Category Archives: Government

Greek sympathy. Not.

Posted on by davald

A friend, also an economist, wondered about the reported austerity measures undertaken by peripheral Eurozone countries as a condition for (mostly) German loans. Have the governments of these countries actually reduced spending?

The chart above, based on FRED data, shows that all three countries reduced their “final consumption spending” from their peak in 2009, although Ireland began its adjustments a year earlier. Greece, to no one’s surprise, sharply curtailed spending.

The New York Times published recent data on several European countries, including Germany and France. Here’s a chart based on the figures:

Greece is in a world of hurt, and very much on the brink of exiting the Eurozone and reinstating the drachma. One of the country’s biggest problems is tax collection. The New York Times has a piece on how Greece’s wealthiest citizens avoid paying:

Mainly, though, these wealthy citizens have done what Greeks from the richest to those of modest means traditionally have done: Pay as little as they can in the way of taxes.

Such obstinacy no doubt galls the traditionally frugal Germans. Chancellor Merkel has steadfastly insisted that Greece institute much needed reforms, including the whole issue of taxes and their collection. The Times:

Last year alone, an estimated 8 billion euros ($10.2 billion) in collectible taxes were in arrears — nearly half of the country’s budget deficit [my emphasis].

Greece’s One-percenters, as the Times article reports, are loath to engage in philanthropy (a Greek term, for heaven’s sake). They are hoarding their cash or investing elsewhere. Sympathy is also a Greek word, but it’s in short supply amongst the wealthy. Thus, ordinary Greeks—counterparts to the Rest of Us here—suffer.

What a mess.

Amartya Sen on Europe’s failed policies

Posted on by davald

Another Nobel Prize winner in economics chimes in. Amartya Sen condemns the German-dictated austerity measures, suggesting that they manifest a “transparent disdain” for the people. Besides, they are counterproductive, as Keynes argued 80 years ago. Sen:

IF proof were needed of the maxim that the road to hell is paved with good intentions, the economic crisis in Europe provides it. The worthy but narrow intentions of the European Union’s policy makers have been inadequate for a sound European economy and have produced instead a world of misery, chaos and confusion.

On the political side, Sen reminds us that the people ultimately decide who governs them. In recent elections, the citizens have tossed out the incumbents. But Sen also suggests that the failed austerity regime has fanned the flames of extremism on both the Right and the Left. We Americans know all about such polarization. Sen:

Europe cannot revive itself without addressing two areas of political legitimacy. First, Europe cannot hand itself over to the unilateral views — or good intentions — of experts without public reasoning and informed consent of its citizens. Given the transparent disdain for the public, it is no surprise that in election after election the public has shown its dissatisfaction by voting out incumbents.

Second, both democracy and the chance of creating good policy are undermined when ineffective and blatantly unjust policies are dictated by leaders. The obvious failure of the austerity mandates imposed so far has undermined not only public participation — a value in itself — but also the possibility of arriving at a sensible, and sensibly timed, solution.

This is a surely a far cry from the “united democratic Europe” that the pioneers of European unity sought.

Who is the Church?

Posted on by davald

As I’ve mentioned on this blog, I was born and raised a Catholic. My parents were rigid in their faith, at least by outward appearance. Our family never missed a Sunday mass or a holy day of obligation. We strictly adhered to eating no meat on Fridays and abstaining from food and beverage before communion, both prohibitions having long since disappeared. (These two about faces alone should disabuse the notion that the Church cannot change.) We said grace before each meal and the rosary during Novenas. But, we never participated in the social aspects of the Church; the idea of being part of a community did not occur to my parents. So, we attended what we were supposed to then headed straight back home. This went on for me until my emancipation, departing for Berkeley in the 60s, no less. Before then I had my first communion, preceded by my first confession, then later my confirmation. Here’s what I looked like when I was confirmed. (I look like a young Republican. But the red should advise.)

