

“…the Federal Reserve just released…its new Distributive Financial Accounts data series [that] offers a granular picture of how American capitalism has been distributing the gains of economic growth over the past three decades. Matt Bruenig of the People’s Policy Project took the Fed’s data and calculated how much the respective net worth of America’s top one percent and its bottom 50 percent has changed since 1989.

He found that America’s super-rich have grown about $21 trillion richer since Taylor Swift was born, while those in the bottom half of the wealth distribution have grown $900 billion poorer.”

This is what a few of the Democratic presidential candidates have been talking about, some loudly and some quietly, for the past few months. Levitz asks the right question:

“So, is an economic system that distributes its benefits in this manner consistent with Americans’ common-sense views of economic justice? If not, would incremental changes be sufficient to bring it into alignment with the median American’s values? Or would more sweeping measures be required?”

In a sense, Democrats are testing whether advocating for changing Capitalism is an argument that voters will accept in 2020. More from Levitz:

 “Some Democratic presidential candidates say that America’s economic system is badly broken and in need of sweeping, structural change. Others say that the existing order is fundamentally sound, even if it could use a few modest renovations. The former are widely portrayed as ideologues or extremists, the latter as moderates.”

Essentially, the question is “who’s the extremist?” in the Democratic Party. This conflation of “extreme” or “radical” with “bad” is what the GOP and the Main Stream Media do every day, and it weakens our policy-making.

We use “extremist” or “radical” as a way of signaling that a policy position is too awful to consider.

If you simply say that something is bad, then you are forced to defend your position. But, when you describe it as “extreme“, you’ve called it bad, and people will HEAR that you think it’s much too big a change to even discuss.

Respectable talking heads like Judy Woodruff will ask: “Will Americans really go for THAT?”

This is bad faith messaging about important questions. This is so ingrained into people who talk about politics that it largely goes unquestioned. We shouldn’t care about pundits and broadcasters saying how extreme or not extreme something is. We should care about the merits of the argument.

Republicans have been calling Democrats “extreme” “radical” and “Socialist” for decades. They’re using bad-faith tactics; de-legitimizing an idea or a candidate without having to debate on the merits.

Bernie Sanders and Elizabeth Warren are offering “extreme” policies only if our baseline is what the average Congress critter’s economic agenda looks like. It’s not clear why that’s an appropriate yardstick.

Did we think calls for sweeping change in Egypt were extremism when students took to the streets demanding basic civil rights? Do we think the young people demonstrating today in Sudan are radicals?  Our assessment (and support) of these dissenters’ ideologies has more to do with how far their values are from those of their corrupt political and military leaders.

And also by how close they seem to be to our core values.

Whether it is extreme or moderate to propose sweeping changes to American capitalism should depend on how close our existing system is to how a just economic system operates. And these latest data show that the one percent have gotten $21 trillion richer since 1989, while the bottom 50% have gotten $900 million poorer.

This is what economic class warfare looks like. Saying that isn’t hyperbole. The earnings and wealth of a majority of our citizens has been systematically declining with the complicity and power of our government, in order to benefit the rich.

It shows how bad things are when the “radical” in American politics is anybody who argues that the American economy isn’t working for a huge percentage of the population.

Judy Woodruff may think that the economy is great, but incrementalism has failed most of us for the past 40 years.

Given all this, any politician who insists that American capitalism is “already great” is clearly someone who is indifferent to economic inequality.

We need to adopt redistributive economic policies. That may sound like an extreme position, but the alternative of continuing our growing wealth inequality, should really be thought of as far more radical.

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Monday Wake Up Call – June 3, 2019

The Daily Escape:

Mont Rotui, Moorea, French Polynesia – 2019 iPhone photo by mystackhasoverflowed

Time to wake up America! Donald Trump has proven once again that he has no understanding of economics. From the Wall Street Journal:

“President Trump will award the Presidential Medal of Freedom to economist Arthur Laffer, one of the pioneers of the idea that tax cuts can boost government revenue, the White House said Friday.

Mr. Laffer is one of the founding theorists of supply-side economics, a school of public economics that rose to prominence during the Reagan administration and returned to the fore in the run-up to the 2017 package of tax cuts that Mr. Trump signed into law.

The White House described Mr. Laffer as “one of the most influential economists in American history,” and said his “public service and contributions to economic policy have helped spur prosperity for our Nation.”

Laffer is famous for his drawing his Laffer curve on a napkin, illustrating his idea to Dick Cheney and Donald Rumsfeld at a dinner in 1974. His curve showed that increases in tax rates will eventually cause government tax revenue to decrease, because people will begin to work and earn less. This was then taken to its theoretical limit, saying that tax cuts could pay for themselves by spurring economic growth.

