US Corporations – Page 8 – The Wrongologist

Monday Wake Up Call – May 8, 2015

“Ethics is knowing the difference between what you can do and what you should do.” – Justice Potter Stewart

It looks like Scrooge McDuck runs human resources at Disney. Disney World laid off 250 tech workers, who were American programmers and computer operators that have been replaced by Indian techies with H-1B visas. The techs were supplied by HCL America, an Indian outsourcing firm.

H-1B visas are intended for high-level professionals who, in concept, fill jobs for which no Americans are available. 85,000 of these visas are granted each year, and they are in high demand. Technology giants like Microsoft, Facebook and Google repeatedly press Congress to add to the annual quotas, saying there are not enough Americans with the skills they need.

In Disney’s case, the Americans were not only available, they were actually working in the jobs.

The H-1B visa program has been great for tech innovation, and the Wrongologist supports it, but this is an egregious abuse of the corporate right to employment at will, and of the spirit of the H-1B visa laws. From the NY Times:

The chairman of the Walt Disney Company, Robert A. Iger, is a co-chairman with Michael R. Bloomberg, the former mayor of New York, and Rupert Murdoch, the executive chairman of News Corporation, in the Partnership for a New American Economy, which pushes for an overhaul of immigration laws, including an increase in H-1B visas.

Companies speak a lot about teamwork, esprit de corps, and group identity, all in the context of helping the company reach its goals. But the Disney lesson is that we’re really good at ignoring those lofty ideals, while driving an anti-employee, mean-spirited chase of a marginal dollar of profit.

If employers really need a foreign employee resource, they should be charged an annual fee of $50K for each H1-B visa they use. For truly unusual skills, it would be worth the fee. For Disney, who is just looking to buy labor for a few dollars less than the going rate for American citizens, it would remove the economic advantage. We need to ask our corporations to stop defending the indefensible.

Republicans shout from the mountaintops about illegal immigrants, while on the other hand, they are quite willing to add to the numbers of H-1B visas, immigration of a kind. Furthermore, H-1Bs allow for chain migration (kids and spouses) as well, and thanks to new rules, H-1B spouses can work as well.

Time to wake up America! Disney’s H-1B’s are the first step in a process. They have been brought in by Disney so that they can gain the experience to manage Disney’s IT operation. And some time down the road, Disney’s Florida HCL people will work with HCL’s India-based IT workers, allowing Disney to move most of their IT operation over there at a fraction of the cost that Disney pays here.

Corporatism has inverted Henry Ford’s mantra to pay his workers enough to afford his cars. The new mantra is, pay only a few employees enough to afford your goods, and let the government worry about the rest of them.

America has to be more than a spreadsheet and a flag.

Today’s wake-up is another in our spring bird collection. It is the Orchard Oriole, the smallest of North America’s orioles, it builds hanging, pouch like nests during its breeding season. We get both the Baltimore Orioles and these guys in Mid-May:

For those who read the Wrongologist in email, you can view the video here.

Monday’s Hot Links:

The Wall Street Journal had a blog post open letter to consumers asking why consumers didn’t spend more money. Imagine their concern, since mean US family income is stuck at the same level as in the late 1990s. Remember that the WSJ supports the TPP trade legislation, like the last deal that outsourced millions of middle class jobs. Please, WSJ, go back to talking to companies, and leave consumers alone.

A list of the top 50 restaurants in the world. 5 are in the US. Wrongo and Ms. Right are going to #49 later this month.

In a stunning discovery that overturns decades of textbook teaching, researchers at the University Of Virginia School Of Medicine have found that the brain is directly connected to the immune system.

Owning a home no longer plays the same role in the lives of Americans that it has in the past. And it is clear that many middle-income Americans cannot realistically aspire to become homeowners anytime soon. A recent survey conducted by the American Institute of CPA’s found that most Americans are now more concerned about having enough money to retire than about becoming a homeowner.

China has 30,000 tons of gold, (which is almost more gold than the rest of the world’s central banks, combined). It’s also important to make explicit that the Chinese are slowly laying the groundwork for it to take over the dollar’s role as the global reserve currency sometime in the future.

Chinese state media has warned that war with the US may be “inevitable.” Beijing published a policy paper detailing how its military will shift its focus from land and coastlines to the open seas. They criticized “external countries…busy meddling in South China Sea affairs. The money quote:

We do not want a military conflict with the United States, but if it were to come we have to accept it.

