Does Kevin Hassett Understand Transfer Pricing?

Howard Gleckman does:

It is true that bringing US corporate rates in line with our trading partners may reduce incentives for improper transfer pricing. But there is a flaw in Hassett’s argument: While these practices are aimed at reducing tax lability, they do not represent real economic activity. And limiting income shifting won’t significantly increase domestic employment.

He was noting this presentation:

Kevin Hassett, chair of President Trump’s Council of Economic Advisers, argued today that the corporate tax cuts in the Sept. 27 Republican Unified Framework would boost overall economic growth. How? In large part because its corporate tax rate reductions would encourage firms to shift jobs from overseas to the US. But the claim is unsupported by the evidence. In a speech at the Tax Policy Center today, Hassett said that the GOP plan would not only increase domestic employment but also raise worker wages by an average of $7,000. That is quite a promise, but after unpacking his argument, it seems improbable at best. His claim: Making statutory US corporate tax rates competitive with the rest of the developed world would encourage firms to stop inappropriate transfer pricing, corporate inversions, and other income-shifting practices. Half of the US trade deficit, he said, results from transfer pricing.

Half of our trade may come from related party transactions and in some cases, transfer pricing manipulation may be significant. But to claim that half of our trade deficit is due to non-arm’s length pricing seems to be quite the stretch. Let me also suggest that this corporate inversion discussion is a distraction as all that does is to turn the tax system into a territorial one where the repatriation tax disappears. Isn’t ending the repatriation tax one of the Republican proposals? OK – we might see a lot of foreign sourced profits coming back home but this simply means shareholders get their dividend checks sooner. Any claim that it would dramatically increase investment is not only bad finance but also rejected by the evidence from our last experiment with a repatriation tax holiday. Gleckman also notes:

the territorial tax system that the Big Six outline contemplates could further encourage US firms to shift revenue to lower-tax jurisdictions since that model would exempt the income of foreign subsidiaries from US tax.

While this could be an issue with ending the repatriation tax, other nations have addressed this by more aggressively enforcing their transfer pricing rules. We could do the same if the Republican Party decides it is time to properly staff the IRS.

Why I Lack Sympathy For The Catalan/Catalunyan Independence Movement

Because like the neo-fascist Lombard League of northern Italy, they are a rich region of a nation that does not want their money going to the poorer regions of that nation.  That is it. Sorry, this is not about language suppression or  anything else.  Catalalunya/Catalonia achieved autonomy on education, health, and local law enforcement a long time ago.  The only thing they lack is all that money they are sending to the rest of Spain.

Yes, they will probably get to keep their money in the future.  I thought it was conservative Spanish  PM, Mariano Rajoy of the PP, who stupidly ordered national police to attempt to break up the independence referendum, who engaged in violence of shooting rubber bullets, clubbing people with billy clubs, and dragging people by their hair, leading to hundreds injured, although nobody dead.  This order that will probably lead to full Catalunyan independence was ordered by a Spanish national constitutional court judge who had ruled the referendum illegal.  If he really thought he was going to stop the vote, he is an idiot.  All he has done is guarantee that "reasonable people" will support the 90% outcome of the vote, with only a 42% turnout, given that opponents apparently boycotted it.  But like those who did not want Crimea annexed by Russia, boycotting a vote organized illegally by those who want a certain outcome, only plays into the hands of those who want that certain outcome.

The path to this has been a mess.  The referendum was voted for by the current Catalan parliament that has a 72-63 members split between those favoring independence and those opposing it.  Like the US, Catalonia/Catalunya favors rural voters in representation, and rural voters are more pro-independence than urban ones, largely in Barcelona.  A poll taken by the government as recently as July showed 48% opposed to independence with only 41% for it.  The pro group has at times beaten the anti group in polls, but in fact the pro group has never gotten above 50% in a poll, although they got 90% in this illegal referendum, which will be taken very seriously by world history, given that this stupid judge sent the national police in to beat people up.

The problem runs deeper.  While indeed the province has autonomy in education and language, many charge that the school system has been taken over by nationalists who are trying to eradicate the Spanish language. Still 60% of the provincial population speaks Spanish as their mother tongue.  This is a very close call, but the critics charge that the nationalists have been going out of their way to suppress their opponents in an undemocratic way.  I can dismiss the national Spanish courts and the EU supporting them, but in fact members of the current government quit in protest over the way the move to push this referendum was done in the Catalan  parliament itself was handled.  They may accuse their opponents of being remnant Franco Phalangist-fascists, but their own tactics resemble that ideology more than those of their critics, just as the Lombard League in Italy goes neo-fascist.

My own personal observations on this really involve a visit I made in 1973 to Barcelona.  I note I was taken to Spain (not Barcelona to my knowledge) in 1954 at Easter time by my parents when I was six and unaware of politics.  I remember getting upset when my sister and I were left in our car in some small town while my parents got something, and a crowd of people came and banged on our car begging for money.  I suggested to my father that we give them some, but he said that there were too many, and if we gave any to some, others would demand more than we had.  Later I saw penitents looking like KKK guys in Toledo.  We bought a figure looking like them and many decades later my grandson Charlie was frightened when young when shown this odd figure. Then in Granada, we saw people living in caves. Really.

Anyway, getting back to well-off Barcelona in 1973, Franco was in charge then, and indeed he totally suppressed  all languages other than Castellano Spanish and maintained a strongly centralized control.  Every sign was in Spanish in Barcelona, but I heard people speaking Catalan, which I figured out because the words they used were neither French nor Spanish, although more like French (and later I figured out more like Italian really).  They did so obviously when no authorities were around, and it was clearly an act of resistance against the dictatorship. I was sympathetic.

