Steve's Politics Blog

Forbes has the article Dear President Trump: Your Tax Plan Needs Bigger Deficits!

What I want to highlight here is this: the private sector needs government deficit spending if it is going to recover properly from both the heart attack of the Financial Crisis and the decades of disease brought on by income redistribution and rising debt levels. This is so because government deficits are private-sector surpluses.

I just have two nits to pick with this article. In talking about the possibility of inflation, the author stated,

yes, it can be inflationary. But a) we are a long way from that point right now and b) it’s only happened once in recent history: World War Two.

I am disappointed in the statement that the last time we had inflation was WW II. Why do Modern Money Theorists always pretend that the inflation of the 1970s never happened? I know it would just complicate matters to discuss the 1970s. However, leaving out the 1970s makes people who remember that time doubt the rest of the story you are trying to tell.

In fact, the inflation of the 1970s was a mini version of what happened in WW II. Lyndon Johnson wanted to fight a war in Vietnam at the same time that he wanted to stimulate the domestic economy. Add the oil shortage imposed on us by OPEC, and it is easy to see that the inflation of the 1970s is easily explained in MMT terms.

The second nit is just a typographical error. The hypothetical $400 trillion deficit mentioned at the end of the article should have said $400 billion.

YouTube has the video How Bitcoin Works Under the Hood.

As discussion of cryptocurrencies are happening more often on the internet, it will be helpful to be able to refer to this explanation to refresh my own memory and to explain it to others.

Boing Boing has the article Candid Wall Street barons worry that GOP tax plan will lead to literal euthanasia of the rentier.

Executives know there’s no mechanism in the G.O.P. tax plan to reward them for passing those savings along to their employees, who Paul Ryan has estimated would get an average $4,000 raise (over a decade) as a result of corporate largesse. The labor market has tightened considerably—the unemployment rate is at a 15-year low—and the stock market is starting to level off. The word on the street, though, isn’t that higher corporate profits will lead to higher wages; rather, it’s all about buybacks: Goldman says stock buybacks will hit $590 billion in 2018, while Merrill Lynch predicts half of all repatriated cash would go to buybacks or acquisitions. It’s a sugar high that might extend the market rally temporarily, but will deepen the rot in our economic cavity.

The analysis of the stock market that I subscribe to is that the stock market is currently in bubble territory. That does not mean we know when the bubble will burst, but it does mean we know it will burst. The Republican tax plan will inflate the bubble some more. If it passes, we still won’t know when it will burst, but it does seem rather foolish to add to the risk that already seems pretty high. Of course, there is always the possibility that the oligarchs will come to their senses, and adopt policies that will deflate the bubble slowly.

Medium has the Caitlin Johnstone article Russiagate Explained.

The term Gish gallop refers to a fallacious debate tactic in which one barrages one’s opposition with a deluge of individually weak arguments which take far too long to debunk individually in a way that sustains the audience’s interest. This is all Russiagate amounts to. When Russiagaters tell you that there’s “too much smoke for there not to be fire” and there’s so much incriminating news coming out that there’s definitely a there there, they are unwittingly telling you “I’ve been won over by a Gish gallop fallacy.

This is the first time I have heard a name given to this debate technique. I have observed this technique used many times in other situations, too. It also irks me to see so many people fall for this.

The Dictionary of American History has the article Fair-Trade Laws. There is a section that discusses Domestic Fair Trade.

In the United States, fair-trade laws were first enacted in California in 1931 to protect small retailers and druggists.

Growing up in the 50s and 60s as the son of a small drugstore owner in Massachusetts, I may have had more awareness of fair trade laws than most of my peers. In my previous post The Antitrust Paradox, I had the excerpt that said the following:

The paradox of antitrust enforcement was that legal intervention artificially raised prices by protecting inefficient competitors from competition.

I immediately thought about the fair trade laws which might rightly be the target of the above complaint. I was quite aware of the history as described in the Domestic Fair Trade article.

In the 1950s, fair trade was hotly contested among various corporations and in the court system, particularly at the state level. By 1956, eight state supreme courts had ruled against fair-trade statutes, making the laws meaningless in some areas. Manufacturers were no longer able to dictate the retail price at which their goods could be sold, which was at the heart of fair-trade laws. Supporters of fair trade redoubled their efforts at the state and national level in the 1950s and 1960s, but by mid-1975, fair trade had been eliminated in 25 states.

At the time this overturn of the fair trade laws was happening, I could see the problems that these laws caused. Ironically, the fair trade laws passed out of existence in 25 states three years before Bork’s book was published. In thinking over the relation of Bork’s criticism of the anti-trust laws as raising prices and the connection to the fair trade laws, I came to realize that the situation was more complex than these rulings would encompass. When the courts looked at consumer prices alone, or fair trade alone, or anti-trust alone, they failed to take into account the interaction of these factors. A decision that fixed a problem in one sphere could cause untold damage in one or more of these and other related spheres. Is this any way to interpret laws? No wonder we have such a mess. We have lawyers and judges making decisions about domains in which they are way outside their areas of expertise.

