Shock and Awe

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It’s odd how people seem surprised at the level of corruption and outright incompetence coming from the Republican party.  We need to remember a bit.

The arrival of George W. Bush was not as traumatic as Trump’s, but then as now we got a new troupe of players (remember the neocons?) who were convinced they were geniuses, and that every other idea represented the stupid old world they were here to transcend.   That affected both the economy (government regulation does nothing good) and international relations (let’s remake the world for freedom and democracy).

It took a little while, but they were a catastrophe on all fronts.  The deregulation movement’s hands-off treatment of the economy produced a new, unregulated banking system (mortgage-backed securities) that ultimately crashed, producing the worst downturn since the great Depression.   $6T of “safe as banking” securities were wiped out.  Only the Democrats’ support of the bank bailouts kept us out of a real depression.

And of course we fought a $2T war that was justified by lies, produced no benefits to the US, and undermined US interests everywhere in the Middle East.  (ISIS was one consequence.)  Even today it’s hard to know what was really behind that war, but it is a fact that the only place in the world where people think it was anything but oil is here!

There are two other important but largely unstated points to be made about that war:

– That fact that it was unbudgeted contributed mightily to the difficulty of recovering from the crash.  In general terms governments need to act countercyclically, i.e. they should save in good times, because they need to spend in bad.   This is not rocket science, but we did exactly the opposite and in a big, untransparent way.   So recovery from the crash had to be all deficit, which made it easier for the Republican balanced-budget hypocrisy to prolong the pain.

– The result of the war was not just what was done, but also what couldn’t get done.  That affected the Middle East, where the greatest opportunity for change was for US money to grease the peace process.   That opportunity was lost forever.  ($2T would have created a true land of milk and honey!)  But that wasn’t the end of it.  That lost money also affected US domestic finances as well.   Post 2008 we find we have money for nothing, not even education.  Part of that problem has been Republican party priorities, but the fact remains we are not the first country to impoverish ourselves with a stupid war.

 

Fast forward to the present.   We’ve got a new bunch of geniuses who have no need for either information or expertise.  They’re smart!

We are now at a stage like the “shock and awe” of the Iraq war.  Reality has not yet had time to intrude on the fantasies.  But we need to remember, it can be that bad!

Where will we go from here?   The picture has a lot in common with the story just told:

– The economy

We seem to have learned nothing from 2008.  With the tax plan we are stimulating the economy at the wrong stage of the business cycle and running a deficit to do it.  Further we are removing Dodd-Frank and everything else enacted to control bad behavior.   There’s also little evidence that these people will do what it takes in case of a crash.

– War

This administration seems even more cavalier about war than Bush people.  We’ve had continuing belligerence with North Korea and Iran and a budget with an untargeted military buildup.  There’s real risk of a crazy war on impulse—with as little planning or understanding of consequences as last time.   We have to hope it won’t be nuclear.

– Russia

Russian is a constant adversary, and our buddy-buddy relationship with Putin is problematical.  Russians are proven experts in cyberwarfare, and the demonstrated impact of viruses points out the threat.  There is even a possible Russia-North Korea connection.  We stop watching them at our peril.

– Climate change

The evidence behind climate change is more than considerable.  As a risk, it is well past the point where any serious business would start paying attention to it.   We have instead decided we’re too smart to have to think.   We are risking our own future, and handcuffing our businesses that would be part of the solution.  The Chinese have taken our place and are running with it, while for us even planning is out of the question.  This is a double whammy—more heat, storms, and drought combined with loss of industrial preeminence.

Those items are not just speculation.   We’re all set to pass the economics into law.  The war rhetoric is if anything more pronounced than with the Bush administration.   For climate change this is stated and active policy.    The Russian case is a little different, but it underlines the seriousness of the dangers.  We just barely escaped with Bush; this time it looks worse.

Again we’re powerless in dealing with geniuses who can’t be bothered with facts, expertise, public opinion or anything else that gets in the way of their greatness.  We can have no confidence, for example, that Trump either understands or takes seriously the fact that a nuclear attack on North Korea will have consequences for the US even without retaliation.  Trump’s statement on deregulating Wall Street, just like his statement on leaving the Paris Accords, acknowledged no risks.

It’s all too easy to forget the past, but we’ve learned that such “genius” has consequences.  The end of this story will not be pretty.

No segment of the population—Republican or Democratic—should believe anything else.

