Think back a couple hundred years ago - before industrialization when economic life was much simpler. Let's assume that when a good or service was purchased, that the person who received the money spent it all - no savings. Therefore, money was circulated just like water can be circulated in a closed pipe. If the pipe makes a circle, then all that is needed to keep water flowing through the pipe is a pump. Similarly, when the blacksmith received $10. for shoeing a horse, we can assume that he took that money and spent it at the grocery. The grocer then took that same $10. and spent it with the farmer. The farmer took the money and spent it at the haberdasher's and so on. So the same $10. gets passed around from person to person until it lands back up at the blacksmith's again and the process repeats itself over and over. As long as all the yeoman in any given village have a good or service they can sell and as long as the money flows through the hands of each person in the village, that same $10. is used over and over; it is circulated round and round just like the water in the pipe. As long as the money flows fast enough, everyone can purchase what they need and business is good. GDP is a measure of how many transactions occur in any given year. The faster the money flows through the system, the greater is GDP.
Now what happens when one of the participants saves some of the money instead of spending it all? Then there is less money to flow through the system and economic activity and hence GDP will be lower. The more money that is saved, the more economic activity will decrease until the money supply is inadequate to meet people's needs. It is a well known fact that, when consumers spend more and save less, economic activity and GDP increase. That's why George W Bush sent everybody a check and told them to go out and spend it. When economic activity decreases enough, a recession or a depression occurs. In the US consumer spending accounts for 70% of GDP so, if consumer spending decreases, economic activity decreases. This would happen in the simple economy described above if, instead of the blacksmith spending his money at the grocer's, he saved it instead. So saving decreases economic activity and GDP. There is one caveat to that and that is, if instead of the blacksmith saving the money, he invested it by expanding his business and created a couple of additional jobs. Then those additional workers would also go out and spend their paycheck adding to economic activity.
When the economy goes into recession two things happen. Government revenues from taxes decline and consumers spend less because they have less money to spend. Keynsianism is a philosophy that says that the government should borrow money in a recession and spend it into the economy thus creating jobs and increasing economic activity or at least preventing starvation and dire need. The other way that economic activity can be expanded is for the central bank to loan money to banks which then loan it to businesses who want to expand their businesses thus creating jobs. So money is injected into the economy either by the government borrowing money or by the central bank printing money in the form of a loan. In either case debt is created and the economy becomes a debt based economy.
If we think of money circulating similar to water circulating in a network of pipes, if a business or an individual saves a portion of the money instead of spending it, there is a continual need for money creation to keep up the same level of economic activity. That's why capitalism has to be a growth based economy. When there was one blacksmith for every village, saving money was not a problem since the income from blacksmithing over the economy as a whole was dispersed to many blacksmiths who all spent most of it keeping it in circulation. If one blacksmith captured most of the business - let's say he called his business Blacksmiths Are Us - and franchised it throughout the whole economy, then all the profits would flow to one person - more or less - and money would be continually taken out of circulation necessitating growth and debt based money creation by the government or private businesses just to provide enough jobs to keep money circulating to all people with economic needs. Money saved and not spent is similar to water in a system of pipes entering a cul de sac or black hole from which it never emerges or to being siphoned off never to return to mainstream circulation.
In today's economy money is continually siphoned off by the major corporations who have not only nationalized but who have internationalized. It's as if Blacksmiths Are Us has gone global. That money which is taken out of the real economy goes into the financial economy which is a black hole from which money never emerges again into the real world economy. So there is a continual need for either the central bank to print money (increase the money supply) or for the government to prime the pump with debt based stimulus money (the fiscal method).
In a western capitalist economy there is a continual need for money to be created either by government borrowing and the provision of fiscal stimulus or by means of the central bank loaning money into the banking system. The only problem is that today, when the Federal Reserve (the central bank) loans money to other banks, the money goes not into the real economy where jobs are created but into the financial or casino economy. In other words it goes to rich people like Jamey Dimon of JP Morgan Chase or Lloyd Blankfein of Goldman Sachs who don't spend it in the real economy but who gamble it in the casino economy so it doesn't do too much good for the creation of jobs which provides for the distribution of money to all who need it. A job is seen as the only legitimate means for an economic unit to acquire the money it needs to meet its needs. Of couse, just giving the money to all who need it would increase economic activity and GDP, but that isn't seen as legitimate. Similarly, when the government borrows and spends, the money also does not circulate much since it is soon siphoned off by the Wal-Marts, the Exxon Mobils - the modern day versions of Blacksmiths Are Us - where it ends up in the financial economy. There is no very good way to keep the money circulating in the real economy since large corporations are siphoning it off at every turn which means that either the central bank has to keep printing money or the government has to keep borrowing and spending money, the Keynesian approach.
Therefore, neither the method of giving money to rich people through zero interest loans nor fiscal stimulus requiring more government debt will work in today's economy. Paul Krugman, who advocates fiscal stimulus and more government borrowing, is wrong and the Republican supply siders who advocate giving more money to the rich are also wrong. Obviously, the central bank cannot go on indefinitely printing money because of the devaluation of the currency and subsequent inflation and the government can not go on indefinitely borrowing money because interest on the debt eventually consumes all expenditures so what is the solution? Giving more tax breaks to the rich only compounds the problem of money being siphoned off from the real economy, taken out of circulation and placed in the financial or casino economy where it circulates only among the financial elite. The Republican solution is to speed up the process of redistributing money from the poor and middle class to the rich even more.
