What’s
Wrong Today:

What is
America’s corporate tax rate? According to the Tax
Foundation, it is 39.1%, the highest in the world:

The
reality is that they pay nowhere near that rate. According to a report by the General Accounting
Office, (GAO) the effective tax rate in 2010 was 13%:

The stated
rate is reduced by large domestic corporate tax breaks and by the ability of
multinationals to keep foreign profits offshore and free from US taxes, both
are permitted by various laws passed by the best Congress money can buy.

In fact, Bloomberg, that bastion of socialist news
coverage, reports
that US multinationals have parked $1.95 trillion of profits offshore (you can see a detailed infographic at the
above link). GE leads the parade, with $110 billion, followed by Microsoft with
$76 billion. 22 companies hold $984 billion, while another 285 companies hold
an additional $963 billion.

So, how
did this happen? As Yves
Smith says: (brackets by the Wrongologist)                           

The
implied tradeoff for the country and our social contract was clear: Give corporations bigger tax breaks and the
economy will grow faster and the average person will be better off. But
that plan hasn’t worked out:

Source:
davecokerblog

Private
domestic investment has dropped like a stone since 2006, two years before the
start of the domestic crash, and today it is at 2003 levels. Right-wing pundits
have maintained that we will not see employment return to the pre-crash levels until
we cut taxes further to unleash the power of business to create more jobs, and Republican
policymakers have dutifully followed that script.

And what
are corporations doing with their big offshore cash hoards? They are investing it in the US stock
market. Take a look at this
chart (gated), at the Financial Times
by Andrew Smithers:

The chart
shows net buying and selling of equities by corporations, institutions, households
and global investors. The purple color reflects buying by corporations, and the
purple bulge since 1997 reflects how
the US stock market has been driven almost entirely by corporations buying
stocks.

What funds
have they used to jump into the market so strongly? It’s largely the offshore
cash that they hold.

So companies
have not lived up to their half of the “lower our taxes and we will grow the economy”
bargain. Instead, they have been feathering their nests by using their cash to
buy back their shares. Here is another chart from Smithers:

This chart
compares US Corporate investment as a percentage of their cash flow (Left axis
and blue line) with US Corporate buybacks of their own shares (right axis and
red line).

Buybacks
are at historic highs and investment is at historic lows in the post WWII
period. As The FT’s Smithers
writes: (emphasis by the Wrongologist)

So, large
corporations continue to find it more attractive to game their stock than compete
in their marketplace, and they are using their offshore cash hoards to play the
game.

Congress
has built a foundation for the corporate elite to continue looting. Corporates
have used some of their cash to make sure that Congress continues to listen to their
needs and votes correctly. Meanwhile, ordinary citizens contend with a hostile
job market, where total employment is still less
than it was in 2007. They have little reason to hope that their financial
condition will improve.

Welcome to
the paradise of oligarchs and corporatists.

We should
be discussing whether or not we are prepared to live in what looks like a neo-feudal
country, dominated by an entrenched oligarchy. The Occupy movement tried to bring attention to this
situation, but, since they were inarticulate and not schooled in media spin, no
one listened. Now what? Today there is no dissident movement, no political
opposition to the status-quo, and Republicans may be poised
to take control of the Senate in November.

What sort
of society do we want to live in? This is one of the basic questions we must
answer, and unless we get better politicians, the beatings will continue.

The issue
should not be only about corporate growth and investment, but also about how well
corporations (which are socially
sanctioned entities) are working to move us toward being the society we
want to become.

Viewed
from this standpoint, it is clear that corporations and their Congressional
supporters are at war with the rest of us, and with the society we need.

We can safely come to some
conclusions. Politics in America is largely determined by dedicated interest
groups that play for keeps. We can’t keep crying that “it’s not fair”, while arguing
that politics is about “issues”. The people have to do something.

America, you citizens and voters: How
about actually “doing” something that brings about a change? How about voting for true reformers in November?

It shouldn’t just be true in college basketball that an underdog can win, it should also be true for a few underdogs in our Congressional elections.

You will never have democracy in
America while big business buys both parties and expects a payoff whichever one
wins – Tony Benn

This
week, we remember Tony Benn, British radical and Member of Parliament for 50
years. Benn told
filmmaker Michael Moore:

Bill Moyers
spoke about Benn’s pop quiz. Benn explained it in 2001, during his farewell speech to the House of Commons:

RIP Tony Benn. He foresaw this Koch Brothers
board meeting:

Fred Phelps, leader of the Westboro
Baptist Church, known
for its virulently anti-gay protests at public events, including military
funerals, also died. If
there is one man who can be credited for the success of the gay rights movement,
it’s him:

We continue to obsess about the
missing plane:

Putin dials heat up to 11:

Putin‘s brackets reflect different kind of March
Madness:

What’s
Wrong Today:-

Yesterday
we reviewed the “prize” that is Crimea. Today we turn to the “prize” that is
Ukraine.