End Government Subsidies of Private Equity

We have written about taxpayer-funded corporate subsidies this week. Let’s talk about the Private Equity (PE) industry, where profit margins are pretty high. By PE we mean investing in assets that include equity securities and debt of operating companies that are not at the time of the investment, publicly traded. Having a number of streams of income coming from a variety of investments or income generating assets is one of the best ways to build wealth. You see, hPE is a re-branding of leveraged buyouts (LBOs) which were the way Wall Streeters built wealth in the 1980s.

In the past 35 years, we have seen a finance-led revolution that has generated fantastic wealth for PE managers. PE has in large part, helped create the growing chasm between America’s most wealthy and everyone else. This is shown in the disproportionate numbers of private equity and hedge fund principals in the top .1% of American wealth. That wealth doesn’t only come from just making a killing when the target company goes public or is acquired, it also comes from favorable tax treatments for the PE company principals and investors.

Although the PE industry is often held up as an exemplar of free-market capitalism, it is surprisingly dependent on government subsidies for its profits. In a typical deal, a PE firm buys a company, using some of its own money and some borrowed money. It then tries to improve the performance of the acquired company, with an eye toward cashing out by selling it, or taking it public.

The key to this strategy is debt: the PE firms borrow to invest since, just as with your mortgage, the less money you put down, the bigger the potential return on investment. But debt also increases the risk that companies will go bust, so early on, the amount of debt PE firms employed was conservative.

That has changed in the last 10 years. After using debt to buy them, many PE funds now have their portfolio companies borrow even more. They then use that money to pay themselves “special dividends.” This allows them to recoup their initial investment while keeping the same ownership stake.

Before 2000, big special dividends were not common. But between 2003 and 2007, PE funds took more than $70 billion out of their companies. These dividends created no economic value-they just redistributed money from the company to the private-equity investors.

As an example, in 2004, Wasserstein & Company bought the mail-order fruit retailer Harry & David. The following year, Wasserstein and other investors took out more than $100 million in dividends, paid for with borrowed money. In 2011, Harry and David defaulted on its debt and dumped its pension obligations on the US government. And when an investment goes bankrupt, there are more fees, and maybe more tax write-offs for the PE partners.

Taxpayers are left on the hook. Interest payments on that debt are tax-deductible, and when pensions are dumped, a federal agency, the Pension Benefit Guaranty Corporation (PBGC) picks up the company’s pension liability. That means taxpayers are on the hook for those unfunded pensions.

And the money that PE dealmakers earn is taxed at a much lower rate than normal income, thanks to the US tax code’s carried interest loophole, which permits that income to be taxed at capital gains rates.

Most do not know that the single largest source of investment capital in PE funds is government pension funds. According to Preqin, a database company that tracks investment in PE, approximately 30% of capital in US PE funds is contributed by government pension funds. Government pension funds are usually called “public” pension funds, administered by government employees and governed by officials who are directly elected by the public or appointed by elected officials.

A key point about the power and reach of PE. They have more than $3.5 trillion under management. Assuming normal leverage (30% equity) that gives them $11.7 trillion in buying power. That’s about 40% of the value of publicly-traded firms in the US. Think about the political clout they have by investing government pension money. Not only do PE firms own a huge portion of America’s productive businesses, unlike the diffuse ownership of public companies, they control them outright.

So, PE is a government-sponsored enterprise, both via tax subsidy and via funding. We taxpayers are helping them to fabulous paydays, thanks to our Congress Critters.

If PE firms are as good at remaking companies as they claim, they shouldn’t need tax loopholes to make their money. If we capped the deductibility of corporate debt, and closed the carried-interest loophole, it would not prevent PE firms from buying companies or improving corporate performance.

But it would add to our tax revenues, and that might keep a bridge or two from falling into a river during rush hour somewhere in America.

“The American Dream: You have to be asleep to believe it.” -George Carlin

Why Don’t Low-Wage People Get Better Jobs?

Regarding Tuesday’s post, “More About Taxpayers Subsidizing Corporations“, which deals with taxpayers subsidizing the low-wage employees of restaurant chains, long-time blog reader Kevin asks: “Why don’t the folks who flip burgers go out and get better jobs?” Excellent question.