Over my adult years, raising my own family, I’ve had an on-again-off-again relationship with the Church. As is my wont, I don’t do things half-heartedly. So, when I was “with the Church” I really was involved. Yet, I can never say that I believed in (a) god. Church for me as I grew older was community, from playing softball to creating liturgies.

Liturgy means ‘the work of the people.’ And that’s how I chose to view the Church. It was all about the people who came, played, talked, listened, and thought together. We made music. We sang.

For me, the clergy were almost irrelevant. Indeed, they often impeded the work of the people. My “passion,” as others call it, inevitably drove confrontations with the parish priest. The last such encounter was precipitated by the pastor, who accused me of usurping his role, and St. Mary’s had room for only one. The message was clear, so I packed up my guitar and beat a hasty retreat never to return.

I pondered this bit of biography while reading Maureen Dowd’s column this morning. She, too, was raised Catholic by strict adherents of the faith. But she also has a problem with the clergy, all the way up to the pope. What galls her this morning is the hierarchy’s harsh tones against the Obama administration, specifically its health care act that obligates insurers to provide birth-control measures.

Dowd tells us a few statistics about the attitudes of Catholic laity, which don’t differ all that much from non-Catholics’. Even to the point of contraception, Catholics disagree with Church dogma that intercourse can be practiced only by a married, heterosexual couple with the clear intention of producing offspring. Sex, in other words, can just be sex, without having procreation in mind.

A few posts back I said, “Damn the church.” In that case I equated the church with the clergy, especially the archly conservative bishops and cardinals who vehemently protest the contraceptive mandate of “Obamacare,” calling it a violation of religious freedom. For Dowd, the Church hierarchy is at war with Catholic women. She writes:

The church leaders headed to court hope to undermine the president, but they may help him. Voters who think sex is only for procreation were not going to vote for Obama anyway. And the lawsuit reminds the rest that what the bishops portray as an attack on religion by the president is really an attack on women by the bishops.

I’d go further. The bishops, the cardinals, and the pope are at war against the “work of the people.” They expect the faithful to fork over their dollars, obey all the commandments, including those of the Church, and otherwise shut up.

Catholics of the world, unite. You have nothing to lose but your clergy.

Taxes

Posted on by davald

Republicans, as a rule, loathe taxes. Some, like Ron Paul, would prefer to eliminate the IRS, which would have the effect of eliminating federal taxes, I suppose. Supreme Court Justice Oliver Wendell Holmes reportedly said in a 1934 speech that “taxes are the price we pay for a civilized society.” It would seem, then, that Republicans have no use for the latter, and it shows, given their rabid temperament—which is simply mean.

I have a decidedly different view of government, one more aspirational than descriptive. I believe that we deserve a government that works for the Rest of Us rather than as a tool for the filthy rich. As it stands, Congress is a cesspool of corruption, completely beholden to its wealthy benefactors.

Yet, if we were to have a government that Abraham Lincoln talked about, you know “of the people” and all that, taxes would have to rise on the rich, certainly, and perhaps a few quintiles below. Those taxes, however, would be used to fund what “the people” want.

But I’m going to eliminate Republicans from “the people,” since they don’t like government, any government, to begin with. That leaves progressives and liberals, the kind of people who long for a “kinder, gentler” nation. We, the real Americans (how’s that?) would gladly pay our taxes knowing that they would be used in furtherance of that goal.

So, speaking of taxes, I offer a few charts below.

The first two are based on historical data provided by the White House, one showing tax receipts from individuals and corporations. The second shows each as a percentage of the gross domestic product.

GDP actually fell in nominal dollars between 2008 and 2009, while tax rates remained constant. That helps explain the last spike in corporate receipts (red) and also in individual income taxes.

Corporate taxes as a percent of GDP have steadily declined since 1952, widening the gap with individual income taxes.  Individual income taxes reached their peak in 2000 (as a percentage of GDP) then fell sharply as a result of Bush II’s tax cuts.