Foreign Policy Magazine reports that Ukraine has
deep internal divisions. Among the leaders of the three opposition parties with
whom European diplomats negotiated the February 21st Agreement was Oleh Tyahnybok. He is the leader of
the extreme right-wing Svoboda (Freedom), an
anti-Russian, anti-Semitic party that wants Ukraine for ethnic Ukrainians who
speak Ukrainian (which would exclude about half of the population). Svoboda
obtained 12% of the vote in the 2012 parliamentary elections.

Until
2005, Svoboda bore the name “National-Social” and had as its symbol
the “wolfsangel,” emblem of
certain Nazi SS units. In 2012, the European Parliament appealed to the democratic
parties of Ukraine to not associate or form alliances with Svoboda. But Svoboda
also has competition on its right from a smaller but more violent group: the Right Sector, led by Dmytro Yarosh, a long-time
fascist activist.  

Despite
all of this, the EU and the US conferred legitimacy on Svoboda and the Right
Sector. This March, the US State Department published a debunking of Putin’s
“False
Claims About Ukraine,”
assuring Americans that Ukraine’s far-right “are not represented” in
parliament.

Svoboda’s members
now hold several ministerial positions, including Vice-Prime Minister, Minister
of Defense, and Prosecutor General (responsible for upholding the constitution
and other laws). The Right Sector’s Yarosh has become Assistant Secretary of
the Council for
National Security and Defense. The Secretary of that Council is Andriy Parubiy, a longtime
far-right activist. Recently, Prime Minister Yatsenyuk dismissed three
Assistant Ministers of Defense for their refusal to integrate the Right
Sector’s militias into Ukraine’s regular armed forces.

For the first time since World War
II, neo-fascists hold posts in the national government of a European state. And they do this
with the blessing of the Western democracies.

Ukraine’s
economic situation:

The
West’s plan has been to sever the Ukraine economy from Russia. The plan began
in 2004 with the Orange Revolution, but was not fully realized. The February 22nd
coup represents the completion phase of that separation, a plan to sever
the Ukrainian economy from Russia. The
Orange Revolution in 2004 and the overthrow of Yanukovich in 2014 are not discontinuous
events; they are linked and part of a continuum.

According
to Counterpunch,
the next step is an IMF package for Ukraine, and additional funding from the
European Union and the US. The IMF deal is still in development, but it will be
the third deal between the IMF and Ukraine:

• In
  2005: $16.6 billion in loans

• In
  2010: $15.1 billion in loans

The
2010 IMF deal slowed Ukraine’s economy, as it required a 50% increase in retail gas prices and corresponding cuts in gas subsidies. That
significantly reduced aggregate consumption by Ukrainian households and slowed
the economy. So did IMF demands for reductions in government spending, another precondition
for the $15.1 billion 2010 IMF package.

The
IMF deal in December 2013 was reported to require that household subsidies for
gas be reduced by 50% once again. Other IMF requirements included cuts to
pensions, government employment, and a commitment to privatization of (that is,
letting Western corporations purchase) government assets and property. 

The
new $15 billion IMF deal represents less than the $20 billion the Ukraine said
it needed last December, before its currency fell 20% and its foreign exchange
reserves fell to less than $10 billion. It is substantially less than the $35
billion the new interim prime minister, Yatsenyuk, asked for.

The
latest Ukrainian GDP (2012) figures show its GDP was equivalent to $335 billion
if adjusted to PPP, (purchasing power parity) terms. Household gas subsidies
reportedly amounted to 7.5% of GDP in 2012. That’s about $13 billion in
nominal terms. If the pending IMF deal reportedly requires a cut of gas subsidies
of 50%, that’s about $6.5 billion taken
out of the Ukrainian economy. 

So
the $15 billion IMF funding will result in only a net $8.5 billion to the
Ukranian economy. Importantly, a significant share of the $15 billion IMF loan will go to western banks, especially
in Austria and Italy who have problem loans in Ukraine.

It
gets worse: Severing Ukraine from Russia may be a pipe dream since, according
to Trading
Economics, more than 60% of Ukraine’s exports go to Russia and other
former Soviet Republic countries, including Kazakhstan and Belarus.

Military Support for Ukraine:

This
brings up the question of the 1994 Budapest
Memorandum, between Russia, the UK, the US and Ukraine. It obligates
signatory states to:

• Respect
  the independence and sovereignty and the existing borders of Ukraine

• Refrain
  from the threat or use of force against the territorial integrity or political
  independence of Ukraine

• Pledge
  that none of their weapons will ever be used against Ukraine.

