Category: Transformational Ideas

Democracy Fatigue

The Daily Escape:

Fall arrives in Ouray, CO – October 2022 photo by Gary Ratcliff

Why is authoritarianism growing at home and abroad? There is a relatively new notion called democracy fatigue: Political passivity and disgruntlement that stems from the exhaustion of seeing endless politicking, but never seeing change that makes lives better.

We’ve had a constant barrage of existential crises: Covid, climate change, Russian imperialism, immigration, inflation, and growing economic insecurity. With needing to act on all of these (and a few more), the ideals of political compromise and letting everyone have their say, seem sadly dated.

On the American Right, many joke that what would make things better is a ‘benign dictatorship.’ Because democracy doesn’t get things done. Politicians everywhere are taking the opportunity to go with “the big lie”. It’s become about lying until your ideas are accepted as fact. From Heather Cox Richardson:

“After World War II, political philosopher Hannah Arendt explained that lies are central to the rise of authoritarianism. In place of reality, authoritarians lie to create a “fictitious world through consistent lying.” Ordinary people embraced such lies because they believed everyone lied anyhow.”

And distrust of democracy is growing. From Hal Gershowitz:

“…in the US, Germany, and Japan, somewhere between 20% and 40%…would embrace “a strong leader who does not have to bother with parliaments and elections.”

Hal reminds us that last April In France, Emmanuel Macron managed to once again defeat right-winger Marine Le Pen, but by a much narrower margin than in their last face off in 2017. Elsewhere:

  • In traditionally liberal Sweden, a coalition of right-wing parties, anchored by the far-right Sweden Democrats, took control of Parliament.
  • Hungary’s uber authoritarian, Viktor Orbán secured his fourth consecutive term as Prime Minister.
  • And most recently, in Italy, a coalition led by far-right leader Giorgia Meloni won and will put together Italy’s first far-right government since World War II.

Beyond these are the far-right British National Party, and the Norwegian Progress Party. While these are fringe parties, they can exert influence on whatever party leads in parliamentary democracies.

Freedom House, founded in 1941 and primarily funded by the US, also paints a bleak picture. It publishes an annual assessment of “Freedom in the World” which notes that authoritarianism is having a great run. Freedom House says in 2020, the number of countries  they listed as “no longer free” grew to the highest level in 15 years. Countries registering declines in political rights were also the highest in 15 years.

They note that a total of 60 countries suffered declines over the past year, while only 25 improved. As of today, some 38% of the global population live in Not Free countries, the highest proportion since 1997. Only about 20% of the world’s population now live in Free countries. The balance (41%) live in Partially Free countries.

The rise in authoritarianism may be due to the fact that in a sea of uncertainty, people are looking for a life raft. So they are willing to listen to and vote for those who articulate the importance of “traditional” values, and to assure them that the purported attack/assault on those values is a threat to them and their families.

The longing for benign dictatorship continues among America’s technology elites, whose denigration of politics flows from a Silicon Valley ideology that mixes libertarianism with authoritarian rule. They seem to want politics to work the way their products do: With elegant solutions implemented by smart, creative makers.

Their message is that surely, there’s a right way to get the job done: Fill the potholes, build the roads, keep our streets safe, get our kids to learn reading and math.

But whose potholes should get filled first? Should we keep our streets safe through community policing or long prison sentences? Should teachers be given merit pay, are small classrooms better, or should we lengthen the school day?

All of these issues can engender deep political fights. That’s because politics is disputes about values, not technical solutions. One person’s “right” is not another’s because people prioritize different values: Equity versus excellence, efficiency versus participation, security versus justice, short-term versus long-term goals.

Trump’s continuing control of the Republican Party is due to his ability to exploit grievance. His “America First” message continues to resonate with millions of voters who view the Democratic Party’s policies as an assault on America’s traditional values.

For the upcoming midterm elections we need to remember that constitutional democracy is not a gift from the gods.

It can be wrested away if we fail to uphold our democracy by voting this fall.

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Monday Wake Up Call – October 3, 2022

The Daily Escape:

Baxter Lake, Baxter State Park, ME – September 2022 photo by Laura Zamfirescu Photography

“We moved to a better neighborhood”. That’s the story of millions of Americans whose lives tracked toward success. In a way, that IS the American Dream, to escape from where you are to someplace better, safer, more upscale.

That version of the American Dream dovetails with our 21st century desire to be isolated from other people. We order dinner from Doordash. We buy housewares from Amazon. We buy automobiles online to avoid talking to the manager at the dealer.

Many of Wrongo’s grandkids say that they hate people, meaning that they only wish to speak with their friends, and not to anyone who might be their customer.

So is alone in a better neighborhood now the American Dream? What about billionaires? They already live in the best neighborhoods. They have battalions of staff insulating them from the rest of us. Have you ever had a meeting with a multi-billionaire? It isn’t an easy thing to do. Over the years, Wrongo has worked for two of them, and they were perfectly fine individuals. But they were completely insulated.

