Government Capture is the American Condition

American corporations today are like the great European monarchies of yore: They have the power to control the rules under which they function and to direct the allocation of public resources. This is not a prediction of what’s to come; this is a simple statement of the present state of affairs. Corporations have effectively captured the United States: its judiciary, its political system, and its national wealth, without assuming any of the responsibilities of dominion. Evidence of government capture is everywhere.
Six Symptoms of Government Capture:
  1. The “smoking gun” is CEO pay.
  2. Retirement risk has been transferred to employees.
  3. Corporate money now controls every stage of politics — legislative, executive, and ultimately judicial.
  4. Government Capture has been further implemented through the extensive lobbying power of corporations.
  5. The most powerful CEOs are above the reach of the law and beyond its effective enforcement.
  6. Government capture has been perpetuated through the removal of property “off shore,” where it is neither regulated nor taxed.
Government cannot and will not hold corporations to account. That much is now obvious.  Indeed, the dawning realization of this truth is what has informed the Occupy movement, but only the owners of corporations can create the accountability that will ultimately unwind the knot of government capture.
Continue reading here.

Another View on the Politics Prolonging the Lesser Depression

This VOXEU article discusses the politics that arise in the aftermath of financial crises on a broader scale, not just our current one.

Political environments appear systematically different in the aftermath of a financial crisis relative to before the crisis. This column argues that the ensuing gridlock and the delay in potentially beneficial policy reforms should come as no surprise.

Financial crises of all colours (banking, currency, inflation, or debt crises) leave deep marks on an economy. Deep economic contractions, both in output and employment, are systematic in the interim and in the aftermath of financial crises, as thoroughly documented in research by Reinhart and Rogoff (2009) and Reinhart and Reinhart (2010).

Sustained waves of volatility, often resulting in secondary crises (e.g. debt crises following banking crashes), are almost the norm in the post-crisis period (Reinhart and Rogoff 2011).

What exactly occurs in the aftermath of financial crises that makes recovering from such shocks so hard? This column argues that the answer may lie mostly with the politics, not the economics.

I might disagree with the authors that the Occupy movement is primarily a “leftist” movement, but the overwhelming weight of this analysis that the politics of the extremes are at play here is difficult to dismiss. With the dominant culture favoring the corporatist alignments of corporation, wealth, and the elite political class the extreme politics prolonging the current Lesser Depression, as Paul Krugman describes our present economic status, can be best described as that which favors inequality at the expense of the vast majority of the public in the world’s nations today. Austerity in Europe is pushing the EU into a recession, and while the Federal government in the US has largely avoided the drastic austerity crippling Britain, Spain, Ireland, Portugal,  and Greece states and local municipalities in the US are being forced into austere budget cuts that defy logic, are counter-productive to growth, largely rooted in extreme political economics espoused by both parties that for the past 40 years has helped create the difficulties and inequality we are now experiencing.

 

What We Have Become…

                                                               Pavel Constantin, Cagle Cartoons, Romania

 

What does it say about democracy in the US when this cartoon coming out of a former communist country in Eastern Europe so clearly describes our corporatist state where an elite political class enjoys the benefits of police state protections against the people? Stay in line, and nobody will get hurt…

Paul Krugman’s Playboy Interview

Paul Krugman speaks with Playboy about the financial crisis and why the ongoing slow recovery is unnecessary, the result of politics, not economics. Read the entire article, but here are a few of the “money” quotes:

PLAYBOY: Some of [the] debate is irrelevant to the average person. All they know is they don’t have a job or they don’t have a job that pays enough.

KRUGMAN: The point is there’s a tremendous amount of suffering. A lot of America is much worse off than it was four years ago. I think the main reason you should be angry about it is that it’s gratuitous. This doesn’t have to be happening. We actually have the tools to make most of this go away. If we could throw aside the political prejudices and bad ideas that are crippling us, in 18 months we could be back to something that feels like a much better economy.

On the utility of union organizing:

PLAYBOY: Is it accurate to simplify our modern economy as a choice between working for a high-wage General Motors model versus the low-wage Walmart strategy?

KRUGMAN: I think the choice we made, really without understanding that we were making the choice, was to make Walmart jobs low paying. They didn’t have to be. In a different legal environment, a megacorporation with more than a million employees might well have been a company with a union that resulted in decent wages. We think of Walmart jobs as being low wage with 50 percent turnover every year because that’s the way we’ve allowed it to develop. But it didn’t have to be that way. If the rise of big-box stores had not taken place under the Reaganite rules of the game, with employers free to do whatever they wanted to block union organizing, we might have had a different result. Part of the hysterical opposition to the auto-industry bailout was the notion that we were bailing out well-paid workers with union jobs.