Inequality

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Inequality is a term so apparently self-evident that it shows up everywhere in political discourse on both the left and the right.  Much of that discourse, however, is so simplistic that it is easily dismissed by the other side:

– For the left, inequality is morally wrong—despite the fact that it can accompany rising living standards even for the people on the short end of the stick.   A fair number of the 238 cities vying for Google’s second headquarters would probably see a rise in both inequality and the general standard of living if they won (just based on an influx at the high-income end).

– For the right, inequality is good since rich people are the “job creators”, so the happier they are the better—despite the fact that there is no evidence for that logic at all. It also seems rather odd to assert that businessmen are so incompetent as to make hiring decisions based on personal satisfaction rather than opportunities to be staffed.

Despite those points, the effects of inequality are neither uncertain nor hard to understand—it’s just easy to be sloppy about it.  This note is an attempt to be more real.

First one must acknowledge that inequality itself is neither bad nor good.  What matters is the well-being of the population, including in particular those on the lower end of the scale.  For people like Steve Jobs (always the first example) personal wealth is the result of creating an economic engine with benefits to many.  It’s hard to argue with that.   And you can push it one step further and say that the incentives for innovation in the US economy are an important reason why the US has been able to stay ahead of the technology curve.  You can even say that the potential for success is an important part of well-being for many people, so that an economy of pure equality—even in the abstract—is not necessarily a good thing.

None of that, however, tells you very much about the effects of growing inequality in the US.  First of all let’s be clear that the increase in inequality is well-established and true for any definition of wealth (income, assets, …) you might want to use.

Further rising inequality here has been no obvious driver of innovation—on the contrary with increasing inequality the US economy has become more and more dominated by large entrenched companies, with less and less room for new companies to succeed.   And no one can argue that the inequality has improved opportunities for people to succeed—on the contrary US society has become less upwardly mobile by every measure.

As for the effect on peoples’ finances—for that there is no ambiguity.  Some of the most telling statistics came in a recent paper examining per-adult income growth for the bottom 50% of the US population.  It turns out that since 1980 there has been no per-adult income growth for the bottom 50%!  That is compared with a 64% increase for the upper 50%, and vastly more for the top 1% (see the chart at the beginning).  Note this was a period when women entered the workforce in large numbers.  Since we’re dealing with per-adult statistics, we’re saying that for the bottom half of the population the net effect of women working was just to keep things from getting worse!  As another example of the same thing—essentially all the benefits of the 2008 – 2015 recovery went to the top 1%.

So what is going on with inequality and what should we think about it?  In broad terms there is no secret.   We can start with the usual three inter-linked suspects:  automation, globalization, and de-unionization.  All of those decrease the power of lower-skilled workers in dealing with management, so growing inequality is no surprise—and the effects are continuing.  While those effects have been felt everywhere, the response of government to that situation has been different in different countries.  In most countries government has attempted to cushion the blow.   That has not been wildly successful, but intervention has at least damped the situation.

In the US the exact opposite has happened.   Perhaps because of the horrendously expensive electoral process here (assisted by Citizens United), we have seen a precipitous rise in the political power of the increasingly rich top.  And political dialogue has naturally evolved to reflect their interests.  Even previously sacrosanct services such as education have suffered loss of public financing; the student debt crisis is an obvious sign.  If you make a list of the public services that the ultra-rich don’t need, e.g.

– Education

– Healthcare

– Retirement

– Social welfare

– Broad-based infrastructure,

it is obvious that all of it has become controversial.   That is contrasted with an area such as defense, where we’re looking for a buildup.

While Trump’s tax plan has been sold as a job creator, that’s not where it came from.  No one is hiding that fact that it is the Republican donors’ tax plan, and its benefits to anyone else are ancillary—and to say the least unproven.  Trump himself came on-board late in the game and conveniently seems to believe that whatever is good for him personally is best for everyone else.  The tax plan shows inequality as a self-reinforcing trend:  more money => more power => even more money.

The bottom line is that inequality in the US is in the process of making this a very different country.  For the poor it means simply less support, though the US has never been very good at that.   The big difference is for the middle class.   Services that they have traditionally relied upon are becoming problematical, and the tax system is increasingly skewed to benefit the rich.  Furthermore the ongoing effects of automation, globalization, and de-unionization have made the threat of falling out of the middle class very real.   It should be emphasized that automation in particular is accelerating as an issue, with artificial intelligence pushing the threat up the income scale.  A recent report predicts almost one-third of existing US jobs could be lost to automation by 2030.