The
signatories are required to “seek immediate United Nations Security Council
action to provide assistance to Ukraine” only in the event of an act of
aggression “in which nuclear weapons are used.” As one international law
scholar puts it:

Now that
Russia has violated the Budapest Memorandum, is there any possibility that the
other signatories will make any military move beyond exercises?

In
fact, according to Reuters,
Ukraine’s new leadership is not seeking membership in
NATO, said Prime Minister Arseny Yatsenyuk in comments intended to reassure Russia and Ukraine’s
large number of Russian-speakers.

Despite Yatsenyuk’s statement, there is an emerging
view in Europe that NATO has to be
active in Ukraine. The NYT
reports that Anders
Fogh Rasmussen, secretary general of NATO, said on Wednesday that the alliance
was considering providing assistance to Ukraine to help deter Russia from another
military intervention there:

He
noted that the foreign ministers of the NATO alliance will decide what to
provide at a meeting on April 1-2. Drumbeats came from Adm. James G. Stavridis,
who led NATO’s military command until he retired last year. He said:

NATO
will hold military exercises in Ukraine this summer. They were announced before
the current dust-up with Russia, RT reports, and US
military will call the shots in the exercise that will bring together some
1,300 Western forces in Ukraine.

According
to the US forces in Europe website, Rapid Trident 2014 is designed to:

Here we
are, once again hip-deep in a crisis of our own making. A crisis that has
driven serious domestic issues, like jobs and inequality right off the front
page of our news outlets. Crimea and the bad Russkis are a better topic for our
corporate and political overlords.

We say they started it, while they say we started it.

It’s more of the “keep the
rubes confused while we keep on stealing”.

Once again,
America has used “democracy” and 60 year old anti-Russian memes in a clumsy and
wrong-headed effort to beat Putin to the draw.

What’s
Wrong Today:

Today
and tomorrow we will look at the geopolitical and economic dynamics that will
play out in Crimea and Ukraine. Starting with Crimea, the NYT gives some insight
into the situation on the ground:

David
Herszenhorn continues: (emphasis by the Wrongologist)

Herszenhorn
interviewed Russia’s regional development minister, Igor N. Slyunayev, who
said:

Yes,
he did say “our” Crimea. Slyunayev went on to say:

Russia
is facing its own fiscal challenges. Revenue growth from oil and natural gas is
projected to slow precipitously, and the Kremlin confronts big bills from
salary increases for the police, the military and other public workers. Time
Magazine reports: (brackets and parenthesis
by the Wrongologist)

There
is no overland transportation link between Russia and Crimea, and building a
bridge across the shortest waterway, near the Crimean city of Kerch, could take
years and cost an estimated $3 billion to $5 billion. Keeping Crimea stocked by
air and sea can be done, but it will be costly and more difficult.

Turning to
the European Union, it is clear that most members are very dependent on Russia
for energy imports, which limits their actions against Russia. Some in the financial
media are willing to acknowledge that the EU can’t afford to implement very strong
sanctions against Russia over Crimea, and Bloomberg quotes them as saying outright that there’s not much more that the West
can do:

It’s a sad
day in America when you have to get your honest news from the pigs at Goldman
Sachs, B of A, and Morgan Stanley.

But Russia
has not been standing still geopolitically. It has finished the final stage of the
East Siberia-Pacific Ocean (ESPO) Pipeline in 2013. Here’s Oil Price, describing what the new pipeline means:

There is geopolitical
significance to the new pipeline in terms of any possible additional sanctions
in the West: The pipeline makes Russia’s Far East a major Asian oil player,
positioning it to become a strategic transit point for oil to Japan, China, South
Korea, the Philippines, Singapore and Taiwan.

That means
Russia has built even more leverage over Europe.

Mr. Putin’s
decision to annex Crimea has pluses and minuses for Russia. It is a province
that likely would have remained Russian even after the breakup of the old
Soviet Union if Khrushchev hadn’t given it to Ukraine. It is a province that is
unable to support itself, but one that is a long-term strategic asset,
militarily. It has some untapped oil and gas reserves to draw upon, but they can
hardly be developed in a short enough period of time to be of value to Crimea or to the
Russian economy as a whole. That will take a decade or two.

Its major economic
sector is tourism, and European and Baltic tourists are going to stay away for
awhile.

This is a
geopolitical situation that saber-rattling and stare-down contests can’t
possibly win, but maybe, time will show it to be a bad decision for Mr. Putin.

The
West had only one bad option regarding Mr. Putin’s Crimea incursion, and that was a
military confrontation. The idea that financial sanctions and visa restrictions
would somehow stop Putin from doing whatever he wanted was fanciful to say the
least. Mr. Obama’s decision not to go to war with Russia or impose truly serious
sanctions over Crimea is a smart one, as is his decision to let our EU allies
bear the brunt of the saber-rattling. That allows Mr. Obama to play a long game, seeing if Putin
can manage the Russian economy past a difficult point, while also propping up
Crimea.