Since then they have achieved sufficient autonomy that their language is everywhere and now taught in schools.  Any claim by Catalunyan nationalists that their language is being suppressed is just a pile of horseshit, to use a technical  term.  I have seen now the opposite when visiting Barcelona: people being humiliated and rebuked for speaking Spanish in public.  This disgusts me just as much as the 1973 suppression of Catalan under Franco disgusted me.  I have no sympathy for  these rich and spoiled crypto-fascists with their arrogant public behavior toward anybody speaking Spanish openly, although I oppose any effort by anybody in the central government to engage in violence to suppress the obviously burgeoning and almost certain to succeed independence movement.

A final note is that my old friend Paul de Grauwe, one of the fathers of the euro, has posted (sorry, too lazy to link) comparing the Catalunyan independence movement to the Brexit movement, and implicitly to the Trump movement in the US.  Obviously there are differences, but the similarities are striking.  Among them are outright delusions, particularly for the Catalalunyans that once they are independent they will  be in the EU and have great economic outcomes.  Ooops, but no.  They will have one economic gain: not sending tax monies to the poorer regions of Spain.  Beyond this, they will lose. They will not be in the EU, and will not be let in soon and will not get those benefits, just like the UK, where lots of idiots voting for Brexit thought they were going to get their cake and eat it too, but are now gradually waking up to the fact that this will not happen.  They are going to pay and pay big time.  I shall not draw out in any detail the comparison with the US situation.

Anyway, I think this is tragic, and I think it is partly a response to the election of Trump in the US: irresponsible lying creeps feel free to override normal procedures and rules to seize power and push forward racist nationalist agendas all over the place.  This one is less likely to end up in outright war and people dying, aside from the several hundred injured in this referendum vote, but I fear that there will be nothing at all good  coming from this, nothing, and quite a bit bad, both for those in Catalunya/Catalonia, as well as the rest of Spain, and possibly in the rest of Europe and the world.

Barkley Rosser

Thoughts And Prayers For Hurricane Victims

We wish to extend our thoughts and prayers to the victims of those who have died or been injured by Hurricanes Harvey, Irma,  and Maria and to their families and friends [for real, rest is satire].  Needless to say, this means that this is not the time to discuss changing current policies regarding climate change.  Our president has decided to withdraw the US from the Paris Climate Accord, the Director of the EPA has ordered removal from all agency websites of any mention of climate change or that it might be at least partly caused by humans, and funding for research on this topic is being cut.  Certainly, as we mourn the dead from these hurricanes, it is simply inappropriate to discuss changing these policies, just as it is still too soon to discuss changing gun policies after the 2006 shooting at Virginia Tech.  Oh, I forgot, we did change policies after that, making it easier for people in many states to carry guns in more public places and purchase them without background checks, as of course it is unconscionable to block gun purchases by mentally disturbed terrorists.

As for talking about changing climate change policies, well, it would be an insult to the families of the hurricane dead to even remotely mention possibly rejoining the Paris Climate Accord or putting anything up on EPA or NOAA websites that would even remotely suggest that human activity might have had anything whatsoever in making these hurricanes stronger than they might have been otherwise.  Obviously these hurricanes were sent by God, and those who died did so at His will, and we must respect that and the hard feelings that the families and friends left behind must have to deal with in coming to terms with this hard truth.  We must all humiliate ourselves in the face of the divine and not remotely question any profits that might be accruing to any fossil fuel companies for their activities in increasing the carbon dioxide in the atmosphere, which our wise administration has determined has nothing to do with climate change whatsoever, the very suggestion of which we know is a Chinese hoax.  Let us all continue to extend our thoughts and prayers and wait for another appropriate time, as long from now as possible, to discuss these matters.

Barkley Rosser

Trump’s Inadequate Response to Hurricane Maria and the Posse Comitatus Act

Credit to Matthew Yglesias for his discussion of the incompetence of Donald Trump as well as the excuses for it from his defenders including:

Officials have also cited the Posse Comitatus Act as a complicating factor that helps explain why Trump was so much slower to dispatch assistance to Puerto Rico than the Obama administration was to send help to Haiti after it was devastated by an earthquake in 2010.

Except this 1878 Congressional Act does not bar the President from calling in the military as Michael Spak and Donald Spak note:

Before 1878, it was common for the United States Army to enforce civilian laws. In frontier territories, the army was often the only source of law enforcement, supplemented by occasional U.S. Marshals. Over time, marshals and county sheriffs regularly called upon the army to assist in enforcing the laws… By the time of the 1876 presidential election, Southern states were reconstituted. Many Southerners opposed both Grant, the outgoing Republican president, and Rutherford B. Hayes, the Republican presidential candidate. Federal troops actively assisted U.S. Marshals in patrolling and monitoring polling places in the South, claiming to be enforcing the federal election laws and preventing former Confederate officers from voting (as was the law at that time). Following bitter election contests in four Southern states, Hayes won the presidency by one electoral vote. Many felt that the federal troops, which supported Hayes and the Reconstructionist Republican candidates for Congress, intimidated Southerners who would have voted for Samuel Tilden, the Democratic candidate. The resulting Democratic Congress was at odds with the Republican President Hayes. In response to what was seen as undue influence over the 1876 election, Congress outlawed the practice of posse comitatus by enacting the Posse Comitatus Act (PCA) (as 20 Stat. 152) as a rider to the Army Appropriation Act for 1880. The act stated: "Whoever, except in cases and under circumstances expressly authorized by the Constitution or Act of Congress, willfully uses any part of the Army or the Air Force as a posse comitatus or otherwise to execute the laws shall be fined under this title or imprisoned not more than two years, or both." Congressional debates indicate that the PCA was intended to stop army troops from answering the call of a marshal to perform direct law enforcement duties and aid in execution of the law. Further legislative history indicates that the more immediate objective was to put an end to the use of federal troops to police elections in ex-Confederate states where civil power had been reestablished.