The only viable solution is to redistribute the money from rich to poor. The money that has been siphoned off and taken out of circulation by the Wal-Marts and Exxon Mobils of the world needs to be siphoned back into the real economy where it can continue to circulate. Too much money is ending up in the cul de sacs where it never reenters the real economy but instead circulates endlessly in the casino economy among very rich people. 300 years ago when the economy was much simpler and consisted of a yeomenry who provided a good or service and spent all the money they took in, money circulated endlessly in the real economy. Today, Wal-Mart and Exxon Mobil take most of the money out of the real economy in the form of profits. That money leaves the real economy and enters the financial economy which is a big black hole as far as the real economy is concerned. In order not to increase the money supply endlessly or to require the proliferation of new products and services, which provide a temporary increase in economic activity, new jobs and circulation of money to a wider distribution of individuals and families, money has to be recirculated and redistributed into the local real economy. And in order for the Federal Government not to have to borrow money endlessly, it needs to siphon money from the rich who won't spend it and redistribute it to the poor and middle class who will. In this manner the economy needs not to be based so much on debt based growth but can become more of a steady state, balanced economy. Money siphoned off by Blacksmiths Are Us is siphoned back again and redistributed to the local blacksmiths where it can circulate in the real economy again.
Another way the economy can grow without creating debt or increasing the money supply endlessly, which means just fueling the casino economy, is to take Ellen Brown's suggestios from her book Web of Debt, and that is for the central bank to not loan money into the economy with zero interest loans to the big banks, but instead to spend the money into the economy for infrastructure projects and the like. Thus the money supply is increased as needed without the creation of debt.This is the method Abraham Lincoln used to fight the Civil War and to build the transcontinental railroad. It is estimated he saved the nation $4 billion in interest by spending the money into the economy with greenbacks instead of loaning it into the economy at interest.
Taxing the rich amounts to siphoning back money which has been siphoned off from the real economy in the first place and putting it back into circulation amongst a wider distribution of people. The Blacksmith Are Us franchisees supply a uniform blacksmithing experience for weary travelers regardless of which village they happen to be in. As such they take business from the Mom and Pop blacksmiths and concentrate wealth at the central headquarters of Blacksmiths Are Us. We imagine that no matter which village George Washington or Thomas Jefferson was in, they could count on the fact that their blacksmithing needs were met with satisfaction when they shopped at Blacksmiths Are Us. However, this would diminish the amount of money in the real local economy due to the fact that the business of the local blacksmith would diminish since the profits would be shipped elsewhere.
A final note: with all the economic turmoil in Europoe over the eventual default by Greece on its loans and the fact that this could create economic chaos, instead it could be seen as an opportunity for Greece to set up its economy as non-debt based by having its central bank spend fiat money into the economy thus creating jobs and distributing income until the economy picks up steam of its own accord. Thus Greece could drop out of the eurozone with it's western debt based economic methods and align itself more with the non-western world to create a non-debt based society instead of one drowining in debt as it is presently constituted.
Frank Thomas has written an excellent article on the transition from fossil fuels as a source of energy to renewable resources such as wind, solar and biomass that is going on in Denmark and Germany. In this article we explore how the price of gas at the pump is determined. This is an opaque subject which has been heaped in layers of obfuscation because the oil companies don't want you to know what a huge scam they are perpetrating on the American public systematically ripping them off at the gas tank. They want you to think that gas prices are set by immutable, impersonal factors like the "world oil market" over which we have no control nor ever could we. When the oil company executives went before a Congressional hearing in May 2011 as gas prices hit $4.00 a gallon, Rex Tillerson, CEO of Exxon Mobil, was asked "how are oil prices set?" He responded that they were based on the marginal cost of producing the next barrel of oil. Nothing could be further from the reality of the situation although it would be a worthy aspirational ideal, something to shoot for in a more perfect world. The Big 5 oil companies - Exxon Mobil, Shell, ConocoPhillips, BP America and Chevron - defended their huge tax breaks and subsidies despite record and eye popping profits as necessary to incentivize them to drill for more oil implying that more domestically produced oil would lessen dependency on imported foreign oil and keep the price down. This is also a total crock. Prices are set on the "world oil market" and have nothing to do with whether or not the oil is produced domestically or abroad.
Big Oil CEOs testify Thursday before the Senate Committee on Finance to defend the trillion dollars in profits they have made in the past decade thanks to you, the American consumer. Some in Congress will defend the billions of dollars in tax breaks and royalty relief taxpayers give to these same companies each year.
Public Citizen recently crunched the numbers and found that Big Oil’s profits aren’t the only eye-popping statistic – what the industry is spending its money on is equally astonishing. Big Oil lavishes more on stock buybacks, dividend payments, lobbying and marketing than on U.S. oil investments. Our research shows that since 2005, the largest five oil companies operating in the U.S. spent nearly half a trillion dollars buying back their own stock and paying dividends to shareholders. That’s more money than they spent investing in their U.S. infrastructure.
This contradicts the industry’s insistence that its billions of dollars a year in tax breaks are needed to create jobs and keep gas prices affordable. In fact, Big Oil’s investment decisions are driven by market prices of crude oil, not U.S. tax policy.
It’s time our leaders stop bowing to corporate interests and put an end to the “take the money and run” tactics of Big Oil that are nothing short of highway robbery.
While the speculation-fueled price of oil per barrel has continued to escalate, the underlying costs to produce oil haven’t. Consider this: On average, it costs $20 to produce a barrel of oil. Big Oil sells it to us for more than $100. This generates the massive cash flow that fuels oil companies’ profits and spending.
Ever wonder who pays for those ubiquitous "touchy-feely" TV ads by ExxonMobil, Chevron and the Oil and Gas Industry that you see day in and day out? You do. Without them the price of gas at the pump could be lower.
