Posts from 3-26-13 to 6-4-13

6-4-13 For the Republican Party, stupid is as stupid does

The Republican Party is facing a number of problems recently highlighted by the now famous statement by Bobby Jindal, Republican Gov. of Louisiana, who urged Republicans to "stop being the party of stupid." Was he right? For a political party, stupid is what undermines your chance to win elections. A lot of what Republicans stand for and are doing appears to be that kind of stupid.

Gov. Jindal was probably referring to a series of really stupid statements by Republican candidates. These would include candidate Romney's accusation that 47% of the electorate are moochers or the sexist remarks of several congressional candidates almost condoning rape. If the Republican Party believes this is the totality of their stupid, there is no hope for them. But Gov. Jindal is warning them.

Political prospects for the Republicans are dismal. History and demography are arrayed against them. Historically, Republicans lost the popular vote in five of the last six presidential elections. In the most recent election, they also lost the popular vote for both the House and the Senate. They retained control of the House only because of severe gerrymandering in House congressional districts. Demographically, the number of white, middle-class males, who have been the bulwark of the party, is in absolute decline. The number of African-Americans, Asian-Americans, Hispanics and women who, along with youth of America, make up the Democrat's base, are increasing as a portion of the electorate.

Republican political strategies to combat this decline have been at best marginal and often perverse. It is stupid, as well as insane, to continue to do the same thing and expect different results. Yet, the insurgent, right wing of the Republican party keeps going back to the same playbook. Their hard-nosed, take-no-prisoners, and never compromise on anything ever have brought political gridlock and electoral losses.

The conservative Republican agenda or platform is roughly individualism, small government, low corporate taxes, a strong national defense and a balanced budget. Actually, that platform like most political platforms responds to a coalition of very different constituencies. Individualism responds to the libertarian wing of the party. Small government serves the interest of the social conservatives. Low corporate taxes and deregulation buy the support of big business. The goals of a strong national defense and a balanced budget bring on board the military-industrial complex, the neoconservative warriors and the deficit hawks.

These interest groups are now declining in numbers and importance and the programs that respond to their needs do not correspond to the growing needs of the new coalition being put together by Barack Obama and the Democrats.

Individualism is seen by the excluded as a pat on the back when you succeed but not a helping hand when you need it. Small government is considered a call for cuts in spending on education, health and the social safety net. Low corporate taxes means high personal taxes. A balanced budget is just another excuse to cut Social Security and Medicare. National security is seen as yet another corporate profit center.

Republican strategists recognize that in the last election Pres. Obama and Democratic candidates won the popular vote because the Obama coalition won among women, the 19 to 30-year-olds, people of color and other minorities. Reince Priebus, RNC Chair, and other Republicans appear to agree that they lost the election because they fell behind in the technical aspects of how to run a campaign. The Republicans believe they have the right message, they just didn't deliver it well.

It is hard to believe that they really believe that. But the Republicans have a deep faith in the moral and political correctness of their values and an unhealthy propensity for self-deception. Karl Rove was sure, even late on election night, that Romney would win.

The self-deception is deeper than election Day polls. Republican Newt Gingrich believes that "Obama's a hard-core left-winger" and Curly Haugland, RNC member, said this is a "socialist administration." The RNC believes they can attract blacks with a "strategic relationship." Former RNC chair Ross Duncan wants to have a "dialogue with those people." "Those people" are way past accepting that attitude.

The most serious flaw in the Republican strategy is its continued dependence on anti-democracy tactics. The widespread determination to suppress the vote of minorities through barriers to registration, identification requirements, and limiting of places, times and machines for voting have been and will continue to be counter productive. Such discriminatory tactics drive minorities to the polls. Redistricting and gerrymandering have also been widely used to deny effective democracy to minorities. The most recent effort to use proportional electoral college voting is blatantly anti-democracy.

Tactics that the Republicans are discussing and using smack of desperation and hypocrisy. The attempt to manipulate the vote is a dead-end, last-stand strategy. This response to the needs of minorities does not afford them the respect they have a right to.