In other words, this PCA is an outdated piece of legislation. But there’s more:

Others suggest the act is obsolete and should be repealed because numerous legislative exemptions have eroded the underlying policy and left the PCA a hollow shell. Others insist that although there are many exceptions, the act is essential to bar misuse of the military by civilian authorities and to prevent a military dictatorship from assuming control of the nation through use of the armed forces. Still others argue that the act means only that federal military forces may not be commandeered by civilian authorities for use in active and direct law enforcement as a posse comitatus. If local authorities need military personnel for specialized operations enforcing state laws, it is argued, they may call on the state governor for the assistance of the state National Guard.

There are many exceptions and no one would think giving aid in a time of need endangers either military dictatorship or the misuse of the military by civilian authorities. This pathetic excuse from Team Trump is just another example of how he turns everything in a culture war.

The Kurdish Independence Vote

Buried on the back pages of this busy week has been the news that in Iraqi Kurdistan on Monday there was a referendum on independence reportedly supported by 92% of the voters.  I imagine that is not inaccurate, and that there was strong support for this referendum, even as Kurdistan Regional Government (KRG) President Massoud Barzani says that it is only advisory and a prelude to negotiations with the central Iraqi government.  As it is, this vote is not being treated as such, and there has been a tremendous negative reaction not only from the Iraqi central government but from all of the neighbors of the KRG, with even their usual ally, the US, not supporting the vote (if not threatening hostile actions against it), with only Israel openly supporting it. The hostile reactions of neighbors and especially the central Iraqi government may well lead to war, even as Daesh/ISIS remains not quite completely defeated within Iraqi territory, with up until now the Kurdish Pesh Merga having been working with the Iraq National Army as well as various Iranian Shia militias against Daesh/ISIS.

Let me be clear that I have enormous sympathy with the aspirations of the Kurdish people for having their own nation.  The 35 million Kurds have long been described as "the largest ethnic group without a nation" (although technically some larger ones merely have a state in India).  They were promised a nation at the Versailles conference back in 1919, but the machinations of the British, French, Turks, and Persians (now Iranians) led to that promise not being fulfilled, and the Kurds being spread among Turkey, Iraq, Syria, and Iran today, and a history over the last century of being crushed and abandoned and lied to by many nations.  They speak an Indo-European language related to Farsi/Persian, and are mostly Sunni Muslim although with a Shia minority.  However, they are largely not as religiously fanatical as most people around them, and the parties representing them in Turkey tend to be secular and leftist.

The three provinces with a Kurdish majority in northeastern Iraq began achieving a de facto autonomy during the first Gulf war, after Saddam Hussein had used gas against them during the 1980s, leading to some of them fleeing to the US, including some to my city of Harrisonburg, Virginia, where they have a large community.  The US supported this autonomous government with a no-fly zone over it, and it achieved a more official autonomy, although not independence from Iraq, after the fall of Saddam Hussein's regime.  During the US invasion, the Kurds were the strongest allies of the US, and their Pesh Merga has been the strong arm of the anti-ISIS military movement in both Iraq and Syria, working especially closely with the US in that.

As part of their autonomy they began developing their oil industry and making deals with international oil companies separate from the Iraq central government, with their exports reaching about 600,000 barrels per day now, not enormous, but also not trivial in a world of about 85 million barrels per day.  They are supposed to share oil revenues with the Iraqi  central government, but there has been ongoing disagreement about this as well as other fiscal matters, with these festering disagreements having worsened over time.  In any case, the KRG has made its deals and exported its oil against the wishes of the Iraqi central government, largely through the Ceyhan pipeline going through  Turkey.

Another important development, arising from during the overthrow of the Saddam regime, is that the Pesh Merga took control of certain areas outside the three provinces directly ruled by the KRG. The most important of these has been the city of Kirkuk, near another center of oil production and which has long had a highly mixed population of Arabs, Turkmen, Kurds, and some others.  The Kurds claim that Kirkuk is a historic cultural center of theirs, and the Kurdish  population there has increased while other groups have left.  But it remains a highly mixed population, and is not officially part of the KRG area.

In general, especially compared to the rest of Iraq, the KRG has largely appeared to do a good job of governing, despite some longstanding internal conflicts between families and factions.  There has not been outright warfare and democratic voting and a reasonably functioning economy, fed especially by their oil exports.  However, this has been deteriorating for some time.  Current President Barzani's term was supposed to end in 2015, but he has extended it by emergency rule.  Also, low world oil prices have led to a slowdown of the economy and increased grumbling.  Also, ambitions for independence have increased as Kurds have achieved military victories in Syria and elsewhere.  All of this has led Barzani to pursue this referendum at this time, which undoubtedly will strengthen his internal  political hand, even as the KRG faces a fierce external  backlash that could lead to war.

The  backlash  includes Iraq demanding that all foreign airlines stop flying to airports in the KRG region.  It appears that those airlines are obeying this demand, and Kurdistan appears to be about to become completely isolated in terms of commercial  air transport.  While it is not clear that they have done it yet and could still back down, Turkey has declared that it will shut off the flow of oil exports through its pipeline from Kurdistan.  If they follow through on that, it will plunge the KRG economy into deep recession.  Iran has declared its opposition and refuses to allow goods to pass through it to the rest of the world and has sent troops to the KRG/Iran border.  Finally, the Iraq central government is demanding that the Kurdish Pesh Merga withdraw from Kirkuk and turn it over to  the Iraq central government.  Reportedly the Iraq army is  on its way to Kirkuk, and this is where war could break out.  Frankly, while I am sympathetic, I have to say that I think this is a terrible time to be making this referendum happen, although clearly President Barzani sees at least short term gains for himself, even if this ends up bringing about serious suffering on the part of his people.

