Archive for Economy
President Calvin Coolidge once said, “The chief business of the American people is business.” But in examining the debate over the Trans-Pacific Partnership, Trade Promotion Authority, etc., one can see the business of business is not America.
It was clear last week that the TPP and TPA (fast track) were not dead, but unlike Monty Python’s parrot, really just resting. Politico reports on maneuvers by House Speaker John Boehner and Republican leaders to revive fast track:
Under the emerging plan, the House would vote on a bill that would give Obama fast-track authority to negotiate a sweeping trade deal with Pacific Rim countries, sending it to the Senate for final approval. To alleviate Democratic concerns, the Senate then would amend a separate bill on trade preferences to include Trade Adjustment Assistance, a worker aid program that Republicans oppose but that House Democrats have blocked to gain leverage in the negotiations over fast-track.
Decoupling TAA and TPA might be a non-starter with many Democrats. But the political mechanics are not as interesting as the broader trajectory of dealings between government and business.
In any of these deals, no matter what the promised benefits, the general public always seems to come out holding the short end of the stick. You can smell it. Somebody is going to make a lot of money. It’s just never us. We get to do the paying.
Even as Jeb! Bush and Hillary Clinton prepare for their close-ups, out in bayou country a GOP presidential wannabe is trying to keep from being the next Sam Brownback.
Republicans’ approach to taxes is not unlike Biblical literalists’ approach to confronting evolution. Christian fundamentalists will construct an elaborate house of cards on the shakiest of foundations and spend enormous time and effort trying to keep a puff of breeze from knocking it over before they will question their crappy theology. (Visit the Creation Museum on Bullittsburg Church Rd.
in Petersburg, Kentucky, and don’t forget to stop by the gift shop.)
Republicans — Louisiana Gov. Bobby Jindal, for example — will concoct an elaborate edifice of nonsense to create the illusion that they are not raising taxes, you know, to pay for services their constituent public actually wants. Like funding universities and hospitals. Facing a potential $1.6 billion budget shortfall (that’s another story), Jindal has gone to Creation Museum lengths to keep from offending Grover Norquist and Americans for Tax Fairness.
Here’s how the local paper explained it last week:
State Rep. Joel Robideaux, R-Lafayette, and 10 other Louisiana House members sent Norquist a letter (PDF) Sunday night, asking Norquist to rethink his approach to Louisiana’s budget and the “no tax” pledge….
The governor has threatened to veto any budget plan or tax bills that don’t meet Norquist’s “no tax” requirements. Currently, the governor is pushing the Legislature to adopt a controversial higher education tax credit — commonly called SAVE — that Jindal says will make the budget comply with Norquist’s wishes.
These are leaders, mind you, elected by the people of Louisiana, sending a mother-may-I letter to a gadfly in Washington, DC for permission to do their jobs. And their governor wants to be president of the United States and stand up to terr’ists.
Robert Reich looks at the Trans-Pacific Partnership’s “near-death experience” in Congress last week and explains that it is not that unions have gotten stronger or that the president has gotten weaker, but that the public no longer supports these trade deals. By about 2 to 1, as it works out. All the arguments in favor “are less persuasive in this era of staggering inequality.” Faced with the in-your-face unfairness of promised benefits accruing primarily to those in the top one percent, the public feels relatively worse off even if they are better off in some absolute sense. Reich writes:
To illustrate the point, consider a simple game I conduct with my students. I have them split up into pairs and ask them to imagine I’m giving $1,000 to one member of each pair.
I tell them the recipients can keep some of the money only on condition they reach a deal with their partner on how it’s to be divided up. They have to offer their partner a portion of the $1,000, and their partner must either accept or decline. If the partner declines, neither of them gets a penny.
You might think many recipients of the imaginary $1,000 would offer their partner one dollar, which the partner would gladly accept. After all, a dollar is better than nothing. Everyone is better off.