Individual income taxes, as a percentage of GDP, remained fairly constant from the early 1950s to the middle and late 90s, when Clinton’s tax increases became effective. Moreover, I would expect that during that period the distribution of the income taxes changed with the marginal tax rate.

A while back I estimated the income taxes on a million dollars of earned income. Take a look:

The Republicans, who don’t count in my universe, would keep lowering the marginal tax and the taxes on corporations. Well, they wouldn’t stop there—everybody would get a tax cut. Except, lest we forget, the poor, those who don’t pay any income tax, though they pay other taxes (e.g., sales). These degenerates, in the Republicans’ eye, need to have “skin in the game,” so they would have to start paying taxes.

Oh, and the GOP would likely eliminate the Earned Income Credit. The poor just aren’t poor enough for the Republicans.

Robin Hood Tax

Posted on by davald

I’m ashamed to admit this, but either I once knew and forgot or I never knew—about the Robin Hood Tax. Last night I got around to watching a taped episode of Bill Moyers. He interviewed RoseAnn DeMoro, a leader of the largest national nurses’ association, about the tax

She and others would like Congress (or the states or the entire world’s governments) to impost a 0.5% tax on financial transactions, or 50¢ on every $100 trade or transfer. By their estimates, the tax would raise $350 billion a year in the United States and $77 billion in the Eurozone. That money could and should be used, says DeMoro, to put people back to work.

Moyers asked DeMoro for her “bucket list,” what she would like to see accomplished before she retires from the scene. She responded with single-payer universal health care, livable-wage jobs for everyone who needs work, and money out of politics.

DeMoro was asked if she or her association would endorse Barack Obama for re-election. She said probably not, because Obama has been a major disappointment, once uttering his support for single-payer and a public option in the current health care act, neither of which survived, of course.

Some global notables have come out in support of the Robin Hood Tax, including Desmond Tutu, Pope Benedict, Bill Gates, Warren Buffet, and even Germany’s Angela Merkel. We can appreciate that if all financial transactions across the planet were subject to this trifle of a tax, then the bankers couldn’t go elsewhere to gain advantage.

Another example of my ignorance is that the U.S. did have a transaction tax from 1914 to 1966. Hmmm. The end coincides with the beginning of the Great Divergence and the federal government’s accumulation of debt. Cause and effect or simple correlation? The tax was 0.1% of stock sales and 0.04% on transfers. Assuming 0.1% on all transactions, the amount that would have raised today is $70 billion per annum. That’s about three percent of current federal receipts, which were $2.3 trillion, according to the White House’s historical tables. (There is a much smaller tax on financial transactions, revenues from which are used to fund the SEC.)

At any rate, sounds like a good idea. Pass it on.

Gambling

Posted on by davald

John Maynard Keynes referred to Wall Street (and its London counterpart, from which Keynes himself extracted substantial profits) as a casino, in its literal meaning. That is, Wall Street is where people place bets.

The legal gambling could be of no moment to the Rest of Us. If rich bastards want to play with their own money, so be it. (They’ve got so much of it, that they no doubt face the challenge of what to do with all that cash. One option: buy a jersey worn by Babe Ruth for $4.4 million.) But, of course, the very rich are playing with our money, since taxpayers are on the hook should bets go south.

This is one major reason why the casino captains must be constrained against their own excesses. I’m talking government regulation. The bankers don’t like it, and why should they? They’re perfectly positioned: heads they win, tails we lose. They’ve made billions and billions of dollars engaging in moral hazard of the worst kind. Should they guess wrong, we come to the rescue. We do so (implicitly) because these guys are really too big to fail. They’ve captured such a share of the global economy that failure for them means catastrophe for all.

Lest you think I’m exaggerating the gambling part, take a gander at this New York Times article on what was going on, and may still be, at JP Morgan Chase. Without proper supervision, the underlings run wild, placing all sorts of bets and buying and selling the same toxic derivatives that brought the whole house down in 2007-2008. And it would still be down, along with the Rest of Us, but for TARP.

“When Ina [Drew] was there, things ran smoothly,” one former trader there said.

