Monday, November 12, 2018

Is It Not The Economy, Stupid?

On many Mondays I indulge in taking Robert J. Samuelson to task after his regular Washington Post column of the day.  Today he was almost right, or if you prefer, even mostly right.  This one was titled "It's Not the Economy, Stupid" about the outcome of the midterm election, as well as a delayed comment on the 2016 presidential election (although, of course, HRC did win the popular vote by three million popular votes, if not the electoral college).  His main argument is that in both of these elections, but especially last week's midterms, the state of the economy was relatively unimportant.  The argument is that here is Trump with GDP growth exceeding 3%, the unemployment rate under 4%, inflation largely under control, but this supposedly good performance did not help him out much with his party taking a pretty serious hit (the size of which still being counted).  He also sees something similar in 2016, although arguably the economy was not as strongly favorable, but still quite respectable while not obviously helping the incumbent party.  Indeed, in 2016 many saw the economy as hurting the Dems, especially in the Rust Belt.

There is a lot of truth to this, with a lot more attention on ethnic and cultural issues, although it should be kept in mind that the top issue for Dems, health care, is at least partly an economic issue.  Certainly one sign of the weakness of the economic issue is the matter of the big GOP tax cut.  They were quite convinced when they passed it last December that this was their ticket to a strong showing in the midterm election.  And indeed it is almost certain that at least some of the acceleration of GDp growth can be attributed to it even if it may be setting up the economy for slower growth down the road.  So according the usual views, it should have helped the GOP. But in the end it seems to have been an electoral flop.  It has consistently done poorly in the polls, and most GOPs running for reelection in the end barely mentioned it.

But then the major source of reported public unhappiness with the tax cut is revealing.  It is the massive inequality obviously inherent in it: the vast majority of the gains went to the top ends of the income and wealth distributions, and everybody knows it.  As it is, supposedly the vast majority of taxpayers did get a cut, but for vast majority of that vast majority, it was such a small cut that they barely noticed it.  In fact, Obama gave a bigger tax cut back in 2009, but the same thing happened then.  When the GOP claimed he had raised taxes, a majority of voters believed them.  They barely noticed the actual cut they got.  No, it does not seem voters are all that upset about the increased deficit, but they resent that so much of it went to the rich.

So in both 2016 and in 2018, a major problem was that while there were all these good looking aggregate statistics, a majority of people really did not notice much improvement.  Yes, job security has steadily improved, but this still has not shown up in wage increases, although reportedly there has begun to be some increase of those recently.  But as with the tax cut, not too much, or maybe too little too late.  The bottom line here is that most people simply are not seeing all that much economic improvement, so while it is not a negative, the economy is not remotely the positive many think it might have been or should have been.  Most of those gains have gone to the top, and that was going on while Obama was president as well.

There is another matter in the midterm election where economics may have shown its old important tole, curiously reported on in WaPo two days earlier.  This is that it looks like Trump's trade war may have impacted several congressional races, mostly not to the GOP's favor.  There seems not to have been much impact, if any, on Senate races, with Dem candidates in Indiana, North Dakota, and Missouri losing even while trying to score against Trump's trade war.  But supposedly the issue played for the Dems in in several races where growing soybeans is a big deal, notably two races in Iowa, one in western Illinois, one in southwestern Wisconsin, and one in southeastern Minnesota, with Dems flipping all these seats while pushing hard on the trade issue.  OTOH, one of the two seats that flipped from GOP to Dem was the northeastern seat in Minnesota.  This is where the Mesabi range is and still probably the largest source of iron ore of any House district in the nation.  Anyway, its economy is booming thanks to the tariff on steel and aluminum imports.  So, we know that so far basically the one industry that has really done well from the Trump trade war has been steel, and so it is not surprising that a district heavily dependent on producing iron ore would boom and favor the GOP, while districts with industries, like soybeans, hurt by the war would go the other way.

So, Samuelson's claim that "It's not the economy, stupid," seems to be a bit overdone, if not completely false.

Barkley Rosser

Sunday, November 11, 2018

A Serious Centennial

After failing to show up at a major American cemetery in France at least our president did not add to his shame by failing to show up for the big show with 60 or so other national leaders at the Arc de Triomphe for the official ceremony marking the centennial of the 11th hour on the 11th day of the 11th month of November, 1918, when the guns fell silent on the western front of World War I, officially ending it in the eyes of most historians, even though fighting would escalate in certain other important zones whose outcomes still shake the world, most notably between Greece and Turkey, with the dissolution of the Ottoman Empire coming out of that leading to many wars since, some of them gong on right now.  We get it that Trump was uncomfortable given that President Macron was lecturing against the sort of nationalism that led to WW I, with a three day forum to follow that Trump will run as fast as possible back to the US to avoid. And, hey, Macron did not even have tanks and missiles for the parade this time, which Trump really likes to see.

This important day, the first Armistice Day, which we renamed Veterans Day in the US after the War to End All Wars' unfortunate sequel (actually  in 1954 right after the end of the "forgotten" Korean War) and have since turned into one of those Monday holidays, has turned into a curiously sad one personally.  It involves another war, Vietnam.  My cousin, Bill Atwater, died yesterday, the day before this serious centennial and also the 243rd birthday of the U.S. Marines.  Yes, Bill was a Marine and was in Vietnam where he was exposed to Agent Orange that led him to have various cancers that basically led to his death, although it was an opportunistic pneumonia that finally actually did him in.  He will be cremated with his ashes spread over the cemetery at Arlington. I had not communicated with him directly for over 20 years (did through another cousin), but he told me at his mother's funeral that he had been spat on when he returned to the U.S.  I have more recently seen stories that such reports were exaggerated, if not outright true.  As it is, I have no way of checking on Bill's story now, but I know  that he was a multiply wounded man.

Maybe those tales of spitting were exaggerated or untrue, but it is true that in the immediate aftermath of the Vietnam War its vets were widely disrespected.  Peaceniks did not like them because of alleged war crimes (some of which were committed) while hawks did not like them because they lost.  This attitude began to change with the dedication of the Vietnam "wall" memorial in Washington on Veterans Day in 1982.  But the rancor remains as I could see in a Veterans Day parade this afternoon in Harrisonburg happening because of the centennial, with a lot of Vietnam vets marching or riding on their hogs, with all those POW-MIA flags flying,

Of course every war leaves its survivors as victims, even those surviving a supposed clear victory like that War supposedly to End All Wars a century ago.   Millions died and a world order was broken. We know that as it started many leaders and people in the combating nations were enthusiastic about it, hoping or a glorious victory within a short time period, even including most of the leftist socialists who were supposed to recognize international working class solidarity, but in so many numbers went along with the nationalist frenzy and war whooping enthusiasm.  And now we see the same sorts of noises and delusions in many nations, fed by lies upon lies.  Resisting this is so important on this anniversary.

Barkley Rosser


The Death of Shame

In any society not in a state of civil war, shame is a powerful force, perhaps the most powerful.  Individuals or organizations caught cheating, lying or otherwise doing evil, when exposed and called out, are expected to be embarrassed.  They should repent their sins and promise to make amends.  Other than pure coercion, what else can disarm those who violate the norms of society?

Evolutionary biologists tell us shame is hardwired not only in humans but many other social animals.  (They may not experience shame the same way humans do, but the outward markers and consequences are the same.)  We seek group membership in good standing, and while there is an incentive to exploit others for personal gain, or just relax our commitment for a while, the punishment of group rejection is a more powerful force.  That’s what holds us together.

It is natural that shame is invoked as a political weapon.  Corrupt businessmen, politicians and public officials may be flying high, but if we can document the facts they are trying to hide, we can clean them out.  A video documenting otherwise hidden police abuse, an audio recording of the murder of civilians released by Wikileaks, the disclosure of evidence of law-breaking by justices or political leaders should accomplish this.  Also testimony from women abused by powerful men: if they come forward and tell the world what really happened, that should stop abuse in its tracks.

All of this depends on the biological mechanism of shame to kick in: those whose hidden misdeeds have been exposed should feel disarmed and admit defeat.  It isn’t enough that they be reviled by other members of the community; if direct coercion is unavailable for any reason, it is only the shame response that makes exposure a force of justice and not an empty gesture.

But the shame response shouldn’t be assumed.  In fact, what evidence we have suggests it operated only within limited circles through most of human history.  Liars and cheaters were accountable to their peers but not underlings or outsiders.  If a Roman warlord falsely took credit for a battle won by a rival, this might be a problem if the truth were known by other commanders, but would it matter what the soldiers knew?  Shame was circumscribed and structured by deeply embedded customs and social hierarchies.  You might have the fantasy you could go back in history and present the truth those who lived through events couldn’t see, but how much difference would it have made?

The faith that shame is a force of universal application and effectiveness is a modern indulgence, a product of the rationalism and optimism of an Enlightened world.  It ignores at least two uncomfortable truths.  The first is that the shame response is not equally strong in all people.  Some are ruled by the fear of shame and exercise little independent judgment or initiative.  Others are almost impervious to it; they seem almost to feed on the disapproval of those around them and succumb only to the application of overwhelming power.  The second is that shame, like all other psychological factors, is mediated by the way we make sense of the world—religion, ideology, and social custom.  This is why priests and warlords experienced shame only among their peers and not universally, and why the notion of universal shame is a historically specific political hypothesis.