And they made their money the old-fashioned way, inheriting it from their Robber Barron parents.

Today’s mega-rich have mostly found ways to extract value from consumers and businesses via software. Take a look at Bloomberg’s Billionaires Index. It’s a list dominated by people who have made money from the digital technology revolution.

And what are they doing with all this wealth? Many are quietly plotting their own survival against the world’s demise. Wrongo heard an interview with Douglas Rushkoff, author of “Survival of the Richest: Escape Fantasies of the Tech Billionaires”. Rushkoff is Professor at City University of NY, also a founder of the Laboratory for Digital Humanism, and a fellow at the Institute for the Future.

Rushkoff explained that billionaires worried about the end of the world know their money will likely be of little value. They’re thinking about political instability, social breakdown, and environmental catastrophe. A number of the world’s richest people are preparing for these events by building bunkers in New Zealand and in other remote locations. From Rushkoff:

“Most of these guys that we think are going to save us are actually wishing for the apocalypse. This is not just something that they fear. It’s something that at this point they’re ready to bring on.”

The book came from a meeting between Rushkoff and five billionaires at a desert resort. The topic? How to survive the catastrophe they know is coming. More from Rushkoff:

“And they spent the rest of the hour asking me really to…test their survival strategies…Do we go underground? Do I get an island?….What about space? And we ended up spending the majority of the hour on the single question, How do I maintain control of my security force after my money is worthless?…..because they’ve all got this money, they’ve…contracted Navy SEALs to come out to their compounds. But then they’re thinking, well, what do we do if our money’s worthless, then why are the Navy SEALs not just going to kill us and take all the stuff?”

Remember the back-yard bomb shelters of the 1950s: With that threat, how big would you want your bomb shelter to be? How luxurious and well-guarded? If the world were destroyed, you would try to live in that shelter full-time. Same thing with these billionaires.

Think about it: They want to use 21st century technology to revive a 13th century social order and impose it on the land and people who live around their protected fortresses. Missing from the plans of tech billionaires? Ideas to stop authoritarianism, decrease inequality, heal social divides, or slow climate change. Rushkoff explains:

“Even if we call them genius technologists, most of them were plucked from college when they were freshmen….They came up with some idea in their dorm room before they’d taken history, or economics, or ethics, or philosophy classes, and so they lack the wisdom needed to oversee their own perverse amounts of wealth.”

So maybe we shouldn’t rely on these guys to protect our future. In fact, Rushkoff says that these people who have the most power to change our current trajectory have no interest in doing so.

At this point in human history, making money is all that matters. In capitalist societies your worth is directly correlated to how much money you have. Everybody understands this. Billionaires are the most prominent symptom, but they aren’t the disease. Capitalism is the disease.

Time to wake up America! There is absolutely zero downside to relieving these people of a big slice of their wealth and putting it toward rehabbing our society. To help you wake up, watch, and listen to Carlos and Cindy Blackman Santana lead a Playing for Change global group of musicians in “Oye Como Va”:

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Europe’s Vulnerability To Russian Gas

The Daily Escape:

Morning light – Norbeck Pass, Badlands NP, SD – July 2022 photo by Rick Berk Photography

After imposing sanctions on Russia for their invasion of Ukraine, Germany and all of Europe are now facing an energy crisis unlike ever in their history. Gas deliveries from Russia have been halted altogether, exposing the dependence of European energy consumers on pipelined gas from Russia.

Strategically, Germany’s dependence on Russia is a muddle. Germany has depended on Russian natural gas since the Cold War. And it steadily increased its reliance on Russian gas while reducing alternative sources of energy such as nuclear power, even after Russia invaded Ukraine in 2014.

On September 5th, Russia said it would close its Nord Stream I pipeline for as long as Western sanctions are in place. This initially sent gas prices higher by 30%. They currently stand at around $400 expressed as the equivalent of a barrel of oil.

The energy shock has morphed into a political and economic shock. In Germany, steelmaker ArcelorMittal is shutting down a plant in Bremen. Germany is spending €65 billion (1.8% of GDP) on measures including a price cap on electricity for households and firms.

France has enacted a retail price freeze for energy. French gas prices are frozen until at least the end of 2022, and the rise in electricity prices is capped at 4%.

Now, 14% of families in England are behind on their utility bills. The UK’s prime minister Liz Truss unveiled a plan to freeze prices for two years, which could cost more than £100 billion (4.3% of its GDP) and will be financed through government borrowing.

But the threatened loss of Russian gas also caused European governments to make big changes by lowering demand and lining up new gas supplies. That has lowered gas futures prices. From Wolf Richter:

“The front-month October TTF contract in the Netherlands – a benchmark for northwest Europe – plunged by 8% on Monday from Friday, and by 44% from the peak on August 26, to €191.02 per megawatt-hour (MWh) at the close today…”

On the supply side, the Netherlands has started operations of two floating liquefied natural gas (LNG) import and storage terminals in the port of Eemshaven. These floating storage and regasification units (FSRU) receive the LNG, store it, re-gasify it, and then send the natural gas via pipeline into the land-based distribution network in the Netherlands, from where it can be further distributed throughout Europe. Three more FSRUs are planned.