But despite the oil company executives' dissimulation, deception and mendacity, there are several factors that go into the witch's brew of oil and gas prices: namely, royalties paid to the owner of the oil before its extracted, the law of supply and demand and speculation. First, the oil as it sits in the ground, unbeknownst to most American citizens does not belong to the oil companies. It belongs to them! It is a public resource no matter how much the executives would try to persuade you that it is private property. Oil corporations pay the Federal government (meaning you the taxpayer) royalties in return for the right to drill on goverment (citizen) owned property. During most of the twentieth century, oil and gas companies generally paid between 12.5 and 16.7 percent in royalties for a lease to drill on public land or water. This is one of the lowest rates paid to a government anywhere in the world! In comparison Norway's citizen/taxpayers get a 50% return on their oil assets.
Based on results of a number of studies, the U.S. federal government receives one of the lowest government takes in the world. Collectively, the results of five studies presented in 2006 by various private sector entities show that the United States receives a lower government take from the production of oil in the Gulf of Mexico than do states - such as Colorado, Wyoming, Texas, Oklahoma, California, and Louisiana - and many foreign governments. Other government-take studies issued in 2006 and prior years similarly show that the United States has consistently ranked low in government take compared to other governments.
So American taxpayers/consumers are being ripped off by oil companies before the oil even gets out of the ground! If higher royalties were paid, this would offset the price of gas at the pump and/or reduce taxes. In any event this would benefit the American consumer/taxpayer. Moreover, royalties have been fraudulently underpaid or exempted from for years. In 1995, both houses of Congress passed and President Bill Clinton signed the Deep Water Royalty Relief Act (S.395), which granted a royalty "holiday" to oil and gas companies drilling in government-owned deep waters in the Gulf of Mexico for leases sold between 1996 and 2000. In 2005, Congress passed and President Bush signed the Energy Policy Act of 2005 (H.R. 6). which included a variety of provisions to provide royalty relief to oil and gas companies.
During the mid-nineties, whistleblowers and the Project on Government Oversight (POGO), a government watchdog group, filed suit against sixteen oil companies for failing to pay their required royalties. POGO’s suit was filed under the False Claims Act (FCA), which provides citizens the power to sue on behalf of the federal government for fraud. In these cases, the Justice Department has the right to join the case. This ultimately happened in the POGO case. From 1998 to 2001, a dozen major companies, while acknowledging no wrongdoing, paid $438 million to settle charges that they had intentionally misreported their sale prices for oil (in order to pay lower royalties).
So while the big oil companies were recording record profits, paying little if any taxes to the Federal government (causing you to pay more) and receiving subsidies, they were also committing fraud by underpaying royalties which were minimal in the first place.
Now that we've got the oil out of the ground, what is the next step? Why placing it on the world oil market which means that US oil companies will sell it anywhere in the world to the highest bidder. You might think that they would sell oil extracted in the US to US consumers first and then this would be supplemented by oil bought from abroad - the so-called foreign oil - to make up the shortfall in which case oil would be subject to the law of supply and demand within the US but such is not the case. American consumers are expected to buy gas that is subjected to the law of supply and demand among world consumers which means that as demand goes up in China and India, for example, American gas prices will rise even as demand within the US is falling. Dependency on foreign oil is a misnomer and a bugaboo. Our supposed dependence on foreign oil has nothing to do with the price of oil. What we're really dependent on is that "our" oil companies sell us "our" oil based on world oil market prices which means that they extract from us much higher prices than if they sold us "our" oil based on the domestic oil market. In other words oil produced on US real estate and sold to US consumers would end up being cheaper than oil placed on the world oil market and priced accordingly. So drilling for more oil on American soil has nothing to do with lessening our dependence on foreign oil because the pricing of oil we consume has nothing to do with how much oil is extracted from American soil.
To the extent that the law of supply and demand comes into effect which, as we shall see, is minimal, it is easily seen that this factor gives the lie to Tillerson's claim that the price of oil is based on the "marginal cost of the next barrel of oil that is produced." The law of supply and demand states that the seller will sell his product for the highest price he can get irregardless of cost. The selling price has nothing whatsoever to do with cost. It only has to do with demand. Edvard Munch probably produced "The Scream" for less than $10. Yet it sold recently at auction for $119 million. A Liz Claiborne sweater for which the worker in Thailand is paid 3 cents to make sells for $170. The law of supply and demand insures that cost has nothing to do with selling price. Insofar as the price of oil is affected by supply and demand, the same thing holds true.
The next factor to be considered is speculation. Oil being a commodity is traded on the commodities exchange. Futures contracts are bought and sold. What this means is that gas prices aren't simply set by the law of supply and demand but that speculators who are only in it purely for profit can drive up the price of oil. These are people who have no interest in ever taking delivery of the oil. They will buy a futures oil contract only to sell it (hopefully at a profit) before the oil has to be delivered. It has been estimated that 80% of the oil market is under the control of speculators. None other than Rex Tillerson, CEO of ExxonMobil, has testified that this has caused a 40% spike in gas prices. So "market forces," namely the selling of oil on the world market instead of just the domestic market and speculators have control of and can manipulate the price of gas at the pump in order to gouge the American public and increase their profits. Although the Commodities Futures Trading Commission was ordered to put position limits on speculators under the Wall Street reform act passed by Congress in 2010, they have failed to do so. This has allowed the continuation of unbridled speculation which translates into an additional $750. a year going directly from your pocket into those of the Wall Street speculators every time you fill up your vehicle!
