Monthly Archives: January 2012

Elizabeth Warren on her Super PAC pact

Here is a snippet, Elizabeth Warren on her Super PAC pact and a plan to sell IBM stock ‘in a heartbeat’ if elected, of Elizabeth Warren’s appearance on The War Room with Jennifer Granholm.

I am a little nervous about this pact now that I hear the penalty is a contribution to a charity. The effectiveness depends on the size of the required penalty. If a third party were to air an ad at a certain cost and the penalty were the cost of producing and airing the ad, then it might be sufficient to drain the coffers of the candidate’s campaign by an equal amount. Anything less and it might still be beneficial to the third parties and the associated campaign to run these ads.

The other problem with the pact is that if Warren supporters feel like she is running an ineffective campaign, they are now powerless to help her. Shades of Martha Coakley refusing to take advice from her friends.

The Biggest Risk to the Economy in 2012, and What’s the Economy For Anyway?

Robert Reich has a very insightful piece The Biggest Risk to the Economy in 2012, and What’s the Economy For Anyway?.

The crisis of American capitalism marks the triumph of consumers and investors over workers and citizens. And since most of us occupy all four roles – even though the lion’s share of consuming and investing is done by the wealthy – the real crisis centers on the increasing efficiency by which all of us as consumers and investors can get great deals, and our declining capacity to be heard as workers and citizens.
Yet these great deals increasingly come at the expense of our own and our compatriots’ jobs and wages, and widening inequality. The goods we want or the returns we seek can often be produced more efficiently elsewhere around the world by companies offering lower pay, fewer benefits, and inferior working conditions.

I look at this as another example of the paradox of our ability to do harm from our individual actions, but our inability to correct the problem unless we take action as a group.

No individual’s refusal to forgo a deal is going to help bring back jobs to this country or improve the working conditions of people in another country.  Thus, there is no incentive for the individuals to refuse the deal in sufficient numbers to change the situation.

Rules can be changed so that such great deals that depend on the disadvantage of others are no longer allowed.  However, changing the rules is not something an individual can do.  This is something that society must organize to do.

If we take a look at the macro view, getting rid of the “great deal” could raise our costs and our incomes by equal amounts so that there was no actual change in our living standards.  There would be no change in the amount of goods and services bought and sold.  There would be no increase in employment. So where would an improvement in our living standards and employment levels actually come from?

I think the change has to come in the fraction that the middle-man sucks out of the process without providing a commensurate societal benefit.  This middle-man is management particularly at the very top end.  It is not that they provide no service.  It is that the rewards are outsized compared to the service provided.  This comes about by concentrations of wealth and power that allows these people to get the rules  changed to skew the market into providing these people with outsized rewards.

Some of the rules changes allow vulture capitalists to use a company’s own cash to finance a leveraged buy-out.  Then the vultures  suck that cash out of the company for their own benefit.  Even worse, they cause the company to go deep in debt to further enhance the vulture’s rewards.  The company goes bankrupt leaving the workers and the investors in the lurch while the vultures walk away fat and happy.

Other rules changes allow banks to fraudulently create mortgages that are then sold to investors with lies about their safety.  When the bubble bursts, the mortgage borrowers lose their homes, the investors lose their money,  the homes go to waste, and the bankers go away fat and happy.

So both kinds of behavior problems, racing to the bottom as workers and earners, and deregulating to allow fraud must be fixed by an organized society.  Frequently we call that government.

There is no use crying about government growing so large.  The non-government forces, international businesses, have grown large.  We cannot expect those players to be controlled by tiny, disorganized governments.  Governments have to work across international borders to put controls on businesses that work across international borders.

Iran, perceiving threat from West, willing to attack on U.S. soil, U.S. intelligence report finds

From the Washington Post, we have the article Iran, perceiving threat from West, willing to attack on U.S. soil, U.S. intelligence report finds

U.S. intelligence agencies believe that Iran is prepared to launch terrorist attacks inside the United States in response to perceived threats from America and its allies, the U.S. spy chief said Tuesday.