So back to the present time.  Those of us who take the Enlightenment outlook for granted tend to assume it’s enough to bring out the facts about dishonest, corrupt or abusive power holders to cause their downfall.  In case you have noticed, however, it’s not working.  We have a president whose rampant dishonesty and exploitive behavior has been amply documented, but he doesn’t care and just continues on.  The Kavanaugh hearings were more of the same, not only for Kavanaugh himself but also the senators shepherding him to his seat on the Supreme Court.  And it is wider and deeper than this: think of the campaign for war against Iraq after the 9/11 attacks, when Bush could even make a comedy skit out of the pretext of looking for weapons of mass destruction.  Or the patently dishonest arguments put forward to justify tax cuts for the rich.  Exposing these lies gave many of us a sense of vindication, but it had no effect on outcomes.  Above all, those in power showed no sign that they cared whether or not they were exposed.  To stop them it was necessary that they be stopped.

I see two reasons why we are having an epidemic of shamelessness.  The first is the emergence of a philosophy on the political right that the majority of the public is craven and easily duped, so the higher good depends on a strategy of deceit.  This has its roots in the teachings of Leo Strauss, the philosopher who taught generations of University of Chicago students after fleeing the Third Reich in the 1930s.  Strauss believed the great works of philosophy were written in code, since deep thinkers, by virtue of their very depth, understood that most people were shallow and un-virtuous.  They couldn’t say this out loud, so they had to devise clever ways to say it to their inner school of acolytes.  (For a counter-view, see this, but it argues only for Strauss, not his students.)  Strauss transmitted this perspective to young skeptics of liberalism, who developed it into a high-minded critique of democracy, from which it devolved into the end-justifies-the-means credo of movement conservatism.  Far from evoking embarrassment and shame, being revealed as a liar is a badge of honor among the elect; it shows they are elevated above the credulous masses.  Movement activists discovered this philosophical stance is also a source of tremendous power: once you are no longer in thrall to your scruples or anyone else’s and can be held back only by a superior force, most mechanisms of social control have no effect, and you can accomplish greater things.  Note, by the way, that such cynicism is not a monopoly of the Right; classical Leninism too justified shameless deceit on the ground of the relativity of morals and the overriding logic of History; public exposure of facts had no effect on Communist show trials.

It seems to me another element is at work, although I can’t quite describe it.  Many people who have not transcended the shame response in their own lives (they are “good people”) nevertheless vicariously identify with heroes and celebrities who have.  It seems there is a thrill to be had in cheering on the bully we are not capable of being ourselves.  But why should there be a historical ebb and flow to this spectacle?  Why now and not before?  Why is Trump admired for his disdain of social norms, while Nixon succumbed to his?  Is it connected to the evolution of movement conservatism, as the Straussian sneer is translated into tweets and viral video clips?  Is it a product of the pseudo-intimacy of the virtual world, where the thrill of the bully, transmitted to us through what feels like a personal medium, can be experienced almost first-hand?  Or something else, or all of the above?

I would like our culture analysts, who are so adept at discerning subtle shades of colonialism in language and art, to take up the study of shame and its progressive disappearance from public life.  In the meantime, those of us who are disgusted by the shameless behavior of those in power should have no illusions.  We won’t get them to back down by uncovering further evidence of their misdeeds, although evidence remains the basis for rational judgment and should always be sought.  Only greater political power will overcome shamelessness.

Friday, November 9, 2018

Siphoning off the Increment to Pay for the Excrement, 2018

"In a Wednesday morning note to investors entitled "It's always a party, regardless of party," Jefferies investment analyst Sheila Kahyaoglu noted the 2006 midterm election, in which Democrats seized the House at the height of the U.S. war in Iraq. Defense companies' share prices climbed an average of 18 percent during that year."

A Washington State Carbon Tax Goes Down in Flames

Initiative 1631, which would have created a carbon tax in Washington State, lost by almost 12% of the vote this week.  Commentators on all sides have interpreted this as a decisive defeat for carbon pricing, making more indirect policies like subsidies to renewables the only politically feasible option.*

I don’t have time for a lengthy analysis, but in a few words I want to suggest that this conclusion is premature.  I live in Washington State and saw the battle unfold first hand in real time.  Voters were not asked by opponents of 1631 to reject carbon pricing; on the contrary.  And it was the failure to draft and promote a straight-ahead carbon pricing law that doomed it.

While supporters of 1631 point to money from fossil fuel interests as the “cause” of their defeat, the actual propaganda of the No side did not belittle the threat of climate change, nor did it even argue against the need for action to reduce emissions.  It hammered on these points:

1. 1631 was weak.  It excluded too much of the state’s emissions and wouldn’t have a meaningful impact on them.

2. Nevertheless it would raise energy bills for virtually all the state’s residents.

3. It proposed an undemocratic procedure for allocating carbon revenues.

The money behind this message may be “bad”, but the message itself was correct.  1631 was so poorly conceived that the arguments of the troglodytes were closer to the truth than those of the progressives.  Take them one by one:

1. 1631 was the second carbon tax initiative in two years.  Last year’s effort, I-732, had broader coverage and allowed for higher carbon prices over time.  It was opposed by progressives, who organized to defeat it and then drew up their own, weaker proposal.  There is a lot of detail to go into, but the short version is that 1631's carbon price was essentially symbolic, a few cents on the carbon dollar.  It was not a meaningful action to deal with the threat of a climate catastrophe.

2. This one was particularly galling for me as an economist.  Supporters of 1631 actually campaigned on the argument that the tax would be paid by a few large corporations, not by all of us.  On this point the No crowd was entirely right and the Yes entirely wrong.  I’m sure many pro-1631ers really believed that energy taxes aren’t passed through to consumers, but those at the top who drafted the proposal knew better.  Their public communication was dishonest, they got called on it, and they lost.

3. 1631 was the product of horse-trading between various interest groups.  Environmentalists wanted carbon revenues to go for green infrastructure.  Identity groups wanted funds funneled into minority, immigrant and low-income communities.  Unions wanted money for workers in the fossil fuel sector who might lose jobs.  Tribes wanted the state to defray the costs of climate change that impinge on them with particular force.  All of these are worthy goals in their own terms.  The problem is, how to translate a deal reached around a table between various representatives of these movements into a political process for disbursing public funds.  The solution they came up with was an appointed board of 15 “experts” who would control the allocation, carving off the carbon money from the general fund and its control by the state legislature.  Do I understand the distrust of the legislature?  Yes.  Was this blatantly undemocratic and contrary to the widely-held principles of how government ought to operate?  Also yes.  The No people blasted this idea again and again, and the public responded predictably.

The defeat of 1631 was an own goal by the progressive community.  We still haven’t had a vote on a sensible, defensible carbon pricing measure.  Until we do, I don’t want to write off the political feasibility of taking direct action against climate change.  A better bill would have universal coverage, as stiff a carbon price as possible, and—because carbon prices would eat significantly into household budgets—would return most or all of the revenues back to the public, ideally in equal lump-sum rebates.**

*Subsidies to renewables, energy efficiency programs and the like, while highly desirable, have only indirect effects on the use of carbon energy.  They shift the demand for fossil fuels to the left by some amount, but in a complex, evolving world with many other factors influencing global energy markets, the effect on emissions is unpredictable.  A direct approach uses the power of law to keep some portion of fossil fuels themselves in the ground, either by a cap on their use or price increases calibrated to corresponding use reductions.  The indirect approach to carbon is direct in its impact on renewables and other resources it targets, just as the direct approach to carbon is indirect in its effects on renewables and efficiency.  Ideally we should adopt both approaches, with programs directed against carbon fuels and for energy alternatives.

**732 was intended to rebate carbon revenues, but through tax cuts.  This was a mistake, since the amount of the rebate was variable (depending on how complex tax formulas would be affected by changing state economic conditions) and the rebates greater for those with higher incomes.  Worse, a portion of the cuts was allocated to business taxes in a misguided effort to buy off business and conservative interests.  The mobilization against it by progressives was vigorous and emotional; I attended an event in which supporters of 732 were called racist from the podium.  Mainstream environmental groups joined this opposition in order to demonstrate their social bona fides.

Thursday, November 8, 2018

US Policy On Iran After The Midterm Elections

A curious coincidence is that the US midterm elections happened one day after the US reimposed its second round of illegal economic sanctions on Iran, with the focus on oil, shipping, and banking, along with some other sectors.  Despite all but a handful of governments  around the world supporting Iran in this matter (despite apparently two attempted assassinations of opponents of Iran's government in European nations recently) against the US out of a hope to keep Iran following the JCPOA nuclear agreement as it has by all reports been doing, the impact of the midterm elections is probably to reinforce support for Trump's policy, even as mostly he lost support in the election.  The reason is that the most important location for serious critics of a president's foreign policy usually come out of the Senate, not the House of Representatives or governors.  So, even though the Dems have taken the House and gained governorships, the GOP gaiined in the Senate, and some of the GOPs leaving included the few Trump critics, notably departing Foreign Relations committee Chair, Robert Corker of TN.  This is the case, even as those GOP gains may only amount to a net two (Dem Sinema now ahead in AZ) or even only one (Nelson in FL may yet pull it out too).