I note as an aside to all this, and perhaps why I am especially concerned, that I have been a friend to people in the Harrisnburg Kurdish community. Back in 2006 I helped save some of them from an FBI effort to  jail them for trying to send money home to relatives in Iraqi Kurdistan.  This was my most proud post on the old Maxspeak, still behind fire walls, as it helped lead to all the local Kurdish men charged getting off. An op ed about all that was put up by me on Juan Cole' site.

Tomorrow (later today technically, Yom Kippur actually) is International Day here in Harrisonburg, when local ethnic groups show up at Hillandale Park to show off crafts and items and information and sell ethnic  food and even play music and dance. A regular highlight each year at 5 PM is when the Kurds dance, and I have joined them in the past in doing so, knowing some of them quite well.  I hope to tomorrow as well and expect them to be especially joyous given this vote.  However, while I am sympathetic and hope for the best, I am afraid that I fear the worst.

Addenda, 6:39 PM, 9/30/17

1)  I suspect that part of the recent runup in world oil prices has been in anticipation of the likely Turkish cutoff of oil coming out of Iraqi Kurdistan.  Prices are at their highest in two years, with Brent crude at between $57 an $58 per barrel yesterday and between $51 and $52 for West Texas Intermediate crude.  OPEC inventories are down, presumably with KSA sticking to their quotas, but "geopolitical uncertainties" have been invoked for part of the price increase, and the Kurdish independence vote and likely Turkish response have looked like part of that.  Until recently the price had been in the 40s for many months.

2)  While many are annoyed with Barzani for doing it prior to the final defeat of Daesh/ISIS in Iraq, it may well be that this has not been achieved playing a role in the timing.  Given the important role of the Pesh Merga in battling Daesh/ISIS Barzani may feel that this need by their erstwhile allies for continued assistance against the common enemy may give him some leverage.  OTOH, it may simply lead to the campaign to finish Daesh/ISIS off falling apart at the final point.

3)  Barzani may be calculating that the Pesh Merga may be stronger than  the Iraq National Army and will be able to hold Kirkuk, and he may be right.  OTOH, the Turks may yet be tempted to intervene due to the large Turkmen population in Kirkuk.  I doubt the Pesh Merga would be able to withstand a full press attack by the Turkish military.  As it is, apparently the Iraq National Army is trying to take control of all border crossings from Iraqi Kurdistan into neighboring Turkey and Iran, as well as with the rest of Iraq.

4)  I did attend the International Festival and I did get to dance with the Kurds there.  They were waving Kurdish flags vigorously and proudly and taking lots of selfies with them.  I spoke with my friend, Rashid, whom I helped keep out of jail and who is probably the main leader of the community.  He told me that two years ago "some ignorant people" had attacked them there because of their waving of Kurdish flags.  I did not express my concerns about what might come to pass in Iraqi Kurdistan.  They may have their fears, but today they were celebrating.

Barkley Rosser

How I Came To No Longer Be A Kaldorian Economist

Yes, for a period of time, according to some sources, I was a member of the "Kaldorian" school of Post Keynesian  economic thought, although I had not previously thought of myself as such, indeed, had been unaware that there even was such a school of economic thought.  But now, according to such sources, I am no longer a member of such a school.  Indeed, it is not clear that there even is such a school, if there ever was.  This is a tale of the ongoing tangle of schools of Post Keynesian economics, as well as how Wikipedia operates, and more broadly the history of economic thought.

I note that while it lasted, this matter was taken at least somewhat seriously.  So, a few years ago I was at a conference and walked into a plenary address that was being given by Tyler Cowen of George Mason.  There was a pretty large crowd, but Tyler interrupted his talk when I came in to note, "I see that Barkley Rosser has entered the room, so I had better be careful what I say about Nicholas Kaldor."  Indeed, ironically, he was just about to say something about Kaldor, and I must say that I had no serious disagreement with his remarks, although maybe he cleaned up his act, given my presence as the representative of "the Kaldorian School," if not the late Lord Kaldor's personal representative.  That was then, but this is now, and I am nothing, nothing, I tell you!

Anyway, as I said, I had not been aware of such a school, much less that I was supposedly a part of it, but then in 2014, my friend Marc Lavoie published his excellent Post-Keynesian Economics: New Foundations.  In it he provided set of supposed schools of Post Keynesian economic thought.  I note that there has long been a history of arguing and battling and generally warring among various strands of Post Keynesian thought, with some expelling others, although not necessarily totally.  Joan Robinson coined the term back in the 1950s, and for a while Paul Samuelson was using the term for an eclectic bunch of Keynesian economists of the early 1960s.  But the term became narrower as the 1960s moved on and journals were started, and battle lines were drawn.  Going into the 1980s, and focused on Post-Keynesian summer schools being held in Trieste, Italy, there was a sharp split between Sraffian neo-Ricardians based in Italy, led by the late Pierangelo Garegnani, and American Post Keynesians who focused on uncertainty and the role of money led by Paul Davidson.  In between them was a more British and Australian based group, some of whom were thought to be followers of Michal Kalecki, and probably Joan Robinson, some of whom made efforts to overcome the sharp split between these other two.  The most important leader of that group was probably Geoff Harcourt, he of the "different horses for different courses," how open-minded of him.  Anyway, those summer schools fell apart, with each of the more sharply opposed groups not attending the seminars of the other, and after this the Americans all but expelling the Italian Sraffian-neo-Ricardians from Post Keynesianism, even if they were still counted by others.