It looks like the Republicans are going to continue as the party of stupid. Well, Gov. Jindal can say, I told you so.

5-21-13 The IRS Is the Victim

The IRS is not involved in "the worst Washington scandal since Watergate." This is a ginned up, politically motivated exploitation of what happens when you underfund the government.

The tax code, generally, exempts charitable (501(c)(3)) and social welfare (501(c)(4)) groups from taxation. Organizations prefer to use 501(c)(4) because they then become social welfare organizations which "may engage in limited political campaign intervention" that does not constitute its primary activity. In addition, donors names remain secret.

The IRS makes the determination under 501(c)(4) as to whether or not the political campaign intervention activity of an organization qualifies as "limited" and is not its "primary activity."

Last week, an audit by the Inspector General of the Treasury Department accused the IRS of using inappropriate criteria when determining eligibility for tax exempt status. Approximately 1/3 of the applications that received special review had Tea Party, Patriot or 9/12 in their names. The audit makes other charges but the "inappropriate criteria" accusation is the one that has been seized by the mainstream media and political conservatives to condemn the IRS as guilty of political bias.

The IRS has the unenviable job of implementing a horrendously complicated tax code with limited resources while operating in an anti-tax political climate. The popular press now refers to the IRS as the "most hated" of government agencies. The IRS has become a target of opportunity. This popular narrative may give comfort and reassurance to the tax haters but the Inspector General's audit is explicit to the contrary. The problem is the "ineffective management" which allowed the criteria to be developed and stay in place.

This is a management problem, not a political problem. The IRS found itself facing a huge increase in work load and a decreased budget. The number of applications for 501(c)(4) status increased from 1800 in 2009 to 3400 in 2012. The IRS budget was cut this year by $300 million and is now $1.5 billion below the president's request. Personnel have been cut by 200.

Over time, the rules for tax exemption became confused and broadened, especially after the Citizens United Supreme Court decision. But falling behind in your work is a difficulty, not a crime. Only a direct quote from the Inspector General's audit can spell out the unforgivable crime: "Treasury Regulations state that I.R.C. Par. 501(c)(4) organizations should have social welfare as their “primary activity", however, the regulations do not define how to measure whether social welfare is an organization's "primary activity."

That bureaucratic understatement says that the civil servants in IRS Exempt Organizations Division had no criteria on which to make a decision. Nor did they have guidance from their political superiors. The IRS commissioner at the time, Doug Shulman, was a Bush holdover and the person who then replaced him, Steven Miller, was only acting. Neither had the clout to protect much less control the agency.

The bureaucrats tried to find some way to work through the mountain of cases. As Steven Miller, the acting Commissioner, testified "people trying to be more efficient in their workload selection" … "made foolish mistakes." In attempting to prioritize the work and trusting their own lack of bias, they came up with shortcuts that did not take into consideration "the public perception" in a highly charged political situation.

The Exempt Organizations Division tried several times to bring the problem to the attention of the agency. It was the head of the division, Lois Lerner, who planted a question in an open forum so she could bring the situation into the public light. She was in way over her pay grade; the problem was and is political. You cannot make rules about lobbying, campaigning and electioneering, especially when it involves money, without recognizing that is the essence of politics. You cannot decide what is political and how much politics to allow unless you are a politician. Bureaucrats don't respond to political perceptions, that's what Congress is supposed to do.

Congress allowed this sort of festering sore because it believes in accountability and responsibility – for everyone except itself. Now that we have the congressional attention, however misplaced, we, the American people, should force Congress to apply the law or make a new one.

The IRS is accused, and justly so, of singling out the Tea Party for special scrutiny. The Tea Party and 9/12 groups are proudly political organizations. The crime is that the IRS did not single out the large blatantly political groups who knew they were breaking the rules. The small homegrown groups just want, and should receive, the same treatment as the big guys are getting. In other contexts, these people are too big to jail and too big to fail. In this context they are too rich to be regulated. The American Future Fund (Koch brothers) reported 23 million in spending, 77% of which was political. MoveOn.Org plays in the same league. Harassment should be reserved for these big guys.