Yet another reason the gains by Dems will probably not lead to much more pressure on Trump on this is that many Dems at least somewhat support his policy, especially those strongly influenced by the Israeli government.  Thus in today's Washington Post, a lead editorial (presumably by neoconnish Fred Hiatt) said there may be reasons for imposing some sanctions because of "malignant" policies by Iran, notably supposedly supplying missiles to the Houthis in Yemen, plus the Syrian government, and Hezbollah in Lebanon (there are doubts on the extent of all this), even as WaPo opposes the US withdrawing from the JCPOA and is highly critical of Saudi Arabia due to the murder of their journalist, Jamal Khashoggi, probably on orders of KSA Crown Prince MbS, a main enemy of Iran.  Indeed, members of both parties in the Senate have become unhappy with the Saudi war in Yemen and may move to cut US military support of the Saudi war effort there.  But this will probably have little to no effect on the reimposed economic sanctions on Iran.

As it is, the ultimate impact of the new sanctions is quite complicated with various cross-cutting effects that are already damaging the Iranian economy, but may end up having less impact than Trump would like.  The most important part of the sanctions involves Iran's oil exports, which US officials claim they would like to see go to zero.  Early forecasts had those falling to about a third of the about 2.8 million bpd of a few months ago, which anticipation helped push oil prices up substantially, with Brent crude topping $80 per barrel while West Texas intermediate crude topped $70 per barrel.  But the Trump administration has granted temporary waivers to 8 countries allowing them to continue importing Iranian oil for awhile, supposedly to avoid excessive disruption of global markers (while not officially announced, the Japan Times claims the 8 waivered nations are China, India, Japan, South Korea, Taiwan, Turkey, Italy [only EU nation on list]. and UAE [yes, that big anti-Iran oil exporter imports oil from Iran]).  As it is, with surging oil inventories in the US, prices have fallen sharply in the last two weeks, with Brent down to nearly $70 and WTI to nearly $60 , with some commenters today claiming that oil is turning into a "bear market."  While this clearly allows Iran to export more oil than previously thought for now, the price decline will hurt Iran.

A fundamental clash in this is between governments and the businesses based in their nations.  Only a handful of national governments officially support Trump in this policy, basically the odd group of Saudi Arabia, Israel, UAE, Bahrain, and apparently Egypt, with a few others sort of semi-supportive, such as Jordan, if with little enthusiasm.  Russia, China, Turkey, and the major EU nations all oppose Trump's policy.  While businesses in Russia in particular go along with their government's view, nearly all of those that are reasonably large in the EU nations are obeying the demands of the US government to cut back business relations with Iran, with poster  boys for this being Total and Peugeot from France out of fear of losing markets in the US or facing sanctions from the US government.  All of this has led to efforts in both China and the EU to set up alternative payment systems to avoid using US dollars and going through US-controlled financial intermediaries, a big conflict over this involving the SWIFT payment system, which the US would like to prevent Iran from using while the major European nations oppose this move by the US.  As it is, given the ongoing efforts by they EU nations to help Iran out, it seems especially unwise of Iranian intel agencies to be attempting to assassinate people in France and Denmark as they have reportedly done, albeit unsuccessfully so far.

A final point is that it is extremely unlikely that this policy by Trump will lead to Iranian leaders kowtowing to him and entering into any negotiations.  If anything, they might get pushed into pulling out of the JCPOA or create trouble for their enemies in various ways.  OTOH, it may be that the sanctions will not lead to as harsh impacts on the Iranian economy as forecast, whether this is due to the Europeans and Chinese setting up alternative payments systems, or due to Iran wriggling out of the sanctions whether due to waivers or through such maneuvers as barter transactions involving oil or the use of "ghost ships" that do not use any radio communications, something reportedly already going on.  We shall see how this all turns out, but for now Trump probably has gotten a modest boost of support for his policies within the US as a result of the midterm elections, much as I am not pleased to see this.

Barkley Rosser




Wednesday, November 7, 2018

Welcome to the Bipartisan Marketplace of Ideas

That is all.

Tuesday, November 6, 2018

Monday Before The Midterms And WaPo Is At It Again

It is Robert J. Samuelson doing his usual schtick, albeit with some recognition of other issues, such as global warming and immigration.  But these are not what has his prime attention on the day before midterm elections in the US.  Moaning that "Everyone" will lose this election, his main focus is on the budget deficit, without a single mention of the Trump tax cuts.

We get, "Start with budget deficits. In fiscal 2018, the gap between federal spending and revenue was $782 billion, nearly 4 percent of gross domestic product (GDP). That's up $116 billion from 2017. Based on current spending and taxes, the Congressional Budget Office expects large deficits forever.     
With a 3.7 percent unemployment rate, no one can attribute these deficits to a weak economy.  Put simply, Americans want more government benefits and services than they're willing to pay for in taxes.....

Our leaders are making proposals that would worsen deficits. Trump backs more tax cuts [ah ha, that he passed some is implicitly recognized]; Democrats advance expensive new health benefits and guaranteed jobs for all [well, at least he did not call for cutting Social Security, as he usually does]."

OK, this could be worse.  He could have actually called for cuts in "entitlements" as he so often does.  But clearly after not mentioning that the deficit has swelled due overwhelmingly because of Trump's tax cuts, he implicitly puts forward cutting "government benefits" as at least equal to raising taxes in terms of dealing with budget deficits.  There is no end to it.

Barkley Rosser






Friday, November 2, 2018

Some Questions about the Ten-Hour Week

Three weeks ago, in response to the IPCC report warning that CO2 emissions had to be reduced to 45% of their 2010 levels by 2030 to avoid the possibility of global temperature rising above 1.5°C, I posted "The IPCC 1.5° C Report and the Ten-Hour Week," which offered the sketch of a plan for how to do that. I have no illusions that the IPCC or any other prestigious organization will latch on to this idea and seek to flesh it out with concrete policy proposals. In some respects, I offered the Ten-Hour Week more as a thought experiment, a way of thinking about the scope and scale of effort required.

I still think it is a damn good way to think about the problem and actually would be worthy of elaboration if only it wasn't "easier to imagine the end of the world than the end of capitalism." Several of my subsequent EconoSpeak posts -- "The Political Economy of the Working Class" "Absolute Decoupling and Relative Surplus Value: Rectification of Names" "Business As Usual: Running on Empty" and "Scratch That" -- have in fact been elaborations on the Ten-Hour Week thought experiment and the issues it raises.

I also posted it to the sustainable consumption discussion list, SCORAI, where it got some very perceptive questions from participants. With permission, I am posting the questions and answers below. Thanks for questions, comments and permission to Thomas Love, Professor of Anthropology, Linfield College, Oregon; John de Graaf, film maker and co-author of Affluenza, Seattle, Washington; Anna Berka, Research Fellow, Energy Centre, University of Auckland Business School, New Zealand; and William Rees, Professor Emeritus Faculty of Applied Science School of Community of Regional Planning, UBC, Vancouver, BC.