The WSJ calls Laffer “one of the pioneers of the idea that tax cuts can boost government revenue”. Isn’t it weird that the fact that his “idea” has been completely disproven in the real world, doesn’t seem to matter?

Conservative economics is not a branch of economics, it’s a branch of Conservatism.

The Laffer curve was successful at its real purpose, providing a basis to funnel more money to corporations and the rich. Republicans traffic in propaganda, not knowledge.

Last year, Laffer co-wrote a book titled “Trumponomics: Inside the America First Plan to Revive Our Economy.” Laffer’s co-author was Stephen Moore, another conservative who styles himself as an economist. Earlier this year Trump nominated Moore to serve on the Federal Reserve Board of Governors. Moore had to withdraw, amid bipartisan opposition from Senators.

Laffer was the advisor behind the notorious Kansas state income tax plan that ruined the state’s finances. In 2012, Then-Kansas Gov. Sam Brownback passed a package of tax cuts based on Laffer’s ideas. The result was that Kansas lagged behind neighboring states with similar economies in nearly every major category: job creation, unemployment, gross domestic product, and taxes collected.

In 2017, the Kansas legislature repealed the Laffer/Brownback tax cuts. After the repeal, state taxes were boosted by $1.2 billion.

Laffer has spent years preaching his idea that almost any tax cut for businesses and the rich could potentially pay for itself. That idea has become the bankrupt conceptual backbone of the Republican Party’s entire economic theology.

For the 2017 Trump tax cuts, his administration also borrowed Laffer’s idea. Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow, have repeatedly claimed that the Trump tax cuts will pay for themselves. But, a new report finds that the tax cuts were responsible for less than five percent of the growth that is needed to offset the revenue loss from the Trump tax cuts.

We must point out here that Larry Kudlow does not hold a degree in economics. He was once fired from an investment bank for doing cocaine. Imagine just how much cocaine you’d have to do to get fired on Wall Street in the 1980s.

Trump’s now added the Presidential Medal of Freedom to the American traditions he’s debasing. Other economists awarded the Medal of Freedom include Gary Becker, Milton Friedman, John Kenneth Galbraith and Robert Solow. Laffer can’t carry their briefcases.

There may be no man alive who has done more damage to America’s understanding of taxes and their effect on economic growth than Art Laffer.

Evidently, Trump is grading him on a curve.

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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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Monday Wake Up Call – March 18, 2019

The Daily Escape:

View from Angel’s Landing, Zion NP – 2019 photo by ducc517

Sen. Elizabeth Warren (D-MA) says that she favors “capitalism with serious rules.” David Leonhardt wrote in Sunday’s NYT:

Her platform aims to reform American capitalism so that it once again works well for most American families. The recent tradition in Democratic politics has been different. It has been largely to accept that big companies are going to get bigger and do everything they can to hold down workers’ pay. The government will then try to improve things through income taxes and benefit programs.

Warren is trying to treat not just the symptoms of inequality, but the underlying disease. Warren also called for an annual wealth tax, for people with assets greater than $50 million. She has proposed a universal child-care and pre-K program. She favors tougher guidelines on future mergers, and also a breakup of the giant tech companies (Google, Facebook) that resemble monopolies.

Of the current crop of Democrats, she’s the reform capitalism candidate. But one idea that Warren hasn’t espoused is the Financial Transactions Tax, (FTT). Wrongo first wrote about a FTT in March 2013.

Sen. Brian Schatz, (D-HI) and Rep. Peter DeFazio (D-OR) introduced a tax of one-tenth-of-one-percent, or 10 basis points (100 basis points equals 1 percentage point), on securities trades, including stocks, bonds, and derivatives. The CBO estimates that the FTT would raise $777 billion over 10 years. Sens. Chris Van Hollen (D-MD), Jeff Merkley (D-OR), and Kirsten Gillibrand (D-NY) are co-sponsors of the bill.

For the math-challenged, 10 basis points on a $1,000 trade equals one dollar. Jared Bernstein says:

FTTs exist in various countries, including the UK and France, with Germany considering the tax (also, Brazil, India, South Korea, and Argentina). The UK is a particularly germane example, where an FTT has long co-existed with London’s vibrant, global financial market.

More from Bernstein: (brackets by Wrongo)

Because the value of the stock holdings is highly skewed toward the wealthy, the FTT is highly progressive: The TPC [Tax Policy Center] estimates that 40% of the cost of the tax falls on the top 1% (which makes sense as they hold about 40% of the value of the stock market and 40% of national wealth).

