Category: Transformational Ideas

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.

Facebooklinkedinrss

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:

Facebooklinkedinrss

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.

Facebooklinkedinrss

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.

Facebooklinkedinrss

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.

Facebooklinkedinrss

Monday Wake Up Call – What’s Next Edition

The Daily Escape:

Chamisa plants near Abiquiu, NM – photo by zuzofthewolves

(Publishing of daily COVID-19 data is on hold while Wrongo tries to understand inconsistencies in the data)

Trump isn’t wrong to begin thinking about what comes next. At some point, we will again poke our heads out of our burrows, and feel the warmth of sunlight. We’ll attempt to resume the life we had before the virus struck. There are two risks in this: First, will we be back in the swing of things too soon? And second, what should we demand be different, given what the nation has experienced?

In Trump’s view the answer is simple. He wants most people back to work in time to have a robust economy come Election Day. He’s targeted May 1st as the start date for his governor buddies to begin revitalizing the economy.

Once again, the Trump administration is showing itself to be utterly incapable of dealing with this crisis.

He’s moving the country to re-open, despite warnings from public health officials and from most state governors. Here’s a germane comment on Wrongo’s Saturday’s column by long-time blog reader Terry McKenna:

“We really know so little. To begin with, we don’t know how the virus spreads. We are learning but that’s all. In the beginning, we guessed wrong that it was not spread by healthy (asymptomatic) persons. Doctors disagree over the size of the droplets that carry the virus. So we are almost like we were before we had the germ theory where all we can do it isolate.

Also “test” is a simplistic word. Which test? We need a test that tells a clinician that someone had the virus in his system, and a test with a fast result is essential. But a negative test means little, especially in a healthy (asymptomatic) person, because in the absence of a vaccine, that person could be infected next week or next month. So we need a test of antibodies – but even still, we don’t know how long immunity lasts.

And then we have the notion that the president can order the country back to work. Even if a business reopens, who will come? And yes, I know someone will, but imagine the NY Mets having their opening day May 15. Will anyone show up? And if they do, will we see a spike in sickness a few weeks later?

We need time for the science to do its work. We may get lucky, viruses do became less virulent over time (sometimes to re-emerge with vigor).”

A partial re-opening of those portions of the economy that are now shuttered is a risk both to the workers, and to the returning customers. Terry is right to ask if we’ll see a spike in sickness a few weeks later, and if we do, what will be Trump’s plan then?

Broadening out our view, many are starting to think about what needs to be different post-pandemic. As we emerge from this crisis, we have a rare opportunity to focus on change: Do we want a Star Trek, or Blade Runner future? A utopian, or a dystopian one?

As Viet Thanh Nguyen said in the NYT:

“Our real enemy is not the virus but our response to the virus — a response that has been degraded and deformed by the structural inequalities of our society.”

We have a once-in-a-generation opportunity to rebuild for tomorrow. Or will we just prop up the economic and political process that has given us today’s problems? As an example, if we don’t want sick and contagious people trying to go to work, America must have paid sick leave.

During the lead up to passing the CARES Act, Democrats in Congress recognized this, but at the behest of business lobbies, the Act exempted 80% of all workers, including all those working at firms with over 500 employees AND those working at firms with under 50 employees!

Here’s an illuminating chart:

And in America, add $600 for four months for 20% of our workers. This is post-Reagan America. Assistance to the poor and working class is given grudgingly, and with strings attached. The rich and corporations are showered in subsidies since they are too virtuous and important to let fail. MAGA really means “Make Americans Grovel Again”.

What has to die after Covid-19 is the myth that America is the best country on earth. We’re not as healthy as we thought we were. The symptoms — racial and economic inequality, callousness and selfishness, have been covered up by our unquestioned acceptance of American Exceptionalism.

We’ve lost our right to that view, despite the many, many small acts of heroism every day by health workers and all the “essential” hourly workers who face becoming infected every day.

Facebooklinkedinrss

Is Warren’s Medicare For All Plan Realistic?

The Daily Escape:

Gros Morne National Park, Newfoundland, CA

Let’s talk about Sen. Elizabeth Warren’s recently announced Medicare for All (M4A) plan. She, along with other 2020 presidential candidates have endorsed some form of M4A. Bernie has a plan. Yang has a plan. Mayor Pete has a plan, called “M4A for those who want it”. Biden is against M4A, pushing an extension of Obamacare instead.

The multiple Medicare for All proposals are unclear to most of us.  Presently, Medicare is primarily a government program for older people that pays a portion of their medical expenses. Participants pay premiums. Medicare Part B pays about 80% of medical expenses. The participant either pays the remainder or, has a supplemental secondary insurance.

Medicare for All is a single payer, government-pays-all concept.

One part of Warren’s (and Bernie’s) plan is forcing people who have private insurance to move to the M4A coverage. According to the US Census Bureau, 66.1% of the population had private health insurance in 2018. Of that number, 217.8 million are covered by private plans, of which 178.4 million are insured through their employers, so that means 218 million Americans would have to move from their current plan to a plan that doesn’t yet exist

In rough terms, the US spends about $4 trillion a year on health care, split almost evenly between government programs and the private sector. The $2 trillion in private-sector costs are also split roughly in half, with about $1 trillion each spent by households (premiums, and out-of-pocket money) and by employers (their share of premiums).

To pay for her plan, Warren needs to raise $2 trillion in government revenue to replace the spending of the private sector. She starts with the $1 trillion that employers are spending and requires them to redirect this money to Medicare via a per-worker fee.

Finding the other $1 trillion is trickier. Warren raises taxes on corporations and the wealthy, whose taxes have declined significantly in the past 30 years. Even after all of the increases she has proposed, tax rates on the rich would still be lower than during the Eisenhower administration.

