Raise Taxes on Rich to Reward True Job Creators: Nick Hanauer

Posted on December 16, 2011 by admin

By Nick Hanauer

Dec. 1 (Bloomberg) — It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop.

Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. It doesn’t, and we aren’t. The conventional wisdom that the rich and businesses are our nation’s “job creators” is every bit as false.

I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc.

Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.

Theory of Evolution

When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.

It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.

And that’s what has been happening in the U.S. for the last 30 years.

Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.

One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.

It’s true that we do spend a lot more than the average family. Yet the one truly expensive line item in our budget is our airplane (which, by the way, was manufactured in France by Dassault Aviation SA), and those annual costs are mostly for fuel (from the Middle East). It’s just crazy to believe that any of this is more beneficial to our economy than hiring more teachers or police officers or investing in our infrastructure.

More Shoppers Needed

I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend.

It is mathematically impossible to invest enough in our economy and our country to sustain the middle class (our customers) without taxing the top 1 percent at reasonable levels again. Shifting the burden from the 99 percent to the 1 percent is the surest and best way to get our consumer-based economy rolling again.

Significant tax increases on the about $1.5 trillion in collective income of those of us in the top 1 percent could create hundreds of billions of dollars to invest in our economy, rather than letting it pile up in a few bank accounts like a huge clot in our nation’s economic circulatory system.

Consider, for example, that a puny 3 percent surtax on incomes above $1 million would be enough to maintain and expand the current payroll tax cut beyond December, preventing a $1,000 increase on the average worker’s taxes at the worst possible time for the economy. With a few more pennies on the dollar, we could invest in rebuilding schools and infrastructure. And even if we imposed a millionaires’ surtax and rolled back the Bush- era tax cuts for those at the top, the taxes on the richest Americans would still be historically low, and their incomes would still be astronomically high.

We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

So let’s give a break to the true job creators. Let’s tax the rich like we once did and use that money to spur growth by putting purchasing power back in the hands of the middle class. And let’s remember that capitalists without customers are out of business.

(Nick Hanauer is a founder of Second Avenue Partners, a venture capital company in Seattle specializing in early state startups and emerging technology. He has helped launch more than 20 companies, including aQuantive Inc. and Amazon.com, and is the co-author of two books, “The True Patriot” and “The Gardens of Democracy.” The opinions expressed are his own.)

–Editors: Max Berley, Stacey Shick.

Click on “Send Comment” in sidebar display to send a letter to the editor.

To contact the writer of this article: Nick Hanauer at Nick@secondave.com.

To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net

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Moyers: Why ‘We The People’ Must Triumph Over Corporate Power

Posted on December 12, 2011 by admin

Berrett-Koehler Publishers
By Bill Moyers

Bill Moyers reminds us that repairing American democracy begins with reasserting that corporations do not have the same constitutional rights as citizens.

December 11, 2011

(Editor’s note: The following is the foreword to Corporations Are Not People: Why They Have More Rights Than You Do and What You Can Do About It, by Jeffrey Clements, a new book from Berrett-Koehler Publishers.)

Rarely have so few imposed such damage on so many. When five conservative members of the Supreme Court handed for-profit corporations the right to secretly flood political campaigns with tidal waves of cash on the eve of an election, they moved America closer to outright plutocracy, where political power derived from wealth is devoted to the protection of wealth. It is now official: Just as they have adorned our athletic stadiums and multiple places of public assembly with their logos, corporations can officially put their brand on the government of the United States as well as the executive, legislative, and judicial branches of the fifty states.

The decision in Citizens United v. Federal Election Commission giving “artificial entities” the same rights of “free speech” as living, breathing human beings will likely prove as infamous as the Dred Scott ruling of 1857 that opened the unsettled territories of the United States to slavery whether future inhabitants wanted it or not. It took a civil war and another hundred years of enforced segregation and deprivation before the effects of that ruling were finally exorcised from our laws. God spare us civil strife over the pernicious consequences of Citizens United, but unless citizens stand their ground, America will divide even more swiftly into winners and losers with little pity for the latter. Citizens United is but the latest battle in the class war waged for thirty years from the top down by the corporate and political right. Instead of creating a fair and level playing field for all, government would become the agent of the powerful and privileged. Public institutions, laws, and regulations, as well as the ideas, norms, and beliefs that aimed to protect the common good and helped create America’s iconic middle class, would become increasingly vulnerable. The Nobel Laureate economist Robert Solow succinctly summed up the results: “The redistribution of wealth in favor of the wealthy and of power in favor of the powerful.” In the wake of Citizens United, popular resistance is all that can prevent the richest economic interests in the country from buying the democratic process lock, stock, and barrel.

America has a long record of conflict with corporations. Wealth acquired under capitalism is in and of itself no enemy to democracy, but wealth armed with political power — power to choke off opportunities for others to rise, power to subvert public purposes and deny public needs — is a proven danger to the “general welfare” proclaimed in the Preamble to the Constitution as one of the justifications for America’s existence.

In its founding era, Alexander Hamilton created a financial system for our infant republic that mixed subsidies, tariffs, and a central bank to establish a viable economy and sound public credit. James Madison and Thomas Jefferson warned Americans to beware of the political ambitions of that system’s managerial class. Madison feared that the “spirit of speculation” would lead to “a government operating by corrupt influence, substituting the motive of private interest in place of public duty.” Jefferson hoped that “we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength and [to] bid defiance to the laws of our country.” Radical ideas? Class warfare? The voters didn’t think so. In 1800, they made Jefferson the third president and then reelected him, and in 1808 they put Madison in the White House for the next eight years.

Andrew Jackson, the overwhelming people’s choice of 1828, vetoed the rechartering of the Second Bank of the United States in the summer of 1832. Twenty percent of its stock was government-owned; the rest was held by private investors, some of them foreigners and all of them wealthy. Jackson argued that the bank’s official connections and size gave it unfair advantages over local competition. In his veto message, he said: “[This act] seems to be predicated on the erroneous idea that the present stockholders have a prescriptive right not only to the favor but to the bounty of Government. … It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes.” Four months later, Jackson was easily reelected in a decisive victory over plutocracy.

The predators roared back in the Gilded Age that followed the Civil War. Corruption born of the lust for money produced what one historian described as “the morals of a gashouse gang.” Judges, state legislators, the parties that selected them and the editors who supported them were purchased as easily as ale at the local pub. Lobbyists roamed the halls of Congress proffering gifts of cash, railroad passes, and fancy entertainments. The U.S. Senate became a “millionaires’ club.” With government on the auction block, the notion of the “general welfare” wound up on the trash heap; grotesque inequality and poverty festered under the gilding. Sound familiar?

Then came a judicial earthquake. In 1886, a conservative Supreme Court conferred the divine gift of life on the Southern Pacific Railroad and by extension to all other corporations. The railroad was declared to be a “person,” protected by the recently enacted Fourteenth Amendment, which said that no person should be deprived of “life, liberty or property without due process of law.” Never mind that the amendment was enacted to protect the rights of freed slaves who were now U.S. citizens. Never mind that a corporation possessed neither a body to be kicked nor a soul to be damned (or saved!). The Court decided that it had the same rights of “personhood” as a walking, talking citizen and was entitled to enjoy every liberty protected by the Constitution that flesh-and-blood individuals could claim, even though it did not share their disadvantage of being mortal. It could move where it chose, buy any kind of property it chose, and select its directors and stockholders from anywhere it chose. Welcome to unregulated multinational conglomerates, although unforeseen at the time. Welcome to tax shelters, at home and offshore, and to subsidies galore, paid for by the taxes of unsuspecting working people. Corporations were endowed with the rights of “personhood” but exempted from the responsibilities of citizenship.

That’s the doctrine picked up and dusted off by the John Roberts Court in its ruling on Citizens United. Ignoring a century of modifying precedent, the court gave our corporate sovereigns a “sky’s the limit” right to pour money into political campaigns for the purpose of influencing the outcome. And to do so without public disclosure. We might as well say farewell to the very idea of fair play. Farewell, too, to representative government “of, by, and for the people.”

Unless.

Unless “We, the People” — flesh-and-blood humans, outraged at the selling off of our government — fight back.

It’s been done before. As my friend and longtime colleague, the historian Bernard Weisberger, wrote recently, the Supreme Court remained a procorporate conservative fortress for the next fifty years after the Southern Pacific decision. Decade after decade it struck down laws aimed to share power with the citizenry and to promote “the general welfare.” In 1895, it declared unconstitutional a measure providing for an income tax and gutted the Sherman Antitrust Act by finding a loophole for a sugar trust. In 1905, it killed a New York state law limiting working hours. In 1917, it did likewise to a prohibition against child labor. In 1923, it wiped out another law that set minimum wages for women. In 1935 and 1936, it struck down early New Deal recovery acts.

But in the face of such discouragement, embattled citizens refused to give up. Into their hearts, wrote the progressive Kansas journalist William Allen White, “had come a sense that their civilization needed recasting, that the government had fallen into the hands of self-seekers, that a new relationship should be established between the haves and the have-nots.” Not content merely to wring their hands and cry “Woe is us,” everyday citizens researched the issues, organized public events to educate their neighbors, held rallies, made speeches, petitioned and canvassed, marched and exhorted. They would elect the twentieth-century governments that restored “the general welfare” as a pillar of American democracy, setting in place legally ordained minimum wages, maximum working hours, child labor laws, workmen’s safety and compensation laws, pure foods and safe drugs, Social Security and Medicare, and rules to promote competitive rather than monopolistic financial and business markets.

The social contract that emerged from these victories is part and parcel of the “general welfare” to which the Founders had dedicated our Constitution. The corporate and political right seeks now to weaken and ultimately destroy it. Thanks to their ideological kin on the Supreme Court, they can attack the social contract using their abundant resources of wealth funneled — clandestinely — into political campaigns. During the fall elections of 2010, the first after the Citizens United decision, corporate front groups spent $126 million while hiding the identities of the donors, according to the Sunlight Foundation. The United States Chamber of Commerce, which touts itself as a “main street” grass-roots organization, draws most of its funds from about a hundred businesses, including such “main street” sources as BP, Exxon-Mobil, JPMorgan Chase, Massey Coal, Pfizer, Shell, Aetna, and Alcoa. The ink was hardly dry on the Citizens United decision when the Chamber organized a covertly funded front and fired volley after volley of missiles, in the form of political ads, into the 2010 campaigns, eventually spending approximately $75 million. Another corporate cover group — the Americans Action Network — spent over $26 million of undisclosed corporate money in six Senate races and 28 House of Representative elections. And “Crossroads GPS” seized on Citizens United to raise and spend at least $17 million that NBC News said came from “a small circle of extremely wealthy Wall Street hedge fund and private equity moguls,” all determined to water down the financial reforms designed to avoid a collapse of the financial system that their own greed and reckless speculation had helped bring on. As I write in the summer of 2011, the New York Times reports that efforts to thwart serious reforms are succeeding. The populist editor Jim Hightower concludes that today’s proponents of corporate plutocracy “have simply elevated money itself above votes, establishing cold, hard cash as the real coin of political power. The more you spend on politics, the bigger your voice is in government, making the vast vaults of billionaires and corporations far superior to the voices of mere voters.”