Some believe that speculators control the market completely and supply and demand has nothing to do with it. In a blog titled "Futures Prices Determine Physical Oil Prices," JD contends that spot oil prices adjust to futures prices and not the other way around as is commonly thought. The spot oil price is simply the price of physical oil if you went out and bought some today. It is not too hard to see why the futures oil price would control the market if most of the oil market was tied up in futures contracts. If that were the case, there would simply not be enough oil on the spot market for current users, and oil consumers would be forced to buy from those who held the futures contracts in which case they would have to pay the futures contract price not the spot oil price. Supply and demand would have little to do with it since there would be relatively little supply on the current physical oil market.
All of this begs the question of why does oil and gas have to be subject to market forces and speculation at all? The answer to that question is that this maximizes profits for the oil companies and Wall Street while providing a disservice to American citizens/taxpayers. If the price of oil was not set by "the market", if control of natural resources was in the hands of or controlled by the citizens/taxpayers, we wouldn't have the ridiculous situation that supply of oil is as great as it's ever been while demand is exceedingly low, yet the price of gas at the pump has doubled compared to what it was when supply was lower and demand was greater.
In the documentary "GasHole" the nefarious activities of the oil companies are pointed out including the elimination of any technology such as the water injected carbuerator which results in a car getting 100 mpg and the electric car that was killed by the oil companies in the 1990s as recorded in the documentary "Who Killed the Electric Car?". Before the turn of the 20th century, in 1893, Rudolf Diesel developed a fuel source based on peanut energy. He said, “The use of vegetable oil for engine fuels may seem insignificant today. But such oils may become, in the course of time, as important as petroleum.” His demise is also shrouded in mystery, and his engine invention moved forward — using oil, another example of how the oil corporations bought out or forced out every alternative to the use of oil to propel vehicles. In 1904 progressive muckraker Ida Tarbell wrote "The History of Standard Oil" in which she pointed out how John D Rockefeller had used unethical business practices to force out smaller oil producers. As a result the Standard Oil monopoly was broken up into smaller companies based on states. In New Jersey it became Standard Oil of New Jersey which later became Exxon. In New York it became Mobil etc. Under the Clinton administration these two corporations were allowed to merge again into ExxonMobil.
The biggest crock is that the way to lower gas prices is to produce more domestic oil - drill, baby, drill. This is because oil prices are set on the world oil market not on any kind of domestic oil market. The way to lower gas prices is for the American people to take control of the resources they purportedly own. We can hire the oil companies to do the work for us of getting the oil out of the ground and refining it, but we should control gas prices, not the oil corporations or the "markets" namely Wall Street speculators. If We the People controlled the price of gas, it could be more rationally based on, as Rex Tillerson said, "the marginal cost of producing the next barrel of oil," instead of oil prices set by the "world oil market" and speculators.
The American solution to the 2008 financial crisis was flooding the economy with money. There was the TARP, the Troubled Asset Relief Program, a $700 billion bailout of the US' largest banks. But that was only the beginning. Dr. Ben Bernanke at the Federal Reserve bank added another $9 trillion to the money supply with his policy of "quantitative easing" which is just a euphemism for "printing money." The Fed has printed money again and again. There was a follow-up policy, QE2, because the Fed figured it hadn't printed enough money with QE1. In addition to the US Fed, the European Central Bank (ECB) has been printing money to bail out Greece and other vulnerable European economies. The Central Bank of Japan has also been printing money fast and furiously. Both the US Fed and the ECB are legally prohibited from buying up their country's debts directly, but they can loan money to their big banks and these banks can in turn loan money to the respective countries in an indirect "wink-wink" transaction thus getting around the inconvenient limitations imposed by law. As a consequence another layer of interest accrues to the big banks increasing their power and dominance over the world economy to the point that supposedly sovereign countries have become mere dependencies on them.
What does all this money creation do? First, it supposedly offers a stimulus to economies that are verging on recession. But that is not really happening due to the fact that most of this money is simply being siphoned off by the world's big banks, and, instead of stimulating the economy, is simply going into the financial sector fueling even more speculation and contributing to a possible further meltdown and bailout down the road. In Europe the money is simply going to pay down debts incurred by the various countries. Nothing is being done to spur Greece's economy, for example. Instead the Greeks are being subjected to a regime of austerity - firing workers, reducing pensions and generally creating economic malaise for the average Greek citizen. This will force the Greek economy into a deeper recession with the result that Greek indebtedness will only increase requiring another round of bailouts by the ECB.
Another effect of printing money, sometimes called government "fiat money", since it's not backed by gold or anything else, is the debasement of the currency and inflation. In general the larger the money supply, the more inflation there is. This is not a big concern when an economy is in recession, but becomes a greater concern when the economy starts to "heat up." As far as the debasement of the currency is concerned, the dollar is starting to lose value with respect to other currencies. The more fiat money the government creates, the less the dollar will be worth and this has implications for the dollar as the world's "reserve currency."
Ellen Brown has written extensively about the good aspects of fiat money, namely, Abraham Lincoln's use of it to win the Civil War and build the transcontinental railroad. But all fiat money is not created equal. In Lincoln's day his fiat money went directly into the "real" economy. That is it went to average working people to fight a war and create infrastructure. It avoided having to borrow the money and saved the US government $4 billion in interest. There is a difference in the fiat money that the Fed and the ECB are creating today. Their fiat money is going directly into the financial sector instead of into projects that distribute the money to average citizens and workers. In other words in a perverted downward spiral, today's fiat money is going to pay off the world's big banks like JC Morgan Chase and Goldman Sachs and to pay interest on huge debts owed to private bankers. The Lloyd Blankfeins and the Jamie Diamonds of the world are profiting while the average working person and citizen is only going deeper into debt. The money is not "trickling down", making Republican assertions that all we need to do to get the economy booming again is to give more money to the rich, a ridiculous assertion. The only way to get the economy working again is to give the money directly to the average working person, but this possibility is not even on the radar of the world's western economies like it was during the Great Depression. That is, instead of inserting fiat money into the financial sector resulting in huge profits for bankers and miniscule results for the middle class, the money needs to be inserted into the economy directly at the middle class level which is to say in the form of infrastructure development and support programs like food stamps and tax breaks for the middle class.