All
of that in the face of some sanctions and political isolation.

It he can
do both, Mr. Putin wins a limited victory. If he can’t, the West can give him enough
rope to hang himself at home.

Tomorrow,
we focus on Ukraine’s domestic situation, and some of the implications for the
US.

What’s
Wrong Today:

The United
States’ social insurance system has always been a public-private hybrid, but conservatives have dreamed of returning to a
world where private social insurance and private charity fulfills all public social
safety net needs ever since the passage of the Social Security Act
in 1935. But, according to an article by Mike Konczal in Democracy, that world never existed. The article
draws on serious historical research to make two main points:

• There
  never was a Golden Age of purely voluntary charity

• What
  charitable support mechanisms existed completely collapsed with the onset of
  the Great Depression

Konczal outlines the desire of conservatives to return to private or
voluntary insurance: (brackets by the Wrongologist)

In
the past 30 years, there has been a continuing effort by Republicans to privatize
much of the safety net, including social security. When Ronald Reagan was challenging Gerald
Ford for the GOP nomination in 1976, during a press conference at Daytona
Beach, Reagan made
this comment about Social Security:

More
recently, we saw similar efforts with President George Bush I’s “thousand
points of light”, followed by George Bush II’s 2005 plan to partially privatize Social Security,
and now, Rep. Paul Ryan’s
and the Republican Party’s platform: Path to Prosperity.

Despite Republican
longing for the old days, there are sound economic reasons why public social
insurance is superior to charity and private solutions. The goal is to protect
people against risks of unemployment, health emergency, and outliving one’s
savings. For risk-mitigation programs to work, several things are necessary.
One is that people are actually covered. This is something you can’t have with
a private system (unless it’s regulated to the point of being essentially
public), since charities or insurance
companies get to pick and choose who they want to help. Konczal says of
private agencies before the Depression: (emphasis by the Wrongologist)

Any safety
net must have the assurance that the system will have the financial capacity to
actually protect people in the event of a crisis. That’s why you don’t depend
on your neighbors to rebuild your house if it burns down. They may not like
you, they may not have enough money — especially if you lose your house in a
fire that burned down the entire neighborhood. Finally, it’s important to know
that more than half
of total private charitable donations go to religious organizations, private
schools, and medical organizations, with
only 12% going to human services organizations.

Private social
insurance cracked after the Great Recession in 2008. According to the US Census,
employer-based health-care coverage has
declined from 64% of the workforce in 1997 to 56% in 2010. Private savings vehicles are a poor substitute
for social security. They don’t look capable of providing the safety net in old
age, since the typical 401(k) holding was just $83,000 in
2013.

Importantly, private charitable
giving failed to meet the challenge of the Great Recession. The start of the Great Recession should have been the exact moment
when private charity could have made a huge difference. But, private giving
fell as the Great Recession started. Overall, giving fell 7% in 2008, with
another 6.25% drop in 2009. Using the yardstick of charitable giving measured
as a percentage of GDP, charitable giving fell during the Great Recession (even
as GDP shrank), from 2.1% in 2008 to 2.0% in 2011. The high point in the ratio was
2.3% of GDP in 2005.

All of this didn’t hurt
as much as it might have, because of the role of “automatic
stabilizers”. Automatic stabilizers are federal programs such as
unemployment insurance and food assistance that maintain an income floor when
people lose their jobs. These stabilizers, in turn, also decline automatically
as the economy starts to recover. During 2009, automatic stabilizers expanded
rapidly, from 0.1% of GDP to 2.2% of GDP, more
than all charitable giving in the US in that year. This was directly
targeted at areas that suffered from the most unemployment, and helped those
most in need—something that private charities cannot do.

Alongside the
government’s efforts to prevent the collapse of the banking sector and the Fed’s
expansion of monetary policy, automatic
stabilizers were a core reason the Great Recession didn’t become a second Great
Depression.

But social insurance
isn’t just a collection of socialist programs. It’s a reflection of who we are as
a people and how we intend to navigate the risks of our age. It establishes a
baseline of equality among all citizens, so that charity can serve to enhance
the lives of the less fortunate instead of forcing them to rely solely on the good will of those
with big bucks.

Contrary to the
idealized imaginings of conservatives, Mike
Konczal’s article amply
demonstrates that the Four Horsemen of accident, illness, old age, and
joblessness won’t be—and have never been—fended off with purely private programs.

 

What’s
Wrong Today:

Wrongologist
blog reader Shelley suggested a column about the “Texas Miracle” on the day
that the NYT had this
story about Texas water rights. Apparently, Texas allows corporations to
pretty much take water away from people who own it: (brackets and emphasis by
the Wrongologist)

And
the commission agreed, exempting 66 towns and electric utilities for health and
safety reasons, even
though hundreds of farmers and others who lost their water held more senior
rights. So a big
corporation got the water. The Texas miracle often favors big business over the
little guy.