The IRS is being accused of the very kind of prejudice that it is now suffering. The IRS is an effective, efficient government bureaucracy that serves us well. It is the IRS's own Inspector General who carried out the audit. The original sin is the delay in the confirmation of senior administration officials.

 5-7-13 As the Corporate Empire Goes, So Goes the US

The world sees an American Empire. Rather, the world's multinational corporations are using United States military and economic dominance to create a corporate empire. However you feel about that empire, it is now in trouble. Economic institutions and principles created to control the 20th century's Cold War are not fitted to 21st century globalization, technology, and religious militancy.

The prognosis isn't good. These mega-trends of the 21st century are already working to thwart the corporate empire even as that power is reaching its zenith. Just as the multinational corporations were celebrating total victory with the collapse of the Soviet Union and the presidency of George Bush, the financial crisis and worldwide recession came along. The corporate agenda took the credit and got the blame. The American economy is now embedded in this empire and, sadly, we will all share its fate.

In the second half of the 20th century, the need for world policy coordination, world governance if you will, led to multilateral institutions by which corporations were pretty much able to impose their policies on the world economy. The International Monetary Fund, the World Bank and the WTO are the most important and powerful of these. All three are based on multilateralism (any market economy can join), free trade (at least in manufactures and agriculture) and the corporate values of efficiency and profit.

These institutions served the corporations well in the 20th century but were early recognized as inadequate to the 21st. They were thus early abandoned in favor of neoliberalism which advocates tight monetary and fiscal policy, deregulation, privatization and market fundamentalism. In current jargon, this is the austerity option. Unfortunately for the corporations, this is also proving to be inadequate to the tasks of this new century.

The 21st century's struggle will be with the rise of China, the awakening of Islam and the future of Africa - Mediterranean, Nilotic and sub-Saharan. The periphery in Latin America and Southeast Asia has already fought off the corporate empire and its neoliberalism. Neoliberalism, whatever its failures, remains the preferred policy choice of the empire.

Neoliberalism pretends a democracy that treats everyone the same. In the 20th century, the advanced countries were supporting multilateral agreements that allow all to participate. But now they are doing the real deals in bilateral or regional agreements like NAFTA and the Trans Pacific Partnership. The first of these puts a wall around Mexico and the second is being designed to exclude and isolate China. It is a rejection and undermining of globalization.

But neoliberalism is also free markets and, for instance, “liberalized” foreign direct investment. The corporations idolize markets but are willing to impose restrictions when they are in the form of patents, copyrights, software and intellectual property. The corporations might control the US market but others are rejecting the restrictions of “free trade.”Under previous economic rules, Brazil and India, among others, baulked at monopolistic pharmaceutical prices and won. The same thing is happening with genetically modified crops except that Monsanto is winning.

The Chinese are, of course, leading this challenge to neoliberalism. They have a managed capitalism that breaks all the neoliberal rules and succeeds beyond all expectations. They insist on the hiring of local managerial and technical staff. They do not allow foreign investment in certain specified industries. The entire financial system is owned and/or controlled by the government.

China has done exactly the opposite of what neoliberalism calls for and has had that astounding 9% annual growth rate for three decades. China prospered as all the world was falling apart. Russia, unhappily, followed the rules and ended up an economic disaster.

Others besides China successfully broke the money rules. Argentina was the first of the emerging market economies to directly challenge the IMF and the World Bank and it became an economic success story. Brazil, Venezuela, Bolivia, Ecuador, Paraguay, Uruguay, Nicaragua, and El Salvador elected regimes that explicitly campaigned against neoliberalism. Well, 80 years ago we would have sent in the marines. Thirty years ago we did sent in the CIA. Of course, for a decade President Bush neglected Latin America and they learned they could well do without us.

In the first, but still minor, threat to the hegemony of the American dollar, the 16 countries of ASEAN, including China, Japan and South Korea, have set up a basket of currencies that, it is expected, will be an Asian Monetary Unit (AMU).