Well, Marc moved beyond this to list five different schools of Post Keynesian thought, providing a small group of people supposedly in each of these groups.  They were fundamentalists, which included Davidson (who has long emphasized going back to Keynes to see what he wrote), Kaleckians, and Sraffians, which pretty much gave us what appeared to have come out of the 1980s arguments.  But then he added two more, Institutionalists and (ah ha!) Kaldorians.  This last group had in it, of course, Kaldor himself, as well as three other dead men: Wynne Godley, Richard Goodwin, and Roy Harrod. A leading Institutionalist was John Kenneth Galbraith on his list.  As it is, I suspect that Marc coined this supposed school of "Kaldorians" because he himself identified with it.  He was disgusted, as have been many of us, with the wrangling warfare between the fundamentalists, Sraffians, and Kaleckians.  So, cook up another school.  My bet that he views himself as part of the Kaldorians is that he coauthored a lot with Wynne Godley, and he identified an interest in nonlinear dynamics as part of Kaldorianism, which indeed was an interest of Kaldor who emphasized economies of scale as breaking down neoclassical equilibrias.

Needless to say, I have long been interested in nonlinear dynamics, so that set up the next development.  That was that on the Wikipedia entry for "Post-Keynesian economics," somebody imported Marc's lists and then added to them massively, but then replaced the Institutionalists with the Modern Monetary School (MMT), led by people like Randy Wray and Warren Mosler and Stephanie Kelton.  On these longer lists, there I was in with people like Godley and Goodwin (whom I especially admire) on the list of the supposed Kaldorian strand of Post Keynesian economics. Hot stuff, whoop de doo.  Not long after that, there I was with Tyler Cowen publicly identifiying me as one, although when I discussed the matter with Marc Lavoie himself, I think he was sort of annoyed that somehow I had gotten added to this list.  As it is, I do not know who put that stuff in the Wikipedia entry, although I saw such a list put up on the internet by a blogger calling him(her?)self "Lord Keynes."  Yeah, some people are a bit full  of themselves.

I had not checked on any of this for some time but was revising a paper for a journal in which I and coauthors quoted Kaldor on equilibrium, ("Consistency and Completeness in General Equilibrium" with Simone Landini and Mauro Gallegati).  Looking at the quote I thought I would check on this on Wikipedia, only to find that those lists of schools are gone.  The verbiage starts out mentioning Kalecki, Joan Robinson, Kaldor, Davidson, Sraffa, and Jan Kregel, also noting Robert Skidelsky's role in defining Keynesianism.  It then later mentions the Cambridge capital controversy, Sraffa and the neo-Ricardians are mentioned.  Kaldor is mentioned as is Paul Davison.  Then money circuit theory is mentioned as is modern monetary theory (MMT).  Wynne Godley and Hyman Minsky (who always rejected the "Post Keynesian" label for himself) get mentioned, with final shoutouts to chartalism and functional finance, both well regarded by the MMT school (there is also a tour of nations and journals and groups).  This is followed by a list of 26 supposed "leading first and second generation" Post-Keynesian economists, of whom I note that 14 are dead.  I list them here for the record:

Victoria Chick, Alfred Eichner, James Crotty, Paul Davidson, Wynne Godley, Geoff Harcourt, Michael Hudson, Nicholas Kaldor, Michal Kalecki, Fred Lee, Augustus Graziani, Steve Keen, Marc Lavoie, Paolo Leon, Abba Lerner, Hyman Minsky, Basil Moore, Ed Nell, Luigi Psinetti, Joan Robinson, George Shackle, A.P. Thirlwall (who once wrote a book about "Kaldorian economics"), Fernando Vianello, William Vickrey, and Sidney Weintraub.

Just to further stir the pot, there is now a new post about "Post-Keynesian economics" up on Rational Wiki, whatever it is.  It has clearly been put up by strong advocates of the MMT school, whom many think view themselves as the true heirs and new leaders of Post Keynesian economics.  If that is the case, this Rational Wiki post would appear to be part of that effort.  After a very brief boilerplate opening, modern monetary theory is presented as the main idea in Post Keynesian economics.  That is it. The rest can go shove it.  The list of external links go to sites run by Warren Mosler, Stephanie Kelton, Steve Keen (more a Minsky-money circuit guy than a hard core MMT person), and two to Bill Mitchell, up there with Mosler and Kelton as an MMT leading figure.  There is a further external links list that go to John Maynard Keynes, Dean Baker, and "Market monetarism."  I think Dean Baker mostly thinks of himself as a Post Keynesian economist, but has mostly stayed out of all these controversies.

Anyway, probably this is all  just picking at minor niggling and unmportant divisions and wrangles, but standing back from it I find it curious, both in terms of the development of these labels and controversies, as well as what the heck is going on with the Wikipedia accounts of all this.  On the latter, this makes me more skeptical of Wikipedia, having also recently run into some outright errors on that source I shall not get into, but just encourages me in continuing to refuse to accept Wikipedia as a source on papers by either students or actual professional economists.

Barkley Rosser

Worse Than The Usual Hypocrisy: Trump, Puerto Rico, And The Jones Act

The Jones Act was passed 97 years ago to protect US shipping within the US from foreign-made ships.  I doubt I ever would have supported such an act, but at least back then there were plenty of US-made ships to fulfill the demand. Despite the Jones Act, the US shipping industry has collapsed in the last century so that the number of such ships is far below demand in normal circumstances, so that intra-US shipping costs are far higher than those outside the US.  Puerto Rico was covered by he Jones Act and remains so.

After Hurricanes Harvey and Irma the Jones Act was temporarily suspended for Texas, Louisiana, and Florida on orders of President Trump, going through the Department of Homeland Security.  The Jones Act is not being suspended for Puerto Rico in the wake of Hurrican Maria, although damage to PR seems to be far greater than what happened on the mainland during Harvey and Irma (with those areas also accessible to supplies and aid by ground transportation, not relying nearly as much on ocean shipping).  The supposed reason is that PR's ports are damaged, which is certainly the case, but even if suspending the Jones Act will only slightly speed up deliveries, it will certainly reduce the costs of supplies, allowing cheaper natural gas from Pennsylvania in place of more expensive oil from Venezuela, for example.