Last fall,
economist Tyler Cowen tried to make the case that “Texas is our Future” in Time
Magazine. Cowen observed that more Americans are migrating to Texas than
to any other state. He said:

The idea that vast numbers of
Americans are “voting with their feet” for liberty and prosperity by abandoning
blue states and moving to Texas has become a conservative gospel, but the answer to the question of whether Texas is America’s
future depends on your political orientation as much as the facts on the
ground.

Phillip Longman in the Washington
Monthly deconstructed some of the migration data. He indicates that according to Census Bureau data,
441,682 native-born Americans moved to Texas from other states between 2010 and
2011. Sounds like a lot. But 358,048 Texans left their state behind during the
same period.

The net domestic migration of
native-born Americans to Texas came to just 83,634. It’s the demographic
equivalent of Germantown, Maryland (population 86,395) “voting with its feet”
and moving to Texas.

What
about job growth? Time reported on the
Texas boosterism of Richard W. Fisher, president of the Federal Reserve
Bank of Dallas:

To be
sure, Texas has more minimum-wage jobs than any other state, and only
Mississippi exceeds it with the most minimum-wage workers per capita.

According
to the Dallas Fed, only 28% percent of the jobs created in or relocated to
Texas since 2001 pay in the lowest quarter of the nation’s wage distribution.
By comparison, jobs paying in the top half account for about 45% percent of the
new jobs in Texas. The most obvious question about Texas
job growth is how much is driven by the
boom in Texas oil and gas production? Texas boosters say the Texas
economy is more diversified than in the 1970s. Yet, oil and gas account for a
rapidly rising share of the Texas economy.

Thanks to
fracking and historically high world oil prices, Texas oil production increased
by 126% between 2010 and 2013. Only a few years ago, Texas’s oil production had
dwindled to just 15% of US output; by May of last year it had jumped to 34.5%. Texas
accounts for 27% of US natural gas production, which is more than the
production of any nation except Russia. That creates jobs outside the oil
patch. A recent issue of Texas
Monthly reported that, in sleepy towns like Cotulla, the population
has more than tripled in the past two years, and no fewer than thirteen new
hotels have opened to accommodate the influx of oil rig workers.

Finally,
between 1998 and 2011, the percent of Texas GDP from oil and gas extraction
more than doubled, according to the US Dept. of Commerce. Meanwhile, despite
the hype about high tech jobs, the share of the Texas economy produced by the
information, communications, and technology sectors is 27% smaller than it was in 1998.

Texas has
a growing population, but inward migration has been quite modest. Texas
population has boomed due to two main factors: immigration from abroad, mostly
Mexico, and a birthrate that is the second highest in the nation after Utah.

From
Longman:

But
regardless of its source, population growth fuels economic growth. It swells
the supply and lowers the cost of labor, while at the same time adding to the
demand for new products and services. The population of Texas swelled by more
than 24% from 2000 to 2013, as did the demand for just about everything, from
houses to highways to strip malls. And this, combined with new flows of oil and
gas dollars, plus increased trade with Mexico, favored Texas with strong job
creation numbers.

Within
Texas, their (few) liberal legislators have updated a publication every year
since 2003 entitled “Texas
On the Brink” which provides rankings that point out the state’s deficiencies,
such as being last in the percentage of the adult population who graduated from
high school while being first among the states in carbon dioxide emissions and
in the share of the population lacking health insurance. Here are a few lowlights:

Education:

• Elementary and Secondary Public School
  Enrollment: 2nd (they have the 2nd largest population)

• Percentage of Population Graduated from High School: 50th

Health Care:

• Percent
  of Population Uninsured: 1st (highest # of uninsured)

• Percent
  of Non-Elderly Uninsured: 1st (highest # of uninsured)

• Percent
  of Low Income Population Covered by Medicaid: 48th

Environment:

• Amount
  of Carbon Dioxide Emissions: 1st (highest)

• Amount
  of Hazardous Waste Generated: 1st (highest)

Democracy:

• Percent of Voting-Age Population Registered to Vote: 47th

• Percent of
  Voting-Age Population that Votes: 51st

Migrate to
Texas! Just don’t be old, sick, poor, a woman, non-Christian, union, non-white,
a child, want to vote, or need an abortion.

The real
Texas miracle is that its current leaders get away with bragging so much about it.

 “I can hire one half of the working class to kill the other half” – Jay Gould

A cynic might say that the trumped up “vote” in Crimea and voting in the US are not that far apart. No, we don’t have mob violence or killings as a part of our process, just voter suppression and Citizens United. We laugh at those immature democracies abroad that just do the bidding of oligarchs.

Bottom line is, we’re on our way to joining that club. America has sold its soul to the corporations’ bottom line, and we got a good price. “We” got a good price, depending on how you define we. We, in this case, means ‘not you.’

