Thursday, August 28, 2014

Trickle Down Economics and smaller govenrment led to the Great Recession

Following hard on the heals of all the Thomas Piketty kerfuffle, Harold Meyerson reports on a new paper in the Harvard Business Review by William Lazonik titled "Profits Without Prosperity:" (Emphasis mine)

Like Thomas Piketty, Lazonick, a professor at the University of Massachusetts at Lowell, is that rare economist who actually performs empirical research. What he has uncovered is a shift in corporate conduct that transformed the U.S. economy — for the worse. From the end of World War II through the late 1970s, he writes, major U.S. corporations retained most of their earnings and reinvested them in business expansions, new or improved technologies, worker training and pay increases. Beginning in the early ’80s, however, they have devoted a steadily higher share of their profits to shareholders.

How high? Lazonick looked at the 449 companies listed every year on the S&P 500 from 2003 to 2012. He found that they devoted 54 percent of their net earnings to buying back their stock on the open market — thereby reducing the number of outstanding shares, whose values rose accordingly. They devoted another 37 percent of those earnings to dividends. That’s a total of 91 percent of their profits that America’s leading corporations targeted to their shareholders, leaving a scant 9 percent for investments, research and development, expansions, cash reserves or, God forbid, raises.
Meyerson summarizes Lazonick's research as essentially throwing open - and the beating to death - the notion of Trickle Down Economics, and draws a stark link to President Reagan's changes in Securities and Exchange Commission regulations on stock buy-backs as the culprit of today's Great Recession (which still very much lingers everywhere BUT Wall Street).  I know that fact-impervious conservative pundits will no doubt shy away from the whole thing, but it should give real conservatives - and fiscal conservatives especially - pause that deregulation (i.e. LESS GOVERNMENT) in the early 1980's resulted in an economic crash in the late 2000's.  Like it or not, as we get ready to "celebrate" American labor this week that the economic fortunes of that labor pool are no longer in their own hands - and all so we can inflate corporate CEO pay apparently.

You can read more HERE

Saturday, June 21, 2014

Media Matters - Polling reflects the chosen media narrative

The fall out from Eric Cantor's recent primary loss and current polling on the President's approval rating highlight a real challenge to modern democracy. Everywhere you look there are stories about the things the President is doing wrong (or not at all) and in the lead up to the Virginia Republican primary the coverage at the national level was on how successfully Cantor had led the GOPs charge to stop the President, not how effectively he had represented his own district.

Unsurprisingly (at least to me) polling conducted under those narratives did not return an accurate picture if what is going on. Cantor was soundly defeated because he wasn't looking out for his constituents first, and the President gets hug marks for leading on individual issues as the economy gets haltingly better - or at least no worse. Yet the Main Stream Media (as well as the more partisan outlets like Fox and Huff Post) continue to report on the bad or negative angles only, often using false equivalencies to mask real "right and wrong" differences.

If we as a nation are going to resurrect our dying democracy, I think we need to acknowledge that media narratives matter.  Then we need to run the media put of town figuratively until they get back to being honest brokers of information.

Wednesday, May 21, 2014

Get out the Hoover: the NSA records phone calls as it nails shut the coffin of democracy

Three recent articles show not only how much the Security and Surveillance State has expanded in the last decade, but why the dangers of that expansion are largely going unchecked.
In the first, Glenn Greenwald, Ryan Devereaux and Laura Poitras report on further revelations from the Edward Snowden NSA document file – specifically that the NSA has taken its previous programs of spying on pretty much everyone (including Americans) by collecting their cell phone metadata to a new level.  They report that the NSA is actively intercepting both the phone metadata (records of calls to whom by whom from where) AND the call contents, which it stores in a play-back enabled form for up to a month:

The program raises profound questions about the nature and extent of American surveillance abroad. The U.S. intelligence community routinely justifies its massive spying efforts by citing the threats to national security posed by global terrorism and unpredictable rival nations like Russia and Iran. But the NSA documents indicate that SOMALGET has been deployed in the Bahamas to locate “international narcotics traffickers and special-interest alien smugglers” – traditional law-enforcement concerns, but a far cry from derailing terror plots or intercepting weapons of mass destruction.