Vox also reports that an FTT would mostly affect wealthy Americans, because an estimated 84% of the value of stocks is owned by the wealthiest 10% of households. Schatz isn’t the first Democrat to suggest an FTT, Bernie Sanders ran on a similar idea in the 2016 Democratic primary. He pitched it as a way to pay for free college.

Globally, there is plenty of experience with FTTs. In the UK, a 0.5% “stamp tax” is charged when someone buys shares on the stock market, and the UK market is fine. France in 2012 introduced a tax on financial transactions, and a study from the European Commission found that trading volumes declined slightly, but share prices and volatility weren’t meaningfully changed. France and Germany have pushed for a European Union-wide FTT.

Opponents include the high-frequency traders, who note that even a small FTT could upend their extremely low margin business model. Although a dollar on a $1,000 trade doesn’t sound like much, if the industry is making 4 billion trades a day, it can add up.

Time to wake up and support an FTT, America. Sens Warren and Sanders support this idea, and you should too. Those who think that the government should use the tax code to ensure that everyone has an equal opportunity to get ahead, and that we should do more to ensure the well-being of our citizens aren’t socialists.

If that makes us socialists, then Eisenhower, who presided over a 90% top tax bracket, was also a socialist.

To help you wake up, here’s Steely Dan with “Any World That I’m Welcome To” from their 1975 album “Kay Lied”. This tune gives you the benefit of hearing the late, great, Hal Blaine on drums. Blaine may have been the most recorded drummer in pop music history. From the late 50s through the mid-70s, Blaine did sessions with Sam Cooke, Ray Charles, The Righteous Brothers, Henry Mancini, Ike & Tina Turner, The Monkees, Nancy Sinatra, The Fifth Dimension, The Byrds, Sonny & Cher, Mamas and the Papas, and The Grass Roots.

The famously picky Steely Dan only used Blaine for this one tune:

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

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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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We Need a New New Deal, Not a Green New Deal

The Daily Escape:

St. Augustine Beach, FL – 2015 photo by Wrongo

(Wrongo and Ms. Right leave today for Florida and their annual week-long visit with Wrongo’s sisters. We’re leaving 19° for 70°. Blogging will be uneven, unless Trump wins his wrestling match with Kim, or India and Pakistan declare war.)

Raul Ilargi:

“There are lots of people talking about how they much disagree with Alexandria Ocasio-Cortez, how silly she is, how dumb and impossible and irresponsible her Green New Deal is, but I think they’re missing a point or two. First of all: what’s the alternative? Who would you trade her for? Would you rather things stay the same?”

Wrongo thinks that Alexandria Ocasio-Cortez seems savvy beyond her years. The septuagenarians in Congress can’t present themselves as she does, because she’s 29 years old, born in 1989. She’s in the first generation to grow up with a ubiquitous internet. For her elders, like Wrongo, that’s an acquired skill.

Wrongo has been thinking a lot about capitalism reform. Changing capitalism to take advantage of lessons learned in the past 50 years should be seen as a good thing, not the first step on the path to socialism as Republicans would have everyone believe.

And the Green New Deal is more New Deal than green. It emphasizes reforming our current economic system by deficit financing a new jobs program aimed at improving our infrastructure. The new infrastructure should create clean power, zero emissions vehicles, and high quality jobs that pay prevailing wages. It would be financed by a new tax structure that adds revenue while tilting the tax burden away from individuals to corporations and the uber-wealthy.

Wrongo isn’t a fan of Ocasio saying she’s a socialist. That’s most likely a bridge too far for America in 2020. It’s also unnecessary. Calling what she, Bernie, Elizabeth Warren and a few others have as policy goals are, for the most part, reform of capitalism.

Of course, cynical politicians can say that the Green New Deal is not realistic. That takes you back to establishment Democrats like Hillary, Pelosi, Biden, Booker, Harris and a few more we can’t hear. That’s fine if you want young Americans to invade a few more foreign nations, or you prefer growing income inequality for people here at home. Otherwise, they would all be terrible political leaders, particularly if you believe those policies must stop.

Turning to the “Green” part of the Green New Deal, Benjamin Studebaker offers a great perspective: (emphasis by Wrongo)

“…at this point, we have integrated the global economy so thoroughly that there may now be many irreducibly global problems that cannot be solved at the national level, even with an American commitment….We don’t have the global political institutions we need to handle problems like this, and every time we try to create them voters balk, accusing us of trying to destroy their cultures and deprive them of “sovereignty” and “national self-determination“, as if there were any meaningful sense in which they still had these things to start with.”

