Archive for the ‘Public Policy’ Category

John Lanchester on the financial crisis

July 7, 2018

John Lanchester

The financial crash of 2008 was worldwide, and the failure of governments to address the causes of the crash also was worldwide.  Because the same thing happened in different countries under different leaders, the reasons for failure are systemic, not just the personal failings of particular leaders.  The solution must be systemic.  A mere change in leaders is not enough.

John Lanchester, writing in the London Review of Books, wrote an excellent article about the crash and its aftermath.  I hoped to call attention to it in my previous post, but, as of this writing, there has been only one click on the link.

I know people are busy and have many claims on their attention.  If you don’t want to bother reading the full LRB article, here are some highlights.  If you’re an American, bear in mind that, even though so much of what he wrote applies to the USA,  his focus is on British policy.

The immediate economic consequence was the bailout of the banks.  I’m not sure if it’s philosophically possible for an action to be both necessary and a disaster, but that in essence is what the bailouts were. 

They were necessary, I thought at the time and still think, because this really was a moment of existential crisis for the financial system, and we don’t know what the consequences would have been for our societies if everything had imploded.  But they turned into a disaster we are still living through.

The first and probably most consequential result of the bailouts was that governments across the developed world decided for political reasons that the only way to restore order to their finances was to resort to austerity measures.  The financial crisis led to a contraction of credit, which in turn led to economic shrinkage, which in turn led to declining tax receipts for governments, which were suddenly looking at sharply increasing annual deficits and dramatically increasing levels of overall government debt.

So now we had austerity, which meant that life got harder for a lot of people, but – this is where the negative consequences of the bailout start to be really apparent – life did not get harder for banks and for the financial system. In the popular imagination, the people who caused the crisis got away with it scot-free, and, as what scientists call a first-order approximation, that’s about right.

In addition, there were no successful prosecutions of anyone at the higher levels of the financial system.  Contrast that with the savings and loan scandal of the 1980s, basically a gigantic bust of the US equivalent of mortgage companies, in which 1100 executives were prosecuted.  What had changed since then was the increasing hegemony of finance in the political system, which brought the ability quite simply to rewrite the rules of what is and isn’t legal.

(more…)

Trump’s Fed protects banks from stress tests

July 6, 2018

Bill Black, an expert on banking and white-collar crime, described how Donald Trump’s appointees to the Federal Reserve Board are revising “stress tests” to free Goldman Sachs and Morgan Stanley from a requirement to prove they are solvent enough to weather the next recession.

To pass the “stress test,” they’d have to put a larger fraction of their profits into capital reserves.   Black said they could easily do this, but it would cut into bonuses and dividends.

He also noted that Germany’s Deutsche Bank in Germany can’t even pass the easier stress test.  Deutsche Bank is Germany’s largest bank and, according to Black, the only large bank willing to lend to Donald Trump’s businesses.

LINK

Fed Lets Goldman Sachs, Morgan Stanley Off Hook, Investors Profit Billions, a transcript of an interview of Bill Black for the Real News Network.

Why Trump may win again

July 3, 2018

I underestimated Donald Trump.  I didn’t think he would be elected.  Although I knew the figures that showed declining support for Democrats, I thought they had enough residual strength to elect a President one last time.

I thought that his election might be a blessing in disguise from the standpoint of progressives.  Trump rather than Hillary Clinton would get the blame for failure to deal with the coming economic crash and ongoing quagmire wars.

I didn’t think that Trump could govern effectively because he was ignorant.  I forget how progressives ridiculed Ronald Reagan and George W. Bush for their supposed ignorance, and yet Reagan and Bush were transformational presidents while Jimmy Carter, Bill Clinton and Barack Obama were not.  Trump is on track to be a transformational president, and not in a good way.

President Trump is transforming the Supreme Court so as to reverse all the pro-labor and pro-civil liberties decisions of the past 40 or 50 years.  The religious right was disappointed that Ronald Reagan and the two George Bushes never advanced their goals.  But I don’t think Trump will have any qualms about giving them what they want.

Trump is crippling the ability of the federal government to perform its lawful duties to regulate and provide public services.  He has raised corruption to a new level, which, strangely, works to his advantage because there is so much of it that I can’t keep track of it.

Nancy Pelosi, Chuck Schumer and other top Democratic leaders are not an effective opposition.  They are too wedded to pleasing their wealthy donors and to a pro-military foreign policy and pro-corporate economic policy.

What I hear from liberal Democrats are (1) a claim that Donald Trump is a puppet of Vladimir Putin and (2) outrage at the latest comment that Trump has made on Twitter.

They let Trump set the agenda.  They have no program of their own.  So even though an overwhelming majority of Americans disapprove of Donald Trump, that will not in itself bring victory.

Increasing numbers of Americans decline to vote in national elections.  They don’t think the leaders of either the Republican or Democratic party represent them.

A certain number vote for Trump not because they expect him to keep his promises, but to “send them a message.”