Part of Greenwald’s reporting is, in keeping with his prior work, to call out the Washington Post, which reported on this program in March, but did not explicitly mention the countries being targeted.  Greenwald and his colleagues pull the veil back a little further, noting the program is active in the Bahamas, Mexico, the Philippines and Kenya.  They also report that the access to the phone systems was gained through a legitimate law enforcement activity, namely the Drug Enforcement Agency’s agreements with those countries governments that allow DEA agents to collect phone information to track suspect drug cartels.

The DEA has long been in a unique position to help the NSA gain backdoor access to foreign phone networks. “DEA has close relationships with foreign government counterparts and vetted foreign partners,” the manager of the NSA’s drug-war efforts reported in a 2004 memo. Indeed, with more than 80 international offices, the DEA is one of the most widely deployed U.S. agencies around the globe.
But what many foreign governments fail to realize is that U.S. drug agents don’t confine themselves to simply fighting narcotics traffickers. “DEA is actually one of the biggest spy operations there is,” says Finn Selander, a former DEA special agent who works with the drug-reform advocacy group Law Enforcement Against Prohibition. “Our mandate is not just drugs. We collect intelligence.”

Greenwald and his colleagues have, therefore succeeded in not just proving the NSA can store whole phone calls, but have made a lie (again) of the fact that US federal law enforcement agencies are NOT part of the massive Security and Surveillance State because they don’t “spy.”
One of the first reactions to this reporting came from Washington Post pundit Erik Wemple, who spent nearly all of his column today highlighting a squabble between the Post, Greenwald and Company, and Wikileaks over whose revelations really serve the public – i.e. who went far enough to help us understand what the real issue is here.  Wemple SEEMS to acknowledge that the Intercept Piece by Greenwald is on a more robust track then the WaPo reporting was:

The Intercept’s partial defiance of the NSA in publishing the names of four countries surely adds contour to the story of MYSTIC — the example of the Bahamas alone fleshes out various legal and diplomatic considerations involved in foreign surveillance. The more careful Washington Post version of the story was interesting yet unsatisfying: Absent a specific country, it was more difficult to reach hard conclusions on the program’s legitimacy, legality and efficacy. Those are the dangers of scaling back detail in consideration of security concerns. When asked if naming just the Bahamas as a way of explaining NSA capabilities would have been a tolerably cautious approach, Washington Post Executive Editor Martin Baron replied, “You make some assumptions here, but I’m not going to address them.”
There are also perils to The Intercept’s approach. It may have touched off a macho-transparentist scramble to out that one country whose secretness The Intercept genuinely wants to protect.

Whatever the outcome, each outlet apparently got the same pitch from the government: “We shared with both news outlets the very same concerns about risks to human life and national security,” says NSA spokeswoman Vanee’ Vines in a statement to this blog.

Of course, as one of Wemple’s more astute commenters noted, raising the issue of an internecine struggle for who got the “outing” right is a way to down play the significance of the additional reporting.

Likewise, David Frum’s column in the latest Atlantic Magazine seeks to divert attention from the real damage that NSA’s action do by trying to refocus readers on the NEED FOR SECRECY that obviates some of the issues Mr. Snowden’s revelations raise.  

Answering such questions is why states maintain intelligence agencies. Awkwardly, however, the very same imperatives that drive states to collect information also require them to deny doing so. These denials matter even when they are not believed.

Of course Frum is better at some in acknowledging that the NSA MAY well get out of line , but he seems to think that mechanisms exist to correct any missteps:

But the implications for national security are especially disturbing. In a world where danger comes as often from substate actors as from competing national governments, democratic governments need more and wider sources of information than before. Of course, the attainment of that information must be governed by law. If the National Security Agency breaks laws, corrective action is called for. But it’s not illegal, according to the most relevant Supreme Court precedent, for U.S. intelligence agencies to collect information on who connects to whom, provided they do not read the contents of messages without securing a warrant first. It’s certainly not illegal for agencies to intercept—and read—messages transmitted outside the United States. Herbert Hoover’s Secretary of State Henry Stimson famously closed the Cipher Bureau on the grounds that “gentlemen do not read other gentlemen’s mail.” Yet as Franklin D. Roosevelt’s secretary of war, Stimson would read decrypted communications with avidity.