Germany had failed to build a single LNG import terminal as an alternative to Russian piped gas, but it has now chartered five FSRUs, three of which will start operating this winter. Germany has also been filling its gas storage facilities at record pace. They are currently 87.9% full, according to Gas Infrastructure Europe. For the EU overall, storage facilities are 83.6% full, well above the EU’s 80% target.

Strategically, Germany (and the EU) can’t simply return to the old normal once (IF) Ukraine hostilities end. Germany’s vulnerability to its natural gas dependence on Russia has irrevocably shaken up the economies and politics of Germany and most of Europe.

Germany seems to have finally figured this out. In the short run, (2-3 years) the consequence will be that Germany’s and EU’s consumers and industrial users will face natural gas prices that are much higher than they were two years ago. Higher-cost LNG will be a larger part of the energy mix, with low-cost pipeline natural gas from Russia a smaller part.

As Wrongo said recently, Russia cannot easily sell all of the natural gas that it’s not selling to Europe, because the pipelines can’t be moved overnight. And Russia has no LNG export facilities linked to its production sites. So Russia will have to cut some production at these sites and will lose the revenues associated with that lost production.

Also in the short run, Europe’s governments will struggle to balance relief for its citizens against letting energy prices rise high enough to discourage use. These governments are scrambling to find alternative sources while cutting consumption as deeply as they can. But winter is coming, and if they aren’t able to find successful workarounds, economic growth will slow, and European voters may demand that their governments drop sanctions on Russia.

That is a political problem that Russia hopes to exploit this winter.

Europe’s response to the Russian invasion of Ukraine has exposed both its vulnerability to Russian gas, and also the poor strategic decisions that it and Germany have made over several decades: to take the cheapest, simplest solution to Europe’s growing energy needs.

Russia is hoping that it will gain some leverage in the diplomacy regarding an endgame in Ukraine and the anti-Russia sanctions regime this winter.

And like always, regardless of the outcome, no politician will be harmed while playing this game.

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Tuesday Wake Up Call, Unhappiness Edition – July 26, 2022

The Daily Escape:

Smoke in Yosemite Valley from the nearby Oak fire – July 25, 2022 photo via Today’s California

At a family party this weekend, my daughter who owns an upscale restaurant, mentioned that while post-Covid, the restaurant is full again, the patrons are much more mean and nasty. That made Wrongo revisit the answers to the latest data on the happiness of Americans from the General Social Survey (GSS), produced by NORC, a nonpartisan research organization at the University of Chicago.

The GSS has been monitoring societal change since 1972. The last GSS survey came out in January 2022. Here’s a significant chart:

Since 1972, the GSS has asked the question: “Taken all together, how would you say things are these days–would you say that you are very happy, pretty happy, or not too happy?” As you can see above, historically the “very happy” people have outnumbered the “not too happy” group by about 3:1 for about 45 years.

But in 2021, the very-happies plummeted from 31% of the population in 2018 down to 19%, while the not-too-happies surged to 24% (the “pretty happys” remained constant at about 57%). For the first time in polling history, Americans are more likely to say they’re not happy than to say they’re very happy.

The Institute for Family Studies (IFS) has taken a look at the GSS data to see what’s driving this precipitous change. Here’s their chart of unhappiness by age:

Until 2018, fewer than 18% of Americans ages 35 and over claimed to be “not too happy”, while fewer than 16% of Americans under 35 had done so. But in 2021, unhappiness rocketed upwards for both groups, to 22% for those 35 and over, and to 30% for those under age 35.

The sharp increase for those under 35 indicates young adults are carrying a unique burden. They’re taking an extraordinarily dim view of the world and their own lives.

Among young adults, different groups had different levels of unhappiness even before Covid. For example, only 6% of married people said they were “not too happy,” versus 16% of the unmarried. The question is whether all groups saw the same spike in unhappiness. Here’s another chart from the IFS:

Unhappiness rose for every group: In each case, the red bars are higher than the blue bars.

In the GSS, social class didn’t protect people very much: Unhappiness rose about 16% for people with prestigious jobs vs. 15% for other people. People who attended college saw their unhappiness rise by 16% vs. 15% for people who didn’t attend college.

Some demographic traits did matter: Men saw their unhappiness rise 18%, vs. 12% for women. Unhappiness rose about 17% for non-Hispanic whites, vs. 12% for racial and ethnic minorities.

Religion seems to have buffered unhappiness. Among people who attended religious services at least two times per month, unhappiness rose only 4%, the smallest increase of any group.