Which brings us to the worse then usual hypocrisy on the part of our president.  While he has been all worked up over football players kneeling and moved to get aid to Texas and Florida as rapidly as possible while expressing lots of sympathetic sentiments for the victims in those states, his initial reaction to Hurricane Maria, after several days delay, was to talk about how bad their infrastructure was before the hurricane and how they have a massive debt situation.  Of course, if he were really concerned about helping them, he could suspend their debt, but at a minimum, given that he is aware that they are poor and debt ridden, on top of having 80% of their crops destroyed and all their power out among other problems, he is insisting that they pay top dollar on supplies brought in by water, where almost all supplies will come.  His refusal to suspend the Jones Act for Puerto Rico after having done so for mainland US territories is far worse than the usual hypocrisy from any president, even this far more hypocritical than pretty much all others one.

Barkley Rosser

Saudi Women Can Drive

As someone who has denounced the Saudi leadership and its new crown prince, Muhammed bin Salman, for maintaining their nation's position as the only one in the world where women are not allowed to drive, I must salute them for changing their law.  They are joining the rest of the world and will allow women to drive now, by all reports the top demand by women in the kingdom for their rights.  Welcome to the rest of the world, Saudi Arabia and Prince Muhammed bin Salman, of whom it had long been rumored that he would bring this about.  It is about time, and congratulations.

Barkley Rosser

Addendum:  This new rule does not take effect until next June, and the women will need to get licenses, so it will be some time before women are actually driving in KSA.  It is not "now," but "in awhile," but it is coming.

On Not Rising for the National Anthem

Apropos #takeaknee and the previous post:

Most of the discussion about whether NFL and other athletes should stay on their feet during the pre-game singing of the Star Spangled Banner miss the point.  Kneeling is a political statement, but so is not kneeling.

The public staging of the national anthem is a political event.  It began in professional baseball during World War I as a demonstration of support for the war effort (before the SSB was even officially the anthem), at a time when propaganda and repression against dissent were fierce.  But you don’t need to know much history to recognize “all rise for the national anthem” for what it is.

The public singing of the anthem is a nationalist ceremony.  Through it, those present confirm their loyalty to the government as a value that supersedes all others.  If we had a different song about democracy and popular sovereignty as supreme values, that might be better, but it would be political too.  Nationalism is simply one particular political value system, and the unthinking acceptance most people give to it doesn’t change that fact.

So athletes who make a show of not embracing the nationalist display are not injecting politics into anything; they are responding to one political statement with another that expresses their own point of view.  If you don’t want to mix sports and politics, eliminate the enforced display of nationalism.

Also, the SSB is a terrible song, with crappy music and lyrics.

Political Football

United States Code Title 18 § 227 #TakeAKnee

Gentrification

This is the bane of urban development, right?  Old housing stock, built for yesterday’s working class, is spiffed up and priced far out of reach of today’s regular folk.  High end shops replace hardware stores, bric-a-brac recyclers and appliance repair centers; a tide of designer coffee flushes out the cheap, refillable kind.  Who can afford to live there?

But wait!  Those refurbished old houses are beautiful.  It’s a pleasure to peruse delicate artisanal fabrics and custom-designed furniture.  The food is fresher, healthier and tastier.  And what’s the alternative—to put a blanket over everything old and keep out all improvements?  Is gentrification even a problem?

It is.  It’s wrong if whole neighborhoods are uprooted, unable to afford housing and services available to them for generations, and the dynamism of city life is crippled if only those who have already made it can make their home there.

Regulations that restrict the development of new housing have rightly come under attack.  Encouraging infilling and greater density benefits the environment and keeps housing costs down, but that only moderates the impact of gentrification.  The luxury apartments that replace old single family houses are still beyond the means of most of us.

My hypothesis is that the basis of gentrification as an urban problem, rather than a type of broad-based development that benefits everyone, is extreme inequality of income.  Gentrified neighborhoods are those outfitted for the upper echelon to spend their money on, and prices are geared to what the traffic will bear.  The rest of us can’t afford it.

Imagine that income were distributed much more equally in this country.  Maybe a few people would be rich, but there wouldn’t be enough of them to fill up whole cities.  And the gap between the better and lesser off wouldn’t be so large as to preclude mixed neighborhoods.  As overall incomes rose over time, so would the quality of housing, shopping options and services.

If I’m right, the solution to gentrification isn’t a prohibition on investments that upgrade urban life, but serious measures to reduce economic inequality itself.  The test is whether countries without the great divide between the rich and the rest are as subject to gentrification as the US.

Ta-Nehisi Coates and the Limited Art of Interpretation

Among the least persuasive writers on contemporary politics, for me, is Ta-Nehisi Coates.  Mind you, I often agree with him, but only because I agreed with him before reading him.  If I go into a piece of his with a different perspective, nothing he says has an effect on me.

Now, if I were intellectually stubborn, the sort of person who rarely changes his mind, that would be a statement about me, not Coates.  In fact, I’m always changing my mind.  Nearly every day my views are shifting, sometimes only slightly, sometimes a lot.  When I go back and read what I wrote several years ago, my first instinct is to grab an editor’s pen.  Maybe I’m too susceptible to persuasion.

But not by Coates.  The thing is, he seldom makes arguments in the sense I understand that term.  There isn’t extended reasoning through assumptions and implications or careful sifting through evidence to see which hypotheses are supported or disconfirmed.  No, he offers an articulate, finely honed expression of his worldview, and that’s it.  He is obviously a man of vast talents, but he uses them the same way much less refined thinkers simply bloviate.

But that raises the question, why is he so influential?  Why does he reach so many people?  What’s his secret?

No doubt there are multiple aspects to this, but here’s one that just dawned on me.  Those who respond to Coates are not looking for argumentation—they’re looking for interpretation.