I’m not sure what sort of legal corrective mechanism Mr. Frum envisions, but given that:

1) Congress has given the NSA, American telecom companies (AT&T, Verizon) and probably itself retroactive legal immunity for the spying reported by the New York Times as early as 2004; and
2) The Director of National Intelligence willfully lied to Congress, admitted it, and has yet to be prosecuted for it

I seriously doubt that we’ll ever see any legal corrective actions for the NSA’s over reaches.  That aside, the NSA also appears to have been lying about its desire and ability to collect phone calls themselves, which Mr. Greenwald’s and the Post’s reporting makes clear is not a technical issue so much as a data capacity issue (which the Utah Data Center will likely solve).  And again, now that the lies have been exposed, I suspect we’ll see little if any formal sanctions develop.

Where Frum really gets it wrong (aside from his misguided notions that this sort of spying is still in compliance with the Fourth Amendment) is that allowing Americans to know about this sort of spying is some sort abrogation of effective Executive Branch power execution that Protects Americans.  

As we have become safer, we have, in that very human way, increasingly begrudged the means of our safety. The intellectual and political pendulum has swung against national-security agencies—indeed, against the basic requirements of an effective executive branch, which are the same today as when Alexander Hamilton outlined them in “Federalist No. 70” in 1788: “decision, activity, secrecy, and dispatch.” Self-described reformers insist that the present-day U.S. government suffers from too much of these four elements. Since the 1970s, they have achieved great success in shifting government to be less decisive, less active, less secretive, and less able to move quickly—and not only in the domain of national security.

Again, I don’t know what planet Mr. Frum resides on, but “government” – if he means the Federal Executive Branch run by the President – is anything but “less decisive, less active, less secretive, and less able to move quickly.”  That Mr. Snowden had to flee the US after calling his own employers and the NSA to account is prima fascia evidence of that.  Equally importantly, conflating calls for the NSA to stop spying on Americans by hovering up every bit of electronic data they can get about us with equally strident calls to stop the effectiveness of other Executive Branch agencies (NOAA, NASA, HUD and DOT come to mind) just highlights how far we have really fallen in our national discourse.  The federal executive branch can be an effective protector of and advocate for Americans rights without undermining the social contract with those same Americans in the name of SAFETY.

America has one final shot to get this right.  If we don’t then we will be the enemy we used to spy on.  And that would be the most tragic legacy of 9-11.

Thursday, February 20, 2014

Olympic Failures in the Media are not Limited to Politics

Heading home tonight after work, I was looking forward to siting down and watching the USA-Canada women's hockey final from the Sochi Winter Olympic Games with my youngest daughter. I've watched prior Olympic women's sports with her two older sisters, and I believe that Olympic sports offer great teaching moments for dads of daughters. I already knew the outcome of the game, as NPR had run a rather extensive story on the game.

So when NBC treated us to a mere 90 seconds of "highlights " with a Bob Costas voice-over, I was more then disappointed. I was sad and angry all at the same time. Perhaps if the US had won we might have seen the match, but I suspect not.

Frankly, watching the women skate to a loss would have offered many more life lesson opportunities to me. And yes, I know NBC isn't in the business of programming just so I can teach my kids stuff. But really - in a day and age where the media routinely creates false equivalence in its political coverage to appear "fair and balanced" it's patently absurd that woman's hockey merited only an afterthought - especially when the men's semi against Canada is slated for prime time coverage tomorrow.

Shame on you NBC - and on us I'd we left this slight to our daughters go unanswered.

UPDATE: Friends have pointed out NBC carried the game live during mid-day programming. That's nice but it actually reinforces my point - today's men's match was run live on NBCs SN network, and it will becrecrunnin prime time tonight. What does that say to our girls and female athletes?

