Archive for June, 2012

An Honest Question: What’s so bad about Socialism that it Infuriates the Right?

June 30, 2012

This small essay was posted on a discussion group hosted by The Nation magazine.

A lot of the socialist underpinnings of a non-socialist nation are under attack. Healthcare isn’t a war won, it’s a battle that ended with something better than a draw. A lot of poor people with no money to spend will still have no money to spend, but now either the tax man or an insurance salesman will be standing there with his hand out. And of course, there are no new funds to pay for the little we got from this. Wealthy individuals still shield their income and their wealth, wealthy companies still exploit workers while lavishly rewarding the managerial elites, tax loopholes abound and more are for sale, with the suppliers being congresscritters and the vendors lobbyists.
And as for the semi-socialist-but-not-free-enterprise education system, the attacks are already well under way.
All that tax money…waiting to be handed over to opportunistic for-profit entities…It’s enough to make a rapacious entrepreneur slaver.

So let me ask here: what, really, is wrong with having at least some of our national endeavors socialist? Can we move from Oh my god that’s socialism which is communism they’ll take my house and we’ll have a politburo in Washington Never Never Never to perhaps a rational discussion of WHAT socialism is, a recognition that some things are better when done socialistically, and to what limits exist for such under our system of government?

Not on the table: abolition of private property. But perhaps on the table: nationalizing of essential services and even industries when capitalism has shown those industries to be too corrupt and operated at the expense of the national good?

As an example, our finance system is a hybrid; public, i.e. socialist, central bank authority (the Fed, FDIC) operating along with private banks, but as has been shown, when the private banks fail due to stupid bets on worthless securities, it’s the government that steps in. Socialist dollars rescued them from bankruptcy. Meanwhile, your savings draw a pittance for you in interest because you’re competing with the Fed, who makes money for loans available at perhaps a half-percent rate which drives your rate down to much less; 0.02% or less. The same banks still extract money from consumers when interest differentials aren’t enough and they aren’t making many loans; fees and such.
If we’re already on the hook when banks fail, why should we not simply nationalize them?

Oil, energy in general, has been the root cause of much of our national decline. We insisted on having oil cheap even when we weren’t producing it. Our money flowed out and came back in the form of interest-bearing loans that propped up the economy and concealed the damage from losses. Double whammy. Later trade imbalance just made it all worse. The world’s most robust economy has become something of a hollow shell, filled not by entrepreneurs but by salesmen and advertisers, hawking products they bought from overseas suppliers. Walmart is really no more than an economic arm, the marketing division, of Chinese manufacturers, despite originating here and despite the Walton family still living here. Commodities markets force us to compete with whichever nation has the money; manufacturing must compete with factories that are subsidized by a government, China for example, and with no control of the government agencies that might regulate this. Our national assets are for sale to the highest bidder and the profits go not to us as a nation but to individuals.

So what makes socialism inherently bad, and capitalism inherently good?

Caveat Emptor

June 28, 2012

I read an article in this morning’s NY Times that suggested the housing crisis might be over, and that housing might now begin to recover. That article inspired the following:

I disagree with the content of this article. I think this is a temporary rise that will be overwhelmed as phase two of the foreclosures kicks in.
Banks are just as predatory as they were before; a temporary reprieve came to pass while they got their paperwork in order and shrugged off the criminal robosigning of foreclosure papers. But they’re now poised to resume the foreclosures because the jobs market still hasn’t recovered. Affecting this is the continuing layoffs of public sector employees that the private labor market simply can’t absorb. A few promising trends are visible; some manufacturers are returning the offshored jobs to the US. But only a few, not enough to reinvigorate the shrunken middle class. The trend is toward fewer homeowners, more renters/leasers of property owned by the wealthier people.
Families that were movin’ on up began movin’ on down; and that hasn’t stopped. So foreclosures will continue, and pressure on the home market will increase as foreclosed properties once again begin to become common.
Something to consider: if Republicans gain power, the banksters that have been paying them will continue to receive favorable treatment. But if the Democrats get in, the consumer might get a break, for a while. But don’t count on much from Democrats; all are politicians, and ideology is trumped by cash. After a settling out, banksters will switch to buying Democrats and the evil process will continue.
Unless we get a determined group of politicians who insist on change, nothing much is going to occur.
People need to become aware that government isn’t your friend; only you can ultimately protect yourself. Social Security under Republicans will push toward ‘privatization’, or in other words the money will go to the stock market.
We can trust market traders, right? So when they get all that retirement-fund money, they’ll take care of citizens, won’t they?
NO politician can be counted on to care for ordinary people. They only interact with us in any meaningful way when they begin running for office. And even then, they soon begin delivering rehearsed speeches with no opportunity for discussion; it’s all one-way, not true communication at all.
The next generation needs to adopt the old slogan: Caveat emptor, buyer beware. And add to it, voter beware. Educate yourself. Take back politics from those who sold it and those who bought it.
Middle class housing is going. Middle class expectation of a good education is going. Upward mobility is fast disappearing. The American Dream is dying, turning into a nightmare, as the middle class lifestyle that was the strength of a nation is slowly being destroyed. Our ‘leaders’ give us platitudes instead of leadership, empty referrals to a time when the nation was strong instead of action to restore that strength. And no real leadership from either party.
Caveat emptor.

Campaign Predictions, 2012

June 26, 2012

I wrote the following analysis in an email to a friend. It was written in response to a letter that he copied to me from a fellow who claimed to be a successful oddsmaker in Las Vegas and small businessman.

He’s a successful oddsmaker; he says so. You can believe him, right?
Feel free to bet a large amount on the outcome.

Not me. I looked at the entries and spotted the weakness right away. “Obama has nowhere to go but down…” means that Obama is UP in those demographics.

Gas prices are down, and dropping. Remember when Gingrich blamed high gas prices on Obama? Low gas prices = voter satisfaction.

Under Bush, the guy whose policies Romney wants to continue, the economy tanked. Under Obama, the economy has been recovering. Republicans favor ‘trickle down’; after ten years, only piss has been trickling down. No jobs. Corporations are sitting on billions that they’re afraid to invest. No jobs. Adelson, big Romney supporter, is hiding his billions offshore to avoid taxes. Taking his money means you adopt his philosophy; a war weary nation isn’t interested in saber rattling in support of Israeli Zionism. That too is a possible issue.

If you want to see my take on economics, why the economy has tanked, read my blog. https://jlknapp505.com/ Be warned, I’m an Independent, but I don’t favor much of anything dealing with Romney and the current Republican and Tea Parties. If reading anything else bothers you, stick to the economics parts.

Romney’s economic policies amount to austerity; cutting the safety net, the one that he mentioned when he said he wasn’t concerned with the poor because they had that safety net. That’s being played out in Europe, and it’s not working. Meantime, Romney wrote an article in which he favored allowing GM to go bankrupt. GM just put on another shift of 800 workers. Jobs. One auto is virtually made in Ohio, all the parts at different plants. That’s going to count.

Expect the Obama campaign to begin pointing out the things Romney said. Expect them to remember all the things Gingrich and Cain and Bachmann said about Romney back during the campaign. With all the current hype, remember that only about 40% of Republican voters wanted Romney during the primary, and if they seem to be supporting him now, that support is likely to be ‘soft’. All that stuff was recorded; expect to see people like Gingrich and Cain and Santorum slamming Romney in ads, saying what they said during the primary.

Romney stuck his foot in his mouth numerous times on the campaign trail. He’s gotten better…but we’ll see how he does against Obama, who’s only had one bad miscue that I noticed. Romney’s going to have to defend things like “I like firing people” and “Corporations are people, my friends” when the campaign really heats up. I suspect people are going to resent the constant barrage of mud over the TV channels, and they’ll know who gave them this: the Conservative 5 on the Supreme Court. That Supreme Court just gave a green light to bunches of Sheriff Arpaio wannabe’s, and they’re going to be arresting Latinos. The relatives of those Latinos are able to vote…and they won’t be voting Republican.

One recent comment said that asking a woman to vote Republican is akin to asking a chicken to vote for Colonel Sanders.