Against such odds, discouragement comes easily. But if the generations before us had given up, slaves would be waiting on our tables and picking our crops, women would be turned back at the voting booths, and it would be a crime for workers to organize. Like our forebears, we will not fix the broken promise of America — the promise of “life, liberty, and the pursuit of happiness” for all our citizens, not just the powerful and privileged — if we throw in the proverbial towel. Surrendering to plutocracy is not an option. Confronting a moment in our history that is much like the one Lincoln faced — when “we can nobly save or meanly lose the last best hope on earth” — we must fight back against the forces that are pouring dirty money into the political system, turning it into a sewer.

How to fight back is the message of this book. Jeffrey Clements saw corporate behavior up close during two stints as assistant attorney general in Massachusetts, litigating against the tobacco industry, enforcing fair trade practices, and leading more than one hundred attorneys and staff responsible for consumer and environmental protection, antitrust practices, and the oversight of health care, insurance, and financial services. He came away from the experience repeating to himself this indelible truth: “Corporations are not people.” Try it yourself: “Corporations are not people.” Again: “Corporations are not people.” You are now ready to join what Clements believes is the most promising way to counter Citizens United: a campaign for a constitutional amendment affirming that free speech and democracy are for people and that corporations are not people. Impossible? Not at all, says Clements. We have already amended the Constitution twenty-seven times. Amendment campaigns are how we have always made the promise of equality and liberty more real. Difficult? Of course; as Frederick Douglass taught us, power concedes nothing without a struggle. To contend with power, Clements and his colleague John Bonifaz founded Free Speech for People, a nationwide nonpartisan effort to overturn Citizens United and corporate rights doctrines that unduly leverage corporate economic power into political power. What Clements calls the People’s Rights Amendment could be our best hope to save the “great American experiment.”

To find out why, read on, and as you read, keep in mind the words of Theodore Roosevelt, a Republican, who a century ago stood up to the mighty combines of wealth and power that were buying up our government and called on Americans of all persuasions to join him in opposing the “naked robbery” of the public’s trust:

It is not a partisan issue; it is more than a political issue; it is a great moral issue. If we condone political theft, if we do not resent the kinds of wrong and injustice that injuriously affect the whole nation, not merely our democratic form of government but our civilization itself cannot endure.

Bill Moyers is the host of Bill Moyers Journal on PBS.

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The GOP’s Crackpot Agenda

Posted on December 7, 2011 by admin

The top Republican candidates share a single, radical vision: to trash the environment, shred the safety net and aid the rich.

By Tim Dickinson
December 7, 2011 8:05 AM ET

By all rights, 2012 ought to be a cakewalk for the GOP. Unemployment is pandemic. Riot police are confronting protesters in public squares and on college campuses. In an epic fail of foresight, the Democratic convention will be held in one of the world’s banking centers, Charlotte, North Carolina – setting the stage for violent clashes not seen since the streets of Chicago, 1968. “I hope they keep this up,” gloated Grover Norquist, one of the Republican Party’s most influential strategists. “Hippies elected Nixon. Occupy Wall Street will beat Obama.”

But don’t go writing the president’s political obituary just yet: He may wind up being resurrected by the GOP itself. The Republican Party – dominated by hardliners still cocky after the electoral sweep of 2010 – has backed its entire slate of candidates into far-right corners on everything from the environment and immigration to taxation and economic austerity. Whether the GOP opts for Mitt Romney or an “anti-Mitt” is almost entirely beside the point. On the major policy issues of the day, there’s barely a ray of sunshine between any of the viable Republicans, not counting those who have committed the sin of libertarianism (Ron Paul) or moderation (Jon Huntsman). No matter who winds up with the nomination, it appears, Obama will face a candidate to the right of Barry Goldwater.

Take it from one of the most divisive figures in the history of GOP presidential politics: “Those people in the Republican primary have got to lay off,” the televangelist Pat Robertson warned recently. “They’re forcing their leaders, the front-runners, into positions that will mean they lose the general election.” Robertson knows fringe politics: In 1988, he ran for president on a platform that included abolishing the Department of Education and adopting a constitutional amendment to prohibit deficit spending. At the time, Robertson was dismissed as an unelectable candidate of the far right. Today, he would be somewhere to the left of Texas governor Rick Perry. And that way lies ruin: “You’ll appeal to the narrow base, and they’ll applaud the daylights out of what you’re saying,” Robertson cautioned. “And then you hit the general election and they say, ‘No way!’ They’ve got to stop this!”

But Republican candidates show no signs of moderating their positions. In fact, with the first primary contests rapidly approaching, all of the top contenders are tripping over themselves in a race to the far right. Herman Cain’s 9-9-9 plan kicked off a flat-tax bidding war: Perry is calling for an even more regressive rate of 20 percent, while Newt Gingrich advocates a flat tax of just 15 percent. Even Mitt Romney – who once blasted such proposals for enriching “fat cats” – now exclaims, “I love a flat tax!” The candidates have also lined up behind a host of other extremist positions: waging war with Iran, slashing or privatizing benefits like Social Security, extending constitutional rights to zygotes, eliminating restrictions on Big Oil and other deadly polluters, and freeing up Wall Street to return to the lawlessness that buzzsawed the global economy. Individual candidates have embellished this partywide radicalism with wingnuttery all their own: Gingrich calls child labor laws “truly stupid,” Perry likens Social Security to “a bad disease,” and Romney wants to privatize unemployment insurance.

To many GOP stalwarts, conditions today seem ripe for a repeat, not of the 1968 election of Richard Nixon, but of the setback the party experienced four years earlier, when embattled incumbent Lyndon Johnson won re-election in a landslide over Republican hardliner Goldwater. “I can’t imagine that we expect – even with the economic situation the way it is – anything but a Goldwater-like drubbing if we persist with these guys,” says Col. Lawrence Wilkerson, who served as chief of staff to Secretary of State Colin Powell. “Even Romney is in many ways unelectable. He’s been a hardliner during the primary on key issues – and then he’s going to do this dance where he suddenly shifts to the middle and is a centrist in the general election? He can do that – but Obama will trounce him.”

PROMOTE DIRTY JOBS

Nowhere is the GOP’s lock-step approach to governance more in evidence than on the question of employment. At a moment when 25 million Americans lack full-time jobs, this is obviously going to be the central issue of the 2012 election. Yet the Republican candidates all have the same jobs plan: to put the unemployed to work on behalf of big polluters.

Take the plan proposed by Rick Perry, which calls for boosting employment through “increased domestic energy production” – including renewable power. But every one of the 1.2 million jobs that Perry claims his plan would create involves the extraction of climate-polluting fossil fuels. There are 20,000 jobs from building the Keystone XL pipeline to burn more of Canada’s tar sands, 100,000 from oil drilling in the Arctic National Wildlife Refuge, 240,000 from drilling in the Gulf of Mexico and off the Carolinas, and 500,000 from “onshore oil and gas development” in the West.

With minor variations, this is the same jobs plan put forth by every GOP candidate. The only true disagreement among them is just how many dirty-energy jobs can be created by allowing Big Oil and other polluters to pillage America’s landscape and shorelines. Gingrich pegs it at 1.1 million jobs. Michele Bachmann says it’s 1.4 million. Romney, whose plan is predicated on the return to the kind of fast-track permitting that precipitated the BP disaster in the Gulf, promises 1.6 million jobs – including 1.2 million from offshore drilling alone. “The United States is blessed with a cornucopia of carbon-based energy resources,” Romney writes in his plan. “We do not even know the extent of our blessings.”

TRASH THE ENVIRONMENT

To clear the way for the orgy of drilling, mining and fracking the GOP candidates have proposed, it’s first necessary to gut the Environmental Protection Agency, which has been authorized by the Supreme Court to curb climate pollution. Many of the top Republican contenders, in fact, once sounded the alarm on climate change; today, they scoff at its very existence.

In 2008, for example, Gingrich filmed a commercial for Al Gore’s Alliance for Climate Protection with then-House Speaker Nancy Pelosi. In the spot, Gingrich gazed into Pelosi’s eyes before looking into the camera and declaring, “We do agree: Our country must take action to address climate change.” Gingrich vowed to “strongly support” mandatory caps on carbon pollution. But now that the likes of Peabody Energy have pumped hundreds of thousands of dollars into his lobbying coffers, Gingrich is singing the polluters’ tune. In November, he said he no longer believes climate change is real: “I actually don’t know whether global warming is occurring.”

Romney’s flip-flop was even swifter. In June, at the start of his campaign, he declared, “I believe that humans contribute” to warming through “our emissions of greenhouse gases.” By October, he had fully embraced climate denial, insisting that “we don’t know what’s causing climate change.” His jobs plan, meanwhile, casts the industries driving the climate crisis as victims of “the Obama administration’s war on carbon dioxide.” Like every other top Republican in the race, Romney also insists that the EPA be effectively barred from enforcing the Clean Air Act, calling the hallmark environmental legislation “outdated” and insisting that it must be “streamlined” to benefit coal plants by “removing carbon dioxide from its purview.”

To date, Romney has received $300,000 in oil and gas contributions. That’s a pittance in comparison to Perry, who has pocketed $740,000 from the same industries. Perry is a shameless climate denier who maintains – against all evidence – that “we have been experiencing a global cooling trend” and that climate change is “all one contrived phony mess” cooked up by Gore, that “false prophet of a secular carbon cult.” The Texas governor insists that all new rules designed to curb the deadly emissions of coal plants or the toxic chemicals used in the fracking of natural gas should be put on hold.

Other GOP candidates go even further. Bachmann insists that under her presidency, the EPA will have its “doors locked and lights turned off.” Gingrich blasts the agency – created by Richard Nixon – as “a tool of ideologues to push an anti-jobs agenda.” Outdoing them all, Cain advocates that the EPA be overhauled by a commission staffed by “the people closest to the problem” – the “problem,” in his view, being federal curbs on pollution, and the “people” being big-energy CEOs. “If you’ve been abused by the EPA like Shell Oil,” Cain said this fall, “I’m going to ask the CEO of Shell Oil would he like to be on this commission, and give me some recommendations.”

The leading GOP candidates also want to roll back new regulations introduced by the Obama administration to prevent industrial boilers, cement plants and coal smokestacks from pumping poisons into the atmosphere that cause tens of thousands of premature deaths each year. Even Republican veterans are appalled by such a blatant rejection of the party’s storied history of conservation, dating back to Teddy Roosevelt. “These rules are grounded in the best available science,” noted William Reilly, who served as EPA chief under George H.W. Bush. “But for some of the most prominent leaders of the Republican Party, science has left the building.”