On the policy failures that have prolonged unemployment at demoralizing low levels that hurt the country, its labor force, based on backward political thinking:

PLAYBOY: So people in America today are suffering when they don’t have to be because of policy makers who won’t do the right thing?

KRUGMAN: That’s right. I’ve gotten some grief for my remark that if it were announced that we faced a threat from space aliens and needed to build up to defend ourselves, we’d have full employment in a year and a half. But that’s true. Why couldn’t we do that to repair our sewer systems and put an extra tunnel under the Hudson instead of to fight imaginary space aliens? Everybody in the world except us is doing a lot of investment in infrastructure and education. This is the country of the Erie Canal and the Interstate Highway System. The Erie Canal was a huge public infrastructure project financed with no private or public-private partnership. Can you imagine doing that in 21st century America? We really have slid backward for the past 200 years from the kinds of things we used to understand needed to be done now and then. And all of that because we are shackled to the wrong ideas.

(The interview that appears in the link above in a recent edition of Playboy, so if a little suggestive skin is offensive to you, reader beware.)

Jefferson vs Lincoln: On Inequality and the Lack of Social Mobility

America’s failed promise of equal opportunity

By Alex Gourevitch and Aziz Rana

Americans are increasingly aware that the ideal of equal opportunity is a false promise, but neither party really seems to get it.

Republicans barely admit the problem exists, or if they do, they think tax cuts are the answer. All facts point in the opposite direction. Despite various tax cuts over the past 30 years, not only have income and wealth inequality dramatically increased, but the ability of individuals to rise out of their own class has declined. Social stagnation is increasingly the norm, with poverty rates the highest in 15 years, real wage gains worse even than during the decade of the Great Depression, average earnings barely above what they were 50 years ago, and more than 80 percent of the income growth of the past 25 years going to the top 1 percent. In fact, since 1983, the bottom 40 percent of households have seen real declines in their income and the same goes for the bottom 60 percent when it comes to wealth. We know what the economic status quo does: It redistributes upwards.

Continue reading here:

The Disingenuous Mr. Romney Comes to Portland

I confess. I was a bad boy at the Romney event last Friday evening at Portland Yacht Services. I openly challenged some of Romney’s disingenuous assertions and after a time the police, at the request of the owner, asked that I leave which I voluntarily did. I have a video clip of my peaceful exchange with the officer. When I inquired who requested my leaving I was given to understand by the police sergeant who escorted me to the exit that it was Phineas Sprague, local business man and host of the event.

I’d like to ask why a campaign event such as this would be publicized as “open to the public” but in fact not be a public event when it comes to the subject of speech. I understood open to the public to mean that anyone from the public was welcomed, regardless of political persuasion. That is what I have always thought “public event” meant. And as a public gathering I naturally thought my speech, particularly my political speech, could arguably be protected. Private ownership of the property on which an advertised “public event” was taking place was used in this case to trump public speech. Had I repeatedly shouted, “fire,” it would have been entirely appropriate for the nearest fifty people to clamor onto my back and shut me up. However, stifling me for challenging Mr. Romney’s thin assertions hardly rises to the level of “fire.”

A fellow that was not even allowed entry into the event and instead stood outside the door listening said nothing whatsoever. His appearance disqualified him. He had the appearance of a fisherman, wore cargo shorts to his mid-calf, had longish hair and a beard, and wore a beret with a non-descript insignia on the front. He described himself as a conservative, actually as an acquaintance of Mr. Sprague. As soon as he entered the event police were signaled by someone inside to remove him. Open to the public, indeed.

I didn’t shout “fire,” at least not in the literal sense. By addressing the platitudes and thin veneer of Mr. Romney’s rhetoric I was calling out the shallowness of the spectacle. A 1%-er put up a private stage for this other 1%-er to shower the crowd with feel good bromides — “When I am President I will create jobs…” “When I am President I will fix the economy…” – saying nothing, really, about how that would be accomplished in any meaningful way. After all it has been over three years since Mr. Romney’s party have openly admitted to on principle opposing every Obama policy and yet the economy improves, albeit slowly but still. It is meaningful that he loves his country, as he offered (I’m sure he does, he has done extremely well here, and in the Caymans…), but the platitude that by bestowing more favors on the 1% he will create jobs and balance the budget is as light as gossamer.