Monday, December 9, 2013

How the Too Big To Fail Banks are driving America broke while pullingwool over pundits eyes

Like most conservatives in sheep’s clothing, Robert J. Samuelson of the Washington Post appears to be delivering sage advice on the woes of world, and has a handy prescription for their fixing.  Today he pontificates (again) on the fact that America is aging, and this aging is THE driver of government spending, which in turn in A MAJOR CAUSE of our economic woes:

We are locked in a generational war, which will get worse before it gets better. Indeed, it may not get better for a long time. No one wants to admit this, because it’s ugly and unwelcome. Parents are supposed to care for their children, and children are supposed to care for their aging parents. For families, these collective obligations may work. But what makes sense for families doesn’t always succeed for society as a whole. The clash of generations is intensifying.

Sounds frightening!  This, we are told is the reason Detroit is backrupt, this is the driver of ever increasing government spending and debt; This has led to heartfelt but bad decision making by shifty and risk averse decisions:

The explanation for this is politics. For states and localities, benefit cuts affect government workers — a powerful but small group — while at the federal level, it’s all the elderly, a huge group that includes everyone’s parents and grandparents. As a result, the combat has been lopsided. Political leaders of both parties have avoided distasteful choices. Younger Americans have generally been clueless about how shifting demographics threaten their future government services and taxes.

Expect when it isn’t (all about politics or generational warfare).  Take elder care – like many Conservatives Mr. Samuleson is appalled, nay apoplectic, that Social Security, Medicare, and Medicaid account for 44% of total federal spending.  Yet, and slo like other conservatives, he NEGLECTS to tell readers that all three are self-funded from payroll taxes; that Congress regularly reassigns monies collected for these three to the regular federal budget; and that if Congress paid back everything actually owed to these program they’d be solvent indefinitely. Once you understand this – which any  Third Grader with Google could have told Mr. Samuelson – then you understand why these programs have been exempt from deficit reduction talks and mini-bargains up to this point.   For those not yet awake enough to grasp the point – Social Security, Medicare, and Medicaid DO NOT add to the National Debt or the Deficit; they are routinely raided by Congress to make both those things lower.

Rather, the federal deficit is caused by the well documents differences in income tax collection and federal spending on the discretionary side.  Again, remember that in total (including the payroll taxes mentioned above) America’s Exceptional Government only takes in 2/3rds of what it needs to operate.  The rest, which creates the debt by accumulating deficits, is on one big giant monetary credit card.  Conservatives want to pay the credit card off by slashing spending on the Mandatory Expenses (those very same Social Security, Medicare, and Medicaid) whose surpluses have kept deficits (and thus debt) at lower than actual levels for years.  The more sensible approach – until recently the Liberal Approach as well – would be to close tax loopholes in the income tax (and possible raise top end rates) while eliminating the income cap on what can be taxed to support Social Security, Medicare and Medicaid.  I personally include in these reforms the need to get rid of  “Carried Interest” as an income category – this is how investment bankers, high power stock brokers, and financiaers who broke our economy in 2008 pay lower actual tax rates the you and I do as wage earners, even though that “carried interest” is their principle form of income.

First and foremost, Detroit suffered from an unprecedented loss of public revenue. As I’ve previously reported, this was brought on by many factors. The most obvious of those were the recession and free-trade-related deindustrialization, both of which decimated the city’s manufacturing job base and drove population out of the city. On top of that, the state of Michigan reduced its revenue sharing with the city.

Second, the city and state spent — and is still spending — big money on wasteful corporate subsidies to politically connected private interests. That includes a reaffirmed commitment to spend $283 million — or more than the city’s entire annual budget shortfall — on a new professional hockey arena. Such profligate expenditures have drained revenues out of city coffers.

But perhaps the least discussed factor is the financing cost associated with a series of Wall Street-engineered debt deals back in 2005 and 2006. These schemes crafted by UBS and Bank of America’s Merrill Lynch were supposed to reduce pension fund obligations by using derivatives to try to “synthetically” convert variable-rate interest instruments into fixed-rate contracts.

Like many cities, Detroit got sold down the river by large (Too Big To Fail) banks, on everything from municipal bonds to interest rate swaps that mad the banks big bucks, but left Detroit hurting. 