So extreme is the agenda of the GOP candidates, in fact, that it even trashes the laissez-faire legacy of Goldwater. “While I am a great believer in the free-enterprise system,” the Arizona senator said in 1970, “I am an even stronger believer in the right of our people to live in a clean, pollution-free environment.”

UNLEASH WALL STREET

The GOP candidates are not just seeking to roll back regulations on Big Carbon – they also want to gut a wide range of safeguards designed to protect consumers and workers. Perry has called for a “moratorium” on all pending regulations. Bachmann wants an end to “this red-tape rampage.” Romney, in a fit of technocratic nonsense, is calling for a cap on regulatory costs, whereby the economic impact of any new regulation must be offset by repealing an established rule. Under his bizarre plan, a Romney administration might pay for new rules against contaminated meat by eliminating the current ban on lead paint in children’s toys.

Above all, the GOP candidates are unanimous in their desire to kill the new post-crash rules crafted to end reckless speculation by big banks and Wall Street firms. Gingrich has gone so far as to call for the Democratic authors of the law, Chris Dodd and Barney Frank, to be jailed for “killing small banks, crippling small businesses, driving down the value of housing and creating corrupting Washington controls over the biggest banks.” Repeal of Dodd-Frank would allow Wall Street firms like Goldman Sachs to return to the days of secretly trading trillions in derivatives contracts and betting against their own clients. It would also kill off the Consumer Financial Protection Bureau, the agency set up by Elizabeth Warren to prevent average Americans from being suckered into subprime mortgages and credit cards with usurious interest rates.

When the GOP candidates talk about these essential curbs on the abuses of big banks, it’s as though they live in an alternate universe – one where Wall Street never drove the world’s economy off a cliff. Cain insists that Dodd-Frank “does little to shield Main Street from the alleged risks of Wall Street,” while Perry adds that the law should be replaced by “market-oriented” measures – but only if such controls should prove “necessary.” The GOP front-runners are so committed to a Wall Street free-for-all that they even want to gut Sarbanes-Oxley, the accounting reforms passed under George W. Bush to bar corporate America from the kinds of bookkeeping fraud pioneered by Tyco, WorldCom and Enron.

Such deregulatory radicalism puts the GOP candidates at direct odds with Paul Volcker, the former chair of the Federal Reserve who helped steer the nation out of a crippling recession during the Reagan administration. Volcker, too, is critical of Dodd-Frank – but he believes the law doesn’t go far enough. “I think Dodd-Frank was close to as good as we could get,” Volcker said this fall. “But it’s nowhere near what we need.”

DESTROY THE SAFETY NET

The Republican candidates are uniformly committed to repealing the president’s health care reform – what Perry, with characteristic subtlety, calls a “man-made disaster of epic proportions.” Under the GOP plans, nearly 1 million young adults would once again be denied coverage, seniors would be forced to shell out billions more for prescription medicines, and insurers could return to hiking premiums while denying coverage to Americans with pre-existing conditions. For these and other reasons, Romney insists, “Obamacare is bad for America’s families.”

Obamacare, however, is only the top entitlement program on the GOP hit list. Almost all of the Republican candidates want to privatize Medicare, replacing its guaranteed benefits to retirees with a fixed voucher insufficient to cover the soaring costs of private insurance. The GOP front-runners have also endorsed a radical plan to cap the federal contribution to Medicaid – a move that would gut insurance for the poor by as much as 3.5 percent a year and shift $150 billion in annual costs onto cash-strapped states. According to the Congressional Budget Office, states unable to pay the added costs would be forced to either “curtail eligibility” to those in need or “provide less extensive coverage.”

When it comes to Social Security, the Republican candidates have all advocated that it be privatized for younger workers – creating a system of personal accounts that would place their retirement security at the mercy of the stock market. The undisputed victor of the GOP plans would be Wall Street, which would profit enormously from collecting management fees over a worker’s lifetime. A study by the University of Chicago that analyzed a similar privatization scheme proposed by George W. Bush projected that such fees would hand Wall Street “the largest windfall gain in American financial history” while “reducing the ultimate value of individual accounts by 20 percent.”

WRECK THE ECONOMY

While threatening to slash the safety net for millions of Americans, the GOP candidates are also committed to a brutal austerity program that would tip the nation back into recession – if not a full-scale depression. The proposal in question is a constitutional amendment that would require the federal government to pass a balanced budget each year. According to Macroeconomic Advisers, a top economic forecaster, balancing the budget in 2012 alone would throw 15 million Americans out of work, double unemployment to 18 percent and contract the U.S. economy by 17 percent. Going forward, the government would be barred from borrowing money during hard times to provide unemployment benefits, food stamps and other essential aid to those in need. As a result, the analysts report, “recessions would be deeper and longer.” Even in times of plenty, a balanced-budget amendment would “retard economic growth” by increasing economic uncertainty – which Republicans have repeatedly blamed as the root of the current lackluster recovery.

WAGE ENDLESS WAR

One portion of the budget that the GOP’s austerity agenda doesn’t touch is the Pentagon, where the Republican candidates call for the kind of costly investments they refuse to back for America’s poor and middle class. While demanding that federal spending be capped at 20 percent of GDP, Romney would mandate that at least one in five federal dollars be spent on defense. “I will not look to the military as a place to balance the budget,” he says. Neither will Gingrich, who calls on taxpayers to “recapitalize our military infrastructure,” or Perry, who wants to sink billions into missile defense and “modernized fleets of ships and aircraft.”

To justify such massive defense spending, the GOP candidates would ensure that America remains entangled in bloody wars in the Middle East. When Obama announced earlier this fall that he would complete the withdrawal of U.S. troops from Iraq – on the timetable negotiated by President Bush – Romney denounced the move as an “astonishing failure.” Bachmann called on “our troops to remain there to preserve the peace,” and Perry insisted that “we need to finish our mission in Iraq” – which evidently involves occupying the country indefinitely, regardless of the wishes of its democratically elected government.

The GOP candidates have been even more hawkish on Iran, with Perry, Romney, Gingrich and Bachmann all promising to go to war to prevent the regime from acquiring a nuclear weapon. Of the top-tier candidates, only Cain expressed reservations about another war in the Middle East, saying instead that he would surround the country with a mobile missile-defense network and tell Ahmadinejad to “make my day.”

“This is nonsense – idiocy! – to contemplate another war in that region right now,” says Wilkerson, the former chief of staff to Colin Powell. Obama’s remarkable successes in foreign policy, he adds – including the demise of both Osama bin Laden and Muammar Qaddafi – have panicked the GOP field into a reflexive hawkishness. “For the Republicans, that’s their mantra,” Wilkerson says. “The only thing they know is war, war and more war.”

CUT TAXES ON THE RICH

The leading Republican candidates all back a host of sweetheart tax cuts for major corporations, whose income is currently taxed at 35 percent. Romney would reduce the corporate rate to 25 percent, while Perry would drop it to 20 percent and Gingrich would slash it to 12.5 percent. Worse, the GOP candidates also favor a “territorial” tax system that would prohibit Uncle Sam from collecting any revenues on profits stashed overseas. The move, according to tax experts, would spur U.S. corporations to shift millions of jobs and billions in profits offshore.

All of the candidates also want to eliminate or drastically curb taxes on investment income, and allow the children of the rich to pay no taxes on their inheritances. For Romney, whose net worth is estimated at $200 million, the issue is personal: With the estate tax repealed, he could pass on an extra $90 million to his children, tax-free – including his son Tagg, currently scraping by as a managing partner at a private equity firm.

All told, the elimination of the estate tax – whose benefits would accrue solely to the top 0.3 percent of taxpayers – would spike the deficit by an estimated $1.3 trillion over the next decade. Yet the GOP candidates continue to insist that the move would somehow benefit the middle class; Gingrich claims that “eliminating the death tax will create more jobs and more revenue for the federal government.” Such lunacy enrages the party’s few remaining fiscal conservatives. “Republican thinking about fiscal policy is fundamentally wrong, and it has been for quite a while,” says Paul O’Neill, who served as Treasury secretary under George W. Bush. “The whole notion that we can cut taxes to the vanishing point and keep raising more money is just crazy. It could even be amusing if it wasn’t so dangerous.”

ATTACK ABORTION RIGHTS

It’s no surprise that the GOP candidates oppose a woman’s right to choose. Every candidate but Romney has signed a pledge vowing to permanently defund Planned Parenthood and to appoint only pro-lifers to key federal health positions. But now, rather than simply pushing to repeal Roe v. Wade, they also want to change the Constitution to award full citizenship to a woman’s egg the moment it is fertilized. “Personhood begins at conception,” insists Gingrich, who wants Congress to pass a law defining embryos as “persons” under the 14th Amendment – a move designed to make abortion unconstitutional. Even Romney, who was elected in Massachusetts as a staunchly pro-choice politician, said on Fox News recently that he “absolutely” would have signed a “personhood” amendment giving constitutional rights to the unborn. An identical measure on the ballot last November – which would have outlawed abortion for victims of rape and incest – was so radical that even Mississippi voters rejected it.

BASH IMMIGRANTS

The candidates’ positions on immigration are so extreme that they seem to have been dreamed up by the Minutemen militia. Perry vows to militarize the border with “boots on the ground” and Predator drones hunting down illegal border crossers from the skies. Offering few details, Romney says “we gotta have a fence” along the Mexican border, while Bachmann envisions a barrier that’s 2,000 miles long and “double-walled.” Cain has vowed to erect a “Great Wall… 20 feet high. It’s going to have barbed wire on the top. It’s going to be electrified. And there’s going to be a sign on the other side saying, ‘It will kill you – WARNING!’” Gingrich, who touts his “humane” approach to deportation, has nonetheless trashed even legal immigrants, once denouncing Spanish itself as “the language of living in a ghetto.”

The GOP’s determination to sabotage its appeal among Latinos – America’s fastest-growing voting bloc – has many Democrats exulting. “We may just run clips of the Republican debates verbatim,” Obama told a gathering of Hispanic journalists in November. “We won’t even comment on them – we’ll just run those in a loop on Univision and Telemundo, and people can make up their own minds.”

Where does this radical new GOP orthodoxy come from? On the economic and regulatory front, at least, a recent interview with Tom Donohue, the president of the U.S. Chamber of Commerce, offers a clue. Donohue outlined the business group’s top policy prescriptions – and they are virtually identical to those promoted by the GOP candidates.

Job creation? “The idea with the greatest potential,” Donohue said, “is to do a number of things in energy.” Environmental protection? Stop giving “wildlife the priority over jobs.” Federal regulation? Obama has “exploded the regulatory burden, particularly through health care, Dodd-Frank and the Environmental Protection Agency.” Corporate tax rates? “We’re the only major country in the world that double-taxes our companies,” Donohue said. “That’s just plain stupid.”

