The Wrongologist

Yesterday,
both the Wall
Street Journal and NBC
reported  that the sale of Hostess
was imminent: The indestructible Twinkie appears to be one step closer to a
comeback. You remember the Twinkie: It is a soft, sweet yellow cake with
methamphetamine in the center.

NBC also
reported that on Monday that Hostess chose McKee Foods Corp, maker of Little Debbie
snack cakes, as the initial bidder for its Drake’s cakes business, which
includes Ring Dings, Yodels and Devil Dogs.

It also
chose United States Bakery as the lead bidder for four of its smaller bread
brands plus bakeries, equipment and depots. 

There goes
America’s new retirement plan. People have been hoarding cases of Twinkies ever
since they heard about the possible bankruptcy. Their evil plan was to auction
them off just before retirement…

The
Wrongologist has previously discussed the Hostess financial situation here.

One small
step in the courts, one giant leap for America’s waistlines.

Although
the name may remind you of an outfielder for the 1986 New York Mets, MOOC is an
acronym for Massive
Open Online Courses. Depending on your point of view, they are the future of
higher education, the end of higher education as we know it, both, or neither.

MOOCs are aimed at
large-scale student participation and open access via the web.

Usually, a MOOC course is a series of
video lectures with associated written materials and self-scoring tests that
are open to anyone. That makes them just OOCs. The M part comes from many people all
over the world taking the course simultaneously.

As we saw
in the success of Wikipedia, demand for knowledge is so enormous that good,
free online materials can attract
extraordinary numbers of people from all over the world.

A recent
commentary from NYU’s Clay Shirky, “Napster, Udacity, and the Academy,” compared MOOCs’
ability to disrupt higher education to what the music industry faced in the
advent of file-sharing networks.

The parallel to the
music industry is apt: When MP3 compression was developed; the recording
industry concluded it would be no threat, because sound quality mattered most.
Who would listen to an MP3 when they could buy a better-sounding CD at the
record store?

Then
Napster happened. It became the fastest-growing piece of software in history.
The industry sued Napster and won, and it collapsed overnight. If Napster had been
only about free access, control of distribution of music would then have
returned the record company. But that’s not what happened.

Instead,
Pandora happened. Rhapsody happened. Spotify happened. ITunes happened. Amazon
sold MP3 songs. Because people
realized you could buy the killer song without paying for the mediocre filler
on the rest of the CD.

The
recording industry crushed Napster, but they couldn’t kill the niche that Napster
filled. Since 2000, revenues for the sale of recorded music have fallen
dramatically. According to the RIAA, recorded music sales dropped from $13
billion in 2000 to approximately $7 billion in 2011. The dollar value of the recorded
music market is now half what it was a decade ago.

The thought of Academia’s
revenues from tuition falling by 50% has to be a source of night terrors for
university leaders everywhere. It may explain any and all of the formal efforts
and informal experiments with MOOC education that have emerged in the past
year.

If we
continue the analogy, university education is now facing similar disruption; with
its MP3 being the MOOC, while it’s Napster is Udacity, an education start up
with links to Stanford University.

Last year,
Introduction to Artificial Intelligence,
an online course at Stanford taught by Peter Norvig and Sebastian Thrun, attracted
160,000 potential students and 23,000 completed it, a scale that dwarfs
anything possible on a physical campus. As
Thrun put it, “Peter and I taught more students AI, than all AI professors
in the world combined.” Seeing this, Thrun founded Udacity, an educational
institution designed to offer MOOCs.

Last March, Tamar
Lewin stated in The New
York Times:

This has many
academics worried about how MOOCs will affect higher education (and their jobs!).

As they
should. In 21st century America, where many new college students reach
graduation with a mountain of personal debt, MOOCs may be regarded as a cost
efficient alternative. Colleges are aware that tuition, once a number that was
never really questioned, is becoming a
value decision by prospective students.

The American public views
most of higher education (through master’s level) as a “commodity,” that
should be sold primarily on the basis of price and convenience, subject to
meeting a minimum standard of quality.

Many university
administrators have already adopted elements of this view, using terms such as
“customer,” and “stake holder,” to describe how the school relates to students,
their parents, and others in their orbit.

Universities
have certain advantages over the recording industry. They are mostly non-profit.
They employ lots of smart people. They are decentralized and their core
competencies are research and learning from the past.

Armed with
these advantages, will it screw up as badly as the music people did? Possibly.

Consider the economic
environment: The
number of highly respected colleges is finite and demand for college is growing,
so institutions have been able to raise tuition faster than CPI for the past 3
decades. Consequently, we face the spectacle of students graduating with hundreds
of thousands of dollars of debt or worse, not finishing due to high costs.

But the cracks are
starting to show:

• Colleges
  are finally feeling some price pressure

• Computer-savvy
  teens and 20-somethings forgoing college to join start-ups in Silicon Valleys
  all across America

• The
  explosion of online degree-granting offerings have already coalesced into
  serious alternatives to traditional, brick-and-mortar colleges

Students and parents
who want the 4-year country club experience will always attend them. But for students
who just want to learn the material and get a job, there will be options, and
the MOOCs could become a successful element in the mix.