Current estimates put 1/4th of the city’s budget shortfall – which has necessitated this bankruptcy filing – squarely in the hands of servicing interest and fees on the interest rate swaps along.  In fact (a set of inconvenient things that, again grade school kids with search engines could help Mr. Samuelson find):

Commissioned by the think tank Demos, the new report out today from former investment banker Wallace Turbeville shows that contrary to the myths about a bloated municipal government overspending on lavish social services, Detroit’s “overall expenses have declined over the last five years” by $419 million thanks to the city “laying off more than 2,350 workers, cutting worker pay, and reducing future healthcare and future benefit accruals for workers.” Today, Turbeville notes that “Detroit has a significantly smaller workforce per capita than comparable cities.” Yet, those draconian cuts still left the city with an annual $198 million shortfall because of three big problems — none of which has anything to do with supposedly greedy public workers and their allegedly overly “generous” pension benefits.

Like it or not, spinning the same, worn out lie doesn’t make it true – and Mr. Samuelson should be ashamed of himself for taking these lies to a national platform.  Someone of his supposed intelligence and moxie would do far better to look at the REAL FACTS, and lead us all to better, more informed judgments about the real causes of a crisis.  Until he and other like him do, our Country is doomed to make the same mistakes we’ve always made in public and government budget policy, and therefore we’re doomed to hurt many of our fellow citizens unnecessarily in the process.

Tuesday, December 3, 2013

Confronting American Racism - Are we any further along because of one movie?

Over at Ordinary times, my friend Mike Dwyer poses this important question about the newish movie 12 Years a Slave:

I ask the question, does this film bring us any closer to an understanding of American slavery? Perhaps. It is such a foreign concept to the modern mind that it may be impossible to bridge that gap but 12 Years A Slave is important because it tries to do just that.

Frankly, slavery as practiced then may be a foreign concept to the mind, but only if the mind is closed both to history  and modern news reporting.  How many stories have we seen on CNN, how many Bravo network docu-dramas about rescued children in the sex trade, how many raids of houses for foreign workers held against their will in the US?  What it different now is that slavery is not a major underpinning of the economic success of a large part of our country, and where it exists it is generally discovered, condemned and prosecuted.  I certainly hope this important piece moves our National discourse along, but as one of Mike's commentors notes:

I think part of the “close to home” issue is that we never really rectified slavery. Or even made meaningful efforts to attempt to do so. “White guilt” persists in large part because little genuine effort has been made to assuage it. I mean, there was 40 acres and a mule, reconstruction… and what else? Affirmative action? Kinda-sorta? I mean, our government hasn’t even offered an apology.
As long as we nibble around the edges of slavery, it will remain a pernicious force in American society, both culturally and economically. And that is a reason to keep at it, whether we've answered Mike's question or not.

Monday, December 2, 2013

Say What You Will - the Semantic Art of Running Away From Real Economic Consequences.

Modern political discourse – or what passes for it anyway – seems to be mostly about semantics, and not really about substantive discussion and debate to find solutions.  Today’s 113th Do Nothing Congress (as I hope History will remember them) spends more time parsing what is “revenue” and what isn’t then they do actually proposing policy and legal solutions to the nation’s problems (like 40 plus votes to repeal the Affordable Care Act in the House without a single vote on an alternative).
So, along comes Robert Samuelson in the Washington Post to politely suggest that the final piece holding us back from prosperity in our country is the semantics of what to call our economy. 

Among our problems is a failure of economic language. We lack the words and concepts to describe observable reality. By conventional wisdom, the Great Recession is long over. “Recession” connotes shrinking output. “Expansion” signifies the opposite. That’s how the National Bureau of Economic Research, a group of academic economists, defines business cycles. Following this logic, the bureau determined the economy stopped contracting in mid-2009. Yet, most Americans — 53 percent, says a recent National Journal/Allstate survey — think we’re still in recession, by which they doubtlessly mean “bad times.”

It’s a tempting argument – if our “real” problem economically right now is we don’t know what to call our current decline (if it is even a decline), then the clear solution is to present different language.  The implicit benefit is that if we can better describe the “real world” as we see it, then we can get at those mysterious “causes” that keep Americans from being “confident” and recreating the post-WWII growth era into which so many of them were born.  Samuelson then postulates that if we got the terminology right, we’d be able to overcome a condition in which:

The problem might not be a dearth of investments so much as a surplus of risk aversion. For that, candidates abound: the traumatic impact of the Great Recession on confidence; a backlash against globalization, reduced cross-border investments by multinational firms; uncertain government policies; aging societies burdened by diminishing innovation and costly welfare states.