Two thoughts. First, they should move up whenever possible, and the chart below about restaurant employee turnover should lead us to believe that they do move out, if not up. When it comes to workplace changes, everyone deserves the chance to move up into higher positions and therefore, this will increase the rate of employee turnover. Research from Work Institute has suggested that 22% of turnover was due to career development and a higher chance of job growth. Being able to excel in your chosen career can only happen if these people decide to make this change. But, whether they leave or not, those jobs will remain at or below minimum wage, and the taxpayers will continue to subsidize these restaurant corporations who underpay them. It falls to the social safety net to make up the difference. Take a look at restaurant employee turnover statistics:

Source: People Report, a division of TDN2k

The burger flippers turnover is the highest among restaurant hourly employees, and it is growing. These are the people who don’t even get tips, so since employee turnover is the highest where wages are the lowest, it’s the burger flippers who move on. This could also be due to job satisfaction they may feel in the workplace. It could be argued that they do not feel the same level of appreciation within a service profession as they would in an office environment that would buy gifts for employees in order to boost their morale in an attempt to keep them for longer.

A second thought is, what jobs can they move up to? Here is a little background:

The US lost more than 8.84 million private sector jobs in the Great Recession. Now, five years after employment hit bottom in February 2010, private sector employment has returned to prerecession levels. The National Employment Law Project (NELP) indicates in a study that low-wage job creation didn’t just happen in the first phases of the recovery, but today, five years in, job growth is heavily concentrated in lower-wage industries. Lower-wage industries accounted for 22% of job losses during the recession, but 44% of employment growth.

Worse, low-wage jobs account for 100% of the net job growth in the economy. Today NELP reports that there are:

• 958,000 fewer mid-wage jobs than at the start of the recession
• 976,000 fewer high-wage jobs than in 2008

The National Restaurant Association’s 2015 economic forecast says the restaurant industry in 2014 added 1,000 jobs per day. It is projected to provide a record 14 million jobs in 2015.

So, where do the motivated, striving burger flippers go?

The glibertarians say the burger flippers should work hard, save money from their minimum wage jobs, get a better education, and move on to a higher paying job, maybe in an office or a laboratory. OK, that’s possible for some.

They say that Mr. Market determines what the value of a burger-flipping job should be. And, if it isn’t a living wage, the burger flipper should study some more.

But when they move on, odds are that they will move to another low-wage job, more likely than not, in the restaurant industry.

And regardless of what new low-wage job they take, the taxpayers’ subsidy of the Corporatists will continue.

More About Taxpayers Subsidizing Corporations

Yesterday we talked about how apartment rents can’t be afforded by minimum wage workers. Today, we look at one industry with low wage workers, the full-service restaurant industry. Full service restaurants are the large name brands like Appleby’s, Cracker Barrel, Chili’s, Outback and Olive Garden.

Full service restaurants employ over 4 million people and that is expected to grow by nearly 10% by 2022, which means that these companies are in a profitable market segment. The top 5 full service chains made $705 million in profits last year, while paying out another $751 million in dividends and stock buybacks.

A new report by the Restaurant Opportunities Center (ROC), shows that five of the ten lowest paid jobs as reported by the Bureau of Labor Statistics (BLS) are in full-service restaurants. Since many full-service restaurant workers receive wages below what is needed to meet their basic necessities, these workers rely on taxpayer-funded programs in order to meet their basic needs. We pay the full-service restaurant industry a double subsidy:

• High numbers of full-service restaurant workers are on public assistance
• By paying a less-than-minimum wage, customers are paying restaurant workers’ wages directly through tips

The ROC’s analysis looked at utilization of public assistance programs to estimate annual benefit expenditures for families of full-service restaurant workers for the years 2009-2013. Here is a summary of their findings:

• Nearly half of the families of full-service restaurant workers are enrolled in one or more public-assistance programs
• The cost of public assistance to families of workers in the full-service restaurant industry is $9,434,067,497 per year (that’s $9 billion for the math-impaired)
• Tipped restaurant workers live in poverty at 2.5 times the rate of our overall workforce
• The taxpayer underwriting of social programs for low-wage workers in a single Olive Garden is $196,970 annually.

ROC estimated that low wages and lack of benefits at the five largest full-service restaurant companies in the US cost taxpayers an estimated $1.4 billion per year. They focused on the major means-tested public programs that provide income supplements for working families. These included Medicaid and Children’s Health Insurance Program, or CHIP, the federal earned income tax credit (EITC), food stamps (the Supplemental Nutrition Assistance Program, or SNAP), basic household income assistance (Temporary Assistance for Needy Families, or TANF).