Universities
are learning a great deal from their experiments with MOOCs.  Armed with
massive amounts of data about the “classroom” performance of students, they can
adjust lectures, course material, and examinations to improve comprehension,
both online and on campus.

MOOCs also
have promotional value for participating colleges and universities.  It’s
one thing to brag on the website about brilliant faculty.  It’s more impressive when tens of
thousands of people experience their brilliance firsthand, with the college’s
name attached.

The huge enrollments
that provide these benefits, the sharing of knowledge and feedback from huge
numbers of students, the widespread publicity, also create problems: While
professors have found ways to promote discussions and collaborative learning
among students, they have not yet
figured out how to completely protect against cheating, how to answer students’
questions in anything like real time, or how to identify and assist those who are struggling.

Almost inevitably, if
the large-enrollment, on-line college course models are successful, they will put many colleges and
universities out of business, and dramatically reduce the size of many others.

No
university has developed a viable business model for MOOCs.  Udacity gets
some revenue from corporations, including Google, for developing
high-level, specialized courses.  For a fee Coursera provides potential
employers with the names of high-achieving students.  In both cases some
of the money is returned to participating institutions, but, at present, it is
insufficient to cover the costs of course development.

And the
costs are considerable. A good MOOC requires technology and people, including
blogs, online discussion boards, Twitter, tagging, document sharing and many
teaching assistants.  

When done
well, the production is complicated, time-consuming, and expensive. When done
poorly, it is unwatchable and no one will complete the course.

In this new
environment, there will also be opportunities for some educational institutions
to offer new, valuable niche components
to college education.

But that won’t happen
without serious, realistic thought and planning, of a qualitatively different
nature than has ever been needed before in Academia.

 

 

What’s
Wrong Today:

There is
much comment in the media and blogosphere about the Republican plan to change
how votes in the Electoral College are apportioned to presidential candidates,
from winner take all, to being largely apportioned to the winner of each
congressional district. Republicans in Virginia and other battleground states
are pushing for this change, in order to prevent future Democratic national electoral success like President Obama’s winning of a 2nd term.

How
does the system work today?

In
most states, (Maine and Nebraska excepted) the presidential candidate who wins the
popular vote in their state receives all of that state’s electoral votes. A
state’s number of electors equals its number of US Representatives and Senators.

Although
ballots list the names of the presidential candidates, voters within the 50
states and Washington, DC actually
choose electors for their state when they vote for President and Vice
President. These presidential electors in turn cast electoral votes for those
two offices, so the national popular vote is not the basis for electing a
President or Vice President.

Despite
what you might think, the Constitution reserves this power to the states. Here
is Article 2,
Section 1; Clause 2:

“Each
state shall appoint, in such manner as the Legislature thereof may direct, a
number of electors, equal to the whole number of Senators and Representatives
to which the State may be entitled in the Congress: but no Senator or
Representative, or person holding an office of trust or profit under the United
States, shall be appointed an elector.”

So it is clear that each state has the exclusive right to
determine how their state electors are selected.

What is the proposed Republican “Fix”?         

The proposed Republican “Fix” would apportion electoral votes to the presidential candidate
that wins each congressional district, plus 2 electors that would go to
whomever won the statewide total. Since
each congressional district is worth one elector, under this approach
in Virginia in 2012, President Obama would have claimed 4 of the state’s 13
electoral votes, despite winning the state by 150,000 votes.

Other
states considering moving from a winner-take-all system to allocating electoral
votes to the candidate winning in each congressional district include Michigan,
Ohio and Pennsylvania, all of which, like Virginia, went for Obama in the past
two elections, but are controlled by Republicans at the state level.

This change
would heavily favor Republican presidential candidates in these states, tilting
the voting power away from cities and toward rural areas, making it more likely
that a candidate with fewer votes over all could win a larger share of
electoral votes. Thanks in part to recent gerrymandering, 27 States have Republican-controlled
legislatures.

Peter
Lund, a Republican state representative in Michigan, plans to reintroduce legislation
that would award all but two of Michigan’s 16 Electoral College votes according
to congressional district results, while the remaining two would go to the
candidate winning the statewide majority, says an article in The Detroit
News.

Mr. Obama
beat Mr. Romney in Michigan by a margin of nearly 450,000 votes. With an
allocation of electoral votes by congressional district as described in Peter
Lund’s proposal, the Detroit News reported that Romney would have gotten 9 of
Michigan’s electoral votes and Obama would have received 7 in 2012. Instead,
Obama garnered all 16 Michigan electoral votes.  

Is the
proposed “Fix” Fair?

Should we
be talking about this in 2013? Debating whether to pass bills to reduce urban
voters to a fraction of the value of other voters while hoping that someone else
will step forward to stop it?

An advantage of the Electoral
College is that it tends to inflate the mandate and give us a leader who has a
leg to stand on, at least at the beginning of his/her term of office. Also, it ensures
that candidates will actually campaign in more places rather than in fewer. Why
would anyone campaign in NH when they can garner five or ten times as many
popular votes in a couple of counties in California? Now they do because the
four electoral votes can make a difference.