But Ms. Drew’s firm hand began to weaken after she contracted Lyme disease. Her absences opened the door for tensions among her deputies to flare into the open. “Look,” one current trader added, “it is a tough place to work.”

Most significant, her deputy in New York was increasingly at loggerheads with her deputy in London who spearheaded the strategy behind the losing bet, Achilles Macris, the current and former traders said.

But there was only so much she could do when she was away, even though some current traders and senior executives at the bank emphasized that Ms. Drew remained vigilant about risky trades throughout her tenure.

“No one could really challenge Achilles’s traders,” a former risk officer said.

Beyond that, the chief investment office was performing well, earning sizable profits for JPMorgan even as other businesses at the bank, like home loans, began to hemorrhage money. Those gains came as the size of the unit’s trades was increasing, but the office’s success blunted questions that were raised about the added risk.

During this time, Mr. Macris gained more latitude to build and expand trades from his desk in London — including the wagers that ultimately went so wrong for the bank. [my emphases]

We should understand that these are leveraged bets, based on some underlying asset, which may or may not be tangible. More often than not the asset is yet another financial instrument, itself based on an asset, either real or virtual. And so on. Should there be an external shock, a broad term encompassing just about any event or change in psychology, the entire scheme collapses. We should also understand that JP Morgan et al. often guess right on their bets, and they make lots of money.

But most important we should understand that these Wall Street gamblers aren’t doing a damn thing for the Rest of Us. Their profits are so many 1′s and 0′s in a computer, which enables them to buy baseball jersey’s, an island retreat, or a pro sports team.

In his column this morning, Paul Krugman makes the case for regulation. Krugman:

The point, again, is that an institution like JPMorgan — a too-big-to-fail bank, not to mention a bank whose deposits are already guaranteed by U.S. taxpayers — shouldn’t be engaged in this kind of speculative investment at all. And that’s why we need a return to much stronger financial regulation, stronger even than the Dodd-Frank regulations passed back in 2010.

Yet, I’m afraid that Krugman’s wise advice amounts to nothing. Even if Obama is re-elected he’s unlikely to rein in the likes of Jaimie Dimon, whom the president has previously labeled a very bright guy, or words to that effect. The Washington Post reports that Obama and his aides have spent quite a bit of time with Wall Street lobbyists. And via Chuck Schumer, Wall Street continues to pour massive amounts of dollars into Obama’s campaign chest. Should Romney acquire the White House we can kiss regulation goodbye and just about everything Obama has somehow managed to accomplish, including his health care law. Heck, Wall Street has purchased the best government their money can buy. Institutionalized corruption, I say.

Now everyone’s using it

Posted on by davald

I surely didn’t coin the expression ‘The Great Divergence,’ but I’ve been encountering that term with some frequency of late. First, Timothy Noah has a book by that title. And now this.

I do take exception to this excerpt from the linked piece:

I consider the Great Divergence to be one of the most important developments in the United States over the past thirty years. The growing economic divide between American communities is not an accident but the inevitable result of deep-seated economic forces.

Was the Great Divergence “inevitable”? I think not, and so do others, including Dean Baker (pdf), Jacob Hacker and Paul Pierson (Winner-Take-All-Politics) and John Cassidy (How Markets Fail). These authors chronicle the deliberate and concerted efforts of the money class to whittle down New Deal financial regulations and persuade Congress to pass bills in their favor. In their judgment, there was nothing “inevitable” about the Great Divergence at all. Here’s Baker:

Money does not fall up. Yet the United States has experienced a massive upward redistribution of income over the last three decades, leaving the bulk of the workforce with little to show from the economic growth since 1980. This upward redistribution was not the result of the natural workings of the market. Rather, it was the result of deliberate policy, most of which had the support of the leadership of both the Republican and Democratic parties.