Since 1991, the federal tipped sub-minimum wage has been set at $2.13 per hour, but states may establish a minimum wage that is higher than the federal government’s. So restaurant workers in 22 states receive the federal sub-minimum wage of $2.13 per hour, while restaurant workers in 20 states receive higher state sub-minimum wages of up to $5.00 per hour. Restaurant workers in eight states receive the full minimum wage.

Women make up 66% of all tipped workers, and people of color make up 40% of the total. Unsurprisingly, their poverty levels are higher in states that pay a $2.13 sub-minimum wage than in states that pay one minimum wage for both tipped and non-tipped workers.

You will pay more for a meal at most of these restaurants than at the fast food places. And that cost will go up if you believe in a fair wage for a fair day’s work. Naturally, the industry, represented by the National Restaurant Association is fighting any increase in the minimum wage for restaurants. This is something ALEC has been working with the National Restaurant Association and state governments to fight.

How about if the 535 well-coiffed rubber stamps in Washington start by raising the wages on any companies where public assistance subsidizes payroll wages? Why should taxpayer money be going to fund stock buybacks and bonuses to restaurant chain CEOs?

We could dream big, of tying the minimum wage to the cost of local resources like housing. Given the problem we reviewed yesterday, the minimum wage could be linked to how many hours is necessary to pay a month’s rent and utilities.

Every low wage worker needs a place to sleep when they aren’t working. It shouldn’t be on the street so that their employers can repurchase more stock.

On our dime.

Monday Wake Up Call – May 18, 2015

The Amtrak accident in Philadelphia came hours before the House Appropriations Committee was due to meet to debate a transportation bill. Amtrak is a for-profit entity, but its board is appointed by the president, and it is entirely funded by the government, receiving roughly $1.4 billion a year in subsidies. It operates in the red, losing $227 million a year.

Congress has been considering tightening the purse-strings. The Senate has been slow to approve $7.8 billion in Amtrak funding that has been passed by the House. Much of the money would go to prop up sagging rails and refurbish rolling stock.

But John Boehner said discussing Amtrak funding in the wake of the crash was “stupid”. Boehner noted that the crash was caused by the train going too fast, not bad infrastructure. Republicans prefer to attack the national train system because only Democrats ride trains, not good truck driving folks. We should invest in modern high-speed trains to zip Americans around the country. We could also invest in a better safety infrastructure so that train wrecks don’t happen if they are the fault of the engineer or conductor. Instead, the rail industry and its Republican friends are pushing for the reduction of train crews on freight trains, which could cause more crashes.

Sadly, the Goldilocks Moment (when it’s “just right”) to discuss practical responses to a tragedy can be discerned only by Mr. Boehner. Yesterday was too early, and politicized the tragedy by pointing out how Republican policies and governance set the stage for eight people to be killed. At some point, John Boehner will tell us it’s now “too late” to get any legislation in the hopper.

Amtrak has received $45 billion in subsidies from the 1970’s to the present. That’s about one year’s taxpayer support for big oil. Democrats should absolutely push for greater Amtrak funding in the wake of the crash.

Don’t expect Boehner or any Republican to take any real heat for opposing this, but it makes their moral position on these issues completely clear.

Time to wake up America! Infrastructure upgrading is not anti-American. For your morning wake up call, here is the Veery Thrush, also called the Wilson’s Thrush:

For those who read the Wrongologist in email, you can view the video here.

Monday’s Hot Links:

The Antarctic’s Larsen “B” and “C” ice shelf’s are going away by 2020. NASA’s Jet Propulsion Laboratory says that the “B” shelf is now “approaching demise.” NASA adds that the ice shelf “is likely to disintegrate completely before the end of the decade.” But, global warming is a hoax…

A 10-year-old oil leak where an offshore platform toppled during a hurricane could continue spilling crude into the Gulf of Mexico for a century or more if left unchecked. No, it isn’t the BP leak. Taylor Energy Company owned the platform and has played down the extent and environmental impact of the leak. The Coast Guard provided a leak estimate that is about 20 times greater than one provided by the company. Quelle surprise! An American company tries to minimize its responsibilities.

A New Zealand company called Touchpoint Group is building a robot that will be angry all the time. The idea is to let angry customers speak to a machine instead of human call center agents. The robot will collect the data to better serve you with bullshit responses.