When Ronald Reagan was elected in 1980, it seemed to me that, since the Republicans had become an ideological party of the right, the Democrats would become an ideological party of the left.  The result, I thought, would be a real political debate based on issues.

This didn’t happen.  Instead the Democratic leaders became more pro-corporate and pro-military.

Now, nearly 40 years later, a true left-wing movement is emerging in America.  Politicians such as Bernie Sanders and Alexandria Ocasio-Cortez even call themselves socialists.

I see that emerging movement as Americans’ only hope because the alternatives are the status quo, which does not work for most Americans, and Donald Trump’s blood-and-soil nationalism, which also will not work.

LINKS

Why Trump country is unfazed by the child separation crisis by Matthew Walther for The Week.

This Political Theorist Predicted the Rise of Trumpism | His Name Was Hunter S. Thompson by Susan McWilliams for The Nation.

What’s missing from Draut’s Better Deal?

June 26, 2018

Tamara Draut, at the conclusion of Sleeping Giant, her book about the new American working class, offered a list of proposals that she called A Better Deal.

THE BLUEPRINT FOR A BETTER DEAL

A Better Deal for Workers
Modernize out labor protections by fighting the definition of “independent contractor,” creating new rules for stable scheduling practices and ensuring that the growing “on-demand” workforce is protected by labor laws and has rights to basic worker benefits.  Expand federal enforcement capacity and increase the fines and penalties for companies that break the rules.
• Guarantee paid sick days and paid parental leave as universal benefits for all workers.
• Raise the federal minimum wage to $15 an hour by 2021 and eliminate the sub-minimum wage for tipped workers.
• Reform labor laws to ensure the ability of workers to join a union, including prohibiting so-called right-to-work laws and establishing majority sign-up as the authorization required for establishing a union.

A Better Deal for Families
Develop a system to guarantee access to affordable and high-quality child care for infants and toddlers for all working- and middle-class families and high-quality jobs for child-care workers.
• Reinvest in state public higher education to achieve debt-free public college for all working- and middle-class students.

A Better Deal for Society
Revitalize our nation’s infrastructure, including addressing climate change, to ensure full employment
• Establish a National Truth and Reconciliation Commission on Racial Healing to provide full accounting of our nation’s violent racial history and to address its legacy in residential segregation, occupational segregation, the racial wealth gap and oppressive criminal justice and policing practices.
• Develop comprehensive immigration reform to provide a pathway to citizenship for undocumented workers.

A Better Deal for Democracy
Reform election procedures and practices, including establishing automatic voter registration to ensure all citizens are registered and widespread adoption of same-day registration, early voting and restoration of voting rights to formerly incarcerated citizens; restore the Voting Rights Act to provide voter protections for African Americans
• Establish a system of public financing at the federal, state and local levels, to reduce the role of corporate money and private wealth in funding elections and allow more racially diverse and working-class people to run for office.
• Amend the Constitution and transform the Supreme Court’s approach to money in politics to establish that money is not free speech and that corporations are not people.

What is missing from this list?

(more…)

Reasons to be hopeful

June 16, 2018

I often feel discouraged about the state of the world.  But a lot of things seem to be improving behind my back.

This set of charts was created by the late Hans Rosling for his newly-published book, Factfulness: Ten Reasons We’re Wrong About the World—And Why Things Are Better Than You Think, and are taken from Amazon’s listing for the book.

Rosling contended that people in Western Europe and North America underestimate the progress being made.  In his opinion, this was based partly on an underestimation of the capabilities of people in Third World countries.  He thought that the harmful effect of this mistaken pessimism is that it discourages continued efforts to make progress.

He created Gapminder software as a means of graphically illustrating progress over time.

(more…)

Can the U.S. guarantee every American a job?

June 1, 2018

Is it possible to guarantee a job at a good wage to everybody who wants one?  Senator Bernie Sanders is working on a proposal to do just that, and several other Democrats have endorsed the concept.

Nobody in this country has ever tried anything like this.

“Full employment” as usually understood means reducing unemployment to the lowest possible figure, now estimated at 1.5 percent.

President Franklin Roosevelt’s New Deal created millions of useful jobs, but fell far short of providing a job to every individual who wanted one.   He proposed a postwar economic bill of rights that included the right to a decent job, but it isn’t clear whether that was meant literally or as an aspiration.

At the present time, the most widely-discussed proposal for a job guarantee is the National Investment Employment Corps (NIEC) proposed by Mark Paul, William Darity Jr. and Darrick Hamilton, working with the Center for American Progress and the Center on Budget and Public Policy Priorities.

The NIEC would provide a job to any American 18 years old or older at a minimum annual wage of $24,600 for full-time workers ($11.83 an hour).  They would have a chance to advance within the program to $32,500.  Wages would rise with the rate of inflation or to keep pace with any increase in the national minimum wage.

Full-time workers would be given the same health insurance and other benefits as other federal employees, whose cost is estimated at $10,000 a year. There also would be an option for part-time work.