Liberal Americans saw the largest increase in unhappiness of any group, by 19%. For moderates, it was 15%, and for conservatives, 13%. Despite what Tucker Carlson might try to make of this, the IFS says that given the sample sizes involved, those differences aren’t statistically significant.

We can blame the Covid pandemic for much of the increase in unhappiness, but we’ve also seen huge social disruption. Here’s a chart showing the percentage of 25-34 year-olds living with parents or relatives in the US:

In 1970, 11% lived with their parents, while in 2020, it was 29%. Note the decline in living with a spouse. From 80% to 38%. While people are getting married later, living alone is relatively unchanged since 1980.

This has occurred during a period when there was very little upside in real wages, and a huge increase in financial assets, which few young adults have, and in the cost of housing. This may also partially explain why young people are unhappy.

We’re about to head into a global recession and most of our politicians have zero idea how bad it will be, or how to fix it. When it comes to the midterm elections, nearly a third of voters say it doesn’t matter who wins.

Time to wake up America! We’re hoping that demography will save us before climate change slays us, or fascism overtakes us.

To help you wake up, listen to 9 year-old musical prodigy Ellen Alaverdyan perform a cover of Geddy Lee‘s iconic bassline on the classic Rush song “Tom Sawyer”:

Scroll away from the video, and she sounds like a pro. Very nice!

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Thoughts on Alito’s Draft Opinion

Daily Escape:

Chama River, near Abiquiu, NM – 2022 photo by James C. Wilson

Wrongo’s last column spoke about how the Republican Party had become the Party of White Christian Nationalists. And that was before the draft opinion overturning Roe v. Wade was leaked to the world. It seems that this likely decision is a key example of how radical Christians are assuming a political role in America that isn’t dissimilar to the Taliban’s in Afghanistan.

Justice Alito’s draft opinion reinforces the view that there’s a very dangerous Christian movement afoot in our nation. It’s not enough for them to live in a country where they are completely free to practice their own religious beliefs. They require the rest of us to live by their religious code, too.

Two thoughts: First about the Court’s legitimacy in the eyes of the public when they overturn a 50-year-old precedent. The Editorial Board of the WaPo summarized the damage to the legitimacy of the Court that Justice Alito is likely to inflict:

“The Court’s legitimacy rests on the notion that it follows the law, not the personal or ideological preferences of the justices who happen to serve on it at any given time….What brought the Court to its current precipice was not a fundamental shift in American values regarding abortion. It was the [result of] shameless legislative maneuvering of Senate GOP leader Mitch McConnell, who jammed two Trump-nominated justices onto the Court.”

For some time, you’ve been able to predict the votes of Supreme Court Justices by knowing the Party of the president that appointed them. That is particularly true if the issue is either overtly political or a Culture War proxy for Republican Party doctrine.

The American people want to believe the law is fair and impartial, because everyone wants to live in a just and predictable society. But this isn’t what Conservatives want. Their so-called love of religion and love of authority move them to reduce or eliminate voting rights, and now, to eliminate women’s rights.

Second, Wrongo thinks that the Conservative Court has gone a political bridge too far. Most polls show that the rights granted in the Roe v. Wade decision are broadly popular, even among Republicans. And Americans have lived with those rights for almost 50 years, assuming it was an inviolable Constitutional right, you know, like owning a gun.

Heather Cox Richardson says that the Supreme Court has never before taken away a Constitutional right. That means there will certainly be a political backlash against those who have supported this attack against women specifically, and against privacy rights in general.

Pew reports that women are more likely than men to express support for legal abortion (62% vs. 56%). And among adults under age 30, 67% say abortion should be legal in all or most cases, as do 61% of adults in their 30s and 40s.

This describes the foundation of a political movement: Young women as the vanguard of an anti-Republican crusade (pardon the Christian pun). We also know that young people historically have had the lowest voter turnout, dating back to the 1960s. Here’s a graph showing what percentage of women have voted by age group:

Source: Stastia

It was only in 2020 that very young women reached the 50% turnout level for the first time in 50 years. They still lag all other age groups in voting. This means that a wealth of untapped political power lies waiting to be flexed this fall, and overturning Roe is the spark that can light the fire.

Add to that Black and Hispanic women who according to a Guttmacher Institute report are, respectively, three and two times more likely to have an unintended pregnancy than white women. Nationally, Black women had 37% of abortions, white women had 34%, and Hispanic women had 22%. Black women are also more than three times more likely to suffer a pregnancy-related death compared to white women.

Pew also reported that two-thirds of Asian (68%), and Black adults (67%) say abortion should be legal in all or most cases, as do 58% of Hispanic adults.

All of this creates the basis for a national political movement to defeat anti-abortion candidates at local, state, and national levels. Think about how a young woman like Mallory McMorrow who spoke so effectively against the Republican Culture War, could be a leader in the fight.