How was the payout distributed? Among the makers and takers. The makers made the deal and took the profits, while the takers took it on the chin. When we look back on the period 1980-2020, the headline will be the corrosive impact of wealth disparity. Now, we are surprised at what happened. We also seem surprised that an airliner can disappear, when an entire middle class has gone missing without explanation. We say, “But, you can’t fight City Hall with a ham sandwich”.

We used to be a nation of shared prosperity. We are now an oligarchy. And power follows money, and back again, through an unbreakable feedback loop. Use the quote above by Jay Gould, one of our original oligarchs, to write this Sunday’s homily.

Crimea’s Referendum:

Putin takes a bite of Ukraine, likes the taste:

NSA acts like an oligarch @ home:

Obama: Oligarch or not?

Oligarchs press advantage against the poor:

Enjoy St. Patrick’s Day. Just don’t drink and drive:

What’s
Wrong Today:

As
John Kerry ends his
meeting today with Russia’s Foreign Minister Lavrov with no progress, it is
time to review a thread that has emerged from the last 10 days of posturing in
the US about Russia’s energy threat to West.

The US
Department of Energy (DoE) said that it would sell
5 million barrels of crude oil from the Strategic Petroleum Reserve; a move it
said was to test the capabilities of the nation’s emergency stockpile in a
rapidly changing oil market, (meaning Ukraine and Russia’s threat to cut flows
of gas to Europe).

It would
be the first sale from the reserve since 1990.

Oil
Price.com reports that after Russia’s occupation of Crimea, many in the
West wondered if it were possible to unleash
America’s natural gas abundance to reduce Europe’s dependence on Russia
for over 30% of its natural gas supply. Moscow has used this leverage in the
past to extract political concessions, and Gazprom, Russia’s gas
behemoth, has threatened to cut
exports to Ukraine should it fail to pay its gas debt.

To many,
the answer to the specter of Russian natural gas dominance is clear: unleash
America’s natural gas.

This
sentiment was crystallized in a John Boehner Op-Ed in the Wall Street Journal last week, which
called on President Obama and the DoE to accelerate approvals for
new LNG export terminals and to open up America’s natural gas supplies to
export. Boehner claimed that not only can the United States match Russia in the
European energy marketplace; it has an
obligation to do so.

The DoE has
approved
six applications for terminals
to export liquefied gas; five are in Texas and Louisiana, and one in Maryland.
A further 24 applications are pending.

Boehner
and other top Republicans are calling on the administration to expedite their
approval. Hard talk from the Boehner:

From last
Friday’s Guardian:

No
surprise that the oil industry and Republicans smell opportunity. But, would
American natural gas exports help shift the European balance of power?

In
short: no. From Oil Price:

Mr. Boehner
ignores two important facts: First, most of those contracts are in Asia, where
natural gas prices are higher than in Europe. Second, the US does not sell
natural gas, corporations do. Why would these
companies voluntarily lose money in order to advance American interests? They
wouldn’t.

Those
businesses are most likely to sell the gas where they will get the greatest
return. Landed (includes costs of delivery by tanker) LNG prices in Europe
range between $10 and $11 per MMBtu (one million BTUs), while the price in
Asia is $15 or higher.

Mr.
Boehner should have also considered that the gas liquefaction process adds
between $4 and $6 to the price of natural gas, and that the benchmark price for
American natural gas spiked to over $7 per MMBtu in the beginning of March due
to our abnormally cold winter.

At these
prices, it would be hard for American producers to compete with European prices
even if they wanted to.
Mr. Boehner’s call (and that of other Republicans) for “helping” Ukraine and Western
Europe offers nothing to solve the current problems with Russia.

Boehner
might have been on solid ground if the argument was to export crude
oil  or possibly, coal
to Europe. That might work quickly to dampen Moscow’s regional clout, but natural
gas exports cannot tip the geopolitical energy scales anytime soon. It might
happen in 5-10 years.

It
is amazing to see the extent to which the foreign policy of our nation can be
subverted to serve corporate interests. Why are we yammering on and on about
Ukraine? Have we done anything about China interfering in Tibet? Or about China
and its clash with Japan over the Diaoyu (or Senkaku, depending on your side in
the dispute) islands?

We
are hip deep in Ukraine because of the neoconservatives who have
specialized in modern imperialism for profit. The class that now manages Washington
have been unceasing in their efforts to achieve their geopolitical goals. Those
include Russia’s encirclement, and direct military intervention, as we have
done in Grenada, Panama, Serbia, Iraq, Afghanistan and Libya.

For
those readers who think this little rant is over the top, here are 3 words to
consider: “Operation Iraqi Freedom”.