After the conventions, expect these to become the real issues on the campaign. Expect them to come up in debate. When Romney has to reply off the cuff, he doesn’t do nearly as well as when he’s delivering a polished, vetted, rehearsed speech.

He does have support among the people whose issue is to get the nigger out of the White House. That group’s firm. Are there enough of them?

Maybe, if I were you, I’d hold off on that bet.

Jack

Offensive Language and the 2012 Election

June 25, 2012

If language offends you, you might want to skip this essay.

The issues involved in the 2012 presidential election are many and varied. The economy, immigration, education, religion, experience levels and what kinds of experience are involved, all of these play a part.

But at heart, all the Republican contenders have played to the right wing base.

That right wing, or conservative, base includes evangelicals.

You’d think that they might remember Jimmy Carter; a good man, very religious, but ineffectual as president. There was nothing like the rabid push to get Carter out of office. That happened, but not with the anger that the conservatives show now. Carter, still a good religious man, has been an excellent ex-president. Compare him to Bill Clinton, a womanizer, a liar, impeached but not convicted, and still Clinton served two terms. He benefited during his time in office from policies and trends that occurred during previous administrations. The economy boomed. He’s also an excellent ex-president.

And then there was George W Bush. By any standard of reckoning, the worst president in modern times. Two terms. Two signature domestic accomplishments, No Child Left Behind and the Bush Tax Cuts. Since these were passed, education has continued to decline in quality and has now become essentially a national embarrassment. The tax strategy has gutted the middle class while funneling money to the elites and has contributed to the Great Recession which occurred during the final years of the GWB presidency. In foreign policy, Bush started two wars, at least one of which was rationalized by false intelligence interpretations on the part of Bush and his advisers; the intelligence community recommended other interpretations of WMD intelligence, but Bush overruled them. And then he and his principal advisers, Cheney and Rumsfeld, mismanaged the Iraq War. At least in part, the mismanagement was to protect the Bush Tax Cuts; the war was financed by borrowing.

Never mind; the failed policies of the GWB administrations concerning the economy are virtually identical to the ones currently adopted by Republicans, including Mitt Romney. In matters of religion, he’s possibly more religious than Barack Obama, but both are family men. Romney provides more financial support to his church than does Obama. Neither is a Clinton or a Carter in terms of family values and religious belief.

And yet, there’s a sense of fury behind the Republican campaigns. And they dare not offend the conservative base. Being more conservative meant a better chance of being elected.

Why? Didn’t the last Democrat president, Clinton, have a better domestic record? And isn’t the economy steadily improving after 3+ years under the current Democrat? Hasn’t he moved decisively against terrorists and begun the process of disengagement from the wars that Bush started?

Why is he so hated by the Conservatives?

I think it comes down to one overriding aim, one goal: get the nigger out of the White House.

Is it simple racism? Some of it is. Some of it also comes from the fear among White working-class people that their political and social dominance is under threat.
Immigrants and mixed-race children and even Muslims are moving in. The old majority is being squeezed politically and in religious terms. Economically they’re also under attack; they were once the middle class that fueled the national economy.

But those things can be addressed. Accommodation can be found. There’s no anger here, although there might be some subconscious fear.

But the presence of a Black, even a half-Black, president in the White House? That strikes at the heart of their feeling of racial superiority. And so the one goal that Obama can’t address, the one aim that nothing he does will deflect:

Get the nigger out of the White House.

It’s increasingly common to see once-forbidden words used in mixed conversations. Fuck…you can say that. Even motherfucker. Once taboo.

But not nigger. It’s there; now it’s called the n-word, as if that somehow hides the word while permitting the concept. Nigger…shocking, isn’t it? Go back and change what Mark Twain wrote, as if he’d been a racist of the first order. He wasn’t, but he used the now-forbidden word. Nigger.

It’s time we confronted this. How can we discuss the concept, the anger that I think is at bottom from the most conservative, if we’re afraid to even mention the word? Two syllables. Forbidden, but not the concept. It’s alright to believe in racism, to vote that way, but don’t write down the word.

Are you offended?