The dollar is the world's reserve currency only because the US cut a deal with the middle east oil sheiks that oil on the world market would only be traded in dollars. But here too the dollar is being undercut since some countries, notably China, are cutting direct country to country deals which bypass the world oil market and bypass having to purchase oil in dollars. There are also moves afoot to replace the dollar by a basket of other currencies which would compete with the dollar. All of this is not promising for the continuance of the predominace of the dollar. Increasingly, US Treasuries are becoming less desirable as investment vehicles which means that the money printed by the Federal Reserve is increasingly being used just to buy up the US deficit which is the shortfall between Federal government expenditures and Federal tax revenues. So money is being printed just to bridge the gap. Obviously, this can only be a short term solution to US deficit and fiscal problems. For the long term the US economy itself has to produce tax revenues sufficient to balance government expenditures or, more likely, to pay increasingly higher interest rates to attract private investors just as Greece and Spain are having to do.
So as the US money supply is further diluted by quantitative easing, the value of US money is diminishing, dollar-denominated debt is less desirable as an investment and the role of the US dollar as the world's reserve currency is being eroded. European countries are in a similar predicament having become essentially subsidiaries of US and European banks. One of the statistics that substantiates these assertions is that 93% of the income gains since the Great Recession have gone to the upper 1%. In other words most of the money created has gone to the hedge funds, large banks and other elements of the financial sector. This money has not "trickled down" to the real economy. This is the ultimate denouement of the fact that the western world has relied too much on debt basing their economies. Rather than spending from strength which is spending from savings and accumulated wealth which countries with sovereign wealth funds are able to do, western countries and individuals have overspent by going into debt and the accrued interest is only driving them further into debt. The result is that huge amounts of interest are owed to the big banks, and this amount of money is swamping western economies and debasing the values of the dollar, euro and yen.
In a Trillion Euros Didn't Buy Much Time, Rick Ackerman discusses the fact that the US and Europe have both been reduced to the same level. Their central banks are being forced into the position of bailing out the US and the European countries by buying up their debt since private investors are becoming more and more reluctant to buy it. The US Fed is printing money to make up the difference between US government expenditures and what US taxes and private investors are willing to fund and in the European case, the ECB is buying up Greek and Spanish debt that private investors are turning up their noses at. This buying of debt means that central banks are effectively printing money to pay off the big banks which are owed money that US and European citizens as taxpayers don't have the money to pay and which increasingly cannot be borrowed from private investors.
All this supports my contention that the real action in the world economy these days is not with the average worker/consumer. The average person is becoming increasingly irrelevant. Instead the big banks, hedge funds and central banks are where the action is. In the US the big banks were bailed out while practically nothing was done to bail out the average person. Just think of the foreclosure crisis where HAMP, the Home Affordable Mortgage Program, turned out to be a worthless, toothless approach which did more damage to the average home owner by raising hopes which were later dashed than if it had never been enacted. It did almost nothing to protect home owners from being foreclosed on even though most of the foreclosures were fraudulent. In some cases home owners were led on being promised modified mortgages if they would only keep up current payments only to be foreclosed on at a later date instead of being given the revised mortgages they had been promised. The government's attitude was "we have to let the banks do anything they want, even engage in fraudulent activities, because to do otherwise would risk collapse of the entire system." Ellen Brown's plea for the elimination of the debt based, interest oriented economy in favor of public banking favoring fiat money injected into the real economy instead of into the financialized economy seems further and further from any possibility of being realized.
A constitution defines the architecture of a society. In the American case, the constitution is over 200 years old, the oldest constitution of any advanced nation. Nations much older than the US have newer constitutions. Why? Because they have rewritten their constitutions - some of them multiple times. Yet in the US the Constitution is taken as something written in stone; it's considered to be irrevocable, eternal, irreproachable, unchangeable. It is given the status of a divine oracle. It is nothing of the sort. It is a remarkable document taking into account the best thinking of the Enlightenment which took place hundreds of years ago. But to assert that it couldn't be rewritten to come up with improvements based on the fact that the world is a much different place today than it was 200 years ago is a form of lunacy and intellectual backwardness.
What should be happening is that the US Constitution should be gone over line by line with the intent to come up with a document far better suited to the 21st century than the present document is, and this should be done by people far more knowledgable and far better suited to the task than I am, people who have studied the constitutions of other countries, people who are well versed in the law, people who have original ideas, people who have taken into account criticism of the US Constitution as it is written now. Even though there is a provision for amending the present constitution, it might be better to scrap it and start over with a whole new document. Alternative constitutions should be written even without the notion that they might ever be implemented just for the exercise of proposing something better than what we have today. This would be a good project for graduate students or even high school seniors. To many people the idea of an alternative constitution may be heresy just as the idea that every word of the Bible may not have been dictated by God is heresy or treason. Rather than view the US Constitution or any constitution as a document revealed from on high or set in stone, it should be viewed as a working document intended to bring about the best results based on philosophical principles and practical results.