And there’s another problem as well.   Adam Smith himself pointed out that the private sector cannot be trusted to provide the proper environment for its own success.   He saw both policing the private sector (e.g. anti-trust, free entry) and education (to sustain the private sector) as tasks for government.   So growing inequality—with the ultra-rich running the government for their own sake—is not only a threat to the well-being of the population, it is a threat to the vitality of the economy itself.

While solutions are outside the scope of this note, we must recognize that rising inequality puts us on track to become a second-class power with few rich and many poor.  That, as noted last time, is our future as banana republic.

The Foreigners Threatening America

25700577124_b9b3d89b92_kRepublicans are good at hateful, manufactured stereotypes.  “Welfare queens” worked pretty well for a while.   Now we have snobbish, nose-in-the-air elitist liberals.  They’re all like that right?  Just like shiftless blacks and Mexican rapists.  Who needs reality when you can tell who to hate based on skin-color, clothing or even the music they listen to.

Let’s get some reality.  Maureen Dodd did us a service last week with her annual piece presenting her brother’s comments from the other side of the political fence.   There was surprisingly little of substance—just breezy support for Trump’s “delivering on his promises to shake things up” and dissatisfaction with the Republican Congress for not getting the job done.  Nothing on actual policy beyond a hint of racism with the kudos to Bannon for “holding Republicans’ feet to the fire”.  All told this was another confirmation that the Trump core will follow wherever he leads.  It wasn’t different from the content of the Trump rallies or from any of the many recorded interviews with Trump supporters.   Just a reminder that after a year of Trump sell-outs nothing has changed.

It’s time to get over the white racism of the left—that the core Trump supporters are ultimately our people who need to be brought back into the fold.  They may be perfectly okay in normal life, but so were the Nazis who saw the Jews being rounded up in their neighborhoods and thought it was okay.   Fascism will do that to people.  Financial reverses plus a skilled demagogue, and reasonable, intelligent people can succumb to it.  And it’s not going to change any time soon.

It’s also clear what Trump and his supporters are doing to this country.  In their assertion of ultimate white privilege, they are undermining what has made this country great—the opportunity for everyone to succeed.  The fascist denial of objective reality is undermining US economic success, denying educational opportunity, and crippling the worldwide response to climate change.  Like Britain, we are on the way to becoming a second-rate power.  However the dangers here are worse—from another economic crash, from a war, or from our uncritical buddy-buddy relations with the Russians.

Two books in particular have shaped ideas about Trump core supporters:   Hillbilly Elegy and Strangers in Their Own Land.   Both tried to be sympathetic, describing the people, their views, and their reasons.  But the second is particularly relevant because it described Louisiana—a state where they’d won.   It was a disaster of epic proportions:   an environmental catastrophe and an educational system gutted to provide tax breaks for oil companies.  The whole business kept running by tax revenues transferred from the north.

The Trump campaign liked to say the last election was the last chance to protect the country from a Latin American takeover.  We now know he may have been right—we are well underway to becoming a banana republic where the ultra-rich control everything (through Citizens United and the Koch Organization) including how little they are taxed.   Public services, including education, are not priorities.  Hannah Arendt (quoted by Michelle Goldberg) talked succinctly about the collusion between the Nazi economic elite and the fascist-inspired masses they controlled, “The temporary alliance between the elite and the mob rested largely on this genuine delight with which the former watched the latter destroy respectability.”

That is what is foreign to America.   That is what must be pushed back before it is too late.

 

Big Brother

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The big story today is the Koch-financed purchase of Time Inc.  While this did make the NY Times—in a rather innocuous, long-winded article—you have to go to the Guardian to get a notion of what is going on.  There are three points:

– Most obviously this gives the Koch organization a direct mouthpiece in print media. To be clear—the Koch organization does not represent just Koch money.   It channels money from the richest people in the US and distributes untraceable billions of dollars through a political organization of 1600 staffers.   It quite literally owns the Republican party (Pence is their creation) and is the source (and explanation) for the current tax bill.

– Also this month, the FCC with its new Trump-appointed head, “eliminated protections against monopolies in local broadcast news, a move widely seen as clearing the way for the expansion of a Trump-friendly local broadcasting network”.  This is the Sinclair Media Group, which forces all local subsidiaries to broadcast centrally-prepared Trump agenda propaganda.

– Finally we have the much-discussed FCC ruling last week rolling back net neutrality.  This action has not gone unnoticed, but its impact has been discussed primarily in terms of network providers’ ability to block competitors for their own services.   In the current context however, it is equally important to recognize this amounts to oligarchic control of internet content.

So there you have it.  Print media, television, and internet all at risk of coming under control.  It can happen here.