The Secretary of Labor would provide “employment grants” to state, county and local governments, as well as Indian nations, for NIEC workers to carry out community projects.  The Secretary also would work with federal agencies to identify kinds of needed work that aren’t being done.  Examples might be energy efficiency retrofitting, elder care, ecological restoration and preschool services.

Where local governments could not think up enough useful projects to provide full employment, the NIEC would step in and do the work itself.  On the other hand, it would not fund work that would displace already existing employees.  Investigators would check to prevent corruption or boondoggling.  That’s how it’s supposed to work.

Paul, Darity and Hamilton estimate NIEC would employ 10.7 million workers which, factoring in part-timers, would equal 9.7 million full-time job equivalents.

They estimate the annual cost of their program at $543 billion a year.  That would be offset, they say, by reduction in spending for food stamps, unemployment compensation, earned income tax credits and other federal programs to help the poor and unemployed, and by an increase in taxable income.

The Levy Economics Institute of Bard College has developed a less-detailed proposal, which is said to be the basis for Bernie Sanders’ proposal.  The main difference is that the Levy proposal is based on a wage of $15 an hour.

It sounds good.  What would be the problems?  I think thee are some serious ones.

(more…)

How the New Deal created millions of jobs

May 31, 2018

Donald Trump promised a trillion-dollar infrastructure program that would create jobs. [1]  Bernie Sanders and other Democratic leaders are talking about a federal jobs guarantee.  Many Americans think this is utopian.

Eighty-some years ago, during the 1930s, Franklin D. Roosevelt’s administration showed what is possible.

The Public Works Administration (PWA) put hundreds of thousands of people to work on a variety of heavy construction projects that gave a face-lift to the nation’s crumbling infrastructure. Roads, bridges and dams were repaired and upgraded. 

Rundel Memorial Library in Rochester, N.Y., funded by the Public Works Administration and completed in 1937

Scores of new schools, libraries, hospitals, post offices and playgrounds were built for an expanding population.  All of these projects were undertaken on a scale inconceivable, even in the most prosperous times.

In April 1935, Congress inaugurated the Works Progress Administration (WPA), which put nearly 3 million people to work, including semi-skilled and unskilled, on projects as diverse as building athletic stadiums, making books for the blind, stuffing rare birds and improving airplane landing fields and army camps.

In its first six years, the WPA spent $11 billion, three-fourths of it on construction and conservation projects and the remainder on community service programs. In those six years, WPA employed about 8 million workers. …

The New Deal paid special attention to the nation’s dispossessed youth.  The Civilian Conservation Corps (CCC) put approximately 2.75 million idle young men to work to reclaim government-owned land and forests through irrigation, soil enrichment, pest control, tree planting, fire prevention and other conservation projects. …

Thousands of unemployed writers, actors, musicians and painters were given an opportunity to earn a modest livelihood from their artistic talents (many of them to achieve fame and fortune in later years) and to enrich the lives of countless culturally-deprived citizens.  The productions of the WPA Theater Project, for example, entertained a phenomenal audience totaling 60 million people, a great many who had never before seen a play.

Through the National Youth Administration (NYA) the government made it possible for 1.5 million high school students and 600,000 college students to continue their education by providing them with part-time jobs to meet their expenses.

A monumental achievement of the New Deal was the creation of the Tennessee Valley Authority (TVA), which produced and sold cheap electric power and fertilizer in a seven-state area (about four-fifths the size of England), whose farms were among the nation’s poorest and least productive, and where only a fraction of the inhabitants possessed electricity to light their homes and operate their equipment.

Source: Labor Educator

These were not make-work projects.  We still enjoy the benefits of these projects today.  Here is a summary of New Deal construction projects here in Rochester, N.Y., where I live.

  • Doubled the size of the Rochester International Airport (still in use)
  • Built a high school (still in use)
  • Built a post office with publicly commissioned art (still in use, art still there!)
  • Built a new Art Deco headquarters for the Rochester Fire Department (still in use)
  • Built a 40,000 square foot library (still in use)
  • Commissioned a variety of murals in high schools and public spaces, most of which still exist
  • Improved the local waterworks system
  • Set up a local Federal Arts Project center, that paid unemployed artists to create exhibits, run community art classes, and create art for public spaces.
  • Source: Jack Meserve, Democracy Journal.

What conditions exist today that prevent us Americans from doing what our forebears did then?

(more…)

Chris Hedges on the coming collapse

May 30, 2018

Chris Hedges wrote last week about the next financial crash.

Wall Street banks have been handed $16 trillion in bailouts and other subsidies by the Federal Reserve and Congress at nearly zero percent interest since the 2008 financial collapse.

They have used this money, as well as the money saved through the huge tax cuts imposed last year, to buy back their own stock, raising the compensation and bonuses of their managers and thrusting the society deeper into untenable debt peonage.