It is not hard to see that our present political system is not working for the following reasons: 1) Money is corrupting politics both in terms of campaign financing and in terms of lobbying activities. The Supreme Court Citizens United decision puts money in politics on steroids. 2) The electoral college and winner take all system prevent politicians from being elected on the principle of one person, one vote. 3) The first past the post voting system is antiquated compared with proportional representation and range voting. 4) Divided government does not work; the filibuster can kill any legislative proposal. 5) The majority of the Supreme Court can strike down any legislation it doesn't agree with based on their personal political belief system. In short the bicameral legislature, the executive branch and the judicial branch are all in need of major rethinking and revising. The current system produces nothing but gridlock unless one party controls all three branches of government. The Affordable Care Act popularly known as Obamacare barely escaped the filibuster to pass both Houses of Congress and to be signed into law by Obama. However, now it looks like it will not escape the Supreme Court which will most likely overrule it. Some of the conservative members of the Court like Scalia and Thomas look like political hacks who will vote their conservatives biases without any pretense of being impartial interpreters of the Constitution and without any respect for historical precedent.
I am no expert. Neither have I studied line by line our current constitution or the constitutions of other countries. Nor am I a legal scholar. This blog is a call for those who are so inclined to contribute the benefits of their thinking in this regard and their work will be published here if it is deemed to be in a constructive vein and appropriate. However, off the top of my head here are some of the things I would change. The First Amendment - Free Speech - needs to be changed to not allow lying to the public either in terms of political ads and TV and radio talk shows in which lies are protected by the First Amendment or in terms of commercial ads in which lying is protected by the First Amendment. Lying should not be protected speech. Neither should money be considered protected free speech. There is no level playing field when those with money can get their viewpoints across and those without money have no voice in the political arena. Negative attack ads have degraded the political process and have little if any redeeming social value. Hucksterism runs rampant with little if any protection of the consuming public except caveat emptor or buyer beware.
The first past the post, winner take all voting system which makes anything other than a two party political system unworkable and unfeasible, should be scrapped in favor of range voting or proportional representation which would lead to a multi-party system in which minority viewpoints would be better represented. Economic rights as well as political rights should be spelled out as they were in the UN Declaration of Human Rights. The present US constitution has nothing to say about economic rights at all. As it is in most countries, health care as well as public education should be a right. There should be a right to minimal levels of food and shelter for those who for whatever reason are unable to provide a minimally decent level of economic well-being for themselves.
Here are Articles 26 and 27:
Article 25.
(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
(2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.
Article 26.
(1) Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit.
(2) Education shall be directed to the full development of the human personality and to the strengthening of respect for human rights and fundamental freedoms. It shall promote understanding, tolerance and friendship among all nations, racial or religious groups, and shall further the activities of the United Nations for the maintenance of peace.
(3) Parents have a prior right to choose the kind of education that shall be given to their children.
Any constitution incorporates the philosophical principles of freedom and equality in various degrees since total freedom and total equality are antithetical and cannot be incorporated in the same constitution. The exact blend of these two principles should be fashioned in such a way as to give each citizen as much freedom as possible consistent with the principle that "we are all in this together." The social Darwinism of the present day Republican party should be repudiated.
It should be mandatory to study the constitutions of the major countries in the world today. For instance take China. The Constitution of the People's Republic of China contains a lot of very interesting and informative stuff. People should read it. It deserves much study. A cursory reading which is all I have time for right now reveals much which contradicts the prevailing ignorant notions about China which American politicians bandy about. For one thing China has a combination of collectivist or state run enterprises and individually oriented or private enterprise. They seemed to have tweaked this arrangement to maximize the best results from each sector as is evidenced by their rapid economic growth and their being on track to becoming the world's largest economy very soon. China also has the traditional three branches of government - executive, legislative and judicial - although the power distribution among these three branches probably favors the executive over the other two branches with the result that they don't experience the gridlock that the current US system produces.
China guarantees more individual rights, including economic rights, in their constitution than the US does although there probably is a gap between the ideal and the real on many levels just as there is in every other country. In other words what is specified on paper does not always represent the reality as practiced, but rather an ideal to be striven for. The Preamble is a bunch of claptrap about socialism and communism that is much outdated compared to the reality on the ground in China today. In fact the first amendment to the Chinese constitution softens the emphasis on collectivist enterprise considerably:
AMENDMENT ONE (Approved on April 12, 1988, by the 7th NPC at its 1st Session)
1. Article 11 of the Constitution shall include a new paragraph which reads: "The State permits the private sector of the economy to exist and develop within the limits prescribed by law. The private sector of the economy is a complement to the socialist public economy. The State protects the lawful rights and interests of the private sector of the economy, and exercises guidance, supervision and control over the private sector of the economy."
2. The fourth paragraph of Article 10 of the Constitution, which provides that "no organization or individual may appropriate, buy, sell or lease land or otherwise engage in the transfer of land by unlawful means," shall be amended as: "no organization or individual may appropriate, buy, sell or otherwise engage in the transfer of land by unlawful means. The right to the use of land may be transferred according to law."
Here is Article 11:
Article 11. The individual economy of urban and rural working people, operated within the limits prescribed by law, is a complement to the socialist public economy. The state protects the lawful rights and interests of the individual economy. The state guides, helps and supervises the individual economy by exercising administrative control.