But that’s not what happens. Most partners decline any offer under $250 – even though that means neither of them gets anything.
When a game seems arbitrary, people are often willing to sacrifice gains for themselves in order to prevent others from walking away with far more – a result that strikes them as inherently wrong.
Even a monkey can figure that out. Just not the One Percent.
Yves Smiths’s post Tuesday summarizes the challenges of reigning in (pun intended) the One Percent and of running a blog with that purpose. Knowing your opponent is key, but mastering the gory details of finance is its own challenge. It is a worthwhile read.
You need to be a soldier in the war to demystify finance, because its supposedly arcane and impenetrable nature is one of its biggest weapons. It’s easy to dismiss critics if they can be depicted as ignorant. There are costs to citizenship. One such cost is knowing your enemy, their strategies, their tactics, and the terrain on which they fight. That requires not passing familiarity with finance, but knowledge of it.
A key piece of that knowledge is “private equity is a government sponsored enterprise.” From tax subsidies to investments in government pension funds to sovereign wealth funds, these investments make money using the government, she writes, and,
… close to half the investment capital in private equity funds is contributed directly by government entities. In this respect, private equity is little different than companies like Fannie, Freddie, and Solyndra that are regularly criticized in the media as recipients of government subsidies.”
The Century Foundation’s Amy Dean, writing for Aljazeera, describes the hangover Republican governors have from drinking all that tea. Those tax cuts for the wealthy haven’t performed as advertised:
In Kansas, Brownback lowered tax rates for top earners by 26 percent. Now the state faces a $334 million budget deficit. Kansas’ public services are so emaciated that the State Supreme Court ruled the funding of the school system unconstitutional. Economic growth has stalled and the state’s employment growth currently ranks 34th in the nation.
Jeff Bryant’s alarming post at Salon details some of the financial services sector’s inventive, new schemes for funding education. Wall Street already saw K-12 schools as “the last honeypot,” a steady, recession-proof, government-guaranteed stream of public tax dollars just waiting to be tapped by charter schools. It first had to convince states to increase competition – meaning eliminating teachers and other public employees standing between investors and their money.
One could argue that the right’s small government, low taxes mantra always had as its goal eliminating the “creeping socialism” of government providing education and other public services on a not-for-profit basis. (What, no middle-man markup?) “Starving the beast” was never about the size of government, but about eliminating public-sector competitors and making sure the right people take a percentage of vital services funded at taxpayer expense.
Since the collapse of the housing market, the giant pool of money is looking for other places to invest. So it’s out with the NINA loans and the CDOs and in with the SLABS, CABS, PPPs, and ISAs. Jeff Bryant writes:
It’s not hard to see the allure of SLABS [student loan asset-backed securities]. Student loans seem to be an endless stream of revenue as colleges and universities continue to increase tuition, economic conditions and employment transience feed the unemployed back into continuing education, and political leaders urge everyone to attend college. The income stream is nearly guaranteed to pay off because the loans are next to impossible to discharge in bankruptcy.
A Huffington Post article by Chris Kirkham states, SLABS offer “seemingly unlimited growth potential at virtually zero risk. The burden of college loan repayment falls entirely on students’ backs, shielding corporations from the consequences of default.”
Again this morning, Paul Krugman knocks down some of the right’s cherished beliefs about its economic theories:
At a deeper level, modern conservative ideology utterly depends on the proposition that conservatives, and only they, possess the secret key to prosperity. As a result, you often have politicians on the right making claims like this one, from Senator Rand Paul: “When is the last time in our country we created millions of jobs? It was under Ronald Reagan.”
Actually, if creating “millions of jobs” means adding two million or more jobs in a given year, we’ve done that 13 times since Reagan left office: eight times under Bill Clinton, twice under George W. Bush, and three times, so far, under Barack Obama. But who’s counting?