Jonathan Bernstein had an important observation in the Washington
Monthly:
(emphasis by the Wrongologist)

The fact is that the Republicans
have the ability to make this happen, even though some Republican are downplaying the plan. California’s redistricting model, using
an independent commission may prove effective, since politics-based redistricting
is at the root of this evil.

Statehouses deciding elections can have severe consequences.

We need a strategy
to prevent this from happening, or to reverse it once it does happen. Removing
politicians from the redistricting process is crucial.

Spread
the word:

To:     Reince
Priebus – Chairman of the RNC

From:
The American Voter


Let’s recap the your party’s ideas to win more national elections:

• Promote
  the fiction of “widespread voter fraud” with new voter ID laws that
  adversely impact the poor and people of color.

• Shut
  down early voting hours in key states and districts where the early vote tends to
  favor Democrats.

• Move
  the goalposts in the Electoral College to a proportional allocation instead of
  winner take all system for electors – potentially distorting the majority will
  of the people.

Mr.
Priebus, here is another strategy to consider: How about taking reasonable
positions on major issues and creating balanced public policy proposals to gain
greater voter support?


How about being a party of better ideas and sounder leadership rather than a
party of subterfuge?

You
will attract more support that way.

What’s
Wrong Today:

The Global
War on Terror (GWOT) will never die. Any hope by those who thought it was over are
about to be dashed.

It’s now
officially back on the front burner, despite saying that we are ending the war
in Afghanistan, despite the death of Osama bin Laden. Here
is Gen. Carter F. Ham, commander, US Africa Command, or AFRICOM:

His words
were echoed by Gen. Martin Dempsey, Chairman of the Joint Chiefs of Staff.

And here
is PM David Cameron on Mali/Algeria and AQIM: (emphasis by the
Wrongologist)

Exit
“traditional” al-Qaeda, holed up somewhere in the Pakistani tribal areas; enter AQIM.
In Gen. Ham’s words, AQIM is a threat not only to the country of Mali, but the
region, and if left unaddressed, a threat to us.

AQIM soldiers in Mali

You have just
not been paying attention to North and Saharan Africa, but the Pentagon has
been doing it for you. We now hear that the current civil war in Mali could potentially
throw the whole Sahara region into chaos.

Pepe
Escobar reports
that the six member nations of the Economic Community of West African
States (ECOWAS) will comprise an African army tasked by the UN to pacify and hold the
parts of Mali under the control of AQIM. As a part of this effort, the US is
sending the first 100 US military “advisers” to Niger, Nigeria, Burkina Faso,
Senegal, Togo and Ghana.

This African
mini-army adventure is being paid for by the West.

Students
of the Vietnam War will note that sending “advisers” was the first step of that
subsequent epic fail.

This French-Anglo-American
concern about Mali being the new
al-Qaeda playground is confusing, since we have just absorbed the fact
that the major playground is really Syria,
northern Lebanon and most parts of Libya.

Trouble may
have been brewing in the Sahara for years, but until France’s invasion of Mali
and the attack on the Algerian gas refinery made headlines, we were buying what Mr. Obama was saying about
10 years of war finally ending.

Can we stay
out of this? Maybe not. We are being driven by three connected strands.

First, from
Algeria:
In 1991, Algeria’s military junta allowed a free election and Algeria’s
Islamists won the first round vote for seats in the parliament. Its military, backed
by France, crushed the Islamic movement and arrested its leaders. As a result,
a civil war erupted between Islamists and the Algerian military.

Over
200,000 Algerians died. Entire villages were massacred.  

After the
uprising was crushed, one Islamist guerrilla group, known as GIC, reformed as al-Qaida
in the Islamic Maghreb (AQIM). At that point, AQIM had little connection to
Osama bin Laden, but the al-Qaida name brought instant attention – a primary
goal of radical groups.

Second,
Mokhtar Belmokhtar.
Belmokhtar went to battle the Soviets in Afghanistan in the 1980’s and 90’s. He
returned to his native Algeria, minus an eye lost in combat. Then, along with some
of his fellow “Afghani,” sought to overthrow Algeria’s western-backed military
regime. After losing in Algeria, he began making trouble in the Sahara,
kidnapping westerners, robbing caravans and smuggling cigarettes.

Third, the
coup in Mali.
After Mali’s soldiers overthrew its government last March, its vast north was in
chaos. The Tuareg declared the independent state of Azawad. Assorted jihadists,
including some of Belmokhtar’s men, imposed Sharia law and Mali’s southerners
called on France for help.

Two months
ago, France’s President Hollande declared France would not again intervene in
Africa. Since granting independence in 1960 to the states that comprised former
French West Africa, France has
intervened militarily 50 times.

Al-Qaida in Mali

Mali is a
major supplier of uranium to France’s nuclear industry which provides 80% of France’s
power. French mining interests cover West Africa, which is also a key export
market for French goods and arms. France may also be aiming to control northern
Mali’s vast gold mines and latent oil reserves. Mali, along with Ghana, account for 8% of global gold production.
Imagine all that gold falling into the hands of say, China. (More below about
China)

When the jihadists
proclaimed that they would nationalize Mali’s mines, France went into action.
They declared Belmokhtar to be Osama bin Laden of the Sahara. Mali became a
humanitarian mission. Then Americans and Brits died in the Algerian hostage
taking by Belmokhtar.