But slavish devotion to the interests of corporate America is only part of the equation underlying the GOP’s current extremism. Today, just 28 percent of Americans identify themselves as Republicans – a drop of five points from the Bush years. To be the ringleader in a small-tent party requires adopting positions that are offensive to the broader public – and even to people who once fit comfortably in the GOP coalition. “You’ve got to address everything from abortion to how many evangelicals can sit on the head of a pin,” says Wilkerson. “It’s really a problem.”

So far, the GOP has gotten away with its sharp turn to the right. In the midterm elections last year, in which Republican hardliners seized control of Congress, conservatives cast 41 percent of all votes. Senior citizens made up a quarter of the electorate, as did voters making more than $100,000 a year. But the general election next fall will attract voters who are younger and less affluent. If Obama can inspire anything resembling the historic turnout he sparked in 2008, the GOP is in for a beat-down. The Hispanic vote, for example, is expected to rise by nearly a quarter next year – and a recent poll found Latino voters swinging to Obama by nearly three-to-one over both Romney and Perry.

What’s more, the GOP’s appeal to the most extreme elements of its coalition may prompt moderate Republicans to stay home – or even to vote for Obama. As long as the GOP insists on catering to the needs of the ultrarich, Republican veterans warn, it risks alienating the working-class conservatives who ushered in the Age of Reagan. “The Republican Party is just screwed up in its head,” says David Stockman, who served as budget director under Reagan. “It’s behaving politically in a very irrational way, and policywise in a nonsensical manner.”

Mike Lofgren, until recently a top Republican staffer on the Senate Budget Committee, has offered an even more dire assessment of “the whole toxic stew of GOP beliefs.” This fall, Lofgren announced he was abandoning his own party – unable to stomach what he called “the headlong rush of Republicans to embrace policies that are deeply damaging to this country’s future.” Citing the “broad and ever-widening gulf between the traditional Republicanism of an Eisenhower and the quasi-totalitarian cult of a Michele Bachmann,” Lofgren summed up the GOP’s capitulation to extremism: “The crackpot outliers of two decades ago,” he concludes, “have become the vital center today.”

This story is from the December 26, 2011 issue of Rolling Stone.

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A Club of Liars, Demagogues and Ignoramuses

Posted on December 5, 2011 by admin

A Commentary by Marc Pitzke

The US Republican race is dominated by ignorance, lies and scandals. The current crop of candidates have shown such a basic lack of knowledge that they make George W. Bush look like Einstein. The Grand Old Party is ruining the entire country’s reputation.

Africa is a country. In Libya, the Taliban reigns. Muslims are terrorists; most immigrants are criminal; all Occupy protesters are dirty. And women who feel sexually harassed — well, they shouldn’t make such a big deal about it.

Welcome to the wonderful world of the US Republicans. Or rather, to the twisted world of what they call their presidential campaigns. For months now, they’ve been traipsing around the country with their traveling circus, from one debate to the next, one scandal to another, putting themselves forward for what’s still the most powerful job in the world.
As it turns out, there are no limits to how far they will stoop.

It’s true that on the road to the White House all sorts of things can happen, and usually do. No campaign can avoid its share of slip-ups, blunders and embarrassments. Yet this time around, it’s just not that funny anymore. In fact, it’s utterly horrifying.

It’s horrifying because these eight so-called, would-be candidates are eagerly ruining not only their own reputations and that of their party, the party of Lincoln lore. Worse: They’re ruining the reputation of the United States.

‘Freakshow’

They lie. They cheat. They exaggerate. They bluster. They say one idiotic, ignorant, outrageous thing after another. They’ve shown such stark lack of knowledge — political, economic, geographic, historical — that they make George W. Bush look like Einstein and even cause their fellow Republicans to cringe.

“When did the GOP lose touch with reality?” wonders Bush’s former speechwriter David Frum in New York Magazine. In the New York Times, Kenneth Duberstein, Ronald Reagan’s former chief-of-staff, called this campaign season a “reality show,” while Wall Street Journal columnist and former Reagan confidante Peggy Noonan even spoke of a “freakshow.”

That may be the most appropriate description.

Tough times demand tough and smart minds. But all these dopes have to offer are ramblings that insult the intelligence of all Americans — no matter if they are Democrats, Republicans or neither of the above. Yet just like any freakshow, this one would be unthinkable without a stage (in this case, the media, strangling itself with all its misunderstood “political correctness” and “objectivity”) and an audience (the party base, which this year seems to have suffered a political lobotomy).

Factually Challenged

And so the farce continues. The more mind-boggling its incarnations, the happier the US media are to cheer first one clown and then the next, elevating and then eliminating “frontrunners” in reliable news cycles of about 45 days.

Take Herman Cain, “businessman.” He sat out the first wave of sexual harassment claims against him by offering a peculiar argument: Most ladies he had encountered in his life, he said, had not complained.

In the most recent twist, a woman accused Cain of having carried on a 13-year affair with her. That, too, he tried to casually wave off, but now, under pressure, he says he wants to “reassess” his campaign.

If Cain indeed drops out, the campaign would lose its biggest caricature: He has been the most factually challenged of all these jesters.

As CEO of the “Godfather’s” pizza chain, Cain killed jobs — but now poses as the job-creator-in-chief. Meanwhile, he seems to lack basic economic know-how, let alone a rudimentary grasp of politics or geography. Libya confounds him. He does not believe that China is a nuclear power. And all other, slightly more complicated questions get a stock answer: “Nine-nine-nine!” Remember? That’s Cain’s tax reduction plan that would actually raise taxes for 84 percent of Americans.

Has any of that disrupted Cain’s popularity in the media or with his fan base? Far from it. Since Oct. 1, he has collected more than $9 million in campaign donations. Enough to plow through another onslaught of denouements.

No Shortage of Chutzpah

Then there’s Newt Gingrich, the current favorite. He’s a political dinosaur, dishonored and discredited. Or so we thought. Yet just because he studied history and speaks in more complex sentences than his rivals, the US media now reflexively hails him as a “Man of Ideas” (The Washington Post) — even though most of these ideas are lousy if not downright offensive, such as firing unionized school janitors, so poor children could do their jobs.

Pompous and blustering, Gingrich gets away with this humdinger as well as with selling himself as a Washington outsider — despite having made millions of dollars as a lobbyist in Washington. At least the man’s got chutzpah.

The hypocrisy doesn’t end here. Gingrich claims moral authority on issues such as the “sanctity of marriage,” yet he’s been divorced twice. He sprang the divorce on his first wife while she was sick with cancer. (His supporters’ excuse: It’s been 31 years, and she’s still alive.) He cheated on his second wife just as he was pressing ahead with Bill Clinton’s impeachment during the Monica Lewinsky affair, unaware of the irony. The woman he cheated with, by the way, was one of his House aides and 23 years his junior — and is now his perpetually smiling third wife.

Americans have a short memory. They forget, too, that Gingrich was driven out of Congress in disgrace, the first speaker of the house to be disciplined for ethical wrongdoing. Or that he consistently flirts with racism when he speaks of Barack Obama. Or that he enjoyed a $500,000 credit line at Tiffany’s just as his campaign was financially in the toilet and he ranted about the national debt. Chutzpah, indeed.

Yet the US media rewards him with a daily kowtow. And the Republicans reward him too, by having put him on top in the latest polls. Mr. Hypocrisy, the bearer of his party’s hope.

“I think he’s doing well just because he’s thinking,” former President Clinton told the conservative online magazine NewsMax. “People are hungry for ideas that make some sense.” Sense? Apparently it’s not just the Republicans who have lost their minds here.

The Eternal Runner-Up

And what about the other candidates? Rick Perry’s blunders are legendary. His “oops” moment in suburban Detroit. His frequently slurred speech, as if he was drunk. His TV commercials putting words in Obama’s mouth that he didn’t say (such as, “Americans are ‘lazy’”). His preposterous claim that as governor of Texas he created 1 million jobs, when the total was really just about 100,000. But what’s one digit? Elsewhere, Perry would have long ago been disqualified. But not here in the US.

Meanwhile, Michele Bachmann has fallen off the wagon, although she’s still tolerated as if she’s a serious contender. Ron Paul’s fan club gets the more excited, the more puzzling his comments get. Jon Huntsman, the only one who occasionally makes some sort of sense, has been relegated to the poll doldrums ever since he showed sympathy for the Occupy Wall Street demonstrators.

Which leaves Mitt Romney, the eternal flip-flopper and runner-up, who by now is almost guaranteed to clinch the nomination, even though no one in his party seems to like or want him. He stiffly delivers his talking points, which may or may not contradict his previous positions. After all, he’s been practicing this since 2008, when he failed to snag the nomination from John McCain. If it ain’t broke, don’t fix it.

As an investor, Romney once raked in millions and, like Cain, killed jobs along the way. So now he says he’s the economy’s savior. To prove that, he has presented an economic plan that the usually quite conservative business magazine Forbes has labeled “dangerous,” asking incredulously, “About Mitt Romney, the Republicans can’t be serious.” Apparently they’re not, but he is, running TV spots against Obama already, teeming with falsehoods.

Good for Ratings

What a nice club that is. A club of liars, cheaters, adulterers, exaggerators, hypocrites and ignoramuses. “A starting point for a chronicle of American decline,” was how David Remnick, the editor of the New Yorker, described the current Republican race.

The Tea Party would take issue with that assessment. They cheer the loudest for the worst, only to see them fail, as expected, one by one. Which goes to show that this “movement,” sponsored by Fox News, has never been interested in the actual business of governing or in the intelligence and intellect that requires. They are only interested in marketing themselves, for ratings and dollars.
So the US elections are a reality show after all, a pseudo-political counterpart to the Paris Hiltons, Kim Kardashians and all the “American Idol” and “X Factor” contestants littering today’s TV. The cruder, the dumber, the more bizarre and outlandish — the more lucrative. Especially for Fox News, whose viewers were recently determined by Fairleigh Dickinson University to be far less informed than people who don’t watch TV news at all.

Maybe that’s the solution: Just ignore it all, until election day. Good luck with that — this docudrama with its soap-opera twists is way too enthralling. The latest rumor du jour involves a certain candidate who long ago seemed to have disappeared from the radar. Now she may be back, or so it is said, to bring order into this chaos. Never mind that her name is synonymous with chaos: Sarah Palin.