I would have Mr. Romney comment on the fact that one of the last times strong measures were taken to balance the federal budget, by Andrew Jackson, a 75-month depression occurred. These hollow notions are what the 1%-ers — him on the stage and him staging the event — use to whip up support for policies that benefit the 1% more than anyone else. There is a reason why the US Census Bureau citing 2010 census data states one in three Americans is poor or near poor. It is no coincidence major corporations are reporting record profits quarter after quarter, or that a very small minority holds the vast wealth of the country. The wealth of this nation has been systematically redistributed upward through preferential tax treatment and special services that only the wealthiest have access to, among other mechanisms. It’s no coincidence the national conversation shifted to this inequality when Occupiers occupied Wall St, the engine feeding this inequality. The truth of this resonates far and wide.

The Maine Revenue Service recently affirmed that if Maine’s wealthiest citizens were taxed at the same level that most other Mainers are, the 65,000 Maine people threatened to be thrown out of MaineCare, Maine’s Medicaid program, would not fear for their health, their housing, nor their place in society. The politics of the corporation and the 1% does not make for a government of, by, and for the people.

With my challenges I am taking back my little piece of ground and occupying it. There is a fire in our republic and I will cry fire.

I have a great deal of respect for the Portland Police, or I should really say, police in general. They do an incredibly difficult job policing our cities and towns. They deal with situations most of us would balk at, some of which put their very lives at risk or in danger of severe harm. They are required to make careful sometimes life changing split-second decisions that are expected to be blameless. Not just anyone possesses the courage to face such a job so organic to the proper functioning of our society. I have a great deal of respect for those that aspire to do so. (On the other hand, I have little respect for the militarization of local police under a dubious banner of national security. This is a slippery slope we have slid way too far down already.)

The police, as far as politeness and respect for my person were concerned, carried out Mr. Sprague’s bidding in an entirely appropriate manner. The space was his and I admit he had the prerogative. My speech obviously upset Sprague and by instructing the police to ask me to leave, he obviously did not think my speech was protected speech. I think really, though, we never even approached that question. My challenges to Mr. Romney were not part of the script for the evening and that may have been what upset him.

I respectfully followed the officer’s polite request that I leave Mr. Sprague’s property. The officer is part of the 99% and I respect that his unions are under attack by people like Mitt Romney, and those that provide stages for Mr. Romney to deliver the 1%’s song and dance routine. Think of me as someone throwing a metaphorical rotten tomato at a lousy performer.

For more on the disingenuous Mr. Romney, Brad Delong offers:

Mitt Romney Rises to Amazing Heights of Incoherence in Michigan

Bring Our War Dollars Home: Afghanistan

A recent article in Armed Forces Journal could not be clearer on the state of the war in Afghanistan. Lt. Col. Daniel L. Davis writes in Truth, lies, and Afghanistan:

I spent last year in Afghanistan, visiting and talking with U.S. troops and their Afghan partners. My duties with the Army’s Rapid Equipping Force took me into every significant area where our soldiers engage the enemy. Over the course of 12 months, I covered more than 9,000 miles and talked, traveled and patrolled with troops in Kandahar, Kunar, Ghazni, Khost, Paktika, Kunduz, Balkh, Nangarhar and other provinces.

What I saw bore no resemblance to rosy official statements by U.S. military leaders about conditions on the ground.

I came across this piece through the excellent online newsletter put out by the Afghanistan Study Group, the Afghanistan Weekly Reader. Wonkish and authoritative the ASG’s reports and news releases are non-partisan, and of the highest quality sort of analysis and information I’ve found on the subject of the decade-plus war being waged in Afghanistan.

The latest DoD request: $88 billion for the war effort in 2013 as the drawdown of troops continues. And for what, asks ASG’s Mary Kaszynski?

We’ve mentioned before that this number seems suspiciously high, considering the pace of the drawdown, We’re not the only ones who think so. At the budget briefing two weeks ago a reporter noted that the cut from last year’s war costs to this year “doesn’t seem like it’s that much of a reduction” and asked DOD officials to “give us some sense of what that’s for, that 88.4 billion?” JCS Chair General Dempsey’s response: “For recapitalization, for reconstitution, we’ve always said that it would take years following the end of the conflict to recapitalize the force.  And some of the OCO costs are caught up in that. ”

Dempsey’s answer is not that surprising. The need to “recapitalize” or “reset” the force after a decade of war is a favorite line for those who want to keep defense spending high. Trimming the defense budget, we are told, would hollow out our military forces and leave us open to all sorts of dangers.