Now we are
tiptoeing into the conflict. Is it a tempest in a teapot? After all it’s only a
few thousand French troops.

• Does
  it threaten the Ivory Coast, Chad and Central African Republic, where 5,000
  French soldiers and aircraft are based?

• What
  about Nigeria? There is an existing Islamist uprising in Nigeria and it worries
  Washington, because we
  import  about 540,000 barrels of oil per day
  from Nigeria out of our total imports of 8.8 million bpd.

What about
the possibility that Mali could become an even larger problem? We are not
focused on it, but China is Mali’s
largest trading partner. China’s Naval Military Research Institute
said this week:

The
Chinese observe that American troops are stationed in 35 African countries and
they conclude that their strategy in
Africa is at risk:  (emphasis by
the Wrongologist)

The
Military Research Institute concludes that China should actively participate in
any UN-authorized peacekeeping operations in Africa. Here is the close of their
press release: (emphasis by the Wrongologist)

Duck, here
comes the grenade! We are now pawns in a geostrategic power play: The “West” will
tussle with China in Africa. Our client, ECOWAS is giving a hand to Mr.
Hollande, while the USA and the UK contemplate a return to the GWOT/ al-Qaida Long
War adventure.

Getting
into little wars is always easy. Getting out is not, as Vietnam, Iraq and Afghanistan
have shown.

Slow down
Mr. Obama, Mr. Cameron. STFU Gens. Ham and Dempsey.

Let’s
think and plan our next moves very, very carefully.

With a
few Hillary Cartoons:

 

And
Finally:

What’s
Wrong Today:

Thanks to
French President Francois Hollande who felt the need to step in to prevent the
collapse of Mali, and a calamitous hostage rescue operation by Algerian forces
that resulted in the deaths of 37, America has discovered Mali. 

Mali, the
largest country in West Africa, is involved in a civil war in which government
troops, along with a Western coalition led by the French, are battling well-armed
ethnic Tuaregs and the AL-Qaeda-affiliated Ansaruldin group.

Once known
as French Sudan, Mali is one of France’s main allies in sub-Saharan Africa. Paris
fears that the chaos might spill out to neighboring states, drastically
affecting regional and international stability and peace. But France is also concerned
the spread will put its influence in this part of the world under serious
threat.

Prior to
the coup last year, Mali looked like a model democracy for the rest of Western
Africa. It has been in turmoil since, as Tuareg rebels took advantage of the
disarray to push further south, capturing half of the country with the help of
Islamic militants. Mali is no stranger to rebellions – this is the fourth led
by the Tuareg nomads of the north since Mali’s independence from France in 1960. The last
ended only in 2008.

Reuters reports that Tuareg forces were helped by
an influx of modern arms after the 2011 conflict in Libya. Tuaregs joined forces with Islamist groups, some with links to AL-Qaeda and they seized
control of the north of
Mali in
2012.

(Above: A manual for installing a laser
sight on a gun, found in the courtyard of a local resident’s home in Diabaly,
Mali and believed to belong to Islamist rebels, on Jan. 23, 2013. Photo by
REUTERS)

Al-Qaeda was
looking for a safe haven in a hostile environment, especially at the end of the
Libyan war. Later, the Islamists overthrew the Tuaregs and installed Shariah
law in the area.   

The
fighting in the north and the establishment of Shariah forced thousands to flee
their homes. The New
York Times
reports that before
the recent French intervention in Mali began, 412,000 people had already left
their homes in the country’s north, fleeing torture,
summary executions, recruitment of child soldiers and sexual violence against
women at the hands of fundamentalist militants.

The Tuareg
have named their movement the MNLA, or National Movement for the Liberation of
Azawad, the name the rebels give to the homeland they would like to carve out
of three regions in Mali’s north.

The
movement has a slick PR machine, a regularly updated website and easily
contactable Europe-based spokesmen. An
unanswered question is: Who finances these people?

Washington
has tried to bolster Mali’s army over the years, providing $17 million in
military aid in the last year to equip and train forces in everything from
desert warfare to winning hearts and minds. European nations have also offered help.

France,
the US and Mali’s insurgents:

The US says that it is
sitting out direct confrontation with the
Mali terrorists. At least, for now. Danger Room reports that as France’s war in Mali stretches into its twelfth day, the US
Air Force has flown a total of five sorties to airlift some 80 French personnel
and 124 tons of equipment.

It remains to be seen
if the US will keep its involvement in Mali limited. The US military, particularly the special-operations
community, might be strained from
over a decade of war.

If the US does limit
its involvement in what the Pentagon calls an “international effort” against
groups aligned with al-Qaida, it would buck its own recent trend in proliferating shadow wars to far-flung places whenever a group
calling itself an al-Qaida offshoot shows up.

It is important to
note that the Pentagon wasn’t speaking about possible CIA involvement in
Mali; it’s worth noting that the CIA has placed operatives on the ground in places where the US has publicly
stated it wouldn’t send ground troops.