The empire is itself undermining globalization and free markets. It is trying to restrict technology with draconian patent, copyright and intellectual property laws. And it has no value system to put up against Islam or any kind of religious awakening.

In conclusion, the countries that follow neoliberal principles suffer for it – and that includes most of the EU. Those who rejected IMF, World Bank and WTO austerity prospered in difficult times.

To the extent that America turns toward the corporate agenda of tight money, paying off the debt, deregulation, privatization and the whole neoliberal schmear, we go down with the empire.

4-23-13 Economic Austerity

Austerity is presently the economic policy advice offered by economists to cure the lingering global economic recession. The IMF and the European Central Bank demand that countries cut spending and pay off debt. Dissenting Keynesians, on the contrary, want to stimulate the economy by spending paid for with new debt. Many countries, especially in Europe, have implemented austerity policies with little or no success.

Now things could change. Economic arguments supporting austerity policies were based on economic research that has been shown to be just plain wrong. There is no empirical support for austerity policies.

Support for austerity policies came from research by Professors Carmen Reinhart and Kenneth Rogoff. They claimed to show in their study "Growth in a Time of Debt" that a national debt greater than 90% of GDP would lead to a sharp drop in economic growth. The theory may have been thin but that empirical support was considered robust. The prescription from the IMF, the European Central Bank and the economics profession in general then became economic austerity: when in economic trouble, keep your debt down and don't take on new debt.

Since the economic crisis began, the advocates of austerity controlled the policy levers and country after country cut spending on job creation, the social safety net and infrastructure, all to stay out of debt.

Then, this year, a graduate student in an econometrics class reviewed the paper's methodology and found multiple errors - in the way countries and years were chosen or excluded, debatable weighting of countries and even a sloppy coding error in an Excel sheet.

When the necessary adjustments were made, there was no correlation between debt and growth. If you want all the technical details, google “Reinhard and Rogoff.” In effect, they shoehorned the data to fit their conclusion.

The unmasking of these mistakes is no small deal. This study has been quoted around the world. Its findings have been cited approvingly by the editorial board of the Washington Post, European Commissioner Olli Rehn, former UK Chancellor Norman Lamont, vice presidential candidate Paul Ryan and former US Treasury Secretary Tim Geithner

And it isn't just the Harvard venue. These authors were "Two top-notch economists" (Financial Times) and "leading economists" (Amazon). Their book, "This Time Is Different: Eight Centuries of Financial Folly," from which the study springs, was referred to as a "canonical work" that produced "a new Washington consensus." The Journal of Economic Literature said "The book… is one for the ages" and the Wall Street Journal proclaimed "We are now in a Reinhart and Rogoff world." Strong stuff.

The economics profession presents itself as a hard science with sophisticated mathematical models where research results can be replicated. This is where refereed journals are supposed to guarantee competence and honesty. This whole exercise indicates otherwise. The profession apparently saw a finding that politicians and their moneyed supporters liked and they climbed on the bandwagon without checking the work sheets.

It may be, as Paul Krugman suggests, that the next time John Boehner or Paul Ryan argues that we have to get the debt down to achieve growth, the audience will just snicker. But I imagine that, in the end, the escounced neoclassical insiders, the defenders of the established paradigm, will continue their hold over the profession. We can hope there will always be graduate students hungry for a grade and the glory of bringing down pompous but negligent professors.

The countries that adopted the austerity course suffered the consequences. Spain, Portugal and Greece did as they were told and are now mired in recession with unemployment rates well into the double digits. To add insult, their debt to GDP ratios have increased. Developing and emerging countries which ignored the IMF and its advice are growing very well, thank you.

Europe has not yet recovered from the financial crisis. Austerity policies intended to reduce their debt are now blamed for weak growth. The UK economy is a picture of how austerity backfires and is cited as an example of why austerity doesn't work. The United States, which instituted a weak stimulus program has seen a weak recovery. But it still is in better condition than the European countries that chose austerity.