That’s
what in Orwellian doublethink, America’s government called 12 years of interference
in Iraqi to keep a supply of oil from falling into, or staying in, the wrong
hands. Interference, with thousands killed on our side and millions displaced
on the side of the Iraqis.  

What’s
Wrong Today:

Low literacy is a persistent problem
among adults in the US. Results from the National Assessment of Adult
Literacy (NAAL), available through the National Center for Education Statistics, found that more than 32 million adults have “Below Basic”
literacy skills. That means they can’t read. This translates to nearly
1 out of every 6 adults, age 25 and older. 

The methodology used to determine reading
levels measures the percentage of adults who perform at each of four
achievement levels: Below Basic, Basic, Intermediate, and Proficient. 13%
percent of adults were at or above Proficient (indicating they possess the
skills necessary to perform complex and challenging literacy activities) while
22% of adults were Below Basic (indicating they possess no more than the most
simple and concrete literacy skills).

This has profound implications for our
economy, both in its impact on social safety net costs, and on long-term unemployment
in America. Here are a few facts about illiteracy in America:

• Percent
  of US adults who can’t read: 14%
• Number of US adults who can’t
  read: 32 Million
• Percent
  of US adults who read below a 5th grade level: 21%
• Percent
  of high school graduates who can’t read: 19%
• Percent of prison inmates who
  can’t read: 63%

According
to Begin
to Read, there is also a linkage between illiteracy and poverty. 43% of
adults at the Below Basic literacy skills level live in poverty compared to
only 4% of those at the Proficient skill level. Moreover,
3 out of 4 food stamp recipients perform in the lowest 2 literacy
levels, while 90% of welfare recipients are high school dropouts. Consider that
49% of 4th graders eligible for free
and reduced-price meals scored below “Basic” on the NAEP reading test,
while 40% of 8th graders eligible for free and reduced-price meals scored below
“Basic” on the test.

It gets
worse. Illiteracy is highly correlated with criminal behavior:

• 85%
  of all juveniles who interface with the juvenile court system are functionally
  illiterate. (Functional illiteracy
  is reading and writing skills that are inadequate to manage daily living
  and employment tasks that require reading skills beyond a basic level)

• More
  than 60% of all prison inmates are functionally illiterate

• Inmates
  who receive literacy help have a 16% chance of returning to prison, while 70%
  who receive no help are recidivists. This equates to taxpayer costs of $25,000
  per year per inmate and nearly double that amount for juvenile offenders

• Over
  70% of inmates in America’s prisons cannot read above a fourth grade level

Finally, we
are not improving. The
US is the only country among 30 OECD free-market countries where the current generation is less well
educated than the previous one. Consider these facts:

• More than 1.2 million people drop
  out of high school each year

• 16
  to 19 year old girls at the poverty level and below, with below average reading
  skills, are 6 times more likely to have out-of-wedlock children than their
  reading counterparts
• Among 4th graders, 53% of African
  American students, 52% of Hispanic students, and 48% of American Indian
  students scored below the “Basic” level on the NAEP reading test
• Among 8th graders, 44% of African
  American students, 41% of Hispanic students, and 37% of American Indian
  students scored below the “Basic” level on the NAEP reading test
• The number of high school seniors
  who read at or above “Proficient” has been declining since 1992

According to Reading is Fundamental:

According to Begin to
Read, 66% of students who cannot read proficiently by the end of the 4th
grade will end up in jail or on welfare. 78% of them will not catch up by the
time they graduate.

The problem isn’t
simply that the Internet and TV have supplanted books in the lives of children
and adults. To a great degree, this is
a class and income inequality problem. If not fixed, the government will feed
40+% of Americans for the rest of their lives, since in the 21st
century economy, there are no jobs for people who cannot read. A more literate (and
better educated) population will improve our standard of living. Solving illiteracy also offers
other benefits:

• Higher rates of employment and
  better wages
• Increased voter participation,
  volunteerism and civic engagement
• Better health and more effective
  healthcare, since more people will be able to read and follow doctors’
  instructions and prescription directions

Many organizations,
both government and non-government, are working the problem, but are falling further
behind each year. It’s time to realize there is a linkage among illiteracy, income
inequality and low economic growth, all of which disproportionately impact the
poor. These factors are part of a negative feedback loop, reinforcing each
other, while sustaining a huge drag on our economy, our international
competitiveness, and our standard of living. If you compare and contrast our struggles with data from websites similar to upskilled.edu.au you can see that more needs to be done to improve the education system in the US.

It’s time we move aggressively
to solve income inequality as part of solving illiteracy.

What’s
Wrong Today:

The
more things change, the more they remain the same. We are beginning Cold War II (CWII)
with Russia, butting heads in several places in the world, none more important
this month than Ukraine. It brings to mind CW I. Here is a little history from
that time:

In 1952,
an American attaché in Moscow was fiddling with a shortwave radio when he heard the voice
of the American ambassador dictating letters in the Embassy, a few buildings
away. Although the Americans tore the walls out of the Ambassador’s office,
they weren’t able to find the listening device.