Larry Sabato’s Crystal Ball lists seven states that offer the biggest potential for a Democratic backlash driven by abortion rights: Arizona, Georgia, Michigan, New Hampshire, North Carolina, Pennsylvania, and Wisconsin. Each of these states has a highly competitive gubernatorial or Senate race on tap for this fall, and several of them have two.

Before you say it’s impossible, remember that in Ireland in 2012, the death of a young woman who had been denied a medically necessary abortion became a rallying cry for the abortion rights movement. In 2018, this Catholic country held a referendum to change their Constitution to legalize abortion, which passed with over 66% support.

The non-Christian-radical path forward is via the ballot box, where women should be poised to lead us to a rebuilt society. Even as the Roberts Court and Republicans turn their backs on the Constitution, we must still embrace it.

The Roberts Court’s radical Christian majority is, intentionally or not, administering a fatal blow to the Court’s legitimacy.

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Will Sanctions Hurt the Dollar’s Role in Trade?

The Daily Escape:

Cherry Blossoms, Univ of Washington, Seattle, WA – March 2022 photo by Erwin Buske Photography

One of the most important elements in the undeclared war between the West and Russia is how sanctions are changing both international trade and the international payments system.

The West has basically frozen Russia out of both. First, by taking Russia out of the SWIFT payments messaging system, and second, by sanctioning Russian banks and the Russian Central Bank. Third, by seizing Russia’s currency reserves that were held in the West.

All of this means that Russia can’t easily accept dollar/euro payments for exports and then convert them into rubles for use at home. By losing access to the international currency markets, it’s become impossible for Russian businesses exporting their energy, goods, or commodities to get paid. This may be a historic moment in economic history.

By freezing hundreds of billions of dollars of Russian reserves, the Russians no longer can access those dollars or euros. Sanctions mean that even the dollars and euros they could create through trade cannot buy much in the countries that support the sanctions.

Naturally Russia is looking for work-arounds for this dilemma. Selling the West anything in dollars or euros no longer makes sense: They can’t use them at home without exchanging them for rubles. And sanctions make that very difficult, since they’re closed out of our banking system.

There are two ways around this. Either use Russian banks that are not banned from SWIFT or go through an informal third-country currency exchange. Russia’s first effort is to only accept payment in rubles for its exports to “hostile nations”. That is, those nations who have imposed sanctions because of Ukraine.

In order to buy Russian oil and gas which they desperately need, Europeans will have to pay in rubles. That means either selling dollars/euros for rubles or selling them for yuan (China) or rupees (India), two countries that are not part of the sanctions regime.

The West’s move has the potential to upend the world’s trading system which today relies on payments in dollars. The dollar has been the world’s principal reserve currency since the end of World War II and is the most widely used currency for settling international trade. The dollar represents about 62% of global trade, down from much higher levels before the euro was established. The other important currencies are the euro at 20.1% and the Japanese yen at 5.7%. China’s yuan is at just 2.0% of trade settlements.

It is increasingly likely that Russia’s move will result in a further “de-dollarization” of trade. Recently, there have been new attempts to abandon the dollar. Saudi Arabia and China are planning to use the yuan in a new oil deal. Russia and India are negotiating to pay for trade in rupees.

China’s energy trade with Russia uses the dollar. Chinese energy imports from Russia soared 47.4%, an increase of more than $52.9 billion from 2021. This accounts for more than 65% of China’s total imports from Russia. Since the sanctions, both countries have stated their intention to move more of this trade to yuan.

A new multilateral financial system is emerging before our eyes. Who the participants will be, and what rules they will follow, are up in the air. The dollar will remain primary between the US and its allies, but alongside it, there could develop Russia-yuan, Saudi-yuan and India-yuan arrangements for trade in oil, minerals, and industrial products. Shifting just part of the global oil trade into the yuan is potentially huge. Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s GDP last year.

We’re likely to see more trade occurring in more currencies, probably on a number of exchanges. We will see the world realign into different trading and monetary blocs, like there were in the past.

However the Ukraine war is settled, the Russian claims that the US has shot itself in the foot about the dollar’s dominating role in trade has a ring of truth. In the past, the US took Iran’s reserves after the Shah was overthrown. We froze Afghanistan’s foreign reserves earlier this year and now the West has done the same to Russia. A few years ago, the UK froze Venezuela’s gold in the Bank of England.

These systems are built on trust, and for the next few decades, trust may be lacking. So we’re looking at the possibility that there will be two quite different geo-political philosophies operating as trading partners as the non-US world develops its alternatives to the dollar as the world’s dominant trading currency.

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Increased Demand is Causing Price Inflation

The Daily Escape:

Pueblo Bonito, Chaco Canyon, NM – November 2021 photo by James C. Wilson. It’s difficult to hire stone masons this good today.