His point is that the US now produces only 15% of total global emissions. More from Studebaker:

“The EU commands a further 10%, while other rich states (such as Japan, Australia, and so on) add another 8%. This means that the rich states only control about a third of total emissions. China controls nearly another third (about 30%), and the rest comes from the remaining developing countries, with India and Russia making the largest contributions (7% and 5%, respectively) of that bunch.”

These developing countries are continuing to increase their emissions. This means that reductions from rich states are cancelled out by the growing emissions of developing countries.

Studebaker concludes that it’s beyond the ability of the US to go green unilaterally, and if we did, it wouldn’t bend the arc of global warming sufficiently to make a meaningful difference.

What we can do is provide an example for the world. We can do the right thing, precisely because it is the right thing to do. And along the way, reforming capitalism will quickly improve the lives of average Americans.

We can form a coalition around capitalism reform that includes most people in the bottom 90% of the economic pyramid. It can include Democrats, Independents and a few Republicans, most of whom would never be part of Bernie’s democratic socialism, or AOC’s Green New Deal.

There will be some version of the Green New Deal that starts in the near future. Let’s call it reform of capitalism, and get started on it today.

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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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Saturday Soother – Amazon Bails on NYC Edition

The Daily Escape:

Marijuana Museum, Amsterdam, Netherlands – 2017 photo by Wrongo

When Alexandria Ocasio-Cortez and Michael Bloomberg agree on something, it’s worth taking seriously, and neither wanted the Amazon deal with NYC. And this week, Amazon scuttled its plans to build its HQ2 in Long Island City, (LIC) Queens, New York City, citing opposition by “state and local politicians.”

Amazon’s abrupt announcement to withdraw from the deal came after it was roughed up at two City Council meetings along with enduring the indignity of having to contend with anti-gentrification protestors and union leaders.

There were two big problems that Amazon faced in LIC. First, they were getting a huge tax subsidy, about $2.8 billion. The tax subsidy looked even worse when we learned this week that Amazon nearly doubled its profits to $11.2 billion in 2018 from $5.6 billion the previous year and, once again, didn’t pay a single cent of federal income taxes.

It didn’t help that the state and city announced the massive subsidies when both are also contending with large budget deficits. NYC Mayor Bill de Blasio, citing a shortfall of $1 billion in revenues, told city agencies to cut their budgets by $750 million by April. And these cuts would have to be recurring.

This helped build outrage about the nearly $3-billion corporate welfare program for Amazon.

The second problem was gentrification in the LIC neighborhood. Immediately after the announcement, real estate prices zoomed, precisely when Manhattan prices were falling. The NY real estate industry was to be one of the primary beneficiaries of the HQ2 project, but local residents would be driven out of their neighborhoods.

Amazon has a poor track record in Seattle. They had fiercely opposed a local tax on large companies to fund housing for the homeless, and got it reversed one month after it had taken effect. Microsoft, after the tax law was scuppered, pledged $500 million to fund affordable housing for the low and middle income in the Puget Sound area, and encouraged other companies to make similar efforts.

Amazon didn’t join with Microsoft.

All is not lost. Amazon says it will still be expanding employment in NYC. And LIC has been a hot real estate/development market for several years, long before Bezos started playing his urban version of the Hunger Games. If the commercial construction in LIC over the past five years was happening in a second-tier US city, it would be equivalent to an entirely new business district.

A third problem was Amazon’s sense of entitlement. They expected zero push back, and their New York City campaign was inept. Amazon seems to have thought that since it had the governor and mayor in its pocket, all it had to do was show up for photo ops. The NYT points out Amazon didn’t even hire a native to grease the wheels:

“…the company did not hire a single New Yorker as an employee to represent it in discussions with local groups. Its main representatives traveled between Washington and Manhattan, and only one had moved into an apartment to work with community members and foster support.”

Amazon’s leaving was celebrated by Rep. Alexandria Ocasio-Cortez (D-NY), who represents the district. She complained about the “creeping overreach of one of the world’s biggest corporations“, and maybe that was the final straw for Bezos.

So props to AOC, and to the local politicians for standing up to this example of corporate welfare.

It’s possible that Jeff Bezos’s sudden change of heart was that he couldn’t stomach the idea of not being able to push around NYC the way he bullied Seattle into dropping its homeless tax. In NYC, he’d have to curry favor, feign interest in the concerns of locals, and make occasional contributions to the city.