Inequality Watch: Scientists find alarming deterioration in DNA of the urban poor. Well, if you lived a life of constant worry over money and how you would pay your bills, raise your kids with enough food, clothing and self-respect, your DNA might deteriorate too!!!

Raul Castro says that Pope Francis may get him to return to religion. Mr. Castro said: “I will resume praying and turn to the Church again if the Pope continues in this vein.” This Pope may really be the Rightologist!

Here is an extra wake-up for you this spring morning. Unclear how this pose happened, but it is relaxing:

Corporations Are Using Free Speech To Undermine Regulations

There is a Corporatist supremacy movement operating below the radar in America. US Corporations are using the First Amendment to undermine the corporate regulatory fabric that has been built up since the founding of the Republic. You know about the Supreme Court’s decision in Citizens United, which said that corporations were legal persons entitled to free speech rights. You remember last year’s decision in Burwell vs. Hobby Lobby, where the Supreme Court decided that the mandate in Obamacare requiring corporations to pay for some of their employees’ contraception is a violation of the company’s First Amendment right of religious expression.

Here are a few examples you may not know about:

On April 14, 2014, a federal court ruled that corporations have a First Amendment free-speech right not to tell anyone if they’re financing “war and humanitarian catastrophe” in Congo. The court decided that although corporations can usually be required to disclose “purely factual and uncontroversial information,” but, in this case, that this principle is limited to government efforts to protect consumers from deception.

The regulation was an obscure provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that requires companies to inform the public if their products use conflict minerals. In the case of conflict minerals, the Act’s goal is to let consumers know if the products they are buying are helping to finance war.

To the court, that provision of Dodd-Frank is unconstitutional, because “it requires an issuer to tell consumers that its products are ethically tainted, even if they only indirectly finance armed groups.”

This is part of a growing Corporate movement to use their rights of Free Speech under the First Amendment to escape regulation, and it has been steadily winning victories in the federal courts.

Another case: In 2011, the National Labor Relations Board (NLRB), released a rule requiring businesses to put up an 11”x17” black-and-white poster notifying employees of their rights under federal law. Beneath the official NLRB seal and above the phrase “This is an official government poster,” it informed employees that they have the right to join, or not to join, a union, and that they cannot be coerced into doing either.

The National Association of Manufacturers sued the NLRB and In May, 2013, the US Court of Appeals in the DC Circuit struck down the NLRB’s rule on First Amendment and statutory free speech grounds. The Court said it did not matter that the “speech” in question was a non-ideological poster that stated US law. And it did not matter that the rule placed no constraints on companies’ speech or on the free flow of information. The Court held that the act of compelling a company to “host or accommodate another speaker’s message” was enough to violate its free speech.

Over the past few years, corporations like Nike, Verizon, Google, and the credit ratings agencies like S&P and Moody’s have been crafting (and winning in court) with innovative new First Amendment defenses to blunt all sorts of “government intrusions”.

What’s going on? The right of free speech was closely connected with the defining idea of government by “We the People“. James Madison explained that in his view, “free communication among the people” is “the only effectual guardian of every other right.”

From the Country’s founding until late in the 20th century, the courts didn’t rule that the First Amendment protected very much of corporate speech. But now, Corporations are busy collecting a portfolio of First Amendment case law that establishes that corporations have a First Amendment-protected right to avoid much of government regulation. If this continues, it will change our society:

• There will be no corporate transparency
• No way to enforce workers’ rights
• No way to compel companies to protect investors or shareholders

Most financial regulations will cease to provide meaningful value to consumers.

Perhaps we have to ask our Courts to remember Justice John Marshall, who wrote in 1819, “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law.”

All of the regulations that helped foster a strong economy and a strong middle class during the 1940’s through the 1970’s are now being weakened through a Corporatist revolution, enabled by our courts.

America is looking at the start of another period of unfettered capitalism. The rise of the Corporatists is at hand. We have reached the point now where we have government of the Corporation, for the Corporation.

What are you (we) gonna do about it?

The Pentagon’s Huge Problems with the F-35

The F-35 combat aircraft is the most expensive weapons program ever undertaken by the Pentagon. It will cost $1.5 trillion to build and operate over its lifetime. Most pilots think that the F-35 is being tasked with too many things, from use as a fighter and a bomber, to landing on the deck of an aircraft carrier, to performing vertical takeoffs and landings. These are conflicting demands, requiring the plane to be over-configured to accomplish all of them. So, the F-35 is unlikely to handle all of these requirements at a high level.