Chris Hedges

Sheldon Adelson’s casino operations alone got a $670 million tax break under the 2017 legislation.  The ratio of CEO to worker pay now averages 339 to 1, with the highest gap approaching 5,000 to 1.  This circular use of money to make and hoard money is what Karl Marx called “fictitious capital.”

The steady increase in public debt, corporate debt, credit card debt and student loan debt will ultimately lead, as Nomi Prins writes, to “a tipping point—when money coming in to furnish that debt, or available to borrow, simply won’t cover the interest payments.  Then debt bubbles will pop, beginning with higher yielding bonds.”

An economy reliant on debt for its growth causes our interest rate to jump to 28 percent when we are late on a credit card payment.  It is why our wages are stagnant or have declined in real terms—if we earned a sustainable income we would not have to borrow money to survive.

It is why a university education, houses, medical bills and utilities cost so much. The system is designed so we can never free ourselves from debt.

However, the next financial crash, as Prins points out in her book Collusion: How Central Bankers Rigged the World, won’t be like the last one.  This is because, as she says, “there is no Plan B.”

Interest rates can’t go any lower. There has been no growth in the real economy. The next time, there will be no way out. Once the economy crashes and the rage across the country explodes into a firestorm, the political freaks will appear, ones that will make Trump look sagacious and benign.

Source: Truthdig

(more…)

Is a non-BS economy even possible?

May 26, 2018

What would the U.S. unemployment rate be if all useless or harmful jobs were eliminated?

It would probably be equivalent to the Great Depression of the 1930s.

Barack Obama, in an interview in 2006, stated the problem:

“I don’t think in ideological terms. I never have. … Everybody who supports single-payer healthcare says, ‘Look at all this money we would be saving from insurance and paperwork.’  That represents 1 million, 2 million, 3 million jobs of people who are working at Blue Cross Blue Shield or Kaiser or other places.  What are we doing with them?  Where are we employing them?”

Source: The Nation

David Graeber, in his new book, Bullshit Jobs: a Theory, quoted public opinion polls that found 37 percent of UK employees and 40 percent in the Netherlands thought their jobs made no meaningful contribution to the world.

Now maybe that is exaggerated.  Maybe some of them think they make a contribution, but that it’s not “meaningful.”

Offsetting this, the inherent bias of people is to think we are accomplishing more than other people think we do or the objective facts indicate.

For example, public relations, advertising, lobbying, consulting and even speculation on financial and commodities markets have their uses.  It is just that they play more of a role in the economy than they should.

I myself think the U.S. military and intelligence services are much greater than necessary to protect the homeland from attack.  Of course, if the mission is to make the United States the world’s only superpower, no number could be great enough.

The question is: What would happen if all these people were thrown on the job market, all at once?

It would be a catastrophe, unless there were some sort of basic income guarantee (which Graeber advocates) or basic job guarantee.

(more…)

Trump’s broken promises to working Americans

May 14, 2018

Donald Trump and supporters. Source: Quartz

When Donald Trump ran for President, it was on an economic populist platform that, in many ways, put him well to the left of Hillary Clinton and of any Republican since Richard Nixon.

Most of what he promised would have been politically popular, economically feasible and beneficial to American working people—although not necessarily politically feasible.  But none of it was done or even seriously attempted.

Jonathan Chait last week wrote about Trump’s broken promises for New York magazine.  Here’s a short list of Trump promises:

  • Create a health insurance program that covers more people than Obamacare.
  • Negotiate lower drug prices through Medicare.
  • Pull out of NAFTA and negotiate a better trade deal.
  • Raise taxes on the rich, including himself.
  • Enact a $1 trillion infrastructure program (later $1.5 trillion).
  • Enact a six-point plan to curb lobbying, including no lobbying by former government officials or members of Congress until five years after leaving office and curbs on foreign companies making campaign contributions.

Trump has done nothing to replace or reform Obamacare, only made minor changes that make it worse.  Nothing was done to lower drug prices.

Simply canceling NAFTA would have been wrong.  Nations, even superpower nations, can’t just break agreements and not suffer consequences.  But there certainly is a need to renegotiate NAFTA and similar agreements.

The infrastructure plan is now $200 million, and even that has been postponed until next year.

As for putting limits on lobbying—that is a joke!

But I suspect that most Americans aren’t aware of this.  Most of the reporting on Trump has to  do with the Russiagate investigation, or Trump’s scandalous personal behavior, or the latest outrageous thing that Trump has said on social media.

These things matter, of course.  But they have nothing to do with public policy.

(more…)

The fault lies not in Russia, but in ourselves

April 7, 2018

If I habitually leave my car with the doors unlocked and the car keys in the ignition, somebody is going to steal it.

That doesn’t mean that the person who steals it is any less a thief, or that the car thief does not deserve to be apprehended and punished.  It does mean that I am a fool if I look to law enforcement to give me total security against theft without taking action myself.

If electronic voting machines are vulnerable to tampering, somebody is going to tamper with them.   If you want a guarantee of an honest vote count, then have paper ballots that are hand-counted in public.