Medieval

Posted on by davald

A friend, and fellow ex-Catholic, linked me to the video on this site, Catholics Called to Witness. It is indeed slick, in a production sort of way, and appeals not to one’s reason but to our limbic system. That is, it’s all about imagery and music. Therefore, it will surely be effective in calling Catholics to November’s voting booths to cast ballots that reflect the Church’s “values,” which are “marriage,” “life,” and “freedom.”

The video, which is positively medieval in tone and visual expression, with a blacksmith pounding out letters that are eventually assembled to spell out the “values,” emphasizes that marriage must be “reinforced” rather than “redefined.” Abortion, of course, must be prohibited in all circumstances. Compelling the Church’s institutions to provide health care insurance that covers contraception is anathema.

Conspicuously absent from this call to arms is any mention of the Church’s social gospel, the teachings found in the Sermon on the Mount, for example. Thus, we hear or see nothing about the plight of the poor and near-poor, roughly half our population, or that 40 million Americans lack health insurance, or the plutocracy that makes paupers of the Rest of Us, or the wars in Iraq and Afghanistan, or the thousands on death rows awaiting lethal injection. Nothing. Nada. Nichts.

The conspicuous absence is all in the name of our Lord. Damn the Church.

A kinder, gentler nation

Posted on by davald

That phrase of George H.W. Bush, surprisingly, describes my aspiration for this country. We’ve got a long way to go.

A friend occasionally scolds me for being “progressive,” which he equates with utopianism. The world is what it is, and there’s really nothing anyone can do about it. That may very well be true, but I choose to believe that things could be—and should be—different.

Suppose you join me for a bit as I describe that aspiration. I’ll just lay out a list.

  • free health care for everyone, regardless of circumstances
  • free education, from pre-school through graduate school
  • a squeezing from both the top and the bottom, so that the rich aren’t so rich and the poor aren’t so poor
  • generous, even lavish support for the arts, in schools and in communities
  • clean water
  • clean air
  • immaculate and well-maintained sidewalks and streets
  • human-scale architecture that both calms and uplifts
  • no death penalty
  • rare and always safe abortions
  • great, not just adequate, schools, with beautiful, clean, and efficient buildings, well-paid and well-trained teachers, ample supplies, state-of-the-art technology
  • a national pension fund that provides a secure and adequate retirement for every worker
  • livable-wage jobs for anyone who needs work
  • truly livable, walkable cities and towns
  • state-of-the-art public transportation systems readily available to all, with an emphasis on convenience, comfort, and aesthetics
  • no guns or bullets
  • safe and high-quality food at affordable prices
  • attractive and eminently usable “third places” (home and work being the other two places), where people congregate to eat and socialize
  • beautiful, proximate, and citizen-friendly public buildings
  • no Fox News
  • no coal plants
  • no Tea Party
  • no Rush Limbaugh
  • a military with the sole objective of only defending our borders against foreign enemies, and no more
  • no Grover Norquist
  • no Harley Davidsons in downtowns
  • a completely different government based on and fueled by ideas; no politics of dirt (i.e., real estate); a unicameral parliament; no judicial review

I should think that in such a country, people would be less anxious, less worried, less greedy, and less angry. They would me more tolerant, more relaxed, more educated, more social, more civil, and more reasonable. In short, we would become a kinder, gentler nation.

What’s wrong with that?

In what universe…

Posted on by davald

Mr. Boehner receives multiple blows from the editors at the New York Times. He deserves all the disapprobation the paper dispenses.

It clearly does not bother Speaker John Boehner that he pushed the United States to the brink of default last year. It does not matter that the deep spending cuts in the resolution he demanded to end that crisis will hurt economic growth. It does not even matter that the House he leads is determined now to break that agreement with even deeper cuts in vital programs.

No, the only thing that matters to Boehner and his ilk is to frustrate Obama’s re-election chances and to shit on the Rest of Us. So, I ask in what universe does Boehner garner support? Oh, that’s right. This is the United States of America, otherwise known as Darwin’s social society, where the superior reign over and steal from those unworthy of decent lives, which, it appears, are us 99-percenters—minus the damnable Tea Party.