After the president fact-checked his critics in Cleveland last week, Susan Crabtree of the Washington Examiner, appearing on “The Last Word,” tried to tamp down his taking credit for unemployment falling to 5.5 percent, citing 30 million people who have dropped out of the workforce. Eugene Robinson would have none of it, pointing out that the Bureau of Labor Statistics figure is the “standard way that we have measured unemployment for many, many decades.” When the game is not going your way, you don’t get to move the goalposts. (IOKIYAR)
As a number of observers have pointed out, however, for big businesses to admit that government policies can create jobs would be to devalue one of their favorite political arguments — the claim that to achieve prosperity politicians must preserve business confidence, among other things, by refraining from any criticism of what businesspeople do.
Under “the confidence con,” any criticism of these “sensitive souls” will prompt Job Creators to take their investments and go home. But there is another free-market dogma not heard much anymore, one voiced by former RNC chair Michael Steele in 2009: “Not in the history of mankind has the government ever created a job.” Yet during the 2012 debate over whether the sequester would hurt the defense industry, the goalposts moved again. But worry not. Like Ah-nold, “never created a job” will be back.
Imagine a self-serving, industry-funded Sunday talk show ad:
One million workers in this country owe their cars, their homes, their kids’ education, and their steady paychecks to the private-sector, free-market entrepreneurs of the American defense industry.
The Defense Industry — meeting demand for fine consumer products like the F-35 Joint Strike Fighter, the fuel-efficient M1 Abrams tank, Tomahawk cruise missiles, the new Zumwalt class guided missile destroyer, and the Hellfire-equipped Predator drone. Predator — for when you really want to reach out and touch someone.
Free Market Capitalism — because government never created a job.
(Cross-posted from Hullabaloo.)
We know Cleveland rocks. But on Wednesday, President Obama visited Cleveland to rock back.
For an infuriatingly long time, he’s been loathe to toot his own horn and play offense when that’s just what fellow Democrats needed him to do in 2010 and 2014. Where’ve you been Barack? [news quote extended, bolded]:
“It was one thing for them to argue against Obamacare before it was put in place,” Obama, using the nickname for his signature Patient Protection and Affordable Care Act, said during an afternoon address to the City Club of Cleveland.
“Every prediction they made about it turned out to be wrong. It’s working better than even I expected. But it doesn’t matter. Evidence be damned. It’s still a disaster. Well, why?”
“The truth is, the budget they’re putting forward and the theories they’re putting forward are a path to prosperity for those who have already prospered.”
Good line. Obama ticked off a number of things his opponents got wrong. Got in Republicans’ faces about it even. And with a smile on his. That probably ticked off them too. It’s the sort of thing Democrats are way to reluctant to do. As Drew Westen says (okay, I’m paraphrasing), if the message isn’t pissing off your opponents, you’re not doing it right. They’ll be on the Sunday bobblehead shows any minute to wag their fingers and wring their hands over the president’s “angry” words and inappropriate swagger.
It’s not as if there isn’t a wealth of material to work from. Perhaps the only sour note in Cleveland was Obama’s continued support for the proposed Trans-Pacific Partnership trade pact opposed by critics in his own party. We’ll leave that for another time.
Anyway, I sourced some of the president’s Cleveland material, maybe improved on it, and added a few peeves of my own. It’s the sort of thing I open carry on my smart phone for those “close encounters.”
People believed them.
Instead, while the national debt did increase as it has every year since the Clinton budget surpluses, budget deficits shrank from $1.4 trillion when Obama took office to $483 billion in 2014.
(Washington Post 10-15-14)
Republicans said Obama’s “socialist policies” would increase the size “of our already bloated government,” lead us towards “national socialism,” and “the country’s economy is going to collapse.”
(NC Rep. Robert Pittenger 01-21-15; Kansas Sen. Pat Robert 09-24-14; Rush Limbaugh 09-10-12)
People believed them.
Instead, federal government employment has shrunk since January 2009, “corporate profits have nearly tripled” and the stock market doubled in six years.