If the confidential files of political parties are vulnerable to hacking, somebody is going to hack them.   If you want to be safe from hacking, then you need good computer security.

If election campaigns can be swayed by social media using personal information to manipulate people psychologically, then someone is going to manipulate public opinion.   If you want to overcome this, then based your political campaign on supporters going door-to-door and talking to people face to face.

I think the American election process is vulnerable to manipulation by foreign powers, but even more so by special interests and political operatives on the home front.   I think the idea that you can safeguard the process by threatening Russia—even if Russians turn out to be guilty of everything they’re accused of—is as foolish as the idea that you can solve the U.S. drug addiction problem by threatening Mexico or Colombia.

(more…)

Diversity is not a substitute for justice

February 20, 2018

Racial and cultural diversity is a good thing.

Adolph Reed Jr.

I, a straight white male, benefited from diversity during my college days in two ways.

I won a college scholarship because I was the only applicant from a small town below the Mason-Dixon line, and because I was one of the few applicants for this particular scholarship who took tests in the humanities rather than the sciences.

The other way I benefited was in meeting a more diverse group of people than I had known before.  I never had a meaningful conversation with anyone who was not white or Christian until I went to college (in the 1950s) and meeting people of different backgrounds was an important part of my education.

But diversity is not a substitute for social justice.  Diversity will not, in and of itself, end plutocracy or war or police brutality or unemployment or divisiveness.

The reason so many powerful people and institutions embrace diversity and reject social justice is that diversity leaves the existing structure of political and economic power intact.   Diversity is a good thing.  But it’s not enough.

LINKS

Diversity: A Managerial Ideology by Darel E. Paul for Quillette.  Hat tip to Alex Small.

Black Politics After 2016 by Adolph Reed Jr. for Nonsite.org (Emory College).  This is long, but well worth reading.

The Political Economy of Anti-Racism by Walter Benn Michaels for  Nonsite.org (Emory College).  A companion piece to Reed’s article, it also is well worth reading.

The New Deal’s forgotten accomplishments

January 1, 2018

A widely accepted criticism of Franklin D. Roosevelt’s New Deal is that it never really ended the Great Depression.  It took rearmament, the military draft and the Second World War to bring about full employment.

Conrad Black. of all people, writing in The American Conservative, of all publications, pointed out that what these critics overlook is the millions of Americans put to work by the New Deal conservation and public works programs.

Between 5 million and just under 8 million workers were employed on New Deal projects during the 1930s, but, according to Black, they were not included in the employment statistics cited by most historians, including partisan Democratic historians.

Solid line counts workers employed on public works as unemployed; dotted line does not.  Source: The Edge of the American West.

Black, formerly a Canadian newspaper publisher, has written biographies of Richard M. Nixon and Franklin D. Roosevelt.   Reviewing Robert Dallek’s recent biography of FDR, Black wrote: —

He states that the unemployed stood at 10 million in 1940, when Roosevelt broke a tradition as old as the republic and went after his third term.

In fact, unemployment was somewhat under 10 million, but was declining in the run-up to election day by 100,000 a month, largely due to the immense rearmament program Roosevelt had initiated and to the country’s first peace-time conscription, which he called a “muster”.

But Dallek completely ignores, for purposes of calculating unemployment, the many millions  of participants in his workfare programs, who were just as much employed as, and more usefully than, the millions of conscripts and defense workers in the major European countries and Japan, against which Roosevelt’s record in reducing unemployment is often unfavorably compared.

[snip]  These programs kept between five million and nearly eight million people usefully employed at any time building valuable public sector projects at bargain wages for Roosevelt’s first two terms, until defense requirements and the public sector took over and completed the extermination of unemployment.

Those unable to work received Social Security, unemployment and disability benefits from 1935 on.

(more…)

Why the FCC proposes to eliminate Net Neutrality

November 27, 2017

Doug Muder wrote an excellent post on today’s The Weekly Sift about how the Federal Communications Commission’s proposal to end Net Neutrality will enable monopolists to dominate the Internet.

Long story short: Net Neutrality means that Internet service providers operate like telephone companies.  Anybody can phone anywhere who is connected to the system, and every ISP charges its customers the same rates..   The end of Net Neutrality means that they operate like cable TV companies.  You would have to accept whatever restriction they choose to impose.

Muder shows how the end of Net Neutrality ties in with the growth of business monopoly and how this ties in with the growth of economic inequality.

I strongly recommend reading Muder’s article, but I have a couple of graphics below that also explain the issue, although not in as great a depth.

LINK

The Looming End of Net Neutrality (and why you should care) by Doug Muder for The Weekly Sift.

(more…)

America’s electrical grid is extremely insecure

August 31, 2017

Electricity gives us Americans a material standard of living that, a century ago, would have seemed like a utopia imagined by H.G. Wells.

Most of us have access to air conditioning, thermostat-controlled heat, electric clothes washers and dryers, electric dishwashers, cable television,  home computers, cell phones and Internet access.