Despite all of the above, in the Pentagon spending bill that passed last month, Congress approved nearly a half a billion dollars more for the F-35 than the Pentagon even asked for.

Conventional wisdom touts the F-35 as an aerial Swiss army knife, but the F-35 is proving to be more like a butter knife — one that only slices taxpayer dollars. A recent report by the nonprofit Project On Government Oversight (POGO), highlights the conclusions in the latest F-35 report from the Defense Department’s Director of Operational Test and Evaluation (DOT&E). Among the problems highlighted in the DOT&E report:

• Software glitches disrupting enemy identification and weapons employment
• A redesigned fuel tank that continues to demonstrate unacceptable vulnerability to explosion from lightning or enemy fire
• Wing issues that cause loss of controlled flight during high-speed maneuvering, a six-year-old problem that apparently will not be solved without sacrificing stealth or combat capability
• Helmet issues that prevent pilots from seeing things approaching from the side
• Engine problems so severe they’re impeding the test schedule, and generating risky operational decisions
• Maintenance issues leading to over-reliance on contractor support

The Marines’ version of the plane won’t be operational until this summer, while the Navy’s version won’t be operational until at least 2018.

There are accusations that Lockheed Martin has papered over these problems, failing to include certain failures or re-categorizing them to improve program statistics. Taken together, the GAO and DOD reports make for an unambiguous headline:

The F-35 is years away from being the next-gen fighter jet promised by Lockheed to the Pentagon.

More time, more money and unresolved problems. What is going on here?

That’s not all. Head-to-head competition with the Russian SU-30 fighter/bomber was conducted in the US in 2008, and the results favored the Russian aircraft. Now, aircraft have two primary missions, air-to-air combat (ATA), and air-to-ground attack (ATG). The F-35 failed the ATA exercises SIX YEARS AGO.

If you find this summary alarming, consider taking a tranquilizer or two before digesting the full POGO article (“Not Ready for Prime Time”) or the detailed DOT&E report, both of which focus on a subject that are the eventual cost equivalent to the combined GDP’s of Denmark, Norway, and Sweden.

We are at the point where we will be fielding yesterday’s aircraft solution tomorrow. To a great degree, this is a failure of the Defense Department’s Acquisition Process. POGO believes that the problem is not nearly as much with the detailed laws and regulations that govern the acquisition of military goods, as it is in the management by the people who have been operating the system. In the case of the F-35, while several nations are providing elements of the plane, Lockheed is the sole source contractor for the DOD.

This creates a case of moral hazard. Moral hazard is the idea that misplaced incentives can create unintended and adverse behaviors. For example, an insurance policy with no deductible could embolden some drivers to discount the consequences of reckless driving, raising the likelihood of accidents. Applied to a defense contractor, this policy can cause a heavy economic toll.

The F-35 program is an example of moral hazard. By continuing to lavish cash upon a failing program, Congress risks making failure a financially viable strategy. The predictable result would be more failure. This debacle is, in many ways, a sign of what happens when Congress is no longer the domain of the kind of statesmanlike adult behavior that puts the country first.

Congress itself has incentives to set perverse incentives for others. Unfortunately for the country, the first sign that moral hazard has truly captured our national defense maybe relying on a program that is supposed to be the single answer, one that does not perform, continues to be postponed, and costs far too much.

The second sign will be the inability of our airpower to effectively support our ground and sea military efforts, as and when called upon.

This will happen if bad decisions continue to bleed our resources, and Congress continues to try to make room for the F-35, a weapon that has not proven itself.

The Republican Revolution is De-evolution

De-evolution, or backward evolution, is a term in biology that describes the fact that a species can change from a more complex form into a more primitive form over time. So noted. Now on to the commentary below:

America used to have smart, effective Republicans, but alas, not recently, and not in the lifetimes of younger voters. In line with this de-evolution of Republicans, consider Paul Krugman’s take down of what he labels the Charlatan Caucus, a group of supply-side voodoo economists that Scott Walker had to court this week: (brackets by the Wrongologist)

On Wednesday…[Walker] did what, these days, any ambitious Republican must, and pledged allegiance to charlatans and cranks.