Always, the Reinhart and Rogoff study was the principal prop for all this very harmful austerity, at home and abroad. And it still is. Our own sequestration spending cuts are an austerity policy. All the teachers who have been laid off, all the people who are unemployed, all the entitlement programs that get cut back, all the lost time in airports and who knows what's next – are concessions to the austerity demanded because of incompetent and sloppy economics.

It is an incomprehensible stupidity for the United States to be adopting austerity policies just as these policies have proven themselves ineffectual in Europe and lacking in any empirical support.

4-9-13 The Politics of Distraction

The political noise is all about guns, gays, immigration and supposedly the debt. The New York Times calls this the Obama Agenda. These are all non-issues and constitute what I call the "politics of distraction." This deliberate distraction from real issues is why we are in long-term, serious, financial, environmental and political trouble.

None of the issues the politicians are dithering over affect the budget, any large voting group or the source of political money. That is, they do not matter to politicians since they do not affect their potential election. The politicians take strong stands on gun control and gay marriage because it is safe to. They can avoid the debt because it has been subsumed under or disguised as entitlements and taxes where ideology guarantees much talk and no action.

The politicians are deliberately using non-issues to distract us from the hard stuff that no one can pay them enough to tackle. It isn't just President Obama, though he plays the game very well. Congressional Republicans and Democrats practice similar avoidance patterns. Both parties are quite ready to distract the people. The hard stuff, the stuff that really threatens civilization, like global climate change, cyber warfare or possible pandemics never gets dealt with. Nor does anything else of import.

Our politicians act as though this interlude between the fall of the Soviet Union and the point where China develops enough to become a military threat gives them a time to be stupid and irresponsible.  Or, as Sen. John McCain said last week,"I don't understand it. What are we afraid of?...If this issue [or any of the current issues] is as important as all of us think it is...why not take it up and debate?" Needless to say, they did not.

In the meantime, real threats do in fact exist: Our banks have stolen our economy, the middle-class is in danger of collapse, income and wealth inequalities divide America, globalization and the Trans Pacific Partnership undermine our rule of law, the social and economic infrastructure of health and welfare is near collapse. The list could go on for many pages but nobody has cataloged or prioritized it. Instead, we are deliberately distracted from it by people who profit from the dysfunctional status quo.

America has to set some priorities. I am reminded of the Defense Department's hierarchy of threat/response reflected in its Defense Readiness Condition, "defcon 1-5," which is the level of military response to a given threat. An analogous ranking might be appropriate for an economic and political threat/response system. This sifting would indicate the size of the threat but probably not its likelihood, which is just as important but even more difficult to determine.

The Defense Department uses "defcon 1" for an immediate threat of nuclear war. So, a "Political Readiness Condition" of "policon 1" would describe an existential threat. That would include nuclear war, a large asteroid, global climate change or a pandemic. Just because these are the stuff of horror movies, does not mean we can neglect them.

Policon 2 would indicate a threat to our national security and independence. This could arise from, a worldwide depression with a collapse of international trade and communication, a cyber attack that brought down our electric and electronic infrastructure or the surrender of constitutional rights as in NAFTA and the Trans-Pacific Partnership.

Policon 3 would reflect a threat to our economic and political structure such as could arise from a domestic insurrection, a genetic threat to agriculture, the Euro and the yuan becoming international reserve and transaction currencies,

Policon 4 would be a threat to our standard of living and an effective democratic capitalism. This category would include a major depression, the end of a middle-class that is reasonably secure in civil and property rights, collapse of the social safety net, extreme inequality of wealth and income, pricing household goods out of reach of the average family or a dysfunctional tax system.

Policon 5 would be the usual state of political and economic affairs where difficulties arise from the normal working of the political and economic system. This list would be long and include problems from corporate power and crowded prisons to healthcare, Iran, and a minimum wage.

Okay! Okay! I recognize the intensely political nature of these categories, the problems chosen and the priorities assigned. But the political process specifically exists to make those decisions and it is not presently doing so. This is just the first cut at a framework that recognizes there are varying threat levels and varying response levels but that sifting the problems cannot be approached out of context.