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SWAT Raids, Stun Guns, And Pepper Spray: Why The Government Is Ramping Up The Use Of Force

Posted on December 5, 2011 by admin

Radley Balko
Senior Writer and Investigative Reporter, The Huffington Post

In February of last year, video surfaced of a marijuana raid in Columbia, Mo. During the raid on Jonathan Whitworth and his family, police took down the door with a battering ram, then shot and killed one of Whitworth’s dogs within seconds of entering the home and they wounded the other. They didn’t find enough pot in the home to charge Whitworth with even a misdemeanor. (He was, however, charged with misdemeanor possession of drug paraphernalia when police found a pipe.) The disturbing video went viral in May 2010, triggering outrage around the world. On Fox News, conservative columnist Charles Krauthammer and Bill O’Reilly cautioned not to judge the entire drug war by the video, which they characterized as an isolated incident.

In fact, very little about the raid that was unusual. For the most part, it was carried out the same way drug warrants are served some 150 times per day in the United States. The battering ram, the execution of Whitworth’s dog, the fact that police weren’t aware Whitworth’s 7-year-old child was in the home before they riddled the place with bullets, the fact that they found only a small amount of pot, likely for personal use — all are common in drug raids. The only thing unusual was that the raid was recorded by police, then released to the public after an open records request by the Columbia Daily Tribune. It was as if much of the country was seeing for the first time the violence with which the drug war is actually fought. And they didn’t like what they saw.

That video came to mind with the outrage and public debate over the now-infamous pepper-spraying of Occupy protesters at the University of California-Davis protest earlier this month. The incident was just one of a number of high-profile uses of force amid crackdowns on Occupy protesters across the country, including one in Oakland in which the skull of Iraq War veteran Scott Olsen was fractured by a tear gas canister, and in New York, where NYPD Officer Anthony Bologna pepper-sprayed protesters who had been penned in by police fencing.

But America’s police departments have been moving toward more aggressive, force-first, militaristic tactics and their accompanying mindset for 30 years. It’s just that, with the exception of protests at the occasional free trade or World Bank summit, the tactics haven’t generally been used on mostly white, mostly college-educated kids armed with cellphone cameras and a media platform.

Police militarization is now an ingrained part of American culture. SWAT teams are featured in countless cop reality shows, and wrong-door raids are the subject of “The Simpsons” bits and search engine commercials. Tough-on-crime sheriffs now sport tanks and hardware more equipped for battle in a war zone than policing city streets. Seemingly benign agencies such as state alcohol control boards and the federal Department of Education can now enforce laws and regulations not with fines and clipboards, but with volatile raids by paramilitary police teams.

Outraged by the Occupy crackdowns, some pundits and political commentators who paid little heed to these issues in the past are now calling for a national discussion on the use of force. That’s a welcome development, but it’s helpful to review how we got here in order to have an honest discussion.

Part of the trend can be attributed to the broader tough-on-crime and drug war policies pushed by politicians of both parties since at least the early 1980s, but part of the problem also lies with America’s political culture. Public officials’ decisions today to use force and the amount of force are as governed by political factors as by an honest assessment of the threat a suspect or group may pose. Over the years, both liberals and conservatives have periodically raised alarms over the government’s increasing willingness to use disproportionately aggressive force. And over the years, both sides have tended to hush up when the force is applied by political allies, directed at political opponents, or is used to enforce the sorts of laws they favor.

How We Got Here

According to Eastern Kentucky University criminologist Peter Kraska, the number of SWAT raids carried out each year in America has jumped dramatically over the last generation or so, from just a few thousand in the 1980s to around 50,000 by the mid-2000s, when Kraska stopped his survey. He found that the vast majority of the increase is attributable to the drug war — namely warrant service on low-to-mid-level drug offenders. A number of federal policies have driven the trend, including offering domestic police departments military training, allowing training with military organizations, using “troops-to-cops” programs and offering surplus military equipment and weaponry to domestic police police departments for free or at major discounts. There has also been a constant barrage of martial rhetoric from politicians and policymakers.

Dress cops up as soldiers, give them military equipment, train them in military tactics, tell them they’re fighting a “war,” and the consequences are predictable. These policies have taken a toll. Among the victims of increasingly aggressive and militaristic police tactics: Cheye Calvo, the mayor of Berwyn Heights, Md., whose dogs were killed when Prince George’s County police mistakenly raided his home; 92-year-old Katherine Johnston, who was gunned down by narcotics cops in Atlanta in 2006; 11-year-old Alberto Sepulveda, who was killed by Modesto, Calif., police during a drug raid in September 2000; 80-year-old Isaac Singletary, who was shot by undercover narcotics police in 2007 who were attempting to sell drugs from his yard; Jonathan Ayers, a Georgia pastor shot as he tried to flee a gang of narcotics cops who jumped him at a gas station in 2009; Clayton Helriggle, a 23-year-old college student killed during a marijuana raid in Ohio in 2002; and Alberta Spruill, who died of a heart attack after police deployed a flash grenade during a mistaken raid on her Harlem apartment in 2003. Most recently, voting rights activist Barbara Arnwine was raided by a SWAT team in Prince George’s County, Md., on Nov. 21. The police appear to have raided the wrong house.

The drug war has been the primary policy driving the trend but, since 2001, the federal government has also used the threat of terror attacks to further militarize domestic law enforcement. This includes not only finding new sources of funding for armor, weapons and gear, but also claiming new powers for the “War on Terror” that are then inevitably used in more routine law enforcement.

But paramilitary creep has also spread well beyond the drug war. In recent years, SWAT teams have been used to break up neighborhood poker games, including one at an American Legion Hall in Dallas. In 2006, Virginia optometrist Sal Culosi was killed when the Fairfax County Police Department sent a SWAT team to arrest him for gambling on football games. SWAT teams are also now used to arrest people suspected of downloading child pornography. Last year, an Austin, Texas, SWAT team broke down a man’s door because he was suspected of stealing koi fish from a botanical garden.

SWAT teams are even sent to enforce regulatory law now. In Hartford, Conn., a SWAT team recently raided a bar on the premise of suspected underage drinking. The same happened at a fraternity at Washington State.

Often, these inspections are merely a way for police to perform a full-on drug raid without the hassle of obtaining a search warrant. Tactical units in Orlando recently raided a series of black-owned barbershops under the premise of an occupational licensing inspection. Once inside, they then scoured the businesses, customers and employees for illicit drugs, mostly coming up empty. There have been similar incidents at bars, with police departments sending SWAT teams on drug raids under the cover of a regulatory alcohol inspection, and once again getting around the need for a search warrant.

The city of Atlanta recently agreed to a $1 million settlement with customers and employees of the Atlanta Eagle nightclub. The gay club is alleged to have been the site of open sex acts and drug sales, but the raid — in which customers were detained on the floor at gunpoint — was officially for a mere booze inspection. The police never bothered to get a warrant.

In 2007, a federal SWAT team raided the studio of an Atlanta DJ suspected of violating copyright law. And in June, the Department of Education’s Office of Inspector General sent its SWAT team into the home of Kenneth Wright in Stockton, Calif., rousing him and his three young daughters from their beds at gunpoint. Initial reports indicated the raid was because Wright’s estranged wife had defaulted on her student loans. The Department of Education issued a press release stating that the investigation was related to embezzlement and fraud — though why embezzlement and fraud necessitate a SWAT team isn’t clear, not to mention that the woman hadn’t lived at the house that was raided for more than a year. Ignoring these details, however, still leaves the question of why the Department of Education needs a SWAT team in the first place.

The Department of the Interior also has one, as does the Consumer Products Safety Commission. Last August, gun-toting federal marshals raided the Gibson Guitar factory in Nashville, Tenn. The reason? The company is under investigation for importing wood that wasn’t properly treated.

In 2006, a group of Tibetan monks inadvertently overstayed their visas while touring the U.S. on a peace mission. Naturally, immigration officials sent a SWAT team to apprehend them.

It hasn’t always been this way. Yes, there has always been police brutality, and the civil rights era in particular produced a number of striking images of excessive force brought down upon peaceful protesters. But it has become routine to use force that is disproportionate to the laws the police are enforcing. Because it has happened gradually over the course of about 30 years, the public has become accustomed to it.

There was a time when the level of force governments chose to use in response to a threat was commensurate with the severity of the threat. From the inception of the SWAT team in the late 1960s and throughout the 1970s, paramilitary police units were generally only deployed when someone posed an immediate and violent threat to others — incidents like hostage situations, bank robberies, riots or escaped fugitives.

Today, SWAT teams are routinely deployed against people who pose little to no threat at all. It’s hard to come up with a legitimate reason that the federal government needs to send heavily-armed, heavily-armored SWAT teams to raid medical marijuana clinics, for example. Whatever your position on the debate over whether federal or state law should govern pot dispensaries, the idea that their customers and employees pose a violent threat to federal agents is absurd. There’s also little justification for sending SWAT teams to raid the offices of doctors accused of over-prescribing prescription painkillers, co-ops accused of selling unpasteurized milk, or for Immigration and Customs Enforcement to send paramilitary squads into businesses suspected of employing undocumented immigrants.

Beyond The SWAT Team

The militarization of police departments can also instill in police a militaristic mindset among cops not involved with the SWAT team. This is troubling because, again, soldiers and cops have very different jobs.

The UC-Davis students may be fortunate they were only pepper-sprayed. In recent years, the stun gun has become the weapon of choice for noncompliance with a police order. A little over a week after the UC-Davis incident, for example, a 61-year-old North Carolina man died after a police officer shot him with a stun gun for failing to stop on his bicycle when ordered. Roger Anthony’s family says he may have failed to stop because he was hard of hearing. He had done nothing illegal. And Anthony is far from the first person to die after receiving a charge from a stun gun.

Police have used stun guns on pregnant women, the elderly and children as young as six. They’re carried by security personnel in some schools. Stun guns may well be appropriate as an alternative to more lethal measures like real guns, but it’s now acceptable in much of the country for police to send a jolt of electricity through someone for noncompliance with a police officer, argument over a traffic ticket or even petulance among children.

The image of the domestic cop dressed in camouflage or a battle dress uniform, toting an assault weapon, or decked out in armor more appropriate for a battlefield is also now common, particularly at protests and high-profile summits or conferences.

At the 2008 GOP Convention, police staged preemptive raids on the homes of possible protesters and rabble-rousers. There were mass arrests of protesters and journalists, few of which resulted in any actual charges. At the 2009 G20 summit in Pittsburgh, camouflage-clad cops deployed sound cannons and arrested protesters, students and even onlookers. This was not because they broke any actual laws, but on their potential to cause disruption. Ironically, the more important the event and the more consequential the decisions are likely to be, the less likely police and government officials are to allow dissent — and the more force they’re likely to employ to keep protesters silent.

But the military mentality extends to more mundane police activities as well. In 2009, I wrote an article for the Daily Beast about the odd phenomenon of cops shooting dogs. In drug raids, killing the dogs in the targeted house is almost perfunctory. We also see stories about cops killing dogs while chasing suspects across the property of a third party, or killing a dog who growls at them after they were called to a house on an unrelated matter.