In addition, by the time M4A had taken the place of private insurance companies, Warren thinks that 2 million jobs would be lost in the health insurance business, and other health-connected services. The principle purpose of a health insurance company is to pay for people’s health care needs. Its goal isn’t employment of workers. Most who would lose their jobs can always transfer those skills to another sector.

As long as the total number of patients doesn’t decrease, we won’t be seeing laid-off doctors or nurses.

Warren’s plan is a detailed policy road map. It’s not draft legislation, but there’s enough detail to write the bill, making it the first time a presidential candidate has gone beyond the arm-waving we usually see around single-payer. Whether you like her plan or not, her focus clarifies the debate.

The best feature is the plan’s aggressive approach to cost control. We can question whether the plan’s too optimistic: it may be unrealistic to get all of the cuts to health care administration, drug costs, and bend the overall growth curve of health care costs by as much as she’s assuming.

The NYT’s David Leonhardt makes the point about the least popular aspect of M4A: the fact that it replaces private coverage. Warren isn’t letting people opt into Medicare, she would force them to join:

“The biggest weakness of Warren’s approach is that it tries to bulldoze through the sizable public anxiety about radical changes to the health care system. Warren would not let people opt into Medicare, a wildly popular idea. She would force them to join.”

Warren makes the point that not all who have private coverage love their health insurer. It’s clear that Americans are far less happy than citizens of peer countries that have universal coverage. But even if not really popular, doing away with private health care will be disruptive.

Also, we’re not as healthy as those in countries with universal coverage. In particular, life expectancy is much lower (the US ranks 37th world wide), and we’re paying far more per capita for health care than anyone else.

“Free enterprise” health insurance simply isn’t working for Americans, and the dissatisfaction is real.

Can we do better? Is Elizabeth Warren’s plan the right amount of aggressive change, or would a more incremental approach be more palatable to voters in 2020?

Wrongo likes Elizabeth Warren and many of her positions. Her goal of fixing a broken health insurance system is right on, including her drive to cut health care costs aggressively. But her plan to eliminate all private health insurance is divisive, and may not bring about the desired goal of universal coverage.

Facebooklinkedinrss

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.

Facebooklinkedinrss

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.

Facebooklinkedinrss

Terror Delivered Via Joystick Is Here

The Daily Escape:

Winter sunrise, Mt Hood, OR – 2019 photo by dontyakno

The Russian company that gave the world the AK-47 assault rifle, the Kalashnikov Group, unveiled its KUB-BLA drone at the International Defense Exhibition and Conference (IDEX) in Abu Dhabi on Feb. 17.

This won’t be the first small-sized drone to be used in warfare. ISIS has already shown the ability to carry an explosive drone payload to a target. In January 2018, a swarm of 13 explosives-laden mini-drones attacked two Russian bases in western Syria. Each of those drones carried 10 one-pound bombs under its wings.

So, technology has again revolutionized warfare, this time by making sophisticated drone warfare technology widely and cheaply available to terrorists and under-resourced state militaries. Not a surprise that it is from the company that gave the world the AK-47, an automatic rifle that “democratized” infantry warfare.

The KUB drone is simple to operate, effective and cheap, according to Kalashnikov. Sergey Chemezov, chairman of Russia’s state-owned Rostec arms manufacturer, which owns Kalashnikov said:

“It will mark a step toward a completely new form of combat…”

The KUB is 4 ft wide, can fly for 30 minutes at a speed of 80 mph and carries six pounds of explosives, said Rostec’s news release. That makes it roughly the size of a coffee table that can be precision-guided to explode on a target 40 miles away, making it the equivalent of a “small, slow and presumably inexpensive cruise missile”, according to the National Interest website.

Apparently, the target market is third-world militaries.

KUB is similar in design to Israel’s truck-launched Harpy drone, which has been on the market for at least 25 years. The Harpy is jet-propelled, and much heavier than KUB-BLA. It carries a 51-pound warhead, and is in the hands of militaries in Azerbaijan, Israel, Kazakhstan, Turkey and Uzbekistan.

The Harpy is designed to fly for long periods, “loitering” above enemy territory.  A single Harpy reportedly costs around $70,000. A KUB will be substantially cheaper, possibly around $7,000, so an operator could purchase hundreds of KUBs and deploy them by the dozen to swarm enemy defenses.

The US wants its own suicide drone. The Air Force is developing what, in a burst of bureaucratic naming creativity, they call “The Low Cost Attritable Aircraft”, (LCAA). In 2016, they awarded Kratos, a San Diego drone-maker, a $41-million contract to design and demonstrate what the government described as a “high-speed, long-range, low-cost, limited-life strike unmanned aerial system.”

The low cost part is estimated at $3 million each, making it clearly an American product designed to much less expendable that a Harpy, and far more costly than a KUB. So, think fewer swarms and less US suicide usage than the drones of our competitors.

This means we have now entered the age of terrorism by joystick. The Pentagon understands the risks, and is seeking $1 billion for counter-drone measures in its proposed 2019 budget.

While there are limits to the damage a cheap suicide drone can do, the psychological effects of a small, but successful attack could far outstrip the actual physical damage. Imagine three suicide drones diving into the crowd at the Super Bowl. America would probably never play football outdoors again.

This is an unwelcome development that was also inevitable. Military planners have wanted air-to-ground weapons that were cheap, and liberated from the need to protect a human pilot.

A fleet of low-cost micro-bombers could be decisive in intra-state warfare, civil wars, and the kind of popular unrest that we experience today. Weapons like the KUB will undoubtedly find a home in the arsenals of various countries, particularly as the technology continues to improve.

The point though isn’t what one of these could do, but rather, what thousands of them might do. Soon, Russia, China and the US will be producing a mass market, cheap and destructive drone.

What could go wrong?

Facebooklinkedinrss