In
addition, the Washington Post reported last June that a US
special forces base was established in Burkina Faso (bordering Mali on the
southeast)in 2007 and the same Post article reported that the Pentagon had
spent $8.1 million enhancing a Forward Operating Base (including airstrip) in Mauritania(bordering
Mali on the west).

There are
negotiations between the Pentagon and Algeria (bordering Mali on the north) for
basing rights.

(Yellow shaded areas above indicate
Islamist controlled areas)

Any claims that the US will sit this one
out are preposterous.

From the New York Times yesterday:

Paris
lacks the airlift capacity to haul all the hardware bound for Africa. Early on,
Paris appealed for help from allied nations. Canada and the UK were the first
to offer up C-17 transport planes and the US sent five of its C-17s
over the weekend. The C-17 is big enough to carry any French fighting vehicle.

As Paris
escalates its involvement in Mali with heavier and more powerful weaponry, we
are asked to believe it does so
without the guarantee that if the battle turns against the French, allied
nations will rush to the rescue.

Does
any of this sound familiar?

Another NATO
member is attempting to put down another insurgency. Let’s guess: the Malian pro-western
“democracy”, with signed contracts with multinational mineral and energy
companies, (Mali has gold, uranium, phosphates, limestone and oil) begs for help while generally
ignoring the plight of the financially, culturally, and ethnically estranged
northern populace.

The Tuareg
have risen up for a 5th time, organized under an Islamist banner
loosely associated with terrorism, and the French have gone in to protect their
interests. Sounds like Vietnam, or any number of incidents of western adventure
in the third world.

You can be
damn sure the French wouldn’t get involved unless there was significant expectation
of material and strategic backup by other NATO members, and that wouldn’t be
Turkey.

We need
answers:
What are the insurgents’ motivations? Where do they get their logistical
support and their money? Why does the local population support them?

Ordinary
people don’t attack their own government for no reason, do they?

So, Mr.
Obama, get us some answers, let’s check out the WHOLE picture this time before
we jump in to the shit.  

Recently,
a Director of National Intelligence gave estimates of al-Qaida’s
“membership” at around 4,000. How is it that 4,000 mostly
semi-literate tribesmen could possibly represent such a grave
“threat” to the US and/or the West?

NO ONE in the US Government or
military is claiming that there are large numbers of “terrorists”
anywhere. Yet al-Qaida is cited as a threat to take over Libya and Somalia,
maybe Syria, threaten Pakistan’s nuclear weapons, pose a serious problem in Afghanistan,
and now be poised to take over Mali…and then, wow, threaten all of Africa and
“the West.”

With 4,000 men – really?  Are we being lied to? Are the numbers really much
larger?

We didn’t learn our lessons in
Vietnam or Iraq or Afghanistan. Now we may be preparing to do the same thing in
Mali – because this time, the Domino Theory is real, my
friend.

The Zombie Domino Theory. The Zombie
Global War on Terror.

Wait until Washington tells us: “It’s
a slam dunk, and this time we will win”.

 

What’s
Wrong Today:

During the
dance on the Fiscal Cliff, our friends in Congress used the Fiscal Cliff bill
to provide corporate welfare breaks to their friends. These giveaways reduce money that in another universe would accrue
to the taxpayers. You can read the full text of the cliff bill here.
The individual tax extensions are in Title II while the corporate tax breaks
are in Title III.

Most of
these tax breaks were already in effect; Congress had been working to renew them
all last year. And they are now extended again for another year (or sometimes
two), at a total cost of roughly $63
billion.

Remember that the Fiscal Cliff law hiked
the payroll tax on working Americans by $125 billion, while simultaneously donating
over $60 billion to the Corporados.

Washington
says that we are in an endgame leading to the resolution of our revenue and
spending issues. But here they are, cheerfully working to distort our markets
for years to come by making these sweetheart deals for their buddies.

Review
the laundry list of taxation transgressions:

First, the
New York Times reported on how Amgen, the world’s largest biotechnology
firm, got lawmakers to insert a paragraph into the Fiscal Cliff bill that did
not mention the company by name but strongly favored one of its drugs.

The
language in the law delays Medicare price restraints on a class of drugs that
includes Sensipar, an Amgen pill used by kidney dialysis patients. The
provision gives Amgen an additional two years to sell Sensipar without Medicare
price controls. It is projected to cost Medicare up to $500 million over that
period.

Amgen,
which has 74 lobbyists in the capital, was the only company to
argue aggressively for the delay, according to several Congressional aides of
both parties.

Amgen’s
employees and political action committee have distributed nearly $5 million in
contributions to political candidates and committees since 2007, including $67,750 to Mr. Baucus, the
Finance Committee chairman, and $59,000 to Mr. Hatch, the
committee’s ranking Republican. They gave an additional $73,000 to Mr. McConnell,
some of it at a fund-raising event for him that it helped sponsor in December while the debate
over the fiscal legislation was under way.

More than
$141,000 has also gone from Amgen employees to President Obama’s campaigns.

Here
are nine more
beneficiaries of Corporate Welfare that were rolled into the so-called Taxpayer
Relief Act:

Tax Break
#1: Tax Breaks for Offshore Loans. This provision was first created in
1997. It allows manufacturers and banks to defer taxes when they engage in
special types of financial transactions called “Active financing”. In short, it rewards firms that lend
money to foreign instead of American companies.