The demand for someone like Coates reflects the broad influence that what might be called interpretivism has had on American political culture.  This current emerged a few decades ago from literature, cultural studies and related academic home ports.  Its method was an application of the interpretive act of criticism.  A critic “reads”, which is to say interprets, a work of art or some other cultural product, and readers gravitate toward critics whose interpretations provide a sense of heightened awareness or insight into the object of criticism.  There’s nothing wrong with this.  I read criticism all the time to deepen my engagement with music, art, film and fiction.

But criticism jumped channel and entered the political realm.  Now events like elections, wars, ecological crises and economic disruptions are interpreted according to the same standards developed for portraits and poetry.  And maybe there is good in that too, except that theories about why social, economic or political events occur are subject to analytical support or disconfirmation in a way that works of art are not.  How should we hear The Rite of Spring in the twenty-first century?  Colonial or pre-postcolonial?  Racist or deracializing?  These are meaningful questions, and thoughtful criticism can help us explore them more deeply, but neither evidence nor reasoning can resolve them.  If you want to know why the US election last year turned out the way it did, however, reasoning and evidence are the way to go.

Coates is an interpreter.  His latest piece in the Atlantic, The First White President, reads the election the way a film critic would read a film.  There are references to factual events, like quotes taken from the campaign trail, but they serve the same function that references to camera angles serve for a critic interpreting the latest from Darren Aronofsky.  In the end, Coates wants to convey his sense of what the election means, that it is a reflection of the deep racism that was, is and will continue to be the core truth of America.  If anything was different, it was that eight years of a black president ratcheted up the racism and allowed a sociopathic white extremist to prevail.  Post-election concern for the well-being of the white working class by white pundits is itself a further reflection of this truth, a turning away from the ugly reality of bigotry. This is a reading of the election as a cultural artifact.

The problem, of course, is that much about the election is subject to social science investigation.  We have opinion polling and the factual record of specific campaign strategies and tactics.  We have a variety of models that predict voting behavior—testable models.  If you go through Coates’ article, you’ll find statements (especially sweeping generalizations) that are dubious in light of the evidence or even flatly refutable.  This isn’t because Coates isn’t well informed or unable to examine the data, but because he is applying the method of cultural interpretation, not evaluating hypotheses.

In the end, Coates is expressing how the election feels to him, and that’s OK.  But his feelings tell us little about why Trump, and not somebody else, is sitting in the oval office.  Is there massive racism in America?  Yes.  Could someone like Trump be elected president if racism were not so widespread?  Almost certainly not.  But like the man says, racism has been a major factor in every election, yet they don’t all come out the same.  It looks like other factors were at work too, especially since Obama outperformed Clinton across most demographics.  Time to get deeper into the data.

Another Year of Equity at Evergreen

The following email was forwarded to me and many other Evergreen faculty:

On [date deleted], students, staff and faculty of The Evergreen State College will hold a Re-Convocation Rally on Red Square to express and affirm their commitment to goals of equity, inclusion and success for all in pursuit of higher education. The rally is organized by Staff and Faculty Acting for Equity, a group that works in partnership with Evergreen students. Rally organizers stated that the “focus will be on healing from the events of last spring and celebrating our collective cultural wealth as the Evergreen community.” Evergreen community members and friends are invited to participate in an afternoon of speakers, music, dancing, discussion, and creative expression.  

Staff and Faculty Acting for Equity said in a statement that “the Re-Convocation Rally will carry forward the community spirit and dedication to equity that motivates Evergreen. We believe that our success as members of a community is dependent not only on ourselves, but on the success of the most vulnerable. We acknowledge the particular strengths of and challenges faced by first-generation, Black and Brown, undocumented, Latinx, trans*, queer, veteran, and disabled students who have been traditionally underserved by higher education. We strive to center their voices as we move toward more equitable outcomes for all our students.”  (I deleted the date—PD)

Needless to say, I agree with nearly all the sentiments expressed here—until I come to the final sentence, which manages to pack, depending on how you count them, two-and-a-half to three untenable and politically destructive assumptions in just its first six words.

To begin, although the word “centering” has become commonplace in the language of a certain swath of the political spectrum, it offers a false metaphor for the space of social communication.  When it comes to a place like, say, a college campus, the notion of a center simply doesn’t apply.  The good folks of Staff and Faculty Acting for Equity, by their organizing and publicity, offer what you might call a node.  The college administration constitutes at least one more node, probably several if you think about all its various levels and units.  We have two unions, one for faculty, another for staff, and they are very nodal.  Of course, more important than all these are the myriad formal and informal clusters of students, staff and faculty who communicate intra- and cross-nodally.

This mis-metaphor is important because it implicitly invokes a zero-sum interpretation of voice.  If voice is arrayed around a single center, and only one point of view can be centered, then enhancing the voice of some requires decentering the voices of others.  As we’ve seen at Evergreen and elsewhere, the actual practices that accomplish this—discouraging or suppressing the voices that must give way for the center to be occupied by others—are rather nasty.  But public speech in most contexts, and certainly at a place like Evergreen, is not generally zero-sum.  Some do not have to speak less so others can speak more.*

That centering business really needs to be, um, decentered.

The second assumption is that the voices listed in the next-to-last paragraph share enough characteristics that it is even conceivable they could all be centered together.  If I say one thing and you say the opposite, how could both our voices occupy this same all-important discursive turf?  Or if they could, on what basis would we deny anyone else’s voice the same status?  No single identity-category is homogeneous; experiences and perspectives differ enormously across individuals.  Add to this the extraordinary diversity of the full list, and the notion of these voices constituting a center is meaningless.  The best you can say for this statement is that its authors want to express their support for many of the students on campus who need it the most, and this is how they try to say it.  If that’s all it is, I share their convictions (and I’ve struggled in my own way to try to put them in practice), but I can’t buy the idea that these groups speak with a common voice.