 “If Americans are feeling glum, they sure are engaging in some retail therapy.”— WSJ’s “Heard on the Street” columnist Justin Lahart

We’re in a period of unclear signals. Every poll says that Americans believe inflation is high and the economy is bad. But unemployment is low, GDP growth is high, and people are buying things like crazy:

“The Commerce Department…reported that sales at stores, restaurants and online rose 1.7% in October from a month earlier, better than the 1.5% economists expected. Additionally, estimates of August and September retail sales were revised upwards. Sales were broadly higher across most categories, with gains at department stores, electronics and appliance stores and online retailers in particular…”

This led economists to revise their fourth-quarter GDP estimates higher. JPMorgan Chase now forecasts GDP will grow at a 5% annual rate in the fourth quarter, versus its previous 4% estimate. The news wasn’t all terrific, as restaurant and bar sales were flat in October versus a month earlier. That might be an indication of cooler weather keeping diners at home as outdoor seating arrangements became less comfortable.

Overall, this dynamic growth in retail sales stands in contrast to the University of Michigan’s consumer sentiment survey that fell in early November to its lowest level in a decade.

How to explain what’s going on? People have some savings. Some people have higher wages, and both seem to be having a greater influence on how much people are willing to spend than price increases are having on how they feel about Biden’s job performance.

Claudia Sahm argues that some of the savings are due to government checks, and it was worth it:

“2021 began with economists arguing about $1,400 stimulus checks. Americans got them, but they got higher inflation too. Even so, the checks were very good policy.”

She compares the government’s reaction in the Covid crisis to their reaction during the Great Recession. This time, Congress went big:

“In 2008, Congress enacted one round of stimulus checks, totaling about $110 billion. During the first year of Covid, it sent out three rounds at close to $1 trillion dollars. A family of four got $11,400, which is about 20% of median family income.”

Here’s a chart showing the difference between the two policy approaches. Sahm plotted the value of the payments against the trend of personal income during both recessions:

The three rounds of stimulus checks provided relief to the families whose lives Covid disrupted and it helped bolster the economic recovery by creating jobs. The Covid relief paid the bills. Stimulus helped bring back paychecks.

Most people spend most of the money they make. With smaller take-home money during the crisis, many Americans made a dramatic cut in their spending. And big cutbacks in spending in an economy driven by consumers, led to big layoffs. So, the policy decision to put money in people’s bank accounts was key to keeping the Covid recession as short-lived as possible.

Clearly, the fast recovery came with a cost. Inflation is higher today than it has been in 31 years. But don’t let the inflation doom-sayers fool you: consumer spending, even after taking inflation into account, has been increasing even as millions are out of work.

New Deal Democrat shows us that total activity through the big Southern California ports is breaking records, and yet as we know, they still can’t keep up with the increased import demand:

Despite increased container handling capacity, this explains a great part of the current supply chain bottleneck since the global supply chain is incapable of handling a sudden jump in consumer demand. It partially explains why goods shortages and price pressures have mounted. That, in turn, is pushing up prices. The NYT quoted Aneta Markowska, chief financial economist for Jefferies, an investment bank:

“It’s the demand in the first place that’s causing prices to move higher…There is a supply shortage, but it’s not because of bottlenecks. It’s because we’ve had this big shock to aggregate demand and supply can’t respond quickly enough.”

There are still plenty of logistics bottlenecks. Yes, we’re buying much more stuff, and paying more for it. But households were sitting on a collective $2.5 trillion in savings built up during the pandemic. And millions of jobs have come back, so spend they will.

The Covid recession was a sharp and steep one, the deepest since the Great Depression. But the speed of recovery has been very fast, due in large part to the policy decision to put checks in people’s pockets.

This time, government worked for us.

Let’s have a Thursday tune. Everyone has heard 1981’s “Under Pressure” a masterpiece by Queen and David Bowie. It was covered by Fall Out Boy as part of ABC’s Queen Family Singalong on Nov 4. Lead vocalist Patrick Stump tries to sound like both Freddie Mercury and Bowie. Read the words and you’ll understand why Wrongo offers it today:

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Climate Change Summit, Part II

The Daily Escape:

Mt. Princeton, Buena Vista, CO – October 2021 photo by Haji Mahmood

Biden sees the Glasgow Climate Summit as a legacy event that will bring about substantive change. But nobody believes that. Change doesn’t occur easily, and in the case of climate change, the forces arrayed against it are overwhelming.

Corporations will not give up profits easily. Individuals will not willingly pay more for goods once companies jack up their prices to maintain margins. Countries will try desperately to avoid being the first to bend the CO2 curve, knowing that their economic growth will slow precipitously.

Sometimes a change in culture has to occur before political change can begin. Think about the civil rights movement in the 1950s and 1960s, or the anti-war movement in the early 1970s. Those great political changes were built on a foundation of cultural change. One came from Black churches, and the other from college students.

We’re in the middle of a 2-year Covid debacle on top of a 13-year economic debacle. Before the Great Recession, if people weren’t making it, they (and everyone else) thought the problem wasn’t America’s politics or our economic system, but it was mostly about their laziness or lack of skills. Back then, we believed that anyone could make it. Few thought the system was rigged, and there wasn’t a widespread push for serious change.