It all sounds cozy and nice, right?  The problem is that Mr. Samuelson, like so many on the Right side of the political aisle (where Mr. Samuelson sits his own protestations not withstanding), is unwilling to grasp a fundamental – and easily described truth of our current economic situation:

 The problem, then, is not machines, which are doing a great deal to boost productivity; the problem is that the benefits from increased productivity no longer accrue to workers. In a provocative paper earlier this year, Josh Bivens and Mishel argued that the gains for the richest 1 percent were due to “rent-seeking” behavior by CEOs and financial professions, not competitive markets. As John Kenneth Galbraith said, “The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.” The newly minted rich want to blame robots for declining wages at the bottom and their innate superiority for their disproportionate share of the income. But these excuses mask their theft of productivity gains that rightfully belong to the rest of us.

Put another way, when real wages decline against spending power in most jobs as the increased “productivity” in the economy goes to a small group of investors (also known by the counter intuitive term “rentiers”) and isn’t spread across the workforce, that loss of productivity contributes to the further erosion of wages by driving down demand for goods and services.  It also contributes to stampedes at Walmart on Black Friday in which people are killed for deep discounts on consumer goods.  Powerful economic elites probably lament the disorder that all this creates (hence their walled communities and bulletproof houses) but at the end of the day they seem to think many of those at the bottom have earned it.  

The ultra simple version is you can't solve demand side economic problems with supply side approaches or solutions.  But we've been trying ever since David Stockman helped President Reagan create the now infamous (and discredited by Stockman no less) Voodoo economics approach.

Cast against all this – and interestingly so given the professed Catholicism of so many conservative pundits and politicians – are the recent writings of Pope Francis.  Ever the Jesuit (and thus dedicated to the state of the nation’s poor and down trodden as few others are) his recent The Joy of the Gospel calls all this out for the heartless and discordant pursuit it is:

The great danger in today’s world, pervaded as it is by consumerism, is the desolation and anguish born of a complacent yet covetous heart, the feverish pursuit of frivolous pleasures, and a blunted conscience. Whenever our interior life becomes caught up in its own interests and concerns, there is no longer room for others, no place for the poor.

As E. J. Dionne reminds us in today’s Washington Post:

His apostolic exhortation, “The Joy of the Gospel,” is drawing wide and deserved attention for its denunciation of “trickle-down” economics as a system that “expresses a crude and naive trust in the goodness of those wielding economic power.” It’s a view that “has never been confirmed by the facts” and has created “a globalization of indifference.” Will those conservative Catholics who have long championed tax-cutting for the wealthy acknowledge the moral conundrum that Francis has put before them?

But American liberals and conservatives alike might be discomfited by the pope’s criticism of “the individualism of our postmodern and globalized era,” since each side defends its own favorite forms of individualism. Francis mourns “a vacuum left by secularist rationalism,” not a phrase that will sit well with all on the left.

Mr. Dionne is right, of course, that many so-called Liberals have also made their beds with the gods and goddesses of the Market – how else to explain our current “Democratic” President’s interest in placating Wall Street (by not prosecuting them for their crimes in the court of public opinion, to say nothing of the actual courts).  Mr. Dionne goes on:

The difference is that a concern for the poor and a condemnation of economic injustice are at the very heart of Francis’s mission. “In this system, which tends to devour everything which stands in the way of increased profits,” he writes, “whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.” Can you imagine an American liberal who would dare say such things?

Well, as a liberal who has written similar words, why yes, Mr. Dionne, I can imagine it very well thanks you.

But to point is still well made – we as a Nation, a society, and as individuals do indeed have the language we need to accurately describe the world in front of us.  We don’t need to adopt the cumbersome semantic twisting of those who refuse to acknowledge the failures of clinging to economic myths simply because those myths both bolster our socio-cultural myths and shield those who have worked actively against the coming to fruition of our full potential personally and nationally.  If a Jesuit Pope from South America can accurately call out America’s ever failing supply-side experiment, using readily available words (and not in his native language), why can’t you Mr. Samuelson?