This is made possible by one of the world’s most complex machines—a continent-spanning system of interconnected generators, transformers and 300,000 miles of wires.

 We take this for granted—until the electric grid fails.  Unfortunately, failures are becoming more frequent and longer-lasting.

Source: OilPrice

Some of the reasons are found The Grid: the Fraying Wires Between Americans and Our Energy Future by Gretchen Bakke (2016).

The average American is without electric power six hours a year, compared to 51 minutes in Italy, 16 minutes in Korea, 15 minutes in Germany and 11 minutes in Japan, Bakke wrote.  The White House itself lost power twice during the George W. Bush administration and twice more during the Obama administration.

Our electrical grid is aging and, in many places, poorly maintained.  About 70 percent of the grid’s transformers and transmission lines are more than 25 years old.   In 2005, one fifth of generating plants were more than 50 years old.   Just as with an automobile, the older electrical equipment is, the most it costs to keep it going.

The main reason for this is the change in the way electric power is regulated.   Before the Energy Policy Act, which was enacted in 1992 and went into effect in 2001, electric utilities were regulated monopolies, with a legal responsibility to guarantee availability of electricity, in return for a guaranteed profit.   There was no reason for a utility not to spend all the money necessary to keep the grid in tip-top shape because they were sure to get it back.

The EPA broke up the grid into (1) producers of electricity, (2) long-distance transmitters of electricity and (3) distributors of electricity.   Supply and demand, not regulators, determined electricity prices.  The idea was that this would open up the grid to new and creative sources of energy.

Suddenly it was possible for a U.S. electric company to go broke.   There was an incentive to cut costs, including maintenance costs.

The most common cause of power outages in foliage—usually in the form of wires coming in contact with tree limbs.   Another common cause is squirrels.   Both the New York Stock Exchange and the NASDAQ exchange have been shut down by squirrels chewing on wires.

After EPA, many utilities stretched out their tree-trimming schedules to save money.  FirstEnergy, an Ohio utility, drastically cut back on its tree-trimming schedule, didn’t even come close to meeting the new schedule and laid off 500 skilled maintenance workers.

The following year three FirstEnergy power lines sagged onto treetops.   That, and a computer bug, created a spreading power outage that left 50 million people in eight states without power for three days.   Bakke described in detail how this happened.   Economists estimate that the outage subtracted $6 billion from the U.S. Gross Domestic Product for that year.

(more…)

How inequality is growing

August 9, 2017

This chart, from an article in the New York Times, shows the growth of inequality in the past 37 years.

The income growth that took place in 1980 benefited everyone, but primarily those at the bottom of the income scale.   That didn’t mean the rich became any less rich.  In fact, their gains measured in dollars rather than as a percentage probably were greater.   But a rising tide lifted all boats.

By 2004, things were just the opposition.  Most of the income growth that took place in that year was concentrated among the top income earners.

There is an interactive chart in the original article that shows the hockey stick pattern began in the 1980s, but really shot up beginning in the 2000s.

My theory is that the driving forces were (1) the Carter-Reagan era upper-bracket tax cuts, (2) the deregulation of the financial industry during the Clinton administration and (3) the refusal of the Obama-Holder administration to prosecute officers of financial firms “too big to fail.”

Deregulation created new ways you could to get rich in ways that didn’t create value for others.   Refusal to prosecute meant that you could get  rich dishonestly and keep what you had.

The Trump administration will not change this.   It is making things worse by advocating for eliminating what little financial regulation there is, and by granting tax relief that primarily benefits the upper brackets.

LINK

Our Broken Economy, In One Simple Chart, by David Leonhardt for the New York Times.

How Did They Get So Rich? by Matt Breunig for Jacobin.  [Added 8/10/2017]  Breunig shows that the great increase in the income of the wealthy came from ownership of capital.  They became so much richer because they were already rich.

Donald Trump is wrecking government, legally

August 7, 2017

President Donald J. Trump in just six months has done permanent damage to the working of the federal government.   It is not just that his policies are mostly bad.   It is that, due to incompetence and contempt for government, he is destroying the ability of government to function.

The trouble is that his wrecking is fully within his legal and Constitutional powers as President, while  the illegal and unconstitutional actions of which he is accused are either unproven and / or have precedent in the Bush and Obama administrations.

LINKS

Why the Scariest Nuclear Threat May Be Coming from Inside the White House by Michael Lewis for Vanity Fair.   Short version by Rod Dreher.

How the Trump Administration Broke the State Department by Robbie Gramer, Dan De Luce and Colum Lynch for Foreign Policy.  Short version by Daniel Larison.

What’s Worse: Trump’s Campaign Agenda or Empowering Generals and CIA Operatives to Subvert It? by Glenn Greenwald for The Intercept.

Trump Is Guilty, of Something by Andrew Levine for Counterpunch.   But what?