This may be what the U.S. intelligence chief may be saying to the public, but we know from past history that this may bear little resemblance to what the intelligence analysts actually believe.  I am waiting for Seymour Hersch or Gareth Porter to come out with a report on what the intelligence experts really think.

Actually, this perceived threat seems to be our government’s fondest hope.  They seem to be desperately looking for an excuse to attack Iran.  Perhaps if they can escalate the threats to Iran, they can get Iran to act on those threats and try to do a preemptive first strike on us.

If Iran refuses to attack us by midyear in time for Israel to launch an attack on Iran, perhaps we can just make up an attack on us.  Latest reports (see Israeli Officials: Attack on Iran Must Come ‘By Summer’) have Israel afraid that if they wait too long, Iran will have all its nuclear facilities underground and safe from Israeli attacks.  How many Americans is Obama ready to kill so that he can have the Bush excuse for attacking Iran?

Bernie Sanders News Update 2

I received this email from Senator Bernie Sanders.  It talks so much sense about overturning the Citizens United Supreme Court Decision, Postal Reform, and Keeping Social Security Safe From Deficit Reduction, that I just had to post it here.

Comparing Taxes Paid By Past Presidents and Presidential Candidates

Talking Points Memo has an article, CHART: How Romney’s Tax Rate Stacks Up To Recent Presidential Candidates’, with an interesting comparison.

Chart of taxes paid by Presidents and Candidates

I maintain that this does not even paint the full picture of how much less the ultra-wealthy pay in taxes than the average middle-class person.

Instead of looking at income as these charts do, it would be interesting to look at how each person’s wealth changes from year to year.  I don’t have figures, but I have some explanations that sound plausible to me.

Typically the very wealthy have their wealth tied up in investments.  The value of these investments can go up substantially from year to year without causing any reportable income as far as the government is concerned.  That increase in wealth that is not income is called unrealized capital gains.  It may all be on paper, but the lifestyle of the wealthy is improved by these gains even if they are not realized right away.

The accountants among my readership will have to verify this, or you can believe Kiplinger’s article, Donate Appreciated Assets, but I believe that if a wealthy person gives away to charity some stock with unrealized capital gains, the wealthy person gets to deduct the full value of the stock.  The difference in what the person paid for the stock and what the deduction is may be huge, but it has never been reported as income and it has never been taxed.  The price the person paid for the stock plus the untaxed gain now becomes a tax deduction.

The wealthy person may have more cash in his or her bank account by giving money away.  The extra cash comes from not paying taxes on reported income because of the charitable deduction. Pretty neat trick, huh?

Thus we have Romney paying at a rate of over 30% on the part of his income called ordinary income and 15% of his income from capital gains.  Yet somehow the average of the over 30% rate and the 15% rate is less than 14%.

I have not gone into the pluses and minuses of taxing unrealized capital gains, so don’t leave with the impression that I am saying we ought to tax unrealized gains in the same way as we tax realized gains.  However, you should go away with the idea that the inequity, as large as it appears in the above charts, is actually much larger than the appearance.  Something needs to be done, but the details of that deserve a whole other blog post.

Well, what do you know? I have a couple of previous posts that may fit the bill.


Why All the Robo-Signing? Shedding Light on the Shadow Banking System

The article Why All the Robo-Signing? Shedding Light on the Shadow Banking System by Ellen Brown finally provided me with the details about why the Robo-signing is such a big deal. I’ll try to give you a clue as to what is in the article with this teaser.

The robo-signing largely involved assignments of mortgage notes to mortgage servicers or trusts representing the investors who put up the loan money.  Assignment was necessary to give the trusts legal title to the loans.  But assignment was delayed until it was necessary to foreclose on the homes, when it had to be done through the forgery and fraud of robo-signing.  Why had it been delayed?  Why did the banks not assign the mortgages to the trusts when and as required by law?

This has nothing to do with signing documents without reading them as the lame stream press has reported.  This has everything to do with forgery and back dating of documents to perpetrate a fraud that the lame stream media has not bothered to mention.