Incidentally, because racial, sexual and other categories encompass many viewpoints, the political assumption that there is a single viewpoint for each such group often leads to an unsavory process by which people in the majority, like whites, pick which organization or ideology represents the “true” expression of the oppressed.  When I read references at Evergreen to the need to support “the students”, I can infer that a particular subset of students has been elevated to this status.  As for me, I don’t consider it my business to decide who speaks for whom, ever.

The half-assumption I quarrel with is the notion that centering some voices by decentering others is at the center of the political agenda.  This isn’t exactly stated, so I can’t give it full noncredit along with the other two, but it’s there to the extent that no other political goal is put forward.  Of course, truly listening to others, especially those who have not gotten the hearing they merit, is very important.  It is not, however, the most important goal in political activism, or to put it differently, political expression is important mainly as a means and not as an end.  Evergreen has urgent equity needs, especially in its lack of services for students who come to it from the short end of America’s grotesque economic and educational inequality.  This is a matter of programs, staff and money.  It’s worth fighting for.  There may be other high priority equity issues, although we haven’t gathered the information we need to identify and understand them, which suggests that putting resources into serious self-study is also crucial.  Perhaps the social justice advocates at Evergreen share this position, and for them the focus on expression is just a step along the path.  I hope so, but there has been little evidence so far to support it.

So what’s the point of scrutinizing equity-speak in such detail?  Maybe I’m just being picky, but I’ve seen how misguided mental frameworks can lead to terrible political practices.  I also suspect that, while most readers who have made it this far may have scant interest in my strange but wondrous little institution, they see parallels with social justice activism in their own backyards.

*Where speech is truly zero-sum, as at a single large meeting, I support the use of a progressive stack at least some of the time.

Obamacare Could Die

We are at this very odd moment now.  We thought ACA was saved by a narrow vote some months ago, when John McCain joined Susan Collins and Lisa Murkowski to block the last version of Trumpcare.  Whew!  No need to worry about millions of people having their health insurance taken away!  Time to start pushing for single payer, Medicare for all, hah hah!  But, ooops!

So here we are with only 12 days to go before the window in which the US Senate can pass a repeal and replace of ACA using budget resolution, and thus with only a majority vote.  But, hey, here we have Cassidy-Graham, which would turn the whole thing into block grants to the states, allowing them to allow insurance companies to charge more for preexisting conditions and pretty much get rid of all those things people have liked about ACA once they began to realize that it might disappear.  But now hardly anybody is aware of what is going down at all, with near zero media attention, since we all moved on to Korea and DACA and whatever..   But this stealth Cassidy-Graham bill could very well pass.

It looks like Collinis and Murkowski will again vote no, realizing that it slashes the Medicaid expansion, among other things, and would kill insurance for many people in their states who currently have health insurance thanks to ACA.  But one of the co-sponsors, Lindsey Graham of SC, is John McCain's closest ally and friend in the Senate, maybe in all of Washington now.  Reports have it that McCain is in fact thinking seriously of voting for this bill, which most reports say is actually worse than what got shot down previously by McCain's swing vote.  The only other reported possible negative vote is  Rand Paul, who is claiming this bill still contains too  much of ACA, but he voted for the "slim repeal" after  similar complaining last time.  He could easily vote for this.

The hard bottom line is that we could wake up in a week or so with this awful bill passed, ready to whiz through the House for Trump to sign, and Obamacare dead after all, with millions set to lose their insurance, with barely anybody even knowing what is up.  This is a seriously bad business.

Barkley Rosser

Carbon Gridlock Redux in Washington State

A year ago—it already seems like another era—an initiative to set up a carbon tax in Washington State, I-732, was defeated by the voters.  The proposal was to use the money for tax reductions in accordance with the standard economic view that taxing “bads” rather than goods generates a double dividend.  I disagree with that (I think the deadweight loss case against taxes is weak), but I agree that carbon prices operate like a sales tax and are regressive, so it’s a good idea to return the money according to an egalitarian formula, preferably equal rebates per person.

But most of the political left sees it differently.  When they look at carbon pricing they see a big new revenue stream that can be used to fund all the things they have been unable to get in a period of conservative (or neoliberal) political dominance.  They want infrastructure, mass transit, community development projects and environmental restoration, and for them returning the money is unthinkable.  So the left in Washington State, including unions, social justice organizations and most of the environmental activist community, opposed 732, denouncing it as a corporate subterfuge.  A carbon tax is always going to face headwinds, but with the left as well as much of the right in opposition, it was doomed.

So here we are again, looking at another round of state carbon tax initiatives for 2018.  The group that organized the left campaign against 732, the Alliance for Jobs and Clean Energy, is drafting their version, which will surely funnel most of the money to the causes (and in some cases the organizations) of their constituents.  But, perhaps in a play to get a bigger voice in the process, the Affiliated Tribes of Northwest Indians, an umbrella group of 57 tribal governments in the region, has just announced it has begun drafting its own initiative, one that earmarks most of the money for environmental purposes, with a chunk dedicated to the tribes.  The prospect is for heated backroom meetings, where the leadership of various organizations push and pull to divvy up the potential carbon cash.  Whether the product of this process can survive at the polls is another question.

As I’ve written before here and elsewhere, I’m appalled at this deformation of carbon politics.  It doesn’t take into account who pays the carbon tax and the effect higher energy prices will have on living standards.  It naively assumes that governments will spend carbon money only on new projects and not shift existing spending in order to free up more funds for whatever they really want to finance.  There is no pretense of democracy in the way it establishes its earmarks.  And it puts the fight to get a piece of carbon revenues ahead of the urgent need to address the climate crisis, with predictable political consequences.  Revenue recycling in the simplest, most transparent fashion is the way to go, but if there are to be earmarks they should be decided democratically.

The politics of carbon activism are tangled in knots, and year after year goes by without serious action to avert an almost unimaginable climate catastrophe.