I am…but perhaps not for the same reason you are. The word doesn’t bother me. I’ve heard it before. I am offended that 70 years after the Tuskegee Airmen, after MLK Jr and the Civil Rights Movement, after Brown vs Board of Education, we’re still rooting out the vestiges of this failed philosophy.

And if saying nigger allows us to confront that, it’s worth it to me.

A Critique of Both Presidential Candidates, and a Suggested Tax Solution

June 22, 2012

There’s a point behind some of Romney’s criticism.
While Obama had Congressional power, he worked to get the Affordable Health Care Act passed. That took much of his political capital. Attempting to also get immigration reform, education reform, any number of other issues addressed, would simply have meant that nothing got passed, given the obstructionist aims of Republicans.
But Obama allowed Congress to work through most of this without risking his own political status. This is not the action of a strong president.
He also didn’t risk that status by attempting to address any other hot-button issue such as immigration reform.
That weakness or unwillingness is now coming around. He’s been a weak president. Put into context, that’s understandable. He’s the first Black president. A serious mistake can set back 70 years of progress in a nation that has had a history of enslavement of Blacks and oppression of minorities in general. For a lot of the Republican base, Mr Obama’s skin color trumps all of the other issues. Racism is not an issue that Republicans address; there’s a reason for that. Put simply, Republicans can count on the racist vote.
Not that I think Romney is an improvement over Obama. The policies he apparently favors, as much as any outsider can determine his real opinions regarding education, budget, the safety net, and the economy, are a disaster in the making.
He would ‘encourage private enterprise.’ I hope he has a better idea than his predecessor in the Republican Party. Encouragement then was to simply shovel enormous amounts of public money to financial firms, who were then suitably ‘encouraged’ to sit on some of that money as a cushion for future losses, skim off some of it as shareholder dividends and executive bonuses, and use some of it to acquire competitors. Supposedly, they were to loan the money in the hope that this would stimulate the economy; not being fools, they used it in ways that seemed most profitable to themselves.
That, BTW, is how you encourage industry: you decide what you want them to do, and via a carrot-stick approach (tax breaks, tax penalties) you encourage them to do that. They’re in it for the money, after all; so use that to encourage them to act in the national interest.
A Value-Added Tax, to replace the current corporate tax system, works. Say you dump the tax rate that only the foolish pay and the savvy avoid; replace it with a VAT, but suspend a portion of that tax for any product produced domestically using domestic labor. No loopholes. Set this at a nominal 15% (vice the current rate, the one that Apple and GE and Big Oil doesn’t pay), and put in a mechanism that automatically raises or lowers this depending on our international balance-of-trade. Work to keep trade within a narrow range, + or – 1% of balance for example. Trade will still happen, but not based on cost; instead, it would be based on quality. Better quality always wins out in international trade.  Nations that want to sell us goods and services would thereby be encouraged to purchase our goods and services or see that VAT rise.
In this way, everyone who has access to the US market pays for that, and those who bring goods in as imports will pay more than those who produce goods domestically.  Want to export a lot of goods to us, then buy our domestically produced goods.  If you don’t want to buy from us, then don’t plan to sell to us.  Balance of trade can easily be determined quarterly; indeed, such information is currently published in The Economist.  And the automatic adjustment mechanism (needed to take the matter out of the hands of a Congress that is far too easily bought by special interests) can take effect as soon as this information is obtained, certainly within the following quarter.
What about planning on the part of managers who might want reassurance of tax rates before they produce goods?  So long as those goods are produced domestically, the manufacturers can be sure their products won’t be undercut in price by imports.
Simple. And it encourages domestic companies to act in the national interest, not their own financial interest. That’s the kind of ‘encouragement’ that they understand.

Economic Malaise, Simplified

June 20, 2012

This essay was written in response to a column by Thomas Friedman in the New York Times, edition of June 20 2012.

Friedman like so many others misses the point, I think. He has some good recommendations, but they won’t solve the economy’s long term problems.

Put simply, in simple and easy-to understand steps:
We have a surplus of workers. Half our workforce can produce all we require in goods and services. The relentless push for more efficiency has gotten just that, and efficient economic processes need fewer workers. Machines have taken the place of men.