Tom Love:
Thanks Tom Walker for a compelling thought experiment.  Interestingly compatible with the analysis David Graeber takes in his recent Bullshit Jobs, wondering about the nature of work in late capitalism and why we work so hard, even when over a third of people in the UK and the Netherlands report that their work (for which they are sometimes well remunerated) makes no difference in the world.  The work week could be drastically shrunk with little apparent effect on overall economic performance. 
But I’m missing a step in your thinking here.  The kinds of bullshit jobs Graeber documents are almost all white collar bureaucratic positions, whether private or public.  So even taking all your simplifying assumptions into account, why would emissions reduce by a rate corresponding to hours worked?  Presumably agricultural and industrial labor would proceed pretty much as is, in current quantities, no? 
John de Graff:
I hope Tom [Walker] won't mind my jumping in here.  The bureaucratic jobs you mention pay better than many of the production jobs and the people who have them then spend on all sorts of consumer products, travel etc.  It's the total compensation/spending (eg. per capita GDP) that has the strongest connection to carbon footprint since there is no absolute de-coupling at all, and with relative decoupling, ecological and carbon footprints continue to rise (albeit more slowly) as GDP increases. The spending of the white collar workers drives the increases in production of the agricultural and industrial laborers.  It may not be a 1:1 effect, but Tom is absolutely right here.  A cut in these bullshit jobs will render much overproduction untenable, forcing shorter working hours in the ag and industrial sectors to prevent massive unemployment.  Am I getting this right, Tom?
Reply from Tom Walker (Sandwichman) to Tom Love:
"So even taking all your simplifying assumptions into account, why would emissions reduce by a rate corresponding to hours worked?" 
That is an excellent question and my answer is that initially emissions wouldn't reduce by a rate "corresponding to hours worked" but explaining why they wouldn't and why that is o.k. anyway would complicate matters more than I want to in a first volley. I am convinced that the first 25% or so of work-time reduction would actually be an efficiency measure that would have little downward effect on final output BUT would also shift investment away from capacity expansion because of the continuing nature of the work-time reductions and higher wage share of income. After that initial 25% or so, there will come declines in output, incomes, consumption and thus emissions resulting directly from, and corresponding to, the reductions in hours. At the lower end emissions reductions may be > 1:1 to reduction in hours. 
So to put some imaginary numbers on it (albeit grounded in very recent empirical research), Let's say the initial 11% reduction in hours in the U.S. corresponds with a 4% reduction in emissions. That might seem disappointing but its something... and it comes with an improvement in "work/life balance." The second year brings a larger emissions reduction but still less than 1:1. People are meanwhile learning that they don't need to work as much as they used to to get by. And so on.
Anna Berka:
Hello Tom, all,  
Thank you for elaborating the thinking behind limiting working time; that's the part of the degrowth agenda I've not yet been able to get my head around.   
Like others in this thread I also have some concerns around the effectiveness, ethics and political feasibility of this proposal that you may have already thought long and hard about:  
  • Your reasoning seems to rest on the fact that a large number of middle and upper income earners could benefit from less work and less stuff, and don't know it - a fair point. It would result in downsizing, more family time, more community time - all good things. But limiting work hours hits low wage earners hardest; people who spend a higher proportion of their income on power, food and commuting, and are already just getting by. In many emerging economies or liberal market economies, low income earners may be working three jobs to cover the basic cost of living, and work life balance would seem of secondary concern. Under the scenario that you set out, it is likely that supply constraints would translate into higher prices (although to the extent to which there is unemployment, production could continue by simply hiring more workers on shorter term contracts) further exacerbating the problem. People would take to the streets.   
  • It doesn't affect the super rich at all, and certainly not in proportion to their footprint - because they are not employed by anybody and do not work in the formal sense, except to reinvest their money.   
  • It affects start-ups, social enterprises that are attempting to deliver positive change for instance by investing in clean technology (ie. doesn't it also put a break on the kind of innovation that we need?). In short, it seems a very indirect/convoluted way to reduce consumption of high emission goods, compared to for instance a carbon tax, which automatically directs investment towards low emission production.  
Like many other ideas in this area, we seem to hit a wall when consumption reduction measures fundamentally transgress notions of individual freedom that underpin democratic society today; and that now seem to be getting in the way of a livable future...
But limiting work hours hits low wage earners hardest; people who spend a higher proportion of their income on power, food and commuting, and are already just getting by.  
Reply from Tom W. to Anna Berka:
That is an excellent point -- and one that I have indeed thought and researched long and hard about. During the 19th century movement for the 8 eight hour day, Mary Steward coined a ditty: "Whether you work by the piece or work by the day, decreasing the hours increases the pay." Her husband, Ira, and his disciple, George Gunton worked out a theoretical explanation of this apparent paradox that was subsequently confirmed, empirically by the industrialist Thomas Brassey and theoretically by the neo-classical economist Sydney J. Chapman.  
To put it bluntly, the low wages of low wage earners are substantially a RESULT of overly long hours. Reducing the hours of work does not automatically increase the pay but it removes a formidable obstacle to higher pay. Whether they understand this or not, employers, RESIST shorter hours because they give workers more leverage in determining wages and other working conditions including subsequent reductions in hours. It establishes a virtuous cycle for worker power, which the employers understandably view with alarm. "Mainstream" economists have taken the side of employers to the extent of ignoring or suppressing the theoretical work in economics that supports the shorter work time argument and slandering policy proposals as "fallacious/" 
Yes, I have indeed thought long and hard (and longer and harder) about this and have written a background manuscript that surveys the arguments against shorter working time and their origins.
John de Graaf:
Anna, It shouldn't be either or.  For lower paid workers, the loss of hours should be at no loss of pay, with greater progressive taxes and earned income credits.  I for one would support a basic income guarantee as well.  But there can be no de-growth without cutting working hours.  Tom has been right on this for a long time.  And if it happens slowly, people get used to the income reductions (except for the poor).  see my piece, "Life Away From the Rat-Race."
Bill Rees:
Friends - 
Think about this. So far, this discussion assumes all else remains constant.  However, if the world takes the recent IPCC report seriously, and reduces fossil fuel (FF) use by nearly half in the next couple of decades, then there will be a massive shortage of energy (demand is actually 'scheduled' to rise by a quarter or more).  The fact is that wind, solar, etc., cannot substitute for many uses of FF and even if they could, the rate of investment required is beyond reach.  In short, there may well be a great increase in the demand for human labour just to provide the necessities.  
Of course, if the world doesn't take IPCC seriously, we'll see 3 Celsius degrees warming and catastrophic impacts that will .. 
(fill in your own blanks)
This should help.
Reply from Tom Walker to Bill Rees,
I agree that transition away from fossil fuels will require more hours of necessary work as well as far, far less hours of bullshit work and fossil-fueled work. In my thought experiment I conceded that "some of these reductions in working time could be reversed by de-industrialization — that is the substitution of less energy intensive but more labor intensive methods of production" but for the sake of brevity didn't go into the complexity of that de-industrialization. 
I am not actually advocating a Utopia of leisure, although it may seem like it. There are two more salient aspects to my thought experiment. One is the effect that a phased, coerced regulation of working time could have on transition from fossil fuel, with the transition to fossil fuel serving as the precedent. The other is translating the intangible and unimaginable -- the 45% reduction of carbon dioxide emissions -- into something that people can imagine: hours of work. Nobody sees or experiences carbon dioxide emissions. Almost everybody experiences work. The global carbon dioxide emissions intensity of paid employment has been remarkably stable over the past quarter century. So REPRESENTING tons of carbon dioxide as hours of work makes quantitative sense. 
One thing that I try to keep in mind at all time is Georgescu-Roegen's warning against the idea that there is a "blueprint for ecological salvation." The "ten-hour week" is not meant as a blueprint. It is meant in the spirit of G-R's eight-point minimal bioeconomic program, which concludes, incidentally, with the admonition: 
...we should cure ourselves of what I have been calling "the circumdrome of the shaving machine," which is to shave oneself faster so as to have more time to work on a machine that shaves faster so as to have more time to work on a machine that shaves still faster, and so on ad infinitum. This change will call for a great deal of recanting on the part of all those professions which have lured man into this empty infinite regress. We must come to realize that an important prerequisite for a good life is a substantial amount of leisure spent in an intelligent manner.

Trump Says Dems Support Venezuelan "High Taxes And Open Borders"

The  average tax rate in Venezuela is 25%. The average tax rate in the US is 26%.  Sorry, Trump, this is yet another lie by Trump, but what else is new on this?

I do not know the details of Venezuelan of immigration policies, but at this point in time the issue  in Venezuela is not immigrants freely arriving and causing economic problems, but just the opposite: people leaving in massive numbers leading to crises in all the neighboring countries of Venezuela.

So, bottom line: Trump not for the first time is totally full of it on all of this.

But now it is time to deal with the political-economic problem of Venezuela, a matter that may lead to some regular readers of this blog to differ with me.

Indeed, Venezuela has turned into a political-economic disaster: extreme hyperinflation with a plunging real output, with massive outmigration, so massive that the receiving nations (Columbia, Brazil, Guayana, Ecuador), have had serious public complaints.

So GOP standard stories have now focused  on Venezuela as the supposed world model of "socialism."  Oh gag on many issues. I have from the moment Hugo Chavez came to power I never supported him, a military guy who had attempted a failed coup.  I shall not name prominent economists who now are fumbling with the current awful situation. 

As it is, indeed for most of the time Chavez ruled the Venezuelan economy performed not too badly, and indeed had had reductions in inequality, long demanded for politically.   Even now, a substantial portion of the Venezuelan population is better off than in the past due to the Chavist policies, even as the general state of the economy is horrendously collapsing under his successor Maduro, who has suppressed normal democratic processes.  And while the economy maintained a not-too-bad performance while Chavez was in power, it has  totally collapsed under Maduro, his  successor.

Of course the critics have argued that the policies that led to this  hyperinflationary collapse were due to Chavez and not his pathetic loser  successor, Maduro. This is a more complicated matter, and gets to the systemic question: has Venezuelan policy been a world avatar of "socialism"?

Chavez avoided such claims, even as he cut a deal with Cuba for them to provide doctors for oil, a deal still in place last I heard. Regarding how "socialist" he was, a lot less than many would say, and that was not how  he described  himself  or his policies  He claimed a nationalist position derived from the great liberator of South America from Spanish rule, Simon Bolivar, who indeed did come from Venezuela.  So the original Chavismo was proclaimed by him to be "Bolivarianismo," a term that has now basically disappeared, for better or worse.

So how "socialist" has Venezuela been, with its failed Bolivarianismo?  Much less than either it  s fervent supporters or its far more numerous critics have  claimed.  In terms of the most hard core definition of socialism, state ownership of the means of production, the  most important part of the economy, the oil sector, was nationalized decades ago, back when Venezuela and Saudi Arabia cooked up OPEC in 1960.  There have been nationalizations since Chavez took power, but most of the Venezuelan economy not in the oil sector actually remains privately owned, not soicialist.

Which brings us to how Chavez and Maduro really messed up the economy. Yes, they imposed some dumb price controls here and there, since totally swamped by the  hyperinflation.  Yes, there were nationalizations of some firms, even as most of the economy remains privately owned and pays lower taxes than in the US. But the real problem was/is corrupt political cronyism, with the  crucial oil sector the central problem for the economy. And the bottom line on that as that when Chavez took power he fired the competent  managers of the state-owned  oil company and installed incompetent cronies who proceeded to destroy the Venezuelan oil industry.  I saw this from Day One and never supported Chavez or Maduro.

What we dealing with here is not socialism, but corrupt incompetence.  Venezuela is not a socialist economy more than it was before Chavez came to power.  It is just a corrupt loser oil exporter that has lost it.

Barkley Rosser


  

Wednesday, October 31, 2018

Scratch That

I made a mistake. And it's a good thing.

Following up on my Running on Empty post, I wanted to give a more finely-grained analysis of climate costs relative to GDP growth, so I returned to my sources to see who their sources were and how they did their calculations. Watson et al., compiled their estimate from National Centers for Environmental Information, "U.S. Billion Dollar Weather and Climate Disasters" and Paulina Jaramillo and Nicholas Muller, "Air pollution emissions and damages from energy production in the U.S. 2002-2011."

Jacobson, Delucchi et al. presented their estimates in two tables, broken down by country. I had taken what I thought was 15% of their global climate cost estimate but it turns out that my number was roughly double theirs. I may have taken their high estimate instead of the mean. Anyway their actual estimate was around $4 trillion in 2013 dollars. But that is not the mistake I am concerned with here.

The mistake came to light after I had all the carefully checked numbers, recalculated in 2012 dollars and I compared annual GDP growth to annual health and climate costs. Climate costs exceeded growth in 13 of the 28 years from 1990 to 2017. Over the entire period those costs offset 95% of reported real GDP growth. Or so the numbers claimed.

Then I tried a different tack. I subtracted estimated annual climate costs from GDP and then calculated annual growth. To my surprise the resulting annual growth was only somewhat lower. O.K., I thought, I'm starting from a much lower total in the base year and the year-to-year number reflects only the the annual increase in climate costs and not the annual cost.

So which calculation, then, is the "right" one? Year-to-year growth minus annual cost or Year-to-year growth of (GDP minus climate cost)? Neither! Both calculations rely on double counting of the sort that Irving Fisher warned about 112 years ago.

The problem is also illustrated by the relationship between GDP and Net Domestic Product. Annual growth of Net Domestic Product and Gross Domestic Product track each other pretty closely:


Meanwhile, look at what has happened to depreciation. It has nearly doubled as a percentage of GDP, from around 9% in the late 1940s to almost 17% in recent years.


Something that doesn't show up too well in the graph above is that most of the growth in depreciation relative to GDP has occurred in the last 48 years. So, doubling every half century we could have an economy in 125 years that runs entirely on depreciation! But that would be O.K. because GDP would be so much BIGGER then. Isn't that right, Professor Nordhaus? Professor Solow? Professor Krugman?

I don't have the solution to this computational problem, other than to point out that it is the inevitable consequence of a poorly-conceived metaphor for the "measurement" of heterogeneous good and services. The monetary yardstick is made of a highly elastic material and correction for changes in the cost of a basket of consumer goods (CPI) does not begin to address the real issue. GDP and GDP growth has become the increasingly opaque lens through which we view society and "the economy." It is a cracked, scratched, smudged, distorting lens that may not even enable us to tell whether what we view through it is upside up or upside down.

Monday, October 29, 2018

Business As Usual: Running on Empty

A little over a year ago, Robert Watson, former chair of the IPCC, and two co-authors published a report titled "The Economic Case for Climate Action in the United States." Based on trends over the past few decades, the authors estimated the current total annual cost in the U.S. of losses from weather events intensified by climate change and health damage from fossil fuel pollution to be $240 billion, which they described as "about 40 percent of current economic growth of the United States economy."

At around the same time, Mark Jacobson, Mark Delucchi and a carload of co-authors published an article in which they projected damages to health and property in the U.S. from climate change and pollution under "business as usual" to be around eight trillion dollars in 2050. A simple linear extrapolation between the two estimates suggests that the annual cost of climate change is increasing at around an 11 percent annual rate. Based on that extrapolation, the health and property damage cost of climate change can be projected to exceed annual GDP growth by 2026.

But wait. Watson's 40 percent figure compares average annual damage with some of the better recent years of growth. Even excluding years of recession and stagnation, in which growth was less than $240 billion, the remaining eight of the last 12 years averaged only around $430 billion a year in real GDP growth. Counting the recession and stagnation years, it's virtually break even.

But there's more. Part of that economic growth simply reflects expansion of the population. Real economic growth per capita in the U.S. has been even more anemic in the 21st century. Of course this means the cost of damage can be spread more thinly as well but the crucial point is still what happens to per capita income relative to the damage.

The future is hard to predict, so I tried a number of scenarios. First, if per capita growth continues at the rate it has since 2009, the U.S. has already entered the red zone where the cost of climate change exceeds growth by an increasing amount each year. If real per capita growth accelerates to 1.5 percent per annum that fateful point won't be reached until the year after next. A growth rate of 2 percent would postpone the day of reckoning until 2024, six years before the IPCC deadline for achieving net zero carbon emissions. To make it to 2030 without crossing permanently into the red would require a sustained rate of real per capita growth that hasn't been achieved since 1960-1970.

One more thing. As Andreas Malm wrote, the global warming effects of fossil fuel consumption are "seriously backloaded" and "substantially deferred." This year's climate damage is a consequence of actions taken decades ago and the greenhouse gases emitted today will not have their full impact until decades from now. How does one estimate, then, the contribution to intermediate consumption of the deferred cost of current emissions? How much should GDP be deflated to account for the artificial inflation of nominal value added by waste gases whose cost is off the balance sheet?

Let's assume that emissions in a given year contribute to 4 percent of climate change costs each year for the next 25 years. Why 25 years and why a constant percentage? Because it is better than attributing all of this year's cost to this year's emissions. Who knows? It probably makes more sense that choosing a "market-based" consumption discount rate of 4.3 percent. At any rate, considering the deferred nature of the climate costs moves the year in which GDP growth vanishes back. The 4 percent for 25 years scenario moves it back to 2007. The economy has literally been running on fumes for over a decade. Talk about "degrowth"!

It/s here. It's not going away. It only gets worse. The question isn't whether or not one "advocates" degrowth but whether or not one faces the stark reality and acknowledges the expiry of GDP growth and consequently the irrelevance -- and, frankly, mischief -- of the growth paradigm.

Saturday, October 27, 2018

Failed Perceptions Of Economic Reality

It is long  viewed that what the electoral populace thinks of the state of the economy is an important factor in how they vote and electoral outcomes.  Prior to 2000 the state of the economy as measured by real per capita  GDP growth explained presidential election outcomes except in cases where there was a war (!940) or there was a party split (1912).  Personal scandals also played roles, with Ford's defeat in 1976 at least partly due to his pardoning of Nixon.  2000  and 2016 had personal scandal issues involved in outcomes that went against the state of the economy (although 2016 a closer call on that), although in both of those elections we had the electoral college installing a president not favored by the national popular vote.

Midterm elections are not so closely tied to economic conditions as they have certain patterns based on the president and when he was elected, with midterms generally not favoring presidents. Nevertheless, economic conditions do play a role, with Reagan taking a big hit in 1982, even as he won big two years later when the economy turned around.

So now we have the economy doing well in terms of GDP growth, a 4,2% growth quarter followed by a  3.5% one, looking better than many forecast, despite some negative signals such as recent bad performance of the stock market. How will all this play out in the upcoming midterm elections?

To be honest, I do not know.  But it strikes me that most of the electoral populace is not in touch with actual current economic reality. It goes on both sides. So, the side that I tend to favor tends to understate the returns people received from the GOP tax cut.  Now I did not and do not support this tax cut for various reasons, but indeed it did hand out money to the vast majority of the population.  But now by nearly 2 to 1, the US populace says they got nothing from it, and they oppose it as mostly giving money to the rich and adding to the budget deficit. All the latter is correct, of course, so it the populace are not complete fools. But in fact most of them did get some gain from this tax cut. But then, back in 2009-10 when Obama gave most of the population a tax cut, most of them did not notice  it and were unaware they had gotten it.  The hard fact is that people only notice big changes in their take home income, and neither Obama's nor Trump's tax breaks were big enough for most people for them to notice it.

Needless to say, while many did not notice the  tax cut  Trump gave them, those favoring Trump are not noticing that the vast majority of the US population has not seen increases in real per capita income.  Trump's tax cut for the majority of the population was too small to overcome the hard fact that real wages have remained largely stagnant.  GDP growth has been high in the last two quarters, but is declining, and  for a variety of reasons is likely to continue downwards.  The recent volatility of the stock market shows these concerns, ranging from Trump's trade wars, creeping inflationary trends, and rising interest rates, not to mention bad markets and slowdowns abroad.

Barkley Rosser


Tuesday, October 23, 2018

"The Opportunity Cost of Socialism"

Why is the Council of Economic Advisers producing party political propaganda for the GOP? As many folks have pointed out, the "report" is rather bizarre. My favorite part is Figure 1, which summarizes Milton Friedman's argument that people spending "their own money" are "more
careful how much to spend and on what the money is spent." This, of course begs the question of how that money came to be defined as "their own."

Let's complicate that story, though, with a couple more matrices: First, Prisoner's Dilemma:
Figure 2: Prisoner's Dilemma
Next, Elinor Ostrom's typology of property:

Figure 3: Typology of property

Figure 1 assumes that there is only one kind of decision situation and only one kind of good. Figure 2 introduces a different kind of decision situation and Figure 3 introduces three different kinds of goods. Are Trump's "economic advisers" really so ignorant of basic economic concepts beyond the most elementary textbook simplification?

How To Get Distracted From What Is Most Important

Of course as the midterm elections are nearly upon us, there is a rising cacophony of issues bubbling up, especially as Donald Trump attempts to excite his extremist base with base fears, while trying to distract most voters from threats by GOPs in Congress to cut the social safety net.  But smoe of the the new issues bubbling up are really more important than others.

So we are now going to have a spectacle every day from now to the election of having top stories on nearly all media focusing on this caravan of Hondurans approaching the US.  Trump declares this to be a national security crisis, which his fervent followers clearly hysterically accept.  But even if this entire group were allowed into the US, it would be no big deal, probably good for our economy and society. 

OTOH, we have the news over the weekend that Trump is planning to withdraw the US from the INF nuclear treaty, signed in 1987 by Reagan and Gorbachev.  The still living Gorby has declared that doing so is "stupid."  That is putting it mildly.  This appears to be the brainchild of super-hawk John Bolton, now in Moscow, where he is also soft soaping Russian meddling in US elections.  But talk is that if INF goes, so will New START, leaving almost no nuclear arms treaties in place between Russia and the US.  Yes, Russia has been reportedly violating the INF treaty in some cases, but is just throwing out an arms control apparatus that took so long to negotiate the way to go?  Bolton clearly thinks so, but he has also talked about how maybe we should use nuclear weapons, echoing loose similar talk coming out of some Russians earlier.  There is also talk of a renewed arms race, which our military-industrial complex would love.

Really, this seems to be coming basically out of nowhere.  Are we to return to a Cold War and arms race and fearing a nuclear war?  It took decades for Thomas Schelling to convince world leaders with nuclear weapons to foreswear the first use of them.  Now he is dead, and we are suddenly hearing all this loose talk and possible unraveling.  Frankly, this is far more dangerous than this Honnduran caravan, but it is back page news, and I fear most people are unaware of it, more worried about Central American immigrants than that the threat of nuclear destruction of the entire human species is suddenly increasing.  We must not be so easily distracted.

Barkley Rosser

Sunday, October 21, 2018

Absolute Decoupling and Relative Surplus Value: Rectification of Names

Jargon is a heck of a drug:
If names be not correct, language is not in accordance with the truth of things. If language be not in accordance with the truth of things, affairs cannot be carried on to success.
The discourse of global warming/climate change is lousy with jargon. This rampant obfuscation gives science deniers rhetorical leverage and induces hallucinations about "Green New Deals" and "Environmental Kuznets Curves." "Decoupling," "rebound effects" and "externalities" are three terms that invite systematic incomprehension. The first two are dead metaphors and the third is an outright fraud -- there is nothing "external" about an externality.

A little reflection on what these terms actually refer to can help clarify what can and cannot be done about carbon dioxide emissions. From the perspective of shameless self-promotion, it can also help show why my policy proposal makes sense and others don't.


Saturday, October 20, 2018

Kevin Hassett and Irwin Steltzer Join in on the Fiscal Dishonesty

Brad DeLong is annoyed at the latest from Irwin Stelzer:
Hassett and others in the administration point out that despite a hefty reduction in the corporate tax rate from 35 percent to 21 percent, government revenues rose by $3.3 trillion in the fiscal year just ended. In part this is because the economy is growing at around a 4 percent rate in response to the tax cuts and to a revival of animal spirits as entrepreneurs and corporate chieftains wake up in the morning wondering not what the government is going to do to them, but what it might do for them. So Trump may yet be proven right. And if that proof does not emerge by 2020, he an always blame the Fed. The problem, says Trump, is that spending rose even more, by $4.1 trillion.
Hassett is lying but let’s note so are the OMB Director and the Treasury Secretary as well as Speaker Paul Ryan:
He was basically lying to us hoping the public would be too stupid to realize that when the price level rose by 2.5% during the same period, we are talking about a 2% real decrease in tax revenues.
Yes nominal government spending rose by 3.2%, which represents only a 0.7% real increase. Spending and revenues both fell relative to GDP. Brad correctly notes:
his claim that under Trump economic growth is "around... 4%". It is not. GDP growth under Trump has been and is widely projected to be roughly 2.7% per year, not "around... 4%". Irwin Stelzer is a liar. Liars are not worth reading.
While true – Trump’s entire economic team has been lying but quoting nominal changes rather than real changes. So maybe Stelzer was talking about the increase in nominal GDP. Yes – that is dishonest but hey – everyone on Team Trump is doing this.

Thursday, October 18, 2018

Fiscal Dishonesty from Paul Ryan (Surprise!)

We earlier noted that when our Treasury Secretary wrote this:
Government receipts totaled $3,329 billion in FY 2018. This was $14 billion higher than in FY 2017, an increase of 0.4 percent...Outlays were $4,108 billion, $127 billion above those in FY 2017, a 3.2 percent increase.
He was basically lying to us hoping the public would be too stupid to realize that when the price level rose by 2.5% during the same period, we are talking about a 2% real decrease in tax revenues. And it seems that some nitwit at CNBC was indeed that stupid. Yesterday I endured an appearance by Paul Ryan on CBS This Morning. No surprise that this dishonest weasel repeated the same lie:
Revenues are up this year. Believe it or not, we cut taxes at the beginning of the year, and we have higher revenues this year. Why do we have higher revenues? Because we have faster economic growth, higher wages, more taxes are coming into the government.
But let’s give credit to John Dickerson for calling Ryan on this intellectual garbage:
Dickerson pushed back, pointing out that when you account for inflation, some of the revenues from the previous tax policy, and the revenue that would increase from population, the revenues are lower than they should be.
I would say Dickerson nailed this liar but how did Ryan respond?
Let me just say it this way. We cut taxes and we have higher revenues coming into the government today still.
Got that? He just repeated his debunked lie. After all Paul Ryan has such total disdain for the public that he simply doubled down on this incredibly stupid dishonesty.

MBS Must Go

The grisly details of the murder of journalist Jamal Khashoggi now coming out make it clear that the one thing that would really clear the air would be for 33-year old Muhammed bin Salman bin Abdulaiz al Sa'ud (MBS) to be replaced as Crown Prince of Saudi Arabia and to be removed from any position of authority and power that he currently possesses.  Indeed, it would be wise if he were subjected to what he imposed on others whom he saw as in his way to assuming the  extreme level of power he currently has in KSA, to be confined to his palace under guard or perhaps in the Ritz-Carlton Hotel.  To make clear his removal from power it would also be appropriate to have da Vinci's painting of Salvador Mundi taken from him, which he is reported to have purchased through intermediaries for $480 million, a sign of the degree of corruption that he has personally engaged in.

It should be clear that MBS's crimes and mistakes go far beyond this awful mmuder by members of his personal bodyguard of Khashoggi.  The thousands of dead civilians in Yemen in the war there that he instigated as Defense Minister is at the top of the list.  But his idiotic embargo of Qatar and his hyper-aggressive attitude towards Iran (stupidly supported by the current US administration) are also on the list, along with his broader suppression of disssidents within KSA.  It may well be that a successor will continue the strongly anti-Iran policy, although some potential candidates have in the past urged negoatiating with Iran, including former ambassador to the US, Turki bin Faisal bin Abdulaziz al Sa'ud, for whom the now late Jamal Khashoggi once worked as a top staff aide.  However, for a variety of reasons this 73 -year old now Chair of the powerful King Faisal Foundation is unlikely to succeed MBS.

Obviously this is not very likely, given that this would have to be done by his father, 82-year old King Salman bin Abdulaziz bin Abdul Rahman al Sa'ud, who clearly strongly supports him, even as he has apparently overruled him on certain matters, most recently in insisting on the shutdown of the proposed sale of 5% of ARAMCO, a centerpiece of MBS's Vision 2030, an overly hyped economic reform plan that always had less of any significance to it than was loudly advertised in US media.  Nations overwhelmingly dependent on oil exports are always talking about "getting off oil," but they rarely succeed in doing so, and there is probably no nation more stuck on oil than KSA, given the low cost of extracting oil there (second lowest after Kuwait at barely $10 per barrel) and its vast reserves.

Of course, for now MBS appears to have the personal support by President Trump and his son-in-law, Jared Kushner, who may have quietly supported the coup through which he came to power.  It is fairly clear that this personal support is reinforced by MBS providing substantial funding to both the Trump Organization and the business activities of Kushner, although the full details of that are not fully known.

MBS has been praised for restricting the Mutaween religious police as well as letting women drive and opening cinemas.  If he were to go it is certainly possible the Mutaween might regain some of their power, but I seriously doubt any possible successor would undo the move to let women drive.  Indeed,,several of his possible successors had previously shown willingness to improve the status of women in KSA in various ways.

There are several possible successors who would not be either over the hill or widly conservative.  The most obvious would be the man MBS overthrew in what was essentially a coup in June, 2017 as Crown Prince, now 59-year old Muhammed bin Nayef bin Abdulaziz al Sa'ud.  He was widely respectes, including by those in the US who dealt with him, a former Minister of the Interior.  It was alleged that he had become addicted to a pain killer as a result of an assassination attempt against him, but it is unclear if this was true or not.  In any case, there are others who  are capable and would return KSA to its more collective form of leadership that did not engage in the sorts of barbaric activities that MBS has been doing.

A curious recent development not not widely reported out of STRATFOR is that MBS's full brother, Khalid, ambassador to the US, was recalled to Riyadh on October 15 and will not return to the US.  Whether this shows MBS getting rid of yet another potential rival or is a sign that MBS himself is in trouble is too soon to know.

Addenda:

One is that in today's (10/19) WaPo, the generally well-nformed David Ignatius reports that it looks like there is a serious split in the Saudi royal family. This probably is the moment to call for MBS to go.  Probably he will hang on, but it looks like he has some serious opposition.  The supposed most likely replacement would be one of his uncles, Ahmad bin Abdulaziz bin Abdul Rahman al Sa'us, born  in 1942, who was briefly Interior Minister some years ago, only to bee pushed aside by Mohammed bin Nayef bin Abdulaziz, who would become Crown Prince, only to be deposed in a coup by MBS.  Apparently Ahmad was a candidate and now is agaiin, although he has not held that many senior positions and holds none now, but is reportedly not corrupt and well liked.  His full brother, the youngest of the sons of KSA founder Abdulaziz, is Muqrin, born in 1945, who was Crown Prince prior ro Mohammed bin Nayef, ans has held many serious senior positions, including Director of the Mukhabarat inttelligence outfit from 2005 to 2012.  But, aside from having a Yemeni wife, he does not seem to be in the running, according to Ignatius, who posted a number of other sharp points.  Another thing going for Ahmad is that he is the youngest of the very powerful Sudairi Seven, with the only other one of those around being  the current king, Salman, MBS's father.  Presumably having his last full brother step in to replace MBS might have some appleal to Salman, who really does u.timately hold the cards on this.

Curiously, Ignatius made a rare errror in his column.  He siid that Ahmasd is the last of Abdulaziz's sons to survive.  In fact, including the king, there are nine of them, the oldest, Bandatr, having been born in 1923.  Most of them are viewed as being unacceptable for one reason or another.

A further curious and not widely reported item is that Jamal Khashoggi's paternal grandfather was Turkish.  That is a Turkish last name, and the "gg" is actually pronounced, "gchi."  The grandfather was the physician for old King Absulaziz, and Jamal had a wealthly and powerful uncle, Adnan Khashoggi, who was quite an operator. This adds a rather poignant touch to his being killed in Turkey while trying to marry a Turkish woman.

Tuesday, October 16, 2018

Fiscal Dishonesty from CNBC and Our Treasury Secretary

Is Jacob Pramuk on the White House payroll?
US budget deficit expands to $779 billion in fiscal 2018 as spending surges. The federal budget deficit rose 17 percent in fiscal 2018, according to the Trump administration. Spending jumped, and revenue only increased slightly following the GOP tax cuts. The Trump administration has pushed for dramatic budget cuts at several agencies and supported massive increases in military spending.
And that was just his headlines!
The deficit increased by $70 billion less than anticipated in a report published in July, according to the two officials. Federal revenue rose only slightly, by $14 billion after Republicans chopped tax rates for corporations and most individuals. Outlays climbed by $127 billion, or 3.2 percent.
He is getting his numbers from this report:
Government receipts totaled $3,329 billion in FY 2018. This was $14 billion higher than in FY 2017, an increase of 0.4 percent...Outlays were $4,108 billion, $127 billion above those in FY 2017, a 3.2 percent increase.
I have skipped the chest thumbing about the economy from Mnuchin and Mulvaney to focus on the stupidity ala CNBC. Real government spending barely kept pace with inflation, which is why outlays relative to GDP fell from 20.7% to 20.3%. Real tax revenues clearly fell in absolute terms and as a percent of GDP went from 17.2% to 16.5%. I guess this is what one gets when one lets Lawrence Kudlow become a chief economic adviser. But this kind of dishonesty is well known ever since Kudlow and his ilk tried to pull this intellectual garbage in the 1980’s. Does anyone at CNBC not realize the Trump White House is playing the same games with numbers? Never mind that the Treasury Department has decided to lead the way on some good old fashion rightwing nonsense.

Who Is The Bigger Terrorist Threat: Iran Or Saudi Arabia?

Yesterday's WaPo had competing headlines about Iran and KSA (Saudi Arabia): Iran is described as a "potential" terrorist threat while the likely Saudi role in the death of journalist Jamal Khashoggi is described as threatening the US-KSA relationship.  The latter problem (likely to be smoothed over by claiming it was done by "rogue agents") has distracted from the ongoing story of how Iran is this awful enemy and threat to the US, "the world's leading state sponsor of terrorism" as organs oof the US government repeatedly tell us.  The problem is that in recent years there have been zero terror attacks by entities principally funded by Iran. 

The new story reports on "potential" attacks, with the most serious possibility being in Europe, where indeed in thr 80s and early 90s Iranian MOIS apparently killed as many as 60 opponents of its regime in various attacks in Berlin and other locations. An Iranian embassy official based in Vienna has  been arrested in Bavaria in connection with an alleged plot to attack Mujahedin-el-Khalq (MEK) activists near Paris, which plot was foiled.  As it is, the MEK was labeled a terrorist group itself by the US government until 2012.  It may be that such a plot was in the making, but it did not happen.  Regarding the US two supposed Iranian spies were arrested in the US who may have been plotting something, but again, no actual attacks, and there is a related report that at least one spy supposedly supported by Iran working for Hezbollah went to the FBI to offer to become an informant but was arrested.  Ah ha!  Another terrorist!

Of course, there is the usual complaint that Iranian forces are in Syria and Iraq, but they are in both nations at the invitation of their governments.  Iran supports Hezbollah in Lebanon, but like Iran itself it ceased engaging in terror attacks in any serious way back in the 90s and is now too busy ruling Lebanon to mess with such stuff.  There are also claims they arm the Houthis in Yemen, but most evidence says they do little of that, and the main problem there comes from the US-Backed Saudis bombing the Yemenis, including civilians.

Which brings us to the Saudis.  So now people are suddenly questioining the close US alliance with them after this Khashoggi business.  But they are the ones bombing and killing civilians in large numbers in Yemen.  They have supported al Qaeda related groups in Syria.  It was fro KSA that most of the bombers on 9/11 came from.  And while the Saudis may now have allowed women to drive, women were never kept from driving in Iran.  The  Saudi-funded madrassas all over the world have been major breeding grounds for Sunni terrorists of various factions and stripes.  Really, this is a no-brainer.  It is the KSA that is a much more serious terror threat than Iran.

Barkley Rosser

Giving Up On Fighting Global Warming

That is what Robert J. Samuelson did in yesterday's Washington Post (I have not picked on him for awhile, time to gt back at it).  The new UN report on global climate change has brought from him a giant shrug of the shoulders along the lines of, so what?  He makes three arguments.

The first is that we do not have the technology to do anything.  Only 4% of total energy is coming from renewables he says, by which he means solar and wind. But there is also geothermal, hydro, and nuclear.  They add up to quite a bit more.  Maybe we have reached the limits on the first two and lack political will to do more on the third, although it is still expanding in China and in some other nations.  But this seems overly pessimistic.

Then he gets into a rant about how in the US there is no focus on the future.  That may be true, but emphasizing that seems to be just giving up.  Every other nation in the world has signed the Paris Accord. Just because the current US administration has pulled out does not mean we cannot get back into it.

Finally he notes that we shall likely see further emissions from poorer nations, especially China and India.  That is certainly true.  But China in particular has begun to move against GHGs, and India is leading the world in efforts to develop clean and safe nuclear power using thorium the US gave up on in the 1950s because one cannot make nuclear weapons from it.  Really.  None of this seems like we should do nothing.

Just to make himself look really ridiculous, on the second argument he goes back to one of his longstanding bugaboos.  He concludes his argument on the lack of future orientation in the US by denoucing the lack of change in Social Security and Medicare, presumably meaning cuts in benefits as he has long advocated.  For me personally, I oppose this as I want to see my children and grandchildren get the same benefits I shall get.  I oppose cutting those benefits  out of my concern for future generations.  This is probably the most  shameful part of what is already a pretty shameful piece by him.