One thing I noticed in the Chinese Constitution is that the word "love" was mentioned: "The state advocates the civic virtues of love for the motherland, for the people [!], for labour, for science and for socialism;" I doubt if this word has been much used in any other constitution surely not in the US one. Perhaps verbiage such as "Fellow citizens should strive to love one another in the spirit that we are all in this together" should be added to any new constitution to ameleriorate the selfish sentiment that "the pursuit of [individual] happiness" (which comes from the Declaration of Independence) connotes. I would like to follow up this blog with a much more detailed analysis of the Chinese constitution as well as of other constitrutions. The German and French constitutions should also be very interesting to study. I invite other independent scholars to do the same and to submit their writings to this blog. The internet makes this kind of research possible. Thank God!
Finally, as an initial step to define a society which actually works on behalf of its people instead of one that only works for the upper 1%, I would suggest the following. I envision a three tier economic system. First, the minimal commanding heights of the economy, namely, the energy and banking sectors should be publicly owned. This would eliminate the scams, the financialization, the speculation, the boom and bust cycles, the financial meltdowns and the exploitation of consumers which the current system has amply and recently demonstrated. It would eliminate speculation in oil and other commodities which has driven up gas prices and threatens to drive the whole economy into another recession or worse. The current high gas prices are caused to a large extent by speculation in the commodities markets. According to Senator Bernie Sanders, 80% of the futures contracts for oil are owned by Wall Street banks. The solution is to get out of the "world oil market" to the greatest extent possible as China is evidently doing by making country to country deals which bypass the market. China's oil-for-loan deals with Venezuela and other countries effectively bypass the world oil market entirely and they also control prices at the pump.
In the US on the other hand, US taxpayers practically give away a resource they technically own (oil) to the big oil companies who then price the oil sold back to consumers on the world oil market which allows a "speculation" tax to be added to each gallon at the pump as Senator Bernie Sanders has pointed out. Norway charges oil companies a 50% royalty on oil extracted from its country which goes into a fund that provides pensions for old people. Still Norway relinquishes control over the price of oil once the royalty has been paid letting the price at the pump be set by the world oil market. This in my opinion is a big mistake. They should reserve enough oil for domestic consumption at a reduced price and then let the excess be sold abroad on the oil market thus reducing prices at the Norwegian pump. The US taxpayers/citizens neither receive much of a royalty for oil extraction nor do they control the price at the pump for domestic production/consumption making up the difference with purchases on the world oil market over which, of course, they have no control.
Secondly, the middle tier would consist of an entrepreneurial sector in which entrepreneurs are given free rein to innovate and develop new products and procedures and to accelerate technological progress. This sector would be supported by venture capital provided by the state as well as private capital. By encouraging this sector the best aspects of the free enterprise system are actually incorporated into the overall system and entrepreneurs are amply rewarded within limits. It is anticipated that individual ownership of patents, and other intellectual property such as trademarks and trade secrets will cease at some point just as they do in present day America. When production has reached the stage of commodification, when innovation has ceased, the production process should be turned over to the third tier, worker/consumer owned enterprises in which workers, not investors, are the primary stakeholders who democratically determine how the enterprises are to be run. In other words they sit on the Board of Directors as workers, consumers and owners. The transfer of property from the entrepreneur owned free market which might be set up much as corporate enterprises are set up today, in other words a top down distatorship, to worker/consumer owned enterprises should be overseen by the government to insure an orderly transition. Shareholders and stakeholders in the original company could be bought out (compensated) by government.
The first tier is somewhat similar but obviously not identical to the Chinese system. The second tier is somewhat similar but not identical to the American capitalist system. The third tier would be the enterprise level in which mature industries would be cooperatively run in accordance with the principles of economic democracy. In other words the workers would own and benefit from the products and services they produce, and enterprises would not be owned by shareholders who are mererly investors with no day to day role in production. These enterprises would be similar to Mondragon, a Spanish cooperatively owned and run enterprise. According to Wikipedia: "Currently it is the seventh largest Spanish company in terms of asset turnover and the leading business group in the Basque Country. At the end of 2010 it was providing employment for 83,859 people working in 256 companies in four areas of activity: Finance, Industry, Retail and Knowledge. The MONDRAGON Co-operatives operate in accordance with a business model based on People and the Sovereignty of Labour, which has made it possible to develop highly participative companies rooted in solidarity, with a strong social dimension but without neglecting business excellence. The Co-operatives are owned by their worker-members and power is based on the principle of one person, one vote."
As envisioned, these enterprises would eliminate exploitation of workers, and workers could look forward to control over their own time and energy using a system such as Preferensism that I have developed. Workers could set up their own time schedules and pay preferences within reason and considering the demands of co-workers. A safety net would protect workers at this level in case of illness, disability and old age. The resulting wealth coming from the advancement of technology is, therefore, effectively shared. This third tier concept is significantly different from what exists in China at the present time since they allow child labor and all sorts of workplace exploitation as has been reported at Foxconn which produces Apple ipods and other tech devices. China has allowed their free enterprise or entrepreneurial sector to run rough shod over their sector of production workers and their socialist principles which preclude exploitation of workers. This has also produced many Chinese billionaires and has done a lot to grow economic development and GNP at the expense of run of the mill production workers.
What I am proposing is a free wheeling entrepreneurial sector combined with a worker owned, cooperative production sector combined with public control of the minimal commanding heights of the economy including the banking and energy sectors. This is an initial top of my head approach to defining part of what should be included in the economic aspects of a new constitution. It is by no means a definitive or final version nor have I gone into detail here regarding the definition of the political system or individual rights. These have only been hinted at at best in this initial article on societal architecture.