If those workers are to be employed, then they must be employed in activities that bring in external revenue. They must serve tourists or manufacture goods for sale offshore, and in both cases what they sell must be something that others want to buy and can afford to buy. For a time, we produced commodities that people needed: oil and coal, metals, foodstuffs. Ultimately the minerals become depleted, the few remaining become too expensive to extract and sell, and other nations could extract minerals cheaper and could begin producing excess foodstuffs using the mechanization and efficiency developed here. Manufacturing, e.g. value addition, and tourism are what is left. And that need to produce competitive pricing means that our unrestrained capitalism must be controlled. Unions demand more, executives demand more, finance demands more, taxation demands more…but when the demands price the US economy out of the market, no one wins. Union workers are laid off, management sees the company decline toward bankruptcy, finance loses what it invested, there is nothing left to tax. The inflated manufacturing sector drags the economy down with it. Only by requiring readjustment of currencies (i.e., a cheaper dollar vs the euro and yen and renminbi) can this adjustment realistically be made. It’s not unilateral; those other currencies and the nations that issue them are involved, and so this is a government issue that only governments can address.  And a consideration to be factored in is that those who hold dollars will see their holdings decline in value.  Governments and banks will take major losses if there’s a decline in value of the dollar.  What helps our economy harms them.

Currency adjustment affects balance of trade. That trade cited above is the basis for a functional economy that employs those excess workers and that can support a large middle class. Our government is now controlled by a few who are positioned to exploit niches and extract riches from the status quo. But that status quo is unsustainable; it’s destroying the very economy it depends on. Those who once manufactured goods for external sale are now importers and salesmen; few goods go out, many come in. Foreign competitors have been joined by Americans who do the same thing those competitors do, compete with the domestic economy.  And money flows FROM the economy, not into it. Instead of employing our surplus labor making goods for export, we now employ foreign workers in foreign nations to do the work and bring the results of that work here. Economically, this is no different from firing American workers and replacing them in our plants with cheap foreign labor. It’s the problem that people cite when they oppose unchecked immigration; but the real job loss is not here, it’s THERE, when the job itself is exported. Exported jobs destroy the middle class.  Pressure on the middle class comes not solely from foreign competitors but also now from our own upper classes who have joined the foreigners in putting pressure on rather than sustaining that middle class.  The Walton family, despite claiming American citizenship and measuring their billions in dollars, have economically become Chinese.  Their economic activity benefits China at least as much as it benefits the US; and of course, it benefits them financially.

The other thing affecting trade balance is the concept of ‘free trade’. This type of agreement effectively removes government from trade and turns all trade decisions over to for-profit entities. In so doing, our inflated economy produces goods that foreigners can’t afford to buy and floods our markets with cheap goods that we can’t compete with on a pure price basis domestically; again, it’s that inflated economy that makes this happen. Regulation of trade is a government function; it’s done by imposing taxes or tariffs on imported goods to slow down the flood of imports that saturates the American market.  But no one in government is prepared to do anything except press for more ‘free trade’, without realizing that this means free imports without corresponding exports.  We freely buy but cannot freely sell.

Only a robust middle class can support our government. That government has been squeezed and faces further pressure. Middle class people can’t afford private schools for their children, they can’t afford to provide for themselves after they’re unable to work, they can’t afford to pay for expensive healthcare. Our middle class lifestyle actually is subsidized by the government we’ve built. That government needs income to provide these things. That income must ultimately rest on taxation. Borrowing is a short-term solution that is ultimately unsustainable. We are currently approaching that limit of sustainability.

The middle class is being squeezed ever smaller; the upperclass now controls the government that has the power to save that middle class. The mechanisms that provided education and housing and health care and retirement are being destroyed, even as the government that provided them is being destroyed. All wealth now flows not into the middle and underclasses but only to the wealthy, who become wealthier thereby.  Government policy protects that wealth.

And so we’ve rebuilt a system of nobles and serfs. The nobles profit by rents, from lands and properties occasionally, but mostly from renting out the money they’ve extracted. They live well not by producing more, but by extracting wealth from rents. They remain wealthy because they ARE wealthy.