Bezos may have felt all that was too high a price. But we should assume Amazon penciled out the deal, and didn’t like the result. For Amazon, it may have been a prudent business decision, artfully dressed up as a response to the political opposition the incentive package was facing.

Maybe, it’s no longer business as usual in America. AOC and other young people may not have money, but that doesn’t mean they can’t use power.

These corporate tax subsidy deals never add up for the cities that make them. Maybe people in other cities will learn from this NYC moment, and fight against the selling of our cities and towns to the uber-wealthy.

Now, it’s time to let go of Amazon, AOC, and Trump’s National Emergency. It’s time to get some Saturday Soothing.

Start by brewing up a vente cup of Roasting Rabbi Coffee, where the company slogan is: “Releasing the Holy Spark in Each Bean!” Try their Breakfast Blend.

Now settle into your most comfy chair and listen to Valentina Lisitsa play Liszt’s Hungarian Rhapsody No. 2, recorded live in May, 2010 in Leiden, Holland:

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

 

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The Power of Messaging

The Daily Escape:

Buttermere Lake, Cumbria, England – photo by Matt Owen-Hughes

On Monday in El Paso TX, Trump attacked Democrats, calling them:

“The party of socialism, late-term abortion, open borders and crime…To pave the way for socialism, Democrats are calling for massive tax hikes and the complete elimination of private health care…They’re coming for your money and they’re coming for your freedom.”

Trump’s focus on “socialism” is based on the few liberal Democratic presidential candidates who have called for Medicare-for-all, or environmental proposals intended to lower carbon emissions.

He brought up the “Green New Deal”, saying it would virtually eliminate air travel and that it sounds “like a high school term paper that got a low mark.”

This is just the latest stage in the war waged by the right against the ideals and programs of the New Deal. Kim Phillips Fein, reviewing the new book “Winter War: Hoover, Roosevelt, and the First Clash Over the New Deal” by Eric Rauchway, writes: (brackets by Wrongo)

Throughout the [1932] campaign, Hoover had attacked what he considered a “social philosophy very different from the traditional philosophies of the American people,” warning that these “so-called new deals” would “destroy the very foundations” of American society. As Hoover later put it, the promise of a “New Deal” was both socialistic and fascistic; it would lead the country on a “march to Moscow.”

2020 will be all about messaging. Once again, just like 88 years ago, Republicans will run on socialism. Trump will add the threats posed by open borders and abortion to the right-wing stew.

The question is what will be the 20+ Democrats who are running for president be talking about? Michael Tomasky in The Daily Beast suggests: (emphasis by Wrongo)

I am saying, though, that Democrats should stop pretending they can unite the country. They can’t. No one can. What they can do, what they must do, is assemble a coalition of working- and middle-class voters of all races around a set of economic principles that will say clearly to those voters that things are going to be very different when they’re in the White House…

There is a power to fashioning a new political coalition around the concept of economic justice. We live in a time when politicians of both parties have followed a consistent strategy: massage the economic numbers and the media, keep the rich and powerful happy, and make sure you stay on the “fiscally conservative” side of the line.

Now, a few Democrats are pushing the party elders to re-consider economic justice as FDR did in the1930s. These Democrats intuit that most Americans are trying to reconcile the life they were told they would have with today’s reality. The gulf between what they were told, and what actually happened is wide. And it looks as if it will only get wider.

Many Americans feel that they can’t pay their bills anymore, and they are afraid. Their jobs aren’t stable, they can’t look forward to retirement. About 20% say they have more credit card debt than savings. The lives they thought they’d live are upside down, and they’re not sure they can do anything about it. Quite a few followed their preachers and a few charlatan Republicans, and can’t understand why things are so scary and bad for them.

America is divided, but maybe not in the way you are thinking. It’s the left behinds and millennials who are worried about their future. And it’s both of them against the politicians, corporations and the oligarchs. As David Crosby sang:

“There’s something happening here, what it is ain’t exactly clear”

In 2020, we’ll be fighting for not just the soul of our country, but the meaning of American life: Should the one with the most toys win?

What is more important, universal health care, or outlawing abortion? Better roads and bridges, or keeping out immigrants? A better environment, or lower taxes?

Ocasio-Sanchez’s Green New Deal (GND) can easily be dismissed, but what really is the difference between how the Green New Deal might be financed, and how the Federal Reserve spent nearly $4 Trillion on its Quantitative Easing (QE) schemes?

The big difference is who profits. QE was welfare for the banks. For the GND, society at large would benefit.

You will get to decide, and plenty of people are already fighting for your attention.

Some are worth listening to. What will you choose to do?

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