These stories have punch, and public reaction to them can be even stronger than to stories about cops killing people. On some level, that’s understandable: the slaughter of a family pet inflicts gratuitous emotional harm. The often cold reactions from police departments to these incidents also show a certain indifference to the people they are supposed to be serving — again, more the way a soldier interacts with citizens in another country than as with a police officer serving his community.

It’s also symptomatic of a mentality that habitually turns first toward force. There are ways to deal with aggressive dogs other than shooting them. But few departments give police officers training on how to deal with dogs. Postal workers get that training, and they report very few incidents of dog attacks. But postal workers don’t carry guns. When you can use lethal force, it’s easier to do so than to use less aggressive tactics. If you have little regard for the people against whom you’ll be using that force — and when there are usually no consequences for using it — it isn’t difficult for violence to become the first option instead of the last.

The Politics of Force

The amount of force the government uses to uphold a given law is no longer determined only by the threat to public safety posed by the suspect. Now, it appears to give an indication of how serious the government is about the law being enforced. The DEA sends SWAT teams barreling into the offices of doctors accused of over-prescribing painkillers not because the doctors pose any real threat of violence, but because prescription drug abuse is a hot issue right now. The feds sent SWAT teams into marijuana dispensaries not because medicinal pot merchants are inherently dangerous people, but because officials believe the dispensaries are openly defying federal law. It is, to put it bluntly, a terror tactic. Sending a couple cops with a clipboard to hand out fines and shut down a dispensary doesn’t convey a strong message. Sending a bunch of cops dressed like soldiers to point guns at dispensary owners and their customers certainly does.

There’s also little evidence that people who consume child pornography pose much of a violent threat to police officers, yet the federal government now routinely sends SWAT teams to apprehend them. The amount of force, again, isn’t dictated by the threat posed by the suspect, but by the disgust the government wants to register at the alleged crime. And while a good portion of the public probably won’t lose much sleep over government violence directed at suspected child pornographers, the suspected part is important. Last April an FBI SWAT team in Buffalo, N.Y., staged a violent raid on man suspected of downloading child porn. They had the wrong guy. The man had an unsecured wireless connection, and a neighbor had used it to download the porn.

The lesson federal officials drew from the case was not that perhaps it’s unwise to send SWAT teams for such low-level offenses, or that perhaps law enforcement should be sure they have the right guy if they are going to conduct such raids. No, the lesson federal officials drew from the case was applicable to the rest of us: It’s dangerous to have an unsecured wireless connection.

The amount force government authorities use, then, is no longer based not on what sort of threat a suspect poses to the government or those around him, but on the political implications of the laws being enforced. It isn’t difficult to see how we get from here to pepper-spraying and beating peaceful protesters, particularly if the protesters are becoming a thorn in the side of politicians or are losing support from the public.

Partisans haven’t reacted well to these trends, either. Last month, Jonathan Meador, a reporter for the Nashville Scene alt weekly, was arrested while covering a police crackdown on occupy protesters in Nashville. Meade’s arrest was outrageous — even more so given that the crackdown itself was illegal. But a couple of weeks before his arrest, Meade himself wrote an article mocking concerns over the heavy-handedness of the federal raid on Gibson Guitars.

It’s a tidy anecdote that goes a long way to explain how mass police militarization can happen with little objection. When excessive government force is directed at people like us and people who with whom we sympathize, we’re outraged. But point the guns at people with whom we have little in common, or whose politics clash with our own, and the reaction is indifference or perhaps even a bit of satisfaction.

In the 1990s, it was the right wing that was up in arms over police militarization. Recall the outrage on the right over Waco, Ruby Ridge, and that striking photo from the Elian Gonzalez raid. The left largely remained silent. Right-wing radio hosts continued to rail against jack-booted thugs and federal storm-troopers, but that all died down once the Clinton administration left office. The militarization of federal law enforcement certainly didn’t stop, but the Sept. 11 attacks and a friendly administration seemed to quell the conservatives’ concerns. So long as law enforcement was targeting hippie protesters, drug offenders and alleged terrorist sympathizers, they were the good guys, not the jack-booted thugs.

In a short but telling 2007 post at Pajamas Media in 2007, conservative commentator Michael Ledeen posted photos of a drug bust in Iran and wrote, “For me, the most revealing thing about them is that the police feel obliged to wear masks while conducting a drug bust in the capital. Tells you something about the relationship between the people and the state.” Of course, police in America often cover their faces when conducting drug raids. What’s “revealing” is both that Ledeen thought that doing so was indicative of a police state, and that he wasn’t aware it was going on regularly here.

Given the history, the reaction from some on the right to the Occupy crackdowns has been predictable. After summarizing some of the more gleeful conservative commentary on the UC-Davis incident, libertarian Steven Greenhut, editor of the investigative journalism site CalWatchdog, then chides them. “What’s really disgusting is the natural instinct of so many conservatives to stick up for the police,” Greenhut wrote. “They don’t like the Occupy protesters, so they willingly back brutality against them, without considering the possibility that conservatives at some point might be on the receiving end of this aggression.”

Shortly after Jared Loughner allegedly opened fire in the parking lot of a Tucson grocery store last January, we saw much hand-wringing about the threat of violence against the government. In fact, violence against government officials is actually pretty rare. But just three days before Loughner’s rampage, police in Framingham, Mass., raided the home of 68-year-old Eurie Stamps. Stamps wasn’t the target of the drug raid. Police were after the son of Stamps’ girlfriend, and actually apprehended him outside the home. They raided the house anyway. Stamps, who was unarmed and broke no laws, was shot and killed by a police officer. By my count, he’s at least the 46th innocent person killed in a botched drug raid. Every politician in Washington condemned the Loughner shootings, and rightly so. But nearly every politician in Washington supports the laws and policies that led to the death of Eurie Stamps.

Both left and right have spent a good part of the last couple decades trying to tie their political opponents to fringe movements that advocate or have engaged in violence. (There are, of course exceptions, on both sides.) Certainly, there are crazy people out there who pose a violent threat, both to others and to the government. But we all recognize them as crazy. Whether be it the dramatic rise in the number of SWAT raids and SWAT teams, the ubiquitous use of stun guns, harsh crackdowns on peaceful protesters, or just the increasingly militaristic mindset of law enforcement on the whole, government violence against its own citizens is much more troubling than the violence of a small number of citizens because government actions carry an air of legitimacy.

Few politicians have the backbone to call for less power, weaponry and authority for law enforcement, because nobody loses an election by being “too tough” on crime. They’ll only begin to question these trends when there’s a political benefit to doing so — or political harm for keeping quiet. So long as partisans on both sides only speak up when their own are on the receiving end of excessive government force, there isn’t much incentive for policymakers to care.

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America’s corporate tax obscenity

Posted on November 3, 2011 by admin

A new report about companies’ finances won’t just enrage you — it’ll make you run to the nearest protest

BY ANDREW LEONARD

In 2010, Verizon reported an annual profit of nearly $12 billion. The statutory federal corporate income tax rate is 35 percent, so theoretically, Verizon should have owed the IRS around $4.2 billlion. Instead, according to figures compiled by the Center for Tax Justice, the company actually boasted a negative tax liability of $703 million. Verizon ended up making even more money after it calculated its taxes.

Verizon is hardly alone, and isn’t even close to being the worst offender. Perhaps most famously, General Electric raked in $10.5 billion in profit in 2010, yet ended up reporting $4.7 billion worth of negative taxes. The worst offender in 2010, as measured by its overall negative tax rate, was Pepco, the electricity utility that serves Washington, D.C. Pepco reported profits of $882 million in 2010, and negative taxes of $508 million — a negative tax rate of 57.6 percent.

Altogether, according to “Corporate Taxpayers & Corporate Tax Dodgers 2008-10,” a blockbuster new report put together by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy that will have you reaching for your hypertension medicine before you finish reading the third page, 37 of the United States’ biggest corporations paid zero taxes in 2010. The list is a blue-chip roll-call.

As the authors acidly note, “Most Americans can rightfully complain, ‘I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo, Verizon, etc., etc., all put together.’ That’s an unacceptable situation.”

The “high taxation” lie

Reading through this report, you will find yourself seized by an irresistible desire to hurl yourself headlong into the nearest OccupyYourLocalCity protest. In an era of crushing government deficits and mass unemployment, corporate America is not only skating blissfully free of its civic responsibilities, but continues to complain that it is paying too much in taxes. Even worse: Congressional Republicans and many Democrats agree! Listening to our politicians talk, you would imagine that corporate America’s neck is permanently under the tax man’s steel-tipped boot. When, in fact, the exact opposite is the truth.

The list of companies that paid zero taxes is only the beginning of the travesties documented by the report. The authors looked at the tax filings from 2008-2010 of 280 of the nation’s biggest, most successful corporations. These companies reported $1.4 trillion worth of profit during a period when most Americans were struggling to stay afloat. The authors discovered that the average effective tax rate — what the companies really paid after government subsidies, tax breaks and various tax dodges were taken into account — was only 18.5 percent, less than half the statutory rate. Fully a quarter of the 280 companies paid under 10 percent.

Remember that fact, the next time someone tries to tell you that American corporations pay the highest income taxes in the free world. The only number that counts is the “effective tax rate.” One of the interesting tidbits provided by the authors is that in many cases, the tax rate on foreign income for many of these companies is actually higher than the effective U.S. rate.

The most distressing part of the tale is the big picture: The overall trend line is pointed in exactly the wrong direction. If you break out just the years 2009-2010, the effective tax rate was 17.3 percent. “In 2008, 22 companies paid no federal income tax, and got $3.3 billion in tax rebates. In 2010, 37 companies paid no income tax, and got $7.8 billion in rebates.” When measured as a percentage of total GDP, over the last three fiscal years, “total corporate income tax payments fell to only 1.16 percent of the GDP … a new sustained record low since World War II.

Corporate taxes paid for more than a quarter of federal outlays in the 1950s and a fifth in the 1960s. They began to decline during the Nixon administration, yet even by the second half of the 1990s, corporate taxes still covered 11 percent of the cost of federal programs. But in fiscal 2010, corporate taxes paid for a mere 6 percent of the federal government’s expenses.

How have these companies managed to cut their tax liabilities so far? The answer includes a mixture of targeted tax breaks that impact specific industries or companies, accounting games that corporations play with stock options, and sweeping adjustments to tax law such as changes in the rules in how companies can write off the value of depreciating equipment. The accounting rules for so-called accelerated depreciation are now so accommodating that companies can write off 75 percent of the cost of new equipment immediately.