(BLS 03-21-15; New Republic 08-04-14; FactCheck.org 01-09-15; Google Finance)
Republicans said if Barack Obama was reelected, “gas prices will be up at around $6.60 per gallon.”
(Utah Sen. Mike Lee 03-07-12)
People believed them.
Gas prices dropped below $2 per gallon in early 2015.
Republicans said Obama’s policies would destroy “nearly 6 million jobs over the next decade” and lead to “diminishment of employment in America.”
(John McCain campaign 10-31-08; Texas Rep. Pete Sessions 11-07-09)
People believed them.
Instead, 12 million new jobs created, more under 6 years of Obama than under 12 years of two Bushes, “the best private sector jobs creation performance in American history [that] outperformed President Reagan’s in all commonly watched categories” according to Forbes.
(ElectaBlog 10-03-14; Forbes 09-05-14)
Meanwhile, “small-government, pro-business” George W. Bush presided over “the biggest federal budget expansion since Franklin Delano Roosevelt” and saw only 1.3 million net jobs created in 8 years (7 million net for Obama in 6 years). The Wall Street Journal called Bush’s “the worst track record on record.”
(Washington Times 10-19-08; ElectaBlog 10-03-14; Wall Street Journal 01-09-09)
Finally, for those with short memories:
Republicans said we had to invade Iraq because Saddam Hussein had stockpiles of chemical and biological weapons. We even knew where they were. We’d be out in six months, it would cost at most $60 billion, “We do not torture,” etc.
People believed them.
How much longer will people believe these guys?
General Atomics MQ-9 Reaper at Creech Air Force Base, NV, one of several test sites promoted by the state.
We’ve also discovered through intelligence that Iraq has a growing fleet of manned and unmanned aerial vehicles [UAVs] that could be used to disperse chemical and biological weapons across broad areas. We’re concerned that Iraq is exploring ways of using these UAVs for missions targeting the United States. – Pres. George W. Bush, Cincinnati, OH, October 7, 2002
That was the first time many of us heard the term “unmanned aerial vehicles.” Ticking off a litany of bogus reasons for invading Iraq, Bush hoped we would collectively wet our pants in fear of unmanned drones over America unleashing death from above. That was then. This is now.
You know, when I saw that headline in the Guardian, I thought I was looking at a decade-late review of the 2004 Vin Diesel film, The Chronicles of Riddick. If you missed Chronicles on cable, the film’s Big Bad (h/t to you Buffy fans) is a murderous group of interstellar religious fanatics called the Necromongers. They rampage across the galaxy, like ISIS in space ships, converting or killing everyone in their paths. They also “believe heavily in a philosophy that says ‘you keep what you kill’, believing that ending another’s life entitles you to their property and position.” Having screwed investors, thrown families from their homes, brought the planet to its economic knees, and demanded tribute (bailouts) lest they take us all down with them, that pretty much describes Wall Street’s philosophy these days, too. Which is why, as Suzanne McGee writes, “’You eat what you kill’ is the motto on many a trading desk.”
What Wall Street doesn’t believe in is its own bullshit, business school catechism about how in a meritocracy pay is a function of celestial mechanics that must not be perturbed lest we offend the Market gods – pay is an elegant function of one’s contribution to the enterprise’s bottom line. How do we know they don’t believe this?
… Wall Street’s profits aren’t what they used to be. Pretax profits fell 4.2% in 2014 to $16 billion, according to New York’s office of the state comptroller. If you think that sounds like a relatively modest decline, consider that 2014 profits were 33% below 2012 levels, and a whopping 74% below 2009, when Wall Street posted record results as markets zoomed back to life after the crisis and banks profited from ultra-low asset values and interest rates.
So what? Well, in spite of the falloff, bonuses rose for the second straight year, with “a 30.1% decline in profitability, and a 15% increase in bonus payments” in 2013, followed by a more modest 2% increase this year.