It
permits big banks like Morgan Stanley to avoid the 35% corporate tax rate on
interest income from money lent overseas. Multinational companies with
financing arms, such as Ford and General Electric, also benefit from this
exception to lower their tax bills.

This break
now costs $9 billion per year, while critics claim it encourages job creation overseas.

Tax Break
#2: Tax Breaks for Offshoring Patents. The fiscal-cliff deal gives big
tax breaks to American companies that sell their products through overseas
affiliates.

Called
a “pass-through” exemption, this loophole allows American companies to set up a
new corporation in a tax haven, like the Cayman Islands, and to sell that new
offshore company US patents owned by the US-based parent company. Any overseas
royalties on overseas licensing of that patent are no longer subject to US taxes.

Tax Break #3:
Condos for Capitalists. Section 328 of the bill extends tax-exempt financing
for the area around the former World Trade Center for another year. Congress
created the Liberty Bond program in March 2002 with $8 billion in tax-exempt
funds.  This tax break was supposed to
help fund reconstruction after 9/11, but a recent Bloomberg investigation
found the bonds have mostly helped finance new luxury apartments and construction
of Goldman Sachs’ new headquarters.

The
new WTC received almost $3 billion through the Liberty Bond program. Goldman
financed construction of its headquarters at 200 West St. with about $1.5
billion in Liberty Bond financing. Bank of America’s tower across from Bryant Park
was financed with $650 million in Liberty Bonds.

Tax Break #4:
Free Money to Railroads. Section 306 of the fiscal-cliff bill gives a
tax credit to railroad companies to provide maintenance on their own lines.

This
credit costs about $331 million over the next two years.

Tax Break
#5: Hooray for Hollywood. The bill renews “special expensing rules for
certain film and television” productions.

This
credit costs $430 million over the next two years.

Tax Break
#6: Tax Breaks for Hedge funds and Private Equity. The mainstream media
has criticized the favorable tax treatment, called “carried interest” that hedge
fund and PE individuals enjoyed on their profits. They continue to be taxed
relatively lightly in the new fiscal cliff legislation.

The
profits from investing other people’s money, known as carried interest, will
continue to be taxed as long-term capital gains for hedge fund and
private-equity managers, not ordinary income as it would be for you.

Tax Break
#7: Wind Power. There is a big tax credit in the bill for the wind power
industry.

The
fiscal-cliff deal gives wind producers a 2.2-cent tax credit for every kilowatt
hour they generate in their first 10 years of operation. This credit is worth about $1 million for every large wind turbine.

Tax Break
#8: Rum Tax break. Congress approved an extension of a long-standing rum subsidy that dates back to 1917.

This
gives $222 million to
Puerto Rico and the US Virgin Islands that is passed on to their
rum
distillers

Tax Break
#9 NASCAR’s racetrack owners. The NASCAR loophole, in place since 2004,
allows anyone who builds a racetrack to receive a small tax benefit through
accelerated depreciation. It was extended for another year.

This
tax break cost roughly $43 million for the past two years.

These are a few of the very long list of tax
breaks for our corporate welfare queens.

You can
review the entire list here along with the Congressional
Joint Committee on Taxation’s report on each element of the Law.

Is this
a scandal or just business as usual?

Government
works this way: There are competing issues and constituencies and lawmakers horse-trade
to get what they want. That means you also get some of what you don’t want. Corporate lobbyists capture individual
politicians with cash and other non-financial support.

Then politicians
fight like hell to give the corporations what they want.  

Politicians
accept that bad will come with the good. The problem is how they define “the
good”. There is nothing wrong with most of these projects. Who isn’t for fixing
railroad lines? Or for drinking rum?

But why should
it be with taxpayer money?

Corporate
Welfare is a cancer on our economy; we must enforce zero tolerance for corporate
loopholes in the next round of tax reform.

Even if
that means higher prices at retail or fewer jobs.

(This
is the 2nd column in a continuing series about America’s low growth
future. You can read the 1st here).

What’s
Wrong Today:

Nothing
is more central to America’s self-confidence than the faith that robust
economic growth will continue forever. Between 1891 and 2007, the nation averaged
a 2% annual growth rate of GDP per person. But it appears that future economic
growth will average more like 1% at best, so says Robert Gordon of Northwestern
University: (emphasis by the Wrongologist)

Mr. Gordon
points out that long-term economic growth hasn’t been a steady process; it has
been driven by several discrete “industrial revolutions,” each based on a
particular set of technologies.

• The
  first industrial revolution, based largely on the steam engine, drove growth in
  the late 18th and early 19th centuries

• The
  second, made possible by technologies such as electrification, internal
  combustion and chemical engineering, began around 1870 and drove growth into
  the 1960s. Gordon says:

• The
  third, our current era, is based on information technology

According
to Mr. Gordon, our third industrial
revolution, while creating real value, has had a smaller economic impact than
the second. Electrification, for example, was a much bigger deal than
the Internet. Mr. Gordon:

We continue
to innovate. Some new ideas are amazing, but will they create sustained growth
at historical levels? Gordon says that the era of greatest incremental change
in our standard of living is behind us, while the case against his techno-pessimism
rests largely on the assertion that the big payoff from information technology is
just getting started. And it will come from the deployment of smart machines.