WikiPedia has the article The Antitrust Paradox.

The Antitrust Paradox is a 1978 book by Robert Bork that criticized the state of United States antitrust law in the 1970s.

This book is important because “The Antitrust Paradox has shaped antitrust law …” Not having read the book, but only after reading another article and this WikiPedia article, I take the gist of the book as the following:

Bork argued that the original intent of antitrust laws as well as economic efficiency make consumer welfare and the protection of competition, rather than competitors, the only goals of antitrust law.[3] Thus, while it was appropriate to prohibit cartels that fix prices and divide markets and mergers that create monopolies, practices that are allegedly exclusionary, such as vertical agreements and price discrimination, did not harm consumers and so should not be prohibited. The paradox of antitrust enforcement was that legal intervention artificially raised prices by protecting inefficient competitors from competition.

I see a very major flaw in this analysis. “Consumer welfare” is a very short-sighted view of what is good for the economy and society. There is another very important group that can be identified, but is not mentioned in anything I have read about the book. That group consists of the workers.

With Bork’s focus on consumers, business has focused on another class that they could victimize. Instead of raising prices to which Bork shifted the courts to focus on, business realized that it could focus on cutting costs. With monopolies and cartels, you gain control over suppliers of goods to sell. You can force the suppliers to cut quality standards, outsource labor, cut wages, and accelerate the use of automation.

It is rather perverse economics and sociology to fail to see that consumers and workers tend to be the same people. So while you keep prices low to protect people in their role as consumers, the courts seem to have no care about keeping wages up to protect the same people in their roles as consumers.

We have people in judicial positions making decisions on what is good for society while they seem to have no clue as to how society works. Society is also an ecosystem, meaning that it is complex with many parts interacting with each other. If you mess with one part, there are all sorts of unintended (or unrecognized) reactions in the other parts. If you do not take a holistic view of the system, you can fix one part while doing great damage to another part. This is exactly what Robert Bork and the judicial system has done. Congress has taken no action to stop the damage.

My previous posts The Democrats Confront Monopoly and Big CEOs’ Thanksgiving Tax Feast also relate to this topic.

Inequality.org has an article about the video Big CEOs’ Thanksgiving Tax Feast.

The trouble with this video (not the article) is that it does not explain why tax cuts won’t produce more jobs at higher wages. I’d like to ask the people who think that tax cuts for corporations will stimulate the economy, why do they think that a company that is sitting on lots of cash because they can’t find anything worth investing in will suddenly decide to invest if they have more cash? If companies can’t find customers for what they can already produce, why would they think they could make money by producing more? Corporations are doing fine boosting their profits by cutting production and cutting wages. If they don’t sit on the cash they accumulate, they use it to buy up the competition so that they have more power to keep prices up in the face of falling demand. Monopoly power has never been good for the consumer no matter what Robert Bork wrote in his book “The Antitrust Paradox”.

The Wall Street Journal has the article George Soros’s $18 Billion Tax Shelter.

But others, including Mr. Soros and Michael Bloomberg, have turned private foundations into massive de facto lobbying operations for bigger government and liberal causes like higher minimum wages, gun control, universal health care, and a carbon tax. Mr. Soros’s $18 billion gift alone is the equivalent of maybe 100 Heritage Foundations. This kind of weaponized philanthropy has the potential to undermine the American free enterprise system.

What a nasty man that George Soros is.

The biography of the article’s author is the following:

Mr. Moore is an economic consultant with FreedomWorks and a founder of the Committee to Unleash Prosperity. He was a senior economic adviser to the Trump campaign.

I am glad we have these right wingnuts to expose those nasty liberals.

Seriously, though, the ability to make huge capital gains profits which will never be taxed is a distortion of our economy that needs to be addressed

Motherboard has the article To Save Net Neutrality, We Must Build Our Own Internet.

We must end our reliance​ on big telecom monopolies and build decentralized, affordable, locally owned internet infrastructure.

This is a possibility I had not considered. The Massachusetts fiber optic backbone goes right through Sturbridge. The town is already connected to it.

Naked Capitalism has the article Capitalism: Not With a Bang But With a (Prolonged) Whimper.

“How will capitalism end?” is the title of a brilliant book by the German thinker Wolfgang Streeck. (Verso, London 2016, published in India by Juggernaut Books.) It provides a cogent and persuasive critique of the nature of contemporary capitalism, and describes its ongoing extended demise, without surrendering to any optimism that as it fails to deliver even in terms of its own logic, all the nastiness and injustice it has generated must inevitably change for the better.

I don’t believe it is quite as dire as the book’s author and the article’s author think it is. It is normal for us not to be able to predict the future. If we can’t see the solution now, it is a failure of our imagination. It is not proof that there can be no solution. Some of us, particularly science fiction writers, can imagine a better future. We just don’t know exactly how we will get to that better future. Admittedly, the path to that future may not be smooth and painless.