The broadcasts continued, so the Americans flew in two technical experts with special radio
finding equipment, who meticulously examined each object in the Ambassador’s
office. They finally tracked the signal to the wooden sculpture of the Great
Seal of the United States, hanging behind the Ambassador’s desk:

Henry Cabot Lodge showing bug at the UN
in 1960

The seal had been a
gift from the Soviet Boy Scouts. Cracking it open, they found a hollow cavity
and an unusual metal object, so mysterious in its design that it has come down
to us through history as “The Thing”:

It seemed too simple
to be a bug, but the little round can was a resonant cavity. The resonant cavity microphone was
patented by the Radio Corporation of America (RCA) in
1941. By pointing a
beam of radio waves at it at a particular frequency, it would sing back. The
metal antenna was just the right length to broadcast back one of the harmonics
of the signal.

The resonator was behind
the eagle’s beak. When someone in the room spoke, vibrations in the air would
shake the foil, slightly deforming the cavity, which in turn made the resonant
signal weaker or stronger. The Thing was a wireless, remotely powered
microphone. It had been hanging on the
ambassador’s wall for seven years.

The Thing has evolved
over time; today we call its descendent a RFID tag.
Our world is now full of these little pieces of metal and electronics that will
sing back to you if you shine the right radio wave on them.

But in 1952, this was
very cool stuff. American diplomats were up against technology from the future.
The person who designed the listening device was Lev Sergeyvich Termen.
Termen was born in Petersburg in 1896, to an aristocratic family. He was a
musical child and became an accomplished cellist, but his greatest love was
physics and engineering.

In 1917, Termen joined
the Bolshevik revolution, and was assigned to work at a new Soviet research
laboratory. His first job was to build a capacitative sensor to measure the
electrical properties of gases. It consisted of two metal plates; by
introducing a gas sample between the plates you could take a reading.

Instead of using a
regular dial for taking readings, Termen plugged in his headphones. The pitch
of the signal in the headphones corresponded to the value of the reading. Termen
noticed that when he moved his hands near the metal plates, it would affect the
pitch. He taught himself to play a few melodies, and his colleagues got
excited. “Termen is playing the voltmeter!” Termen soon had
constructed the world’s first electronic musical instrument.

His colleagues called
it the “Termenvox”, in his honor. Ninety-two
years ago this month, Termen was summoned to the Kremlin to
meet Lenin, who loved the device. That was the start of a journey that laid the foundations for
modern electronic music.

We, of course call
the device the Theremin, used in music
and movie soundtracks to produce sounds we associate with science fiction. In
popular music, it was used most notably on “Good Vibrations” by the Beach Boys.

Termen playing the Theremin, 1929

According to Albert
Glinsky’s book, Theremin:
Ether Music and Espionage, Stalin sent Termen to America, where he became
the toast of New York society, while passing information on US industrial
technology back to the Soviets. From Glinsky:

Termen met
and married a young black American ballet dancer, Lavinia Williams, in 1938. Yet,
later that year, he returned suddenly to the Soviet Union, leaving his wife
behind. Some suggest he’d been kidnapped by Soviet officials, but Glinsky says
a combination of debt and homesickness led Theremin to return voluntarily.

That sounds doubtful, since he returned to Stalin’s
purges.
He was arrested and accused of being a counter-revolutionary, and received an eight year sentence in 1939. Termen was exiled to a Siberian labor
camp and subsequently vanished into the top-secret Soviet intelligence machine.

World War
II saved Termen’s life. He was put to work in an institution only the Soviet
Union could have invented, a prison
filled with the greatest engineers and aerodynamicists in the country. After the war, he worked on various listening
devices. In addition to ‘The Thing’, he developed an even more innovative
system called Buran,
which listened to the vibrations in a window pane by reflecting a beam of light
off of it.

This is
still cutting-edge stuff today. Termen had built a laser microphone before
there were even lasers. It won him his freedom. People who met Termen after the
war remarked on the fact that he would barely move his lips while he talked, a
habit born of life under constant surveillance.

Termen
spent years trying to join the Communist party, but they kept making excuses to
turn him away. When he was 90 years old, he applied again, but they told him
that to join he had to take a five-year advanced course in Marxism-Leninism.

So he did
it. He went to night school and passed the course.

In 1991,
literally weeks before the fall of the Soviet Union, Termen got his party
badge. The 95-year-old Bolshevik was briefly the newest Communist in the
country. When people asked him: “Lev Sergeyevich, why on Earth would you join
the Communist Party now, when everyone else is leaving?”

He gave
the most badass answer imaginable: “I promised Lenin.”

Can you
imagine someone in today’s Russia saying: “I promised Putin”?