It is time to get serious about our responsibilities to ourselves, to our country and to our world. America has to create the political agenda for the world. Politicians who would sooner distract us than serve us should be made to focus on what is important, not what would get them reelected.


3-26-13 Iraq: Ten Years Later

Ten years ago as the Iraqi war began, I wrote a column (March 27, 2003) "Cost of War Goes Far beyond Combat." I projected a high-end money cost of: "$1.9 trillion, [which] covers a long campaign with maybe street fighting, guerrilla warfare, terror around the world and a 10 year occupation that America pays for. All things considered, I think I hit it pretty close.

This 10 year mark offers a chance to look back and consider the real cost of the war and see that the money is the least of it. The war was a political debacle, an economic disaster, a human horror and a self-inflicted wound that will fester and drain our political and moral strength for the next 50 years

Politically, the war weakened the whole structure of  alliances by which we have led the world the last 75 years. Our allies were staggered by the sheer incompetence of the war, from Secretary of State Colin Powell's United Nation presentation, which the Bush Administration knew were lies, to the fractured country we left behind in Iraq. Simply put, our allies no longer have any reason to trust us to do the right thing.

Domestically, the conduct and aftermath of the Iraq war led to an erosion of our freedom and the spread of legally questionable detention, surveillance, torture and loss of privacy. We are now burdened with a pervasive and justified political cynicism and polarization that has deep roots in that war.

Economically, the American economy had been growing comfortably with virtually all the economic indicators headed in the right direction. This was particularly true of the budget, which was under control and in surplus for the first time in decades. The war changed all that and everything headed downhill. America's finances became chaotic with burgeoning public and private debt. Effective government budgeting ceased while spending and international trade deficits went out of control.

The war gave us the economy that we've been living with ever since: high profits and growing income and wealth disparity, stagnating employment and wages with insecurity for all except the very wealthy. The financial bubble and crisis can be linked directly to the economic chaos created by that war.

The human horror has no adequate metric. Our American dead, military and contractors, total10,000. The Iraqi dead have never really been counted but most estimates put the number in the hundreds of thousands. The magic of modern medicine, communication and transportation brings the wounded home alive but with robotic arms and springs replacing feet.

The horror of all those with traumatic brain injury or post traumatic stress disorder constitute a nightmare that they, and we, will suffer for decades. The suicide rate among our military continues to climb. But there is no price tag can be put on any of this.

Virtually everyone now knows this was a self-inflicted wound. The ever morphing goal – finding weapons of mass destruction, the hoped-for spread of democracy, the removal of Saddam Hussein and, to be honest, the oil – were not worth it. But all of that is not the worst of what we are going to suffer.

The United States of America has long been honored for its honesty, generosity and integrity. We have a lot to be proud of. Americans mean what they say and are willing to help anyone in need. We were the indispensable nation.

Then the Bush Administration, acting for all of us, made an unprovoked and unannounced attack on an Iraq that we had disarmed through economic and political sanctions. In the prosecution of the war, whatever our intentions, Americans destroyed the social and economic infrastructure of Iraq and left behind a devastated people and a country mired in sectarian violence.

The Iraqi war provides no honor. The public reasons given for the unprovoked attack were lies. Our government knew that there were no weapons of mass destruction, that Saddam Hussein took no part in the attack of 9/11 and that Iraq constituted absolutely no threat to American interests. Any real attempt to spread democracy in the Middle East was lost in an incompetence of governance that is almost incomprehensible. Immense amounts of money were squandered on the embassy compound and other bases for Americans while the Iraqi economy crumbled. Early on, American authorities flew in and simply lost $12 billion in cash.

We left Iraq with a devastated country, somewhere between a failed democracy and an authoritarian dictatorship. We left Iraq with an epidemic of cancer and infant mortality that is being blamed on the depleted uranium ammunition that we fired into Falluja and other places. We left the Middle East and the Islamic world far more destabilized than we found them.

The world does not honor or respect the United States the way they did before Iraq.