Now, young people are tumbling to the fact the problem isn’t them – it’s the system. Think of it as a game of musical chairs, where the people sitting down never stand up when the music plays. From Ian Welsh: (Brackets by Wrongo)

“They [the young] think, ‘it’s you, not me’ where ‘you’ = society and politics. They may have…student loans, but they know boomers paid….[only] a nominal amount for university. They know they can’t afford a home or apartment, not because they don’t earn enough, but because wages have effectively gone down, and real home prices have gone up….They know medical care is too expensive and that drugs didn’t used to cost nearly this much.”

Young people are beginning to understand that without political change, their lives aren’t going to get better. In fact, they will probably get worse. This is true for the climate as well as for the basic inequalities in our society.

We need a political revolution to change these things, but America’s political system doesn’t like big changes. It does enable smaller cultural and political changes all the time. Our politicians give us intermittent reinforcement: They are amenable and sometimes eager to serve up limited forms of change, but not what most people want, or what the planet needs.

And the longer we rely on today’s politicians to save us, the farther we will be from the changes we need. Our political system is very resistant to change, as the prolonged debate over Biden’s social spending bill shows.

And there’s no political will at any level to change the system.

Still, it has to change, or it will self-destruct. When you are at Wrongo’s advanced age, the temptation is to say, “the future is hopeless.” But America’s youth will soon replace the elders in both political parties. They will not be staying quiet.

What must happen is a cultural change that a significant portion of the population will buy into. It doesn’t have to be everyone, but it has to be compelling to at least a 10%-20% minority which can then influence the other 80%-90%.

We live in a culture that values greed, power, and control over other people’s lives. So, the new culture must be built on a different set of values. Insisting on a different set of values is something we can all do both individually and collectively.

The Trumpists have attempted this with middle-aged White Americans. Steve Bannon knew that change must first happen culturally, that the culture has to want it, or at least allow it. But so far, the Trumpist appeal seems limited to 30% of the population.

The other 70% are on the sidelines, waiting for a reason to believe in something else.

If you doubt that young people can have an outsized impact, watch “The Children Will Rise Up!” an climate change anthem written by Nandi Bushell, who gained social media fame as a drummer, and Roman Morello, son of Rage Against the Machine’s Tom Morello. Here these two 10 year-olds perform with cameos by Jack Black and Greta Thunberg:

Sample Lyric:

They let the earth bleed to feed their greed.
Stop polluting politicians poisoning for profit.
While they are killing all the trees, now we all can’t breathe
As the temperature’s a rising, nothing is surviving.

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Monday Wake Up Call – IRS Funding Edition, March 22, 2021

The Daily Escape:

Slot Canyon, Grand Staircase Escalante National Monument, UT – photo by chipotle42

Today we turn our attention to the IRS. David Sirota wrote in the Daily Poster that new IRS figures compiled by Syracuse University show that in the past eight years, there was a 72% drop in the number of IRS audits of people making more than $1 million.

Last year, 98% of individuals making more than $1 million didn’t face an audit. At a time when Americans face growing economic inequality, the IRS is letting billions of dollars in tax revenue slip through its fingers because budget and staffing cuts have left the agency incapable of effectively auditing the 637,212 millionaires now living in the US. It’s worth noting that the number of American millionaires has increased by 88% since 2012.

What’s more, the IRS audit focus has shifted from the wealthy to the poor. A large group of progressive organizations sent a letter to the Biden administration saying: (emphasis by Wrongo)

“Since 2011, audit rates for millionaires, who are disproportionately white, have dropped more than twice as much as for taxpayers claiming the (Earned Income Tax Credit), who are disproportionately people of color. Audit coverage is now the heaviest in many low-income majority-Black counties.”

A recent Treasury Department report concluded that at the IRS:

“…high-income taxpayers are generally not a collection priority, nor is there a strategy in place to address nonpayment by high-income taxpayers.”

As evidence, the report showed that the agency failed to recover more than 60% of the $4 billion in back taxes owed by those making more than $1.5 million.

At the same time, overall enforcement has been hobbled by draconian budget reductions that have resulted in 43% fewer IRS revenue agents and 26% percent fewer IRS criminal investigators in the last decade:

There’s also been a 51% drop in the number of audits of America’s largest corporations. Sirota says that in 2012, almost all of our corporate behemoths were audited. However, in 2020, only about 38% were audited.

There are two separate problems here. First, the IRS budget has been cut dramatically by Republicans. Between 2010 and 2018, the IRS’s budget was slashed by more than 20%, and its enforcement budget has been cut by 24%, according to the Center on Budget and Policy Priorities, leading to the substantial reduction in IRS agents shown above.

A July 2020 report from the Congressional Budget Office found that increasing funding for IRS enforcement by $40 billion would boost revenues by more than $100 billion over the next decade. From Sirota:

“To that end, Reps. Ro Khanna (D-CA) and Peter DeFazio (D-OR) — both Congressional Progressive Caucus members — have recently introduced separate bills that would boost the IRS’s enforcement budget and audit rates.”