Krugman reminded us that the phrase, “charlatans and cranks” was originally coined by Republican economist Gregory Mankiew, who served as George W. Bush’s chief economic adviser. Krugman is speaking about Gov. Scott Walker’s appearance at a New York dinner featuring supply-siders’ Arthur Laffer (of the Laffer curve), CNBC’s Larry Kudlow, and Stephen Moore, chief economist of the Heritage Foundation. More from Krugman: (emphasis by the Wrongologist)

Bowing obeisance before the high priests of bunk – like questioning climate change, evolution, and the current president’s American bona fides – has become a “right” of passage for Republican presidential contenders. Clearly, to be a Republican contender, you have to court the powerful charlatan caucus.

In Krugman’s view, with these economists, reality always takes a holiday. Ideology takes precedence. He cites:

• Mr. Moore published a 2004 book titled “Bullish on Bush,” asserting that the Bush agenda was creating a permanently stronger economy.
• Mr. Kudlow sneered at the “bubbleheads” who asserted that inflated home prices were due for a crash.
• Mr. Laffer wrote in the WSJ in 2009, “Get ready for inflation and higher interest rates”. What followed were the lowest inflation in two generations and the lowest interest rates in history.
• Mr. Moore publishes articles with lots of bad numbers. According to Krugman, Moore’s numbers are consistently wrong; they’re for the wrong years, or just plain not what the original sources say. And not surprisingly, his errors always make the case he wants.

But the supply-side ~~economists~~ charlatans continue to have a big influence on Republican politicians. The NYT also reports that the University of North Carolina’s Republican-appointed Board of Governors is closing several academic centers on its campuses dedicated to studying poverty, climate, and social change. That couldn’t also be about ideology, could it? More from The Times:

It’s clearly not about cost-saving; it’s about political philosophy and the right-wing takeover of North Carolina state government…said Chris Fitzsimon, director of NC Policy Watch, a liberal group…And this is one of the biggest remaining pieces that they’re trying to exert their control over.

OK, 29 of the 32 university board members were appointed by the Republican Legislature since 2010, but that doesn’t make the decision about politics?

It’s similar to Scott Walker’s Wisconsin, where our friend of education is cutting the University of Wisconsin’s budget by $300 million. Mr. Walker saw Mr. Laffer’s curve, and bought it. It hasn’t worked out so well for him, since he now has to refinance a $108 million debt payment, increasing the state’s borrowing costs by $19 million over the next two years. The re-fi is a result of Walker’s $600 million tax cut in 2014, which will ultimately lead to a $648 million deficit over the next two years. But, in the big Republican wet dream, he will be president by then, and blame his successor for Wisconsin’s fiscal debacle.

And there is Gov. Sam Brownback (R-KS), whose aggressive tax cuts were heartily cheered on by Republican economists, but which have driven his state into a deep fiscal crisis. North Carolina’s Republican Gov. Pat McCrory has also tasted the charlatan Kool-Aid, but isn’t quite there yet, although he’s working on it.

Back to Krugman. He concludes:

So what does it say about the current state of the GOP that discussion of economic policy is now monopolized by people who have been wrong about everything, have learned nothing from the experience, and can’t even get their numbers straight?

Current-day Republicans seem to have abandoned the idea that there is an objective reality. What are you going to believe, Right-Wing doctrine, or your lying eyes? These days, Right Wing doctrine wins.

In America, there has been a steady drumbeat by conservatives against education. Conservatives really believe in education…but only if it’s the privatized, de-evolved kind.

You can’t have a bunch of people looking too closely at facts, because as is well-known, reality has a liberal bias.

Road Trip Vol. II

Finally, trees with green leaves, green grass and temps in the 50’s. There was snow cover along I-95 for 630 miles south from the mansion of Wrong in Connecticut. After that, we passed through 50+ miles of ice-covered trees. In that part of America, there seemed to be few snow plows, so gas station and supermarket parking lots were ice-covered. Many schools and stores were closed.

I-95 was dry from Baltimore to Savannah, due to Socialist snow plows clearing and salting the roads. Apparently, the Obama tyranny will never end.

Have you noticed that Congress looks more and more like their owners?

Boehner is convinced that America will blame the Democrats when funding for the Department of Homeland Security expires. The reality may be the opposite:

Today’s Links:

What ISIS wants. A must read from The Atlantic.