The problem with this argument is that it’s simply not true. A new report from the Congressional Research Service says, in a typically understated way, “it can be argued that the use of the term “hollow force” is inappropriate under present circumstances.”

V Recessions, U Recessions, and L Recessions

Jared Bernstein does a nice job showing the relative recovery dynamics of several recessions suffered in the US since June of 1969. As he briefly explains the role of business cycles on his blog, and with a great graphic showing employment as a share of population (from the Bureau of Labor Statistics), recoveries take form based on how quickly employment numbers rebound. V recessions hit bottom with recovery in jobs showing a relatively quick rebound. Re-hires or easier mobility between jobs tend to work to the benefit of the unemployed here after the initial storm is weathered and the economic adjustment kicks in. U recessions rebound more slowly, and in the early 90’s and 00’s were viewed as “jobless” recoveries. Not as easily explained, but clear to have been the dynamic for these two recoveries.

Where we are now is in one of the more insidious recoveries, described by the L profile. The long-term unemployment in this dynamic is ensuring for some, especially for older workers, that they will not enter the workforce again at the same level of income or with the same level of work as when they left it. That is the tragedy of such a loss of utilizable capacity, or in more human terms, a tragedy of the loss in terms of human dignity for those that have worked all their lives, played by the rules, only to be pushed out of the job market as they approach their retirement and are unlikely to be able to return to meaningful work.

For those in that case, without sufficient savings with which to retire, either through a loss of savings in the financial crash, not having been able to save, a divorce, foreclosure, or medical crisis that ate up savings, this portends a difficult end of life scenario for those caught on the foot of the L…

Look around. Many of your neighbors are in just this predicament. Connect the dots as to why: a failure to enact effective fiscal and monetary policy to speed recovery (thanks to anti-revenue, “business-friendly” corporatists), off-shoring of jobs to boost profits, reliance on automation to boost profits, down-sizing and consolidation to boost profits, technological advances that make re-training difficult for many. Efforts to weaken already weak safety nets leave these under-utilized workers scrambling at the end of their lives (also thanks to anti-revenue, “business-friendly” corporatists). While Bernstein doesn’t delve into the role of inequality in our current L shaped recovery neither the preferential tax benefits for those making a living from capital gains and dividends (the corporatists), nor the race to maximize profits is to be ignored.

Source: BLS

Stiglitz on the Perils of 2012

Joseph E. Stiglitz of Columbia University, winner of a Nobel Prize in Economics, paints a fairly dismal portrait of this year if we continue chasing snopes through the forest — those ideas that our short term debt and deficit crisis requires unprecedented austerity and draconian budget cuts — and fail to enact economic policy that stimulates growth.

This year is set to be even worse. It is possible, of course, that the United States will solve its political problems and finally adopt the stimulus measures that it needs to bring down unemployment to 6% or 7% (the pre-crisis level of 4% or 5% is too much to hope for). But this is as unlikely as it is that Europe will figure out that austerity alone will not solve its problems.   On the contrary, austerity will only exacerbate the economic slowdown. Without growth, the debt crisis – and the euro crisis – will only worsen. And the long crisis that began with the collapse of the housing bubble in 2007 and the subsequent recession will continue.

If the right policies and points of view are taken, it is not all doom :

Meanwhile, long-term problems – including climate change and other environmental threats, and increasing inequality in most countries around the world – have not gone away. Some have grown more severe. For example, high unemployment has depressed wages and increased poverty.

The good news is that addressing these long-term problems would actually help to solve the short-term problems. Increased investment to retrofit the economy for global warming would help to stimulate economic activity, growth, and job creation. More progressive taxation, in effect redistributing income from the top to the middle and bottom, would simultaneously reduce inequality and increase employment by boosting total demand. Higher taxes at the top could generate revenues to finance needed public investment, and to provide some social protection for those at the bottom, including the unemployed.

The Obama administration rode in with much hope, but stacking his cabinet and economic team with those that created the conditions that led to disaster, and marginalizing those whose proscriptions are proving out to be what is needed to speed recovery and reduce unemployment, a repeat of the same old program does not bode well for the near future, nor the far.

%d bloggers like this: