Howard Zinn: RIP

The historian Howard Zinn died this week at 87. His _The Peoples' History_ of 1980 altered how many viewed US history, bringing to attention the stories of those who were not the winners of the American dream, the many who suffered, from slaves through Indians, and on and on to many groups. He performed a real service and will be missed.

Banning Foreign Companies' Campaign Contributions

Many companies have tried to reduce taxes by incorporating abroad -- the so-called Bermuda Inversion. Wouldn't the banning of foreign campaign contributions apply to them?.

Finance vs. Independence at the Fed

Richard Smith is a historian who is doing a biography about my mother's cousin.
Here is his timely piece about the corrupting influence of finance on the Fed -- in particular about A. P. Giannini got Truman to remove Marriner Eccles from his position as chairman of the Fed. So much for independence.

Smith, Richard H. 2010. "Breaking News (From 1948): Banking Mogul Ousts Fed Chairman." Huffington Post (28 January).

http://www.huffingtonpost.com/richard-h-smith/breaking-news-from-1948-b_b_439398.html

Climate Disclosure: More than a Carbon Inventory

The SEC has voted to require something that firms should already be doing proactively, assessing their vulnerability to climate change and legislative remedies for it. What everyone should recognize, however, is that first generation measures are not enough.

First generation analysis was first-round: a business or agency would inventory its own carbon emissions and the impact that climate change would have on their own operations. This is a good start, and much has been learned.

To go to the next generation, the guiding principle is to evaluate not only your own direct exposure, but also that of important customers, partners and suppliers. You can say it’s their problem, and it is, but it’s also yours. For example, my institutional home, Evergreen State College, has to consider what the consequences will be for student enrollment if fossil fuel prices are increased dramatically. How many commute from distant locations, and how many of these will move to our neighborhood in order to continue their education? If there are likely to be significant shifts in residential patterns that will affect student demand, can we predict them? Are there actions we can take in advance that can minimize the downside of these adjustments or possibly take advantage of the upside?

You could say that what is needed is for organizations to stop looking at themselves as if there were thick lines around their borders and see themselves ecologically.

The Ideological Use of Cost Benefit Analysis

This short section from my forthcoming Invisible Handcuffs discusses the ideological use of cost-benefit analysis.

http://michaelperelman.files.wordpress.com/2010/01/cost-benefit.pdf

Profound Journalistic Ignorance of Climate Change Legislation

It’s not like this is a new issue. By now, you’d think that journalists would have figured out what’s what in the realm of forestalling climate change, but you’d be wrong. Just take a look at today’s long writeup in the New York Times.

After a quote from Lindsay Graham, a senator from South Carolina, pronouncing the death of cap-and-trade, the coauthors write

Mr. Graham’s opinion matters because he has been the only Republican willing to work with Democratic senators on some form of climate change legislation.

But towards the end of the piece we read that

Two senators, Maria Cantwell of Washington, a Democrat, and Susan Collins of Maine, a Republican, have proposed a system known as “cap and dividend” under which power plants, steel mills, refineries and other major carbon emitters would have to pay for permits to pollute, with all of the money being rebated to consumers to cover the higher costs of energy and manufactured goods.

So: Graham is the only Republican willing to collaborate, but Collins has also sponsored a carbon-capping bill (one that would allow trading too).

Even worse—in fact, much worse—the article completely mischaracterizes Cantwell-Collins. It does not, unlike Kerry-Boxer, require industry-by-industry emission permits. Instead, it requires permits for introducing fossil fuels into the economy, whether by extraction or importation. It goes after carbon from the top of the food chain, making its cap comprehensive, unlike approaches that try to determine which uses of fuels will be regulated and by how much. This also neatly sidesteps the political morass that results from inviting each industry to lobby for its own dispensations. Auctioning fossil fuel permits and rebating the proceeds to the public, as Cantwell-Collins proposes, is not an evasion of environmental responsibility, but a rational attempt to make the inevitable energy price increases economically and politically palatable.

The real story is not the death of climate change policy, but the collapse of one particular initiative that was largely smoke and mirrors, fatally compromised by payoffs to any business alliance that stuck out its hand. The bad news is good news, unless all we know is what we read in the papers, feel discouraged and give up.

A Woody Allen Moment

You may remember the scene from “Take the Money and Run” (if you’re as old as I am). Over and over, as he was growing up, bullies would pull Woody’s glasses from his face, throw them on the ground and smash them. Now, as an adult, he is cornered by the police after a failed heist. In a panic, he pulls his glasses off, throws them on the ground and smashes them. “See,” he says, “I did it myself.”

Fast forward to Obama post-Massachusetts, offering to shrink the beast all on his own.

Time to switch role models.

The Other Shoe

In broad outlines, the story is very simple. In bailing out the financial system without taking possession of more than a small equity position, and then in engineering a stimulus that was deliberately inefficient—devoting a third of its cost to tax cuts at a time of massive deleveraging—the Bush and Obama administrations squandered hundreds of billions of dollars in public resources. Now, to prove his fiscal responsibility, Obama wants to cut spending on core functions of government, like public health, the environment and national infrastructure.

You can blame him for leaving the bloated Pentagon budget off the table, or for prematurely panicking over fiscal deficits. Both criticisms are entirely justified. But in a larger sense, we condemned ourselves to a generation of torturous public finance in that spasm of terrible policy. We will be paying for it, one way or another, for years to come.

Obama is not a Wimp

Barack Obama gave the appearance of meekly appealing for bipartisanship, only to get kicked in his private parts. Yet, look how courageously he is willing to take on the liberals and his party. Along with Larry Summers and Rahm Emanuel, he can really kick butt. Locale he has taken on the teachers union by ramping up Bush's No Child Left Behind. Watch him cut back entitlements for those people without enough initiative to run their own hedge funds.

He may down to the Israelis, but look how decisive he is in Afghanistan, willing to fight an unwinnable war. Not even Joe Lieberman can top him.

And what about his decisive actions against the fat cats? He didn't kick them when they were down. A would not real hero to behave that way. No, he gave them billions of dollars, but now he's decided to take them on, by creating regulations so tough that the fat cats will have to spend thousands of dollars to figure out how to circumvent them.

Barack Obama, change you can believe in.

This Ford’s in Reverse

How should the Democrats respond to their collapse in Massachusetts? Harold Ford, who wants the Democratic nomination for Senate in New York, says swing to the right: cut taxes, lower our sites on health care, fast-track more foreign workers in high-tech fields (which companies want in order to undercut wages they see as “too high”), and cut government spending.

In other words, be like Republicans, only more civilized.

If voters voted on ideology this would make sense. With the Republicans racing to the right, the median voters ought to be there for the taking. Unfortunately, few people actually vote on ideology. Political preferences are based primarily on identity (who we think are “us” as against “them”), secondarily on narrative. If Democrats reposition themselves as responsible conservatives, it just means that, when they are in power, their policies will be more conservative.

Obama’s Gesture on Student Loans

According to this morning’s New York Times, in his state of the union address Obama will call for a cap on student loan repayments. The formula will set a maximum of 10% of post-graduation income above a living allowance. Money not collected due to the cap will be replaced from the general budget.

Is this better than nothing? Yes. It removes a bit of the pressure on grads who face a harsh job market or who want to explore less pecuniary pathways in life. It also encourages students to borrow more for their education, which is a good idea if it allows them to cut back on the number of hours they try to work as they go to school, study, raise kids and cope with life’s other challenges. The cost of tuition has gone up relentlessly, and students have responded by trying to earn more, at the expense of their ability to graduate in a reasonable amount of time and remain sane in the process.

But why is this proposal so much less than it should be? For decades education policy analysts have been calling for putting student loan repayment on an ability to pay basis. Repayment should be set as a fixed percentage of income, with a proportionality between the amount of the loan taken out and the number of years of repayment. Some, who make a bundle, would end up paying more, others less. The system would be progressive and predictable. It would also pay for itself, which in principle frees up more public money for reducing tuition in the first place. (Obama would have lower-income students paying a little less, but no one paying more.)

There is a larger debate that ought to be held around using tuition to pay for the costs of public education. Outside the US this is much less common. One reason is that societies want to encourage more students to continue to a higher level, and studying is already challenging without adding financial pressure to the pot. Another is that they want to separate curricular decision-making in higher education from student preference, at least to some extent. If a college depends primarily on tuition to make ends meet, it has to give greater weight to student demand when deciding what courses to offer, which programs to expand or eliminate, what kind of teaching to reward, and so on. Obviously there are arguments on both sides of this debate, but the US has swung very far in the direction of demand-driven revenues. My college, which is nominally public, now gets the majority of its funding from students, not the state legislature.

The Obama proposal is small, small, small. I guess we are entering Phase II of his presidency, where he shifts to Clintonoid minimalism, a fine mist of minute policy droplets that bathes the public with good PR even if no one actually gets wet.

Guard Labor

My article on Guard Labor is in the new issue of Dollars and Sense. It is extracted from my forthcoming book, The Invisible Handcuffs.

http://www.dollarsandsense.org/archives/2010/0110toc.html

The article begins:

Guards are everywhere in a capitalist economy. A few are dressed up in uniforms, so they are easy to spot. But most do not look like guards at all. Some sit in comfortable offices; others work on assembly lines in factories. James O’Connor, a prolific sociologist from UC Santa Cruz, describes one familiar set of guards whom we do not usually think of as guards:

Consider the labor of the ticket seller at a movie house. The seller’s task is merely to transfer the right to sit in the theater to the movie-goer in exchange for the price of a ticket. But it may not be immediately obvious that it is not the lack of a ticket that keeps you out of the theater ... The ticket is actually torn up and discarded by a husky young man who stands between the box office and the seat that I want.

These guards are a central feature of capitalism. Capitalists depend upon guard labor to protect their commodities, including the goods and premises they own, but especially the labor-power in their employ. Capitalism’s reliance on guard labor deforms the entire productive process, not only wasting labor, but also snuffing out badly needed creativity.

Fed Finally Dumps Eurojunk

Mark Thoma http://economistsview.typepad.com/economistsview/2010/01/links-for-2010-01-21.html links to a story from the WSJ entitled "Fed to End Overseas Dollar 'Swaps'-WSJ.com. It reports that as of Feb. 1 the Fed will have unloaded all of the nearly $500 billion in foreign currencies, mostly euros, that it obtained through swaps in its massive increase in its balance sheet in Fall 2008. That reportedly was used to hold all kinds of horrendous eurojunk coming out of the AIG collapse. It was the worst stuff on the balance sheet, most probably. Now it is about to be gone.

Of course they have replaced it with US mortgage backed securities that do not look so hot, although they are promising to stop accumulating those in March. If that does not work out, could trigger the dreaded second dip.

The Hypocrisy of Corporate Personhood

"Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like." -- often misquoted as "Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked?"

Edward Thurlow, 1st Baron Thurlow. 1731-1806. Lord Chancellor of England, 1778-1783, member of Parliament at end of eighteenth century

In light of the Supreme Court's outrageous decision about campaign finance, I would suggest a move to treat corporations as persons -- making them liable to imprisonment and even the death penalty, when they cause loss of life.

But no, the pro-corporate types invoke a brilliant act of legerdemain, making the death penalty for corporations unthinkable.  As I noted in Manufacturing Discontent:

"during the height of the scandal regarding Enron's multibillion dollar frauds, a "Wall Street Journal opinion piece entitled, "Corporations Aren't Criminals," noted:  "Under the common law, a corporation could not be guilty of a crime because it could not possess mens rea, a guilty mind" (Baker 2002).  Sadly, the author was correct -- at least in so far as the current courts are concerned. In the eyes of some judges, the law goes even further than ruling that corporation that violate the law lack a guilty mind.  They insist that corporate managers, who should possess a mens rea, have an ethical responsibility to violate the law when doing so will prove profitable for stockholders.  For example, Frank H. Easterbrook and Daniel R. Fischel, the former a federal judge as well as a senior lecturer at the University of Chicago School of Law, wrote:

It is not true, however, that there is a legal duty to enforce every legal right ....  Managers do not have an ethical duty to obey regulatory laws just because those laws exist.  They must determine the importance of these laws.  The penalties Congress names for disobedience are a measure of how much it wants firms to sacrifice in order to adhere to the rules:  the idea of optimal sanctions is based on the supposition that managers not only may, but also should violate the rules when it is profitable to do so. [Easterbrook and Fischel 1982, pp. 1171 and 1177 n]"

Haiti Everywhere

"Much was said this night against the parliament. I said that, as it seemed to be agreed that all Members of Parliament became corrupted, letter to chuse men already bad, and so save good."

James Boswell

In my book, The Pathology of the US Economy, I wrote about how I was witnessing the United States following when I called "The Haitian Road to Development." What I meant was an economic strategy based on pushing wages down to make the economy productive.

Over the last two days, I have been thinking about the Haitian Road to Development more broadly. We lost our power. I don't mean political power; I mean electricity that powers our house. Without electricity, the computer was dead. Reading was possible only during particular hours. We were dependent upon a corporation that has been attempting to maximize profits by cutting back on maintenance.

Yesterday I had to ride my bike about 12 miles in a heavy rainstorm with winds up to 60 miles an hour. The rains stung my face. At times, I had to dismount and walk the bicycle to avoid getting pushed into oncoming cars.


Finding myself at the mercy of the elements, for brief moments, I would think about my minor difficulties and inconveniences for brief moments, then imagining how conditions in Haiti were infinitely worse. Everybody who knows anything about Haiti realizes the way that outside forces (largely the United States) have crippled the public sphere. Poor people have no choice but to denude hillsides for charcoal and build shanties that are vulnerable to the inevitable mudslides.

To much of the outside world (well, maybe just United States), the cause of the miserable conditions in Haiti are obvious: the voodoo religion, insufficient markets, ….

In many ways, I was thinking about how the US was coming to resemble Haiti. Of course, the decline in this country is of our own making, wasting our fortunes on wars that have no possibility of a long-term positive outcome -- as if any wars do. But the mudslides in California would be familiar to Haitians. The destroyed houses are more affluent. The missing trees were not chopped down by poor people needing fuel. The inhabitants are not left without water or food. Even so, I suspect that Haitians might have more understanding of the destruction than we do.

The Haitian state is incapable of protecting the people, but it weakness is not self-inflicted. In the prologue to The Confiscation of American Prosperity, I wrote "since the election of Franklin Roosevelt in 1932, every Democratic administration with the exception of Lyndon Johnson’s has been more conservative—often far more conservative—than the previous Democratic administration. Similarly, every elected Republican administration, with the single exception of George Herbert Walker Bush’s, has been more conservative than the previous Republican administration." Obama has done nothing to reverse this destructive trend.

The US state's idea of protecting people is to launch wars elsewhere and collect dossiers on people within the country. In the face of Hurricane Katrina or other disasters, it proves itself totally incompetent. The state is even less capable in protecting the people who fall between the cracks -- a child who cannot study because of a toothache. An elderly person who requires care and home -- care which the state of California keeps restricting. Instead, the state takes on the responsibility of caring for more than 2 million prisoners.

In effect, the state is fast ceding power to the corporate world, which threatens to go much further in Haitianizing our society.