Netanyahu wrecked a two-state solution with Palestinians in 2011. Found this at Sic Semper Tyrannis, a go-to blog on military strategy in the Middle East

Hillary Clinton and Elizabeth Warren have “cordial” meeting. Does cordial mean, “civil, but can’t stand each other?” Were they smiling, or grinding their teeth?

Monday Wake-Up Call – February 16, 2015

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn” − Alvin Toffler

Today’s wake-up call is for Americans who can’t unlearn that trickle-down doesn’t work, and that voting in politicians who espouse it will prolong the nation’s agony. Do people know that the new GOP House began passing a series of deficit-hiking tax cuts that will primarily help the rich at the expense of everybody else?

Rep. Paul Ryan (R-Wis.), chairman of the Ways and Means Committee (which writes tax legislation), wants to make some previous tax breaks permanent. From HuffPo:

The House voted 272 to 142 to make permanent a number of temporary provisions that are aimed at helping businesses earning up to $2 million. The main cut, which would add $77 billion to deficits over 10 years, allows businesses to immediately write off new equipment purchases up to $500,000. Temporary versions of the measure have been passed about a dozen times before, generally as economic stimulus measures.

The GOP then passed a second tax cut, aimed at giving bigger tax breaks for charitable giving. Ryan wants even more tax cuts that would add another $300 billion to the deficit. Those may reach the House floor later this month.

Here’s the Republican strategy: Slice the elephant and eat it a bite at a time. Pass small pieces of tax legislation while ignoring the deficit impact, then when their corporate and wealthy individual patrons are taken care of, remind everyone that the deficit is the biggest, baddest enemy the economy has. Then propose budget cuts that hit the working poor and the middle class. Ryan’s current strategy can be seen here: (emphasis by the Wrongologist)

If you dare try to make these things that we all agree on that need to stay in the tax code permanent, it’s ‘You’re not paying for it; it’s a budget buster; you’re being irresponsible; you’re jeopardizing tax reform.’ Process, process, process…Here’s the problem. What we’re trying to do here, we’re trying to grow the economy. We’re trying to get people back to work.

That meme will end soon. It will be replaced with: “growth is being stifled by the deficit”.

The NYT’s Upshot notes that a number of Republican governors are proposing tax increases — and in every case, the tax hike would fall most heavily on those with lower incomes, while they propose simultaneous tax cuts for business and/or the wealthy. Krugman analyzes it thusly:

If you look for an overarching theme for overall conservative policy these past four decades…It has been about making the tax-and-transfer system harsher on the poor and easier on the rich. In short, class warfare.

Class warfare. These folks keep bottling snake oil and voters keep buying it. Lowering income taxes on the wealthy doesn’t create jobs. Why would it? The focus of the GOP on cutting income taxes is solely intended to protect the rich.

Wrongo has run businesses for 35+ years and never saw taxes as an impediment. Taxes are paid out of profits, not revenue, and paying taxes means you are running a profitable business. Cutting taxes for small business can be a disincentive: Why should the owners expand the business when their net is greater, and they didn’t have to increase sales? For large corporations, tax cuts mean that people in the C-suite get richer. Nothing. Filters. Down.

Here is your Monday tune to fight the Plutocracy. “Rich Man’s War” by Steve Earle, from his 2004 album, “The Revolution Starts Now”:

And some Monday hot links:

The Westminster Dog Show starts today. Wrongo and Ms. Oh So Right are attending.

Researchers are using drones and satellites to spot lost civilizations. Remote sensing technology is revealing traces of past civilizations that have been hiding in plain sight.

Lobbyists move though the revolving door back to House and Senate committees. There is a profound change taking place among Capitol Hill staff, as many GOP lawmakers are handing the keys to K Street corporate lobbyists. Public Citizen’s Paul Holman notes that Speaker John Boehner, has “encouraged new members to employ lobbyists on their personal and committee staff.”

More than 4,000 Fort Carson soldiers are heading to Kuwait, where they will become one of America’s largest ground forces in the troubled region. Did you know that the Army has kept a brigade in Kuwait since the end of the Iraq war in 2011?

Majority of public school students are now considered low-income. Another success brought to you by trickle-down economics.

Unaffordable rents here to stay say experts. They aren’t likely to ease up for at least two years, according to the latest Zillow Home Price Expectations Survey

The Wrongologist

Geopolitics, Power and Political Economy

Category: US Corporations