Machines
may soon be poised to perform many tasks that currently require large amounts
of human labor. This will mean rapid productivity growth and therefore, high
overall economic growth.

But the
crucial question is: Who benefits from that growth?

Between
1975 and 2009, US labor productivity doubled, while average real US wages were slightly below the 1975 level.

Where did
the benefits of that productivity go? Into corporate profits. In 2009, the US
corporate profitability index stood at 1300 when compared to a 1975 index value
of 100.

This strongly suggests that increasing
productivity is unlikely to benefit the rest of us in the future, since it has
not benefited us in the recent past.

The
Financial Times published the results of a study by Standard & Poor’s of the
per worker corporate profits for the F500. Their findings:

There
are no statistics that show how much of these profits were shared with the employees
who created it. But we know that bonuses and raises were few and many sustained
cuts to their benefit packages.

The
further deployment of smart machines may leave many Americans behind, particularly
those “middle
wage”
or mid-skilled workers whose skills slowly become redundant in the face of
technology. Our economy has been losing these middle wage jobs for decades. Jobs
are growing for both the highly skilled and least skilled among us.

It makes
economic sense: In affluent nations, competition stimulates technology
improvements that increase labor productivity and reduce costs. As labor
becomes more productive, fewer people are required to produce the same goods.
This leads to unemployment unless
demand grows at the same rate as labor becomes more productive. If
growth stops, unemployment increases, household income drops, demand drops and
the system collapses toward recession.

This shows
the policy dilemmas about growth:

• High
  growth is unsustainable. Unbounded resource consumption exceeds environmental
  capacity

• No
  growth is unstable. It leads to reduced consumer demand, increased unemployment
  and the spiral of recession

What will sustained low
(1%) growth lead to?

Inequality in America
will continue to grow. CEOs will continue to reap the benefits of multinational
sales in emerging markets. The exodus of prime-age males (the missing 1/5th)
from the labor force will not improve. American educational attainment will
continue to slide among our competitors. And with students owing $1 Trillion in
the face of low wage growth, America’s 18-34 year olds will be unable to build
savings adding to the inequality.

From
1993 to 2008, income growth among the bottom 99% of earners was 0.5 points
slower than the economy’s overall growth rate.

If future output
grows at a rate of just 1% a year; that means the overwhelming majority of
Americans will see their incomes grow at just 0.5% annually.

Conclusion:

Our
political system does not have a vision, a strategy or any policy for the
future.

The
assumption that the genius of the “free market” will take care of the future by
itself, is just a theology. We need to get serious. Any change in economic
status of our society flows first from an idea and then follows the tedious
process of implementation. A meditation from Tom Dispatch:

Our
soon-to-be overrated country needs to develop a plan: We need to consider mega projects, joint ventures between the private
sector and the government to employ our middle and low wage citizens.This policy would not need to last forever, our low birth rate will bring population back towards equilibrium with job creation in 20 years or so. 

The Fed’s
Quantitative Easing has not been about improving our economy; it is about preservation
of the current flawed system which brought the current economic catastrophe down
upon us. Harnessing the next wave of economic growth so that it benefits all
the people means confronting the above.

The
question is: Do we have the political sense and moral fortitude to do so?

What’s Wrong Today:

 

Guns are enabling tools for
killers.

 

On August 1, 1966 Charles Whitman killed 14 people and wounded 32 others
in and around the Tower of the University of Texas during a 96 minute shooting rampage.
Whitman did most of his shooting with a scoped bolt action 6mm Remington, (below) a rifle that looks and functions like a deer rifle:

 

Adam Lanza used a Bushmaster
.223, (below) the civilian equivalent of the military’s M-16. It is similar
in form and function to M-16 and he killed 26 in less than 20 minutes. 27 if
you include killing himself. Oh, and he also killed his mother, but he had killed
her earlier.

 

96 minutes vs. 20 minutes. 14 dead vs. 26: The thread that runs from
Charles Whitman to Adam Lanza includes two strands: gun technology and the tactics used to defend us from guys like
them.

Let’s start with tactics:

After Newtown, we learned that police
tactics for mass shootings, particularly in schools, have changed in the last
decade. In the past, first responders, when faced with a school shooting in progress
were told to wait for the SWAT team.

 

Apparently, enough people died
while first responders waited for SWAT to arrive, that they changed tactics:
Now, first responders are told to go right in, to walk past the wounded and try
to kill the shooter if he won’t be arrested.

 

The idea is that the sooner the shooting stops, the lower the body
count.

 

Great tactics, but a tall order for a cop who may not be as well armed
as his or her adversary.

 

Let’s talk about technology:

 

Gun owners love putting multiple shots into a target, whether it is a rusted
out car on the back 40, a hillside, or a paper target outline of a human. Therefore,
they buy the biggest magazines they can for their guns.

 

And maybe this is a chink in the NRA’s armor: The size of gun magazines and the use of automatic weapons. People
support outlawing of high capacity magazines.