Having read Ellen Brown’s articles before, I have learned that she has a thing against fractional reserve banking.  I fully expected her to go completely off the rails in this article in her usual way.  I was pleasantly surprised to see that she relegated her prejudice to one small paragraph that can be easily ignored.  It does not affect the veracity of the rest of the article.

The Boston Globe Attacks The Lieutenant Governor

This is just the latest minor part of The Boston Globe‘s attacks on Tim Murray, the Lieutenant Governor of Massachusetts.

The Boston Globe obviously has taken a dislike to Tim Murray. Why don’t they just come right out and explain why?

Wasserman may think it is cute to talk about Murray’s troubles while not making any mention of The Boston Globe‘s concerted effort to bring about his downfall, but I, for one, would like to know what is really going on here. What is the ulterior motive?

I have heard a rumor that Steve Grossman, our state treasurer, wants to run for Governor and is trying to torpedo Murray’s career. I have this from a not highly reliable source.

A Phony Economic Narrative

Nation of Change has this surprising editorial, A Crisis in Two Narratives.  I wouldn’t be surprised if this weren’t a new attempt at the far Right, upper 1% to come up with yet another alternative to Keynesian economic prescriptions for what ails the world economy.

You might be entertained by reading the article.  If you don’t immediately see the flaws in this silly argument, let me add my take on what is said in this article.  The quoted sections come from the article.

This has got to be one of the most misguided analyses I have read in ages. I am surprised to see it in Nation of Change.

“But, as Tyler Cowen has argued in his book The Great Stagnation, once these “low-hanging fruit” were plucked, it became much harder to propel growth from the 1970’s onward.”

If, indeed, it became difficult in the 1970s, more likely the problem was the onslaught of wealth transfer from the bottom to the top.

“If this diagnosis is correct, advanced countries need to focus on reviving innovation and productivity growth over the medium term,”

If the diagnosis is correct, how is it possible that making companies able to produce more with less labor (productivity growth) going to put people back to work and increase demand?

The solution is much simpler and far more obvious. Start shifting the wealth back from the wealthy who have been taking it away from the middle class since the 1980s and put it back in the hands of the middle class so that they can put the demand back in the economy.

Reregulate the banks so that we can shift the focus of our economic growth away from money manipulation which destroys jobs, and toward making useful things that require workers. We need to stop the anti-union forces so that those workers share the benefits of productivity gains that they help make possible.

Finally, the government should rebuild infrastructure now while there is slack in the economy and it will be cheapest to do. We are running trillions of dollars of deficit on the infrastructure rebuilding that is necessary to do in any case, and now couldn’t be a better time to do it.

How Swedes and Norwegians Broke the Power of the ‘1 Percent’

The Nation Of Change has the article, How Swedes and Norwegians Broke the Power of the ‘1 Percent’.

While many of us are working to ensure that the Occupy movement will have a lasting impact, it’s worthwhile to consider other countries where masses of people succeeded in nonviolently bringing about a high degree of democracy and economic justice. Sweden and Norway, for example, both experienced a major power shift in the 1930s after prolonged nonviolent struggle. They “fired” the top 1 percent of people who set the direction for society and created the basis for something different.

Didn’t the U.S. have a major power shift in the 1930s?  How come the Swedes and Norwegians have managed to keep their shift longer than we did?

I don’t think the following articles are the answer, but they do show how far we have to go.

From Truth Out we have, Wall Street: The Candidate’s Friend.

President Obama may talk a good populist game and even kick some corporate butt when he goes on the attack against Wall Street “fat cats.” Yet he still enjoys the company of bankers — see our “On Democracy” essay on the subject — and for all their grumbling about his policies, the investment community is coming up with significant cash for his re-election; the kind of change they believe in.

The article from Truth Out points to the article from the Sunlight Foundation, Political Contributions from Financial Sector Increased 700% Since 1990.

A new analysis prepared by the Sunlight Foundation shows that wealthy financial sector donors gave $178.2 million in political contributions in 2010, more than ten times what they gave 20 years ago. More than any other industry, individuals from the finance, insurance and real estate (FIRE) sector, particularly those in securities and investments, are the key drivers of the overall growth of elite donors, or what Sunlight calls The Political One Percent of the One Percent.