Khanna’s legislation would increase IRS enforcement funding by $70 billion and require the agency to audit 95% of large corporations, 50% of individuals reporting more than $10 million of annual income, and 20% of individuals reporting more than $1 million of income. Sounds about right.

IRS referrals for criminal prosecution and Justice Department tax convictions have both hit an all-time low. The US is estimated to be losing roughly $600 billion/year in revenue from unpaid taxes, while wealthy taxpayers are evading or avoiding paying their fair share. Better enforcement will produce revenue and bring renewed respect for our legal system.

We must have more tax revenue, and while Rep. Khanna’s bill would go a long way toward making things right, we also must raise our corporate tax rates, and the IRS must reassess its audit priorities.

We can’t be auditing more poor people than millionaires.

Wake up America! It’s time to stop our largest corporations and our wealthiest individuals from skating out on their tax responsibilities. To help you wake up, listen to the Tedeschi Trucks Band performing  “The Sky is Crying” at the Royal Albert Hall. Performing at the Royal Albert seems to bring the best out of American groups. Here’s another great example:

Some prefer the Stevie Ray Vaughn version, but this is at least as good.

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HR 1 Must Pass in the Senate

The Daily Escape:

Florida Beach – photo by Wrongo. Most years, we’re in FL looking at the ocean this week. That’s another thing cancelled by Covid.

The House passed HR 1, the “For the People Act,” an omnibus voting rights, and ethics and campaign finance bill. If passed by the Senate and signed by Biden, the legislation would set national standards for federal elections, require nonpartisan redistricting, and put the brakes on hundreds of bills introduced by Republican legislatures across the country to limit ballot access in the wake of Democrats gaining control of Congress and the White House.

Jonathan Last says that Senate Democrats now must make three calculations as they decide whether to take up the legislation:

  1. Do they have the votes to pass it?
  2. Do they have the votes to break the filibuster?
  3. If the answers to (1) and (2) are yes, should they move forward?

Let’s assume for the sake of this discussion that the answers to (1) and (2) are yes. Then, of course they should move forward! Last observes that:

  • We have one party with a small—but clear, and durable—majority.
  • We have another party that has given up on trying to create a majority and instead has retreated into attempts to use systemic leverage—of both geography and anti-democratic gerrymandering — to preserve power for their minority.

Last says the only counter to the Republican’s efforts to game the system is to use the system to create more democracy — to lessen the points of leverage available to Republicans.

So, the Senate must pass HR 1. That expands voting. It moves the leverage away from politics and for the first time in America, towards the people. Last brings up a NY Magazine interview with David Shor, where he says:

“Since the maps in the House of Representatives are so biased against us, if we don’t pass a redistricting reform, our chance of keeping the House is very low. And then the Senate is even more biased against us than the House. So, it’s also very important that we add as many states as we can.”

So, if Democrats can kill the filibuster and pass HR 1, a next step is to bring up statehood for DC and Puerto Rico. Republicans will howl, but as Last says, if the Dems have learned anything in the last four years it’s that there are only two relevant questions when Congress acts:

  • Are you explicitly forbidden from doing something by the black letter of the law?
  • Do you have the votes to do it?

If the answer is No to the first and Yes to the second, then you can do it. That is exactly what Republicans did every time in the Trump era. Remember Merrick Garland, and Amy Coney Barrett? Remember that members of the Trump administration refused to testify in front of House committees?

Remember too that the Constitution allows Congress to add states by simple majority vote. If Democrats have the votes, then they can also do that. Republicans aren’t the only Party who can use the political leverage available in our system.

The difference would be that Republicans have used that leverage to empower electoral minorities, while the Democrats in this case, could use that leverage to empower electoral majorities.

Vote suppression is the Republican’s default position. They have become truly authoritarian, despite continuing to give lip service to the Constitution and to democratic principles. January 6 taught us that the only election reform Republicans will unanimously accept is one that declares its candidates the winners regardless of the election’s results.

To do any of this, the Senate Democrats need to be united, and that is the most important test for new Majority Leader Chuck Schumer. Sen. Amy Klobuchar (D-MN) laid out the case for getting rid of the filibuster:

“We have a raw exercise of political power going on where people are making it harder to vote and you just can’t let that happen in a democracy because of some old rules in the Senate…”

Schumer’s task is to corral Democrats Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ). Surely, they see the Republican Party’s antidemocratic bad faith. The Republican Party is no longer republican.

As Wrongo has said before, Jan. 6 should have shattered any illusions about the intentions, not just of Trump and his dead enders, but about the Republican Party’s allegiance to our Constitutional republic.

Democrats must act accordingly. And as soon as possible.

The course of action available to them won’t be an option in 2022 after the GOP passes all the voter suppression legislation that they now have pending.

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