Neoliberalism and the Grenfell Tower disaster

June 19, 2017

If British reports are to be believed, the Grenfell Tower inferno in central London might have been averted for a cost of a mere $6,000 — or a little more than $100 for each of the 58 unfortunates who, on the best estimate available this weekend, perished in the disaster.

According to the London Daily Mail, when the tower was recently renovated, builders opted for a cladding material so inappropriate that it is rated “flammable” in Germany and its use in tall buildings in even lightly regulated America is banned.  The attraction was a saving of a mere 10 percent.  On the Mail’s numbers, that added up to a total saving compared to a safe material of £5,000 — equal to a little more than $6,000.

Such is the dystopia that deregulation, British-style, has wrought — a dystopia whose excesses are now finally coming to be widely recognized by voters and elected leaders alike.

Source: Eamonn Fingleton

This is neoliberalism in action.   First you privatize a public service, as was done with public housing in Great Britain, because for-profit corporations are supposed to be intrinsically better able to make decisions than public bodies.  Then you make decisions based on assumptions about profit-and-loss, because this is supposed to be objective and rational.

Also, you judge the worth of a human life based on that person’s financial net worth.

Thankfully, not everybody makes decisions on this basis.  The brave firefighters who saved Grenfell Tower residents were motivated by a sense of duty, not a cost-benefit analysis.  Yet firefighters, too, in the UK as well as the USA, are being weighed in the neoliberal balance and found wanting.

(more…)

Did Senate Dems trade ACA for Russia sanctions?

June 15, 2017

Senate Democrats reportedly made a deal to allow Republicans to gut Obamacare in return for their support of tougher sanctions against Russia.

The Republicans have a 52 to 48 majority, so they have the power to force through their plan.   We the public don’t know what it is going to be, but, in order to be reconcilable with the House bill, it will include denying government health care benefits to millions of people in order to enable tax cuts for the very rich.

There are procedural tactics that the Democrats could use to delay action until public opposition has time to build, but they reportedly have agreed not to do this.

So the public loses a program that, despite its many flaws, has saved lives in return for the increased possibility of war with Russia.

Reports of a deal may be false or exaggerated and, if there is a deal, not all Democrats may be on board with it.

But it is an indisputable fact that the Democratic leadership in Congress is putting much more energy into investigation, so far fruitless, of Trump’s ties with Russia than into opposing the Republican political agenda.

(more…)

Book note: The Making of Global Capitalism

May 30, 2017

International financial organizations such as the International Monetary Fund and the World Trade Organization have come to be a kind of world government, dictating policy to supposedly sovereign governments.

I recently read a book, The Making of Global Capitalism (2012) by two Canadian leftists named Leo Panitch and Sam Gindin, on how this came about.   I thank my friend Tim Mullins for recommending it.

It’s quite a story.  It is not well understood.

The first part of the story is the U.S. New Deal.   President Franklin Roosevelt and the Democratic Congress gave the U.S. Treasury Department and the Federal Reserve System the authority they needed to stabilize the crumbling U.S. financial and banking system.

The second part is the 30 years following World War Two.   Under the leadership of the U.S. Treasury and Federal Reserve, international financial institutions were created that duplicated the U.S. system.  They presided over the era of greatest peace and prosperity that North Americans and Europeans had ever since.

The third part is what happened after that.  The world’s financial system endures a series of ever-greater financial crises.   To deal with them, international financial  institutions demand the surrender of gains made by American and European workers and the middle class in the earlier era.

The irony is that a financial governing structure created by American power is now stronger than ever, while the actual American economy is rotting away beneath it.

Panitch and Gindin described in great detail how this happened, step-by-step,.

(more…)

Donald Trump, a walking conflict of interest

May 3, 2017

I doubt if Donald Trump could get through a single day, certainly not a single week, without being involved in a conflict of interest.

The Atlantic magazine has drawn up a list of 39 issues (and counting) in which decisions by President Trump will affect the profitability of the Trump Organization.

Maybe the biggest one is the federal investigation of the Deutsche Bank, which holds $300 million in IOUs from the Trump Organization.

U.S. banks wouldn’t give Trump credit after he defaulted on debt when his Atlantic City casinos declared bankruptcy, so he turned to the Deutsche Bank, which is under investigation by the U.S. Department of Justice on charges of  laundering money for Russian mobsters.  Attorney-General Jeff Sessions said he will continue this investigation impartially.  We’ll see,

The Department of Labor and Internal Revenue Service have been conducting investigations as to whether the Trump Organization violated labor law and tax law.   Will these investigations continue?  We’ll see.

The Trump Organization’s lease agreement with the General Services Administration for the Trump International Hotel property contains a provision that no elected official will be part of the lease.  But the GSA has ruled this doesn’t apply to Trump because he’s no longer officially head of the business.  An impartial decision?  Maybe.

Trump’s business is involved in business deals with politicians and close relatives of politicians in India, Indonesia, the Philippines, Turkey, Dubai and Argentina.  Will Trump, if necessary, make decisions that threaten those relationships?  We’ll see.