It’s not sustainable. Never has been, never will be. The traditional solution is violence, the kind of violence that pushed the American Revolution and the later French one. At some point, the level of unsustainability will reach that tipping point. It’s not here yet, but it appears certain to come.

If I can figure this out, why can’t our elected leaders? Why are they so unwilling to act before a crisis overtakes us, a crisis that we can’t recover from?

And why do we keep putting the venal and stupid and uncaring in positions to control our lives?

The Role of Productivity in the Economy’s Problems

June 10, 2012

According to an economist on Bill Maher’s show, economists look at finance, labor, and productivity. I haven’t directly discussed that last, although it’s a part of our economic problem.
Productivity gains have been a part of our economy for centuries, but they really took off in the period of the world wars. Here, and also in other countries, productivity was seen as a weapon to win the wars, and every part of the economy got a boost.
Meantime, labor came to be in short supply because so many men went into the armed services. Even with this lack, even with less capital available for development (government capital was also being siphoned off to buy weapons and pay troops), productivity boomed. I googled a history of shipbuilding during the war years and found this: “In the decade prior to 1940, America’s shipyards launched only 23 ships. In the five years after 1940, American shipyards launched 4,600 ships. San Francisco Bay Area shipbuilders produced almost 45 percent of all the cargo shipping tonnage and 20 percent of warship tonnage built in the entire country during World War II. The war lasted 1,365 days. In that span of time Bay Area shipyards built 1,400 vessels–a ship a day, on average.” Auto manufacturers made airplanes as well as trucks, typewriter manufacturing turned part of their effort to making weapons, and all of them made more in a shorter time and used less labor in the process.
Since that time, innovation has continued. Farmers use machines instead of farmhands; miners use machines instead of miners, and this includes not only deep-shaft mining (boring machines, etc) but also the huge machines that scoop up multiple tons in one pass and load it on huge trucks that require one driver rather than a hundred to move the equivalent amount of ore.
John Henry lost eventually. So did all the other laborers.
With productivity gains, education became more important. Unskilled workers had no place in most industries. And labor became excess. We no longer need large numbers of workers, but I can only provide an estimate: perhaps 60% of our workforce is needed to provide everything we need in goods and services. I tried to google this and found nothing. So I’ll go with my estimate; if you have better data, please share it.
So by my figures, 4 of every 10 workers aren’t needed in the domestic economy. They must provide goods for export, or act as a drag on the economy.
But we aren’t really keeping up with exports when they are compared with imports. Free trade agreements are more harmful than helpful. I’ve written about this before so I won’t rehash it here.
We import; manufactured goods, but also commodities. We have a potentially strong manufacturing sector, but we don’t make full use of it. Our manufactures come from places where labor is perhaps 1/10th the cost of labor here. Only through political control, e.g. tariffs and taxes, can we address this. But the business sector favors the higher profits from importing as compared to manufacturing, and they have extraordinary clout in politics. Politicians refuse to act. For some, influence from management elites combines with simple lack of understanding of the economy.
So: productivity gains reduced the demand for domestic labor, failure of the export process made that labor valueless, and government borrowing propped the economy up so that this was hidden for too long. And now a failure of our education system, coupled with a failure of our politics, has rendered an once-addressable problem critical.
And no one in government appears to understand the problem, much less be involved in devising a solution.

June 5, 2012

Jlknapp505's Blog

I wrote a series of short essays and posted them on the International Mensa Economics Forum.  I’ve now collected them and I’ll post them here.  There may be some overlap and repetition, but hopefully not too much.

This topic, free trade, has been in the back of my mind for a long time.  Two recent reports have revived my interest and cause me to develop my thinking further.

It has recently been reported that US corporations are stockpiling major cash reserves; the theory is that they’re waiting for an improvement in the economy before they invest.  Also, at this time the Boeing Aircraft Company is attempting to move the production of their new Dreamliner airplane to South Carolina.  There’s a connection here.

A little background: we have two sets of labor laws generally in the USA.  They’re set by states, and political systems and attitudes determine which sort of laws exist. …

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