Barkley Rosser

Friday, October 12, 2018

U.S. Saudi Trade

Donald Trump appears to be reluctant to investigate the murder of Jamal Khashoggi because of an alleged trade deal?
Donald Trump has said US investigators are looking into how Jamal Khashoggi vanished at the Saudi consulate in Istanbul, but made clear that whatever the outcome, the US would not forgo lucrative arms deals with Riyadh. The president’s announcement raised concerns of a cover-up of evidence implicating Saudi Arabia’s powerful crown prince, Mohammed bin Salman, in plans to silence the dissident journalist…Any sense that the administration might seek to impose serious consequences on Saudi Arabia was dispelled by the president. Asked at an impromptu press conference in the Oval Office whether the US would cut arms sales if the Saudi government was found to be responsible for Khashoggi’s disappearance, the president demurred, saying the US could lose its share of the huge Saudi arms market to Russia or China. In the Oval Office Trump pointed out that the disappearance took place in Turkey and that Khashoggi was not a US citizen.
He may not be a citizen but he did hold a green card and worked for the Washington Post. Credit to the Republicans in Congress for pressing on the appropriate investigation of this matter. My only comment today will be to challenge Trump’s argument that our trade with Saudi Arabia is more important than sanctioning the Saudi government for this murder likely ordered by Mohammed bin Salman. The Census Bureau reports on both our imports from Saudi Arabia and our exports to them. Over the last decade, imports have varied from less than $17 billion per year to over $55 billion. These imports are predominantly been oil of course. Exports have never reached $20 billion per year so we have run persistent and sometimes large deficits with the Saudis. In Trumpian “logic” – aren’t we losing to them? To be fair, we choose to import Saudi oil but then again, the kingdom is not the only supplier of this commodity. But Trump is telling us that we may have yuuuge exports of military goods:
I know they’re [Senators] talking about different kinds of sanctions, but they’re [Saudi Arabia] spending $110 billion on military equipment and on things that create jobs, like jobs and others for this country. I don’t like the concept of stopping an investment of $110 billion into the United States.
Of course this figure is considered “fake”. Maybe the Saudis will purchase more military goods in the future than they have in the past. But as the Census Bureau notes, their 2017 purchases were a mere $2 billion whereas the Saudis purchased over $2.7 billion in civilian aircraft and $1.6 billion in automobiles. I’m sure Boeing, Ford, and GM enjoy exporting their products wherever they can but these amounts are indeed peanuts compared to the world market for automobiles and airplanes.

Wednesday, October 10, 2018

The Political Economy of the Working Class

The political economy of the working class is pluralist.

The political economy of the working class is pragmatic.

The political economy of the working class is critical.

Karl Marx chronicled and contributed to the political economy of the working class. He did not invent, conclude or supersede it. In  his Inaugural Address to the International Working Men’s Association, Marx celebrated the first victory of the political economy of the working class, the passage, in 1847, of the Ten Hours' Bill:
This struggle about the legal restriction of the hours of labor raged the more fiercely since, apart from frightened avarice, it told indeed upon the great contest between the blind rule of the supply and demand laws which form the political economy of the middle class, and social production controlled by social foresight, which forms the political economy of the working class. Hence the Ten Hours’ Bill was not only a great practical success; it was the victory of a principle; it was the first time that in broad daylight the political economy of the middle class succumbed to the political economy of the working class.
This passage tells us what we most need to know about the political economy of the working class. It is founded upon "social production controlled by social foresight" in opposition to "the blind rule of supply and demand laws." The "most notorious organs of science" had predicted and "proved" that "any legal restriction of the hours of labor must sound the death knell of British industry" and, of course, they were subsequently proved absolutely wrong. Not 'merely' wrong, but the exact opposite of apposite.

The political economy of the working class is innovative.

The political economy of the working class is traditionalist.

The political economy of the working class is eclectic.

The first victory of working class political economy Marx spoke of occurred 17 years before his inaugural address, 20 years before publication of Das Kapital and a year before The Communist Manifesto. It would be anachronistic to give credit for that outcome to Marx's analysis or agitation. Moreover, Marx says that the victory culminated 30 years of struggle, which would make the political economy of the working class at least older than Marx.

The political economy of the working class is conservative.

The political economy of the working class is revolutionary.

Why does this even matter? It matters because the alternative between "social production controlled by social foresight" and "the blind rule of supply and demand laws" cannot be reduced to Marxism vs. non-Marxism or socialism vs. capitalism. It is instead a contest between collective wisdom and a very peculiar sort of solipsistic, motivated passivity. If there ever was such a thing as "laws" of supply and demand, they would only be self-enforcing to the extent that market participants were not aware of them. As soon as those regularities are observed, they will be gamed.

It also matters because units of  radically different type lie at the heart of the two political economies. The political economy of the middle class is denominated in monetary units, while the political economy of the working class revolves around qualitative as well as quantitative time. The limitation of the length of the working day confers "physical, moral, and intellectual benefits" above and beyond simply "more time off" and a better bargaining position for wages. "After all their idle sophistry, there is, thank God! no means of adding to the wealth of a nation but by adding to the facilities of living: so that wealth is liberty -- liberty to seek recreation -- liberty to enjoy life -- liberty to improve the mind: it is disposable time, and nothing more."

Andres Malm tells us that with passage of the Ten-Hours Bill in 1847, "Water power received its coup de grâce." "If labour scored a gain in the Acts of 1847 and 1850, capital retaliated by speed through steam." "[A]ccording to Von Tunzelmann, the Ten Hours Act was 'probably the most important determinant' of the rise of high-pressure steam and, by extension, the final victory of the engine in the cotton industry (and beyond)."

So, there you have it. The great victory of the political economy of the working class over the political economy of the middle class had the unintended consequence of completing the victory of fossil fuel over renewable but erratic water power.

But, of course the story doesn't end there. Might not the same political economy of the working class act as a lever in the transition away from fossil fuels? The IPCC 1.5° C Report and the Ten-Hour Week

Tuesday, October 9, 2018

The IPCC 1.5° C Report and the Ten-Hour Week

I read the IPCC summary for policy makers so you don't have to. You may have heard that CO2 emissions have to fall by 45% by 2030 to avoid the possibility of overshooting 1.5°C global warming. Actually emissions must decline by 45% from 2010 levels, which are already substantially lower than 2018 levels. The strategies for reducing emissions by that amount are quite complex and depend on hundreds of governments adopting scores of policies that they have no intention of adopting.

So, burn in climate catastrophe Hell, grandchildren!

But wait! Didn't Keynes write something long ago about the economic possibilities for our (their) grandchildren? "What can we reasonably expect the level of our economic life to be a hundred years hence?" Keynes asked that in 1930 -- which just happens to be a hundred years before the IPCC 2030 target date! What about the ecological survival possibilities for our grandchildren?

I have translated the IPCC report into terms compatible with Keynes's prognostications. Remember his prediction of a 15-hour week being "quite enough to satisfy the old Adam in most of us"? How rapidly and how steeply would we have to reduce workweeks to achieve the 45% reduction in emissions by 2030, assuming no other changes in technology (or population)?

I've taken quite a few short-cuts to calculate these estimates. For starters, I only look at the twenty top emitters of CO2 from 2015. I assumed that emissions reductions targets for each country should be allocated on the basis of convergence toward a uniform emissions per capita standard, which would be 45% below average emissions per capita in 2010 (for the 20 countries).

Several countries among the top twenty currently emit fewer tons per capita of carbon dioxide than the hypothetical 2030 standard. These include Brazil, India and Indonesia. Mexico is currently emitting close to what its 2030 quota would be. So my estimates are concerned only with the remaining 16 countries.

To achieve emissions reduction through hours and population limitations alone would require annual reductions in working time of between one percent for Turkey and twelve percent for Saudi Arabia. Also near the top end are the U.S., Canada and Australia at around an eleven percent per annum reduction. With considerable rounding and a generous allowance for holidays and vacations, these reductions in annual hours would indicate a workweek in 2030 of around ten hours.

In the middle range, France and the U.K. could look forward to workweeks of around 20 hours a week. China, currently the world's largest emitter of CO2 would see its workweek cut to somewhere in the neighborhood of 25 hours per week.

Of course some of these reductions in working time could be reversed by de-industrialization -- that is the substitution of less energy intensive but more labor intensive methods of production. Hours reduction could also be moderated by transition to solar and wind energy, by energy conserving technological advances and by the introduction of carbon-capture technologies, including large-scale reforestation.

This hours reduction exercise is only meant to give a simplified view of the scale of transition required. But it also alludes to an earlier transition that consolidated the central place of fossil fuels in an expanding industrial economy.

In 1847, after decades of struggle by factory workers, the U.K. parliament passed the Ten Hours Bill. In response, manufacturers turned to the high-pressure steam engines to compensate for the loss of factory working time with faster, more powerful, more fuel efficient machinery that could do more work in less time. By the end of the 1850s, steam power had decisively eclipsed water power and high-pressure steam had surpassed the low-pressure Watt steam engine.

It was not the intention of the ten-hour legislation in the mid-19th century to deliver the "coup de grâce," to water power, as Andreas Malm termed it, but that was its effect. Might not a working time policy designed and intended to enforce a transition away from fossil fuels be worthy of serious consideration?