And then there are daughter Ivanka’s women’s fashion business and son-in-law Jared Kushner’s family real estate businesses.

Never even mind the penny-ante stuff—Donald Trump charging the Secret Service for use of Trump facilities while they guard him and his families.

Any of these conflict would be highly controversial as a stand-alone issue.  The problem is that there are so many issues it is impossible to remember any one of them.

The problem is that there is hardly any decision that Trump or his appointees can make—whether in foreign policy, tax policy, labor policy, environmental policy or consumer protection—that will not in some way affect the profitability of the Trump businesses.

(more…)

Neoliberalism and Its Discontents (1)

April 13, 2017

What follows is notes for the first part of a talk for the Rochester Russell Forum scheduled at Writers & Books Literary Center, 740 University Ave., Rochester, NY, at 7 p.m. Thursday, April 13, 2017

Neoliberalism is the philosophy that economic freedom is the primary freedom, economic growth is the primary goal of society and the for-profit corporation is the ideal form of organization.

It is the justification for privatization, deregulation and the economic austerity currently being imposed on governments by lenders.

Neoliberalism has its roots in classical liberalism, which arose in the 18th and 19th centuries.  Classic liberals said that the purpose of government is to protect human rights, including religious, intellectual, political and economic freedom.   They fought the absolute power of kings and the privileges of aristocrats and demanded the right of individuals to determine their own fates.

Classical liberalism came to be supplanted in the early 20th century by a belief that government regulation and welfare could, if well thought out, enhance human freedom by giving individuals more choices.   A graduate of a public school or university, for example, has more options than a person unable to afford an education, so taxing the public to pay for public schools and universities would be a form of liberation.

Neoliberalism is a backlash against social liberalism.  Neoliberalism affirms that freedom of enterprise is the only important freedom.   Its well-known adherents include Friedrich Hayek, Ludwig von Mises and Milton Friedman.

It came into widespread acceptance in the 1980s, as a reaction against the manifest failures of central economic planning and as a way to break the political gridlock of the welfare state.  Ronald Reagan and Margaret Thatcher were both strongly influenced by the neoliberals.

Neoliberalism’s strongest adherents are to be found among economists, journalists, financiers, Silicon Valley executives and right-of-center parties in the English-speaking world and western Europe, and in international institutions such as the International Monetary Fund, World Bank and European Central Bank, which enforce neoliberal policies on debtor countries.

It is more of an implicit philosophy than a credo, a series of assumptions that has come to permeate our society.

What follows is my attempt to understand the logic behind these assumptions.

(more…)

An interview with Noam Chomsky

April 11, 2017

I missed this interview with Noam Chomsky when it was broadcast a week ago, but he has good insight into U.S. and world politics.   I respect him for his breadth of knowledge and independence of mind.  The broadcast is a little over an hour, which is a long time to watch something on a computer screen, but you don’t have to watch it all at once.

It took me many decades to appreciate Chomsky.  During the Cold War, I thought he was insufficiently aware of the evil and threat of the Soviet Union and of Communism generally, and overly quick to condemn the United States because our faults were aberrations whereas theirs were systemic.

I started to change my way of thinking in the 1990s when the Soviet threat ended, but the United States did not return to what I thought was normal.   I was shocked at how easily the Bush administration was able to wipe the Bill of Rights off the blackboard and commit the country to perpetual war.

But my real disillusionment was when the Obama administration, instead of offering hope and implementing change, simply filed some of the rough edges off the Bush policies to make them more acceptable.

Now comes Donald Trump who is, as Chomsky said, a kind of parody and exaggeration of what has gone before.

I can appreciate Chomsky, now that I have freed myself of the mental limitation of refusing to consider anything outside the range of the opinions expressed by Democrats and Republicans.   As Chomsky noted in the interview, what we should worry about are the policies on which self-described conservatives and self-described liberals agree.

Doug Muder on Jared Kushner

April 4, 2017

If you want a symbol of this new aristocratic reality, you need look no further than Jared Kushner, who was born rich, married the boss’s daughter, and is now (at age 36) one of the most powerful people in the country.

Kushner’s title is Senior Adviser to the President, and his yuuuuge portfolio just keeps growing.  For example, he is the administration’s point man on bringing peace to the Middle East.  That project might totally absorb someone of lesser dynastic credentials, but he also has been Trump’s channel to China, a nation some distance from the Middle East.  [snip]

Apparently that still left him with a lot of free time, so … Ivanka’s Dad named him to head the new White House Office of American Innovation … [snip]

Yes, Kushner may have little in the way of personal accomplishments or evidence of expertise relevant to governing a republic.  But if merit is a matter of blood and breeding, and if it is enhanced by an alliance of great houses, then he has merit in spades.

Source: The Weekly Sift

Matt Taibbi on Trump the destroyer

March 23, 2017

Trump the Destroyer: Trump has stuffed his cabinet with tyrants, zealots and imbeciles—all bent on destroying our government from within by Matt Taibbi for Rolling Stone.   Highly recommended.