 

On the left is a 90 round magazine for the AR-15.
It works in the Bushmaster too. Most police officers and mayors believe a 10 round magazine should be the
legally available standard.

 

If it was the only permissible size magazine and the shooter abides by
the law, only carrying legal magazines of the proper capacity, what’s to stop
him from carrying a satchel full of extra magazines so he can shoot all day?
Nothing.

 

But he will still have to re-load more often, and that is why the
outlawing of high capacity magazines is a practical solution, given the evolution of police tactics.

 

There is a saying: “If you’re reloading, you’re not in the
fight.”  

 

So, if a shooter has to change magazines under duress, he’s out of the
fight for a few seconds and the highway patrolman, the deputy sheriff, or the
local cop who happens to respond, will have a second or two to fire at the
shooter without risking return fire.

 

Any cop in that situation would appreciate those seconds.

 

The same applies to automatic weapons. They should be outlawed except
for military-type requirements. That means except for the military or the
police, if they are faced with automatic weapons fire.

 

Nobody has a good definition of an “assault weapon”. So let’s base
prohibitions on weapon functionality: No automatic weapons, no high capacity
magazines, no guns that have the same specifications as the military weapon.

 

Even with these rules, tragedies will still happen, but the body counts
might be lower, as the new police tactics expect. We need to give that cop an
extra few seconds to make the shooting stop. That way, some parent gets to see their child come home at the end
of the day, a child who wouldn’t without that extra time.

 

The NRA as an enabler:

 

The ‘90s weren’t
particularly good for gun manufacturers. Bankruptcy and reorganization were
rife in the industry. That was due to the fundamental flaw in the gun manufacturer’s
business model: To make the gun safe for the user, it has to be so well built that
it never needs to be replaced.

From
1980 to 2000, the gun industry failed
to keep up with population growth. The US population grew from 226. 5
million to 281.4 million, a 24 % increase. Over the same period, total domestic
small arms production fell by 33 %.  As
America grew, the gun industry was shrinking.

 

To sell more guns, the industry had to find a way to make customers want
more guns, and/or create more customers. That became the role of the NRA:

According to the Violence Policy Center, the first step was the NRA’s campaign to change state laws to allow the concealed carry of firearms;
and (2) the gun industry’s parallel aggressive marketing of concealable,
high-powered handguns.

Second was creating a demand for militarized
firearms for civilians. These are weapons in the military inventory, or
weapons based on military designs. Militarized weapons have been the industry’s
key design and marketing strategy since the 1980s.

Today, militarized
weapons: semiautomatic assault rifles, 50 caliber anti-armor sniper rifles and
armor-piercing handguns, define the US civilian gun market.

 

Finally, one of the best tactics in this situation is to scare the customers into thinking they’ll never be able to
get any more guns unless they buy now. This is the “Obama is going to
take away your guns” message that pervades the NRA’s advertising. It made 2009
and 2010 two of the best three years for sales for the gun industry since 1980.
The best year was 1981 when 5.4 million were sold.

 

Building market share for gun manufacturers has become the sole raison
d’être for the NRA. And it has worked.  

David Keene, CEO of the NRA, is receiving death threats for his role in trying
to ensure that gun owners continue to have an easy time getting the guns
they need. Who does he blame for the threats?  Mr. Obama.

Keene said:

Why is Mr. Keene afraid? He’s certainly
armed.

 

The Wrongologist asks incessantly: What kind of society do we want to
be?

 

If we want to be a better society, we must behave like a better society.
Organizations must dial back the rage. Media must report truth without rancor
or inflammatory editorializing. Individuals must be made to see that they are
part of the whole that is America.

 

We can have a 2nd Amendment and fewer mass shootings. To do
so, we have to pass laws and make deals, deals that none of us are likely to be
satisfied with at the end of the day.

 

This is the consequence of democracy.

Today was a great day for our
American Republic. We again transferred power without the losers challenging the
outcome. Mr. Obama gave a reasoned, progressively-tinged speech. He started by quoting the
Declaration of Independence, which his Tea Party adversaries have spent the
past four years trying to twist to meet their politics. He
conceded every point possible about liberty, individualism, freedom, limited
government, suspicion of centralized authority.

Then came the twist: He proceeded
to make all of that the foundation for construction of a vision of equality,
justice, civil and human rights, peaceful engagement with the world;
justification of a commitment to the social welfare state; and to a limited
degree, an activist government.

Perhaps heads are
exploding on Fox News today. 

Four years
ago, Mr. Obama’s election was seen by many as a fluke, a confluence of events
including fatigue from the worst presidency of the modern era and a catastrophic
economic collapse.

Four years
later, we’ve returned Mr. Obama to office when few thought it would be
possible, given the stagnant economy and persistent unemployment.

We live in a
remarkable country. Every once
in a while it shows through. Today, we glimpsed a future in which we could
learn to live up to our ideals. To move toward the better society that we hope to become.

The best part for the
Wrongologist was the poem by Richard Blanco. Richard Blanco
is a poet and teacher. He is the fifth person to be an inaugural poet. He is the
first immigrant, first Latino, the first openly gay person and the youngest to
be the US inaugural poet.

Read his wonderful poem:

 

Live in this moment. The political fights will resume
tomorrow!