A look at the list of the 10 corporations receiving the biggest tax-subsidy breaks from the U.S. government will defeat the ameliorating effects of any medication: Wells Fargo, AT&T, Verizon Communications, General Electric, International Business Machines, Exxon Mobil, Boeing, PNC Financial Services Group, Goldman Sachs Group, and Procter & Gamble. “56 percent of tax subsidies,” write the authors, “went to four industries: financial, utilities, telecom, oil/gas/pipeline.”

The companies that pay

However, not all companies are tax dodgers. Of the 280 companies analyzed by the authors, about 25 percent of the total paid close to the statutory rate, a little over 30 percent. But there’s no rhyme or reason to who pays or who doesn’t.

DuPont and Monsanto both produce chemicals. But over the 2008-10 period, Monsanto paid 22 percent of its profits in U.S. corporate income taxes, while DuPont actually paid a negative tax rate of –3.4 percent. Department store chain Macy’s paid a three-year rate of 12.1 percent, while competing chain Nordstrom’s paid 37.1 percent. In computer technology, Hewlett-Packard paid 3.7 of its three-year U.S. profits in federal income taxes, while Texas Instruments paid 33.5 percent. FedEx paid 0.9 percent over three years, while its competitor United Parcel Service paid 24.1 percent.

The authors conclude on a wistful note, with a list of what Washington could do to bring sense and reason to corporate taxation, while providing the government with desperately needed revenue. But as the authors themselves readily acknowledge, their recommendations exist in an alternate universe from the one that we actually happen to live in.

Unfortunately, corporate tax legislation now being promoted by many in Congress seems stuck on the idea that as a group, corporations are now either paying the perfect amount in federal income taxes or are paying too much. Many members of the tax writing committees in Congress seem intent on making changes that would actually make it easier (and more lucrative) for companies to shift taxable profits, and potentially jobs, overseas. Meanwhile, GOP candidates for president are all promoting huge cuts in the corporate tax or, in several cases, even elimination of the corporate income tax entirely.

And that, ultimately, is the most enraging fact about the new report from the Citizens for Tax Justice and the Institute on Taxation and Economic Policy. It won’t make a darn bit of difference.

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Wall Street Is Shrinking

Posted on November 3, 2011 by admin

Zachary Karabell

The sorry saga of Jon Corzine and MF Global is another signal that the diminution of Wall Street is underway, says Zachary Karabell, with shrunken market capitalization and receding profits.

As the Occupy Wall Street movement gathers momentum and money, Wall Street itself is losing both. The swift collapse and bankruptcy of trading firm MF Global is testament to that, and—while like all unhappy families it has its own peculiar story—its failure is also emblematic of the spiral of declining profits that is rendering Wall Street a shadow of what it was just a few years ago.

It is tempting to make the failure of MF Global into a passion play of its high-profile CEO, Jon Corzine, former senator and ex-governor of New Jersey, and former head of Goldman Sachs. As Charles Gasparino noted, Corzine is a decent man with a stellar résumé and undoubted success in the world of business and politics, yet he has presided over major failures at Goldman in the 1990s and now at MF. His political career is equally mixed: yes, he got elected twice by the good voters of New Jersey, but he was then vehemently booted by those same voters who preferred the histrionics and no-b.s. demeanor of Chris Christie.

Corzine undoubtedly and most unwisely encouraged risk at MF Global. As we know now, that entailed taking $6.3 billion in short-term positions on European sovereign debt just as the euro zone was plunged into yet another phase of its multiyear crisis by the near-default of Greece. That $6.3 billion was five times the entire tangible equity of MF Global, and was only possible through a leveraged bet that Corzine had to have countenanced. Betting five times your firm on risky bonds can make you a fortune. It can also go bad quickly, and for Corzine it did, bringing down the remnants of a firm whose origins stretch back to the beginning of the 19th century and the heyday of the British Empire.

As was true with the even greater leverage that brought down Lehman Brothers and chunks of the financial system in late 2008, the failure of MF Global is another numbing example of risk run amok. The major investment banks and trading firms have lessened their tendency to bet the proverbial farm because they recognize that only mayhem and loss can come of it, as the sorry story of Corzine and MF Global demonstrates.

Yes, the J.P. Morgans and Citis of the world have pared back risk and exposure, in part due to more stringent capital regulations for depository banks, and in part due to managers who prefer to have steady businesses rather than spectacular ones. Corzine was not among them, and he couldn’t be. He was hired to take over a midsize trading firm with a specialty in derivatives that had nearly imploded in late 2008. He was brought in to make the firm a powerhouse by taking on the trades that the investment banks most wounded in the financial crisis were cutting back on. In that sense, he likely did what he was hired to do: make big bets. Unfortunately, he did what he wasn’t hired to: make bad bets.

MF Global is proof that the choice is between foolish, deadly risk and a steady, unspectacular, and less lucrative future.
L’affaire Corzine is being treated as more proof of a Wall Street out of control, yet, like what happened with the UBS trader who recently lost billions, the real issue is that the entire incentive structure of trading has shifted dramatically over the past two years, and it is leading to plummeting profitability. Goldman, the firm Corzine once headed and which the Occupy protesters and the Matt Taibbis of the world love to revile, became obscenely profitable in the late 1990s and 2000s largely on the basis of trading profits. The same was true for Lehman et al., and it was the inability of Merrill Lynch, Bear Stearns, and others to keep up that led to their outsize derivative risks and concomitant collapse. What made Goldman so unusual wasn’t risk control per se—though its execs would surely dispute that—but that its traders had a knack for taking the right risks and avoiding the blow-ups.

But in the past two years, as it has become a poster child for Wall Street corruption and a veritable piñata as a symbol of excess, Goldman has become increasingly less profitable. And so have all the others on the Street, from Morgan Stanley and Citi, to lesser-known players. In its recent quarter, Goldman showed massive declines in its trading revenues of both bonds and equities, 20 to 30 percent. The same dismal results were seen across the industry.

The reasons are simple: interest rates around the world are low and trading in a narrow range, except for extreme outliers like Greek debt. Equities are so volatile that even professional traders get whipsawed, and the actual revenues from getting paid to transact trades have been shrinking as machines manage more of those trades for fractions of pennies. There is only one way these companies could make anywhere near what they were making a few years ago: take huge gambles, do what Corzine did at MF Global, and hope they go well. Bet on black and hold your breath.

Most firms won’t do that. The risk of implosion is greater than the rewards of being right. Even if MF Global’s exposure to European debt had gone well, it might have made billions and doubled or tripled its profits, but the risk of being wrong isn’t seeing those profits cut in half: it is seeing the business obliterated. In the new normal of Wall Street, the reality is a bizarre combination of individuals who expect the rewards that came with the risks of the mid-2000s with an industry that cannot hope to replicate those rewards except with a level of risk that is akin to climbing Half Dome in the dark during a snowstorm without a rope.

The diminution of Wall Street is well underway. The market capitalization of the leading firms has shrunk, and the percentage of profits accruing to financial institutions has receded. Yes, these are still hugely profitable businesses, but more in sync with the profitability of Silicon Valley and industrial companies. In the 1960s and 1970s, Wall Street was a niche industry, with its stars and fortunes, but not commanding 30 percent of all profits of all companies in the United States. It was an industry of grit and greed, but one more in balance relative to the rest of society. It is now quickly receding to that once again.

You wouldn’t know that given the animus of protesters, or given the mindset of many of those who staff and lead these companies. But MF Global is proof that the choice is increasingly between foolish, deadly risk and a steady, unspectacular, and less lucrative future. Corzine and MF Global are the klaxon. The battle between the protests and Wall Street isn’t heating up. Wall Street has lost. Whether that benefits the 99 percent remains very much in doubt.

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China Trade: Another Chapter in the 2000s Weak Jobs Story

Posted on November 3, 2011 by admin

A friend was commenting on this post from the other day wherein I hypothesized as to why employment growth was so much slower in the 2000s than in earlier decades. He suggested the sharp acceleration in Chinese imports after their entry into the WTO in 2001.

Well, just by chance I was referring someone to this important paper by Autor et al and I stumbled on this figure of Chinese import penetration into the US, with an awfully clear acceleration, as my friend described.

Autor et al, link above. Their measure here is US imports from China divided by gross domestic purchases.

The paper measures the impact of import penetration from low-wage exporters on US wages, employment, and the extent to which the safety net is invoked to offset these impacts. Trade economists used to argue that trade with low-wage countries was unlikely to be doing much damage to our job market because the magnitudes were too small. But, as authors write, China’s aggressive export-led growth changed that equation:

In 1991, low-income countries accounted for just 2.9% of US manufacturing imports…However, owing largely to China’s spectacular growth, the situation has changed markedly. In 2000, the low-income-country share of U.S. imports reached 5.9% and climbed to 11.7% by 2007, with China accounting for 91.5% of this import growth over the period. The share of total U.S. spending on Chinese goods rose from 0.6% in 1991 to 4.6% in 2007, with an inflection in 2001 when China joined the World Trade Organization.

They also find large negative effects relative to other research on this issue:

Rising exposure increases unemployment, lowers labor force participation, and reduces wages in local labor markets. Conservatively, it explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in exposed labor markets. The deadweight loss of financing these transfers is one to two-thirds as large as U.S. gains from trade with China.

US manufacturing employment lost 3.4 million jobs between 2000-07 (which, as shown in the link above, was the slowest business cycle for job growth on record). Autor et al find that more than half of those losses were the result of rising exposure to Chinese import competition. So I think my friend has a point.

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China’s 99% — Why China Will Not Surpass the U.S.

Posted on November 3, 2011 by admin

Lyric Hughes Hale
Author, ‘What’s Next? Unconventional Wisdom on the Future of the Global Economy’

The received wisdom these days is that the West is in rapid decline, and China is on an upward trajectory that cannot be stopped. Sooner or later the pundits say, the two lines will cross– perhaps explosively– and China will rule the world. The latest evidence? Klaus Regling heading to Beijing on Friday to beg for Chinese financial aid to rescue Europe. It is certainly a long way from the foreign treaty ports and other indignities that China suffered at European hands in the last century… I wonder if there is a Chinese word for schadenfreude?

I might have contributed modestly to the momentum theory of China’s ascendancy myself with the 2003 article that David Hale and I wrote for Foreign Affairs, China Takes Off. To say that China is rising is one thing however, because that is undoubtedly true. To say that China will rule the world is quite another.

An amazing number of Americans who were polled recently incorrectly believe that China’s economy is already bigger than the US. The view from inside China is somewhat different. As any thoughtful person there will attest, China faces a slew of obstacles at this stage of its development. China might be a rich state, but its people remain poor. China may become the world’s largest economy in 2016 according to optimistic estimates by the IMF, but that simply means that total output will be larger than in the US. A country with 1.3 billion people should have an economy larger than one with .3 billion in absolute numbers: China’s population is more than four times larger. If both economies were exactly the same size, China’s GDP per capita would be just 25% compared to the US.

What this means is that in spite of the overall size of its economy, the standard of living in China is correspondingly lower. Just one example to put this into perspective: only 20% of Chinese people have flush toilets. The inescapable fact is that a world in which Chinese consume at the same rate as Americans is a world that cannot exist, based upon available resources of food, water, energy, and other commodities and products such as cars. It would require by some estimates four plant Earths. There is a natural limit to Chinese consumption simply because there are so many Chinese people. This might be unfair, but it means that the great majority of Chinese will not be able to enjoy the kind of life we live here in the US absent exponential and unforeseen technological progress.

Demographics play a crucial role in terms of limiting Chinese growth and economic prosperity. China’s population, similarly to Japan, is getting older. The difference is that the Chinese are not going to be as rich as the Japanese by the time that much of their population is over the age of 65. By 2040, assuming current demographic trends continue, there will be about 400 million Chinese elderly with fewer descendants to take care of them than in previous generations. According to a report by CSIS, The Graying of the Middle Kingdom instead of the current ratio of 6:1 working adults to elder dependents, by the middle of this century there will only be about 1.6 working adults for each elder. Due to the lack of job-related and government pension funding the end result will be that China’s savings, upon which her wealth has been built, will erode. China faces a steady decline in its workforce beginning mid this decade, thanks to the One Child Policy.

The elderly are also major consumers of health care services. The United States is the richest nation on earth, and has positive population growth, but we are still worried about being able to take care of our baby boomers in the future. In today’s China, healthcare is at a premium, and many people in the countryside cannot afford any medical treatment– full stop.

According to a recent article in Foreign Affairs by Yanzhong Huang, The Sick Man of Asia, China’s Health Crisis in 2006 80% of China’s health care expenditures were funneled into the treatment of only 8.5 million government officials. Another amazing statistic Huang cites: more than 73% of Chinese hospitals have reported violent incidents between patients and healthcare professionals. Why? Because feelings run high when you are told that your child, your parent or your spouse cannot be given treatment because you cannot pay for it. China is worried about getting both old and sick: by 2040, more Chinese will be suffering from Alzheimer’s than the total populations of all the developed nations combined.

Health care is not the only area of concern. The Chinese government is aware that there is growing resentment of income inequality, the result of the introduction of capitalism and the wholesale abandonment of its social safety net. When I first went to China in 1979, the so-called Gini coefficient, the measurement of income inequality, was low. China was a truly socialist country and all services including housing were provided by the state. China in 2011, nominally and in fact politically still a communist country, has greater income inequality than the US.

Someday China’s 99% could be a truly potent force. China’s leaders are worried about organized protests. There is no Twitter in China, as I recently confirmed with the co-founder of Twitter, Biz Stone. Facebook does not function, and the Internet and all online news is censored. Chinese citizens will increasingly face an asymmetric information gap as they struggle to compete with other large developing countries such as India, which allow the free flow of information. This is not an environment in which innovation can flourish. Try to imagine a Chinese Steve Jobs–almost all of the new companies in China today are derivative of US products, services, and business models.

Examples of the limits of technological progress in the face of suppression of information can be seen in recent accidents involving China’s showcase technology. The bullet train tragedy, the grounding of the new Airbus made in China, and similar events add up to an enormous glitch factor as China attempts to step up the technology ladder to more complex systems. Overheard comment–an inspector on the Shanghai’s vaunted subway system will not allow his family to use their trains. Whenever there is an atmosphere of fear, bad news does not get reported up the command chain.

Other countries are increasingly less willing to share their technology with China for a variety of reasons. Some businesspeople have had bad experiences, either in terms of political pressure (Google) or more commonly, theft of intellectual property. Lack of protection by China’s legal system is cited as the number one structural impediment to foreign companies doing business in China. This all goes back to the ideal of creating an atmosphere in which ideas can flourish and R&D spending is rewarded through the stock market and other vehicles, a process that is not taking place in China today.

Small business, the cradle of job creation everywhere, is at a lending standstill in China. Most small and medium size businesses are forced to go to the black or “informal” lending markets for funding, with interest rates of 20, 30 and 40%. Chinese banks are equipped to funnel loans to the large state-owned businesses, but they do not have credit analysts who can determine whether or not a business should be given a loan on its own merits. The languishing stock market is still dominated by behemoth state-owned enterprises, so when startups need capital, they often turn to foreign investors. In spite of the glut of savings within China’s banking system, all of China’s major Internet firms raised funds in US stock markets–Sina, Sohu, Alibaba. Lack of access to capital has also resulted in the loss of thousands of Chinese engineers and entrepreneurs who decided to come to the US to start their businesses, to the inestimable gain of Silicon Valley.

Another common misperception is that China will overcome the US militarily. First of all, China has no major allies, with the possible exception of Russia, which clearly seeks to protect its own interests first and foremost. The US on the other hand has firm global allies, military bases worldwide, and a navy that girdles the earth. Secondly, in today’s world, warfare is all about technology, and in spite of its successes with rockets and satellites, China is still handicapped in this area. Finally, there is the question of political will. China will fight to protect its interests in Taiwan and in Tibet. But other than that, North Korea has proved to be a major albatross, and there is another strong power in the region, Japan, which will do everything it can to check China’s military ascendency.

All of this is not to say that China isn’t the greatest success story of our generation. It is a land and a people I love dearly, a civilization whose history and art are unparalleled in many respects. But there is no predetermined place for China to regain on the world stage–history is that simple. When you next read about the “end of America” or China’s “inevitable” domination, put on your skeptical spectacles. In spite of the visible, flashy wealth of its modern coastal cities, China is still very much a developing economy on the brink of major changes. Its current system of centralized non-democratic government might be perfect for implementing unpopular choices such as joining the WTO, a decision that was estimated to cost 50 million jobs at the time. The question is whether China has been able to use its wealth it has gained since joining the WTO to create institutions that can bring longer-term stability.

As China is transitioning to become a full member of the world community from which it was entirely separated just forty years ago, we have perhaps seen the end of Chinese rather than American exceptionalism. The characteristics that allowed China to make enormous progress to date are not necessarily the qualities that will be needed to create productive global integration going forward. China is already our greatest commercial partner, and the US should do everything it can to encourage China’s engagement, including eschewing trade barriers of all kinds. Overly optimistic misinformation about the realities China faces can lead to poor decision-making by our own government officials. The bottom line is that we should not fear a strong China. Rather, we should fear a weak China.

What are the steps China should take? It should implement a path to full convertibility of its currency and open capital accounts, end financial repression, promote income equality and access to social services, allow the free flow of capital and information across and within its borders, promote freedom of expression– all these changes and more need to be executed carefully and with all deliberate speed. With a leadership transition looming, the Chinese ship of state now requires a captain who recognizes that China’s future depends on integration rather than exceptionalism.

I believe that being China’s leader at this time in history just might be the toughest job on earth.

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Too Big to Jail

Posted on November 3, 2011 by admin

Robert Scheer
Editor, Truthdig.com; Author, ‘The Great American Stickup’

Can we all agree that a $1 billion swindle represents a lot of money, and the fact that Citigroup agreed last week to pay a $285 million fine to settle SEC charges for “misleading investors” demonstrates a damning admission of culpability?

So why has Robert Rubin, the onetime treasury secretary who went on to become Citigroup chairman during the time of the corporation’s financial shenanigans, never been held accountable for this and other deep damage done to the U.S. economy on his watch?

Rubin’s tenure atop the world of high finance began when he was co-chairman of Goldman Sachs, before he became Bill Clinton’s treasury secretary and pushed through the reversal of the Glass-Steagall Act, an action that legalized the formation of Citigroup and other “too big to fail” banking conglomerates.

Rubin’s destructive impact on the economy in enabling these giant corporate banks to run amok was far greater than that of swindler Bernard Madoff, who sits in prison under a 150-year sentence while Rubin sits on the Harvard Board of Overseers, as chairman of the Council on Foreign Relations and as a leader of the Brookings Institution’s Hamilton Project.

Rubin was rewarded for his efforts on behalf of Citigroup with a top job as chairman of the bank’s executive committee and at least $126 million in compensation. That was “compensation” for steering the bank to the point of a bankruptcy avoided only by a $45 billion taxpayer bailout and a further guarantee of $300 billion of the bank’s toxic assets.

Those toxic assets and other collateralized debt obligations and credit default swaps were exempted from government regulation by the Commodity Futures Modernization Act, which Rubin helped design while he was treasury secretary and which was turned into law when Rubin protégé Lawrence Summers took over that Cabinet post.

In arguing that the derivatives market in housing mortgages and other debt obligations required no government oversight, Summers told Congress, “First, the parties to these kinds of contracts are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies. … Second, given the nature of the underlying assets — namely supplies of financial exchange and other financial instruments — there would seem to be little scope for market manipulation. …”

Oops. One wonders if Summers, who went on to be president of Harvard after playing such a disastrous role in the federal government, ever asked his mentor Rubin what went wrong. After all, it was Rubin who was a honcho at the “sophisticated financial institution” of Citigroup when, as the Securities and Exchange Commission filing against the bank explains, Citigroup structured and marketed a $1 billion toxic asset to investors without disclosing that it was simultaneously betting against that asset.

Back in January of 2008, knowing full well of the chicanery of his own bank and others with which he was quite familiar, Rubin nonetheless told an audience at Cooper Union in New York that the turmoil in the markets was “all part of a cycle of periodic excess leading to periodic disruption.” CNNMoney, reporting on his talk, noted that Rubin “doesn’t seem particularly alarmed. … And the economic problems that he did acknowledge were blamed on just about everyone but the major financial players.”

Rubin, who became a key adviser to the Obama campaign, has long cultivated an image as a do-gooder by making philanthropic contributions that deflect attention from the consequences of his own grievous actions. He has played a major role in shaping Obama administration economic policy not only through former aides like Summers and Treasury Secretary Timothy Geithner but through the Hamilton Project, which he has funded at the Brookings Institution. The Hamilton Project has had much influence over the Democratic Party, and President Barack Obama as a young senator was the project’s first public speaker.

But facts these days tend to intrude in ways inconvenient to the superrich, who assume they can control the narrative. This month the Hamilton Project released a depressing assessment of the results of the era of radical market deregulation that Rubin’s policies launched, particularly as it had a horrendous effect on children.

Referring to the “Great Recession,” dismissed by Rubin at its inception as a mere blip in the business cycle, the report noted that the family income of the median child in the U.S. has fallen nearly 14 percent in the past five years and is now 7 percent lower than in 1975, concluding that while the income of the top 10 percent of families with children has increased 45 percent in the last 35 years, “half of America’s children are worse-off than their counterparts 35 years ago.”

That’s a telling obituary for the illusion, fostered by Robert Rubin as effectively as anyone, that the 22 percent of children in the United States who suffer below the poverty line and the offspring of multimillionaires like Rubin are living in the same America.

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