Republican Congressman Paul Ryan has laid out a new budgetary plan for the US, part of which is his plan for lowering taxes (on the rich), something that Republicans have been consistently doing with a vengeance since the days of Ronald Reagan. (See "How Republican Presidents Lowered Taxes on the Rich" Parts 1 and 2.) As pointed out in Part 1, Reagan "flattened" the tax code by reducing it down to just two tax rates just as Paul Ryan is proposing, but Ryan is taking it one step further than even Reagan dared to do. Reagan's tax code called for two rates of 15% for married couples filing jointly with (inflation adjusted) incomes up to $56,427. Ryan wants to lower that to 10% for incomes up to $100,000. Also Ryan wants to lower Reagan's tax rate on high earners from 28% to 25% for incomes over $100,000. Right now there are six tax brackets which were set by the Bush tax cuts. They can be found in Part 2. Of those Ryan's plan would give a tax break to the upper five tax brackets. The only tax bracket that wouldn't get a break under Ryan's plan would be the lowest one which is the tax bracket for the poor (naturally). Their tax rate would remain at 10%.
So there is nothing new and revolutionary here. It's just the same old story: lower taxes on the rich and raise them or keep them the same for the poor. In addition Ryan wants to eliminate capital gains taxes entirely which are the taxes which most rich people pay since most of their income is in capital gains. Even Ronald Reagan who lowered the capital gains tax from 28% to 20% didn't have the audacity to do that! During the Clinton years capital gains taxes were raised back up to 28% and 29%. This was largely responsible for the fact that Clinton's budgets in the later years of his Presidency produced a budgetary surplus. When Bush came in in 2000, capital gains taxes went back down to 15%, even lower than Reagan's audacious move. This is largely responsible for the fact that Bush drove up the deficit and the debt to record proportions. Obama has not been able to move tax rates on the rich back up to where they were under Clinton. This is why Obama has continued to run record deficits. He is still operating under the Bush tax rates. It's not for Obama's lack of trying. You can blame the Republican controlled House and the filibuster rule, which killed Obama's legislative proposals even when Democrats controlled both Houses of Congress, for that.
While Ryan's plan would devastate Federal government revenues by lowering taxes on the rich through both income tax and capital gains tax cuts, his proposal for corporate tax cuts would provide the death knell for revenues which would usher in an age of extreme austerity for average American citizens because none of the social programs which provide for the poor, the sick and the elderly would have a prayer of survivng. Ryan wants to eliminate the corporate income tax entirely replacing it with a "Business Consumption Tax" of 8.5%. The current corporate income tax, which hardly any corporations actually pay, is 35%. Even with the current rate corporate taxes provide a drastically decreased portion of Federal revenues compared to what they provided just a few years ago. In 2010 corporate income taxes provided just 9% of Federal revenues whereas in 1960 corporate income taxes provided 23% of Federal revenues. In the 1950s it was even more - 28%.
Ryan's Business Consumption Tax is similar to a VAT tax which is common in Europe. This might make some kind of sense if it applied to imports and not just domestically produced products as it does in Germany. This tends to encourage domestic production and consumption and decrease imports. However, Ryan's rate of 8.5% is ridiculously low. In Germany the VAT tax is 19%!!
Ryan's plan to eliminate the corporate income tax rate entirely would be a disaster for the US. Instead, the loopholes should be eliminated so that corporations contribute 20%-30% of Federal revenues as they did in the 1950s and 60s. What has happened since 1980 is that Federal revenues have depended more and more on taxes collected from the poor and middle class as FICA and SECA (payroll) tax rates which are regressive have been raised while capital gains and corporate taxes have been either formally or effectively reduced.
Part 1 of this series covering the Reagan years can be found here. This post relies on data from the following sources: Federal Income Tax Rates History, Social Security and MedicareTax Rates, Historical Capital Gains and Taxes and Party Control of Congress and the Presidency. In the first part we pointed out that Reagan under the tutelage of Ayn Rand lover Alan Greenspan flattened the tax code to just two rates: 15% for anyone making less than $56,427. and 28% for anyone making more than that amount. This effectively raised taxes on the poor and lowered them on the rich compared to the day Reagan entered office when the tax rate was zero on the poor and 70% on the rich. Reagan and Greenspan also drastically raised Medicare and Social Security (payroll) taxes which affect mainly the poor and middle class. Bush Sr served from 1989 till 1992 when Clinton took over. In 1991 under a Democratic Congress, Bush Sr raised taxes despite his pledge not to. Remember his campaign promise: "Read my lips. No new taxes." However, despite the big brou ha ha, Bush did not raise income taxes on the poor and middle class; he only raised them on the rich. You would think that, if the middle class and poor were paying attention, they would have been satisfied with this development and reelected Bush in 1992. But the Republicans and right wing media talking heads raised such a hue and cry, convincing voters that Bush Sr had raised taxes on all people and not just the top few percent, that Bush was defeated and Clinton elected. What Bush did was to add a third tax bracket of 31% for incomes over $135,336 while leaving unchanged the two lower tax brackets. Bush "unflattened" the tax code slightly which should have raised a cheer among the middle class, but it didn't due to the fact that they were convinced by the right wing punditry that Bush raised taxes period, end of story. They didn't distinguish whom Bush raised taxes on. They only paid attention long enough to understand that Bush raised taxes.
Bush Sr also raised FICA and SECA (Social Security and Medicare) taxes. These went from 7.150% for employees and employers in 1987 to 7.51 in 1988 and 1999. The corresponding rates for the self-employed went from 14.3% in 1987 to 15.02% in 1988 and 1989. So what Bush gave with one hand to the poor and middle class in the form of not raising their income taxes, he took away with the other by raising FICA and SECA taxes which affect mainly the poor and middle class. The net effect was to make the total tax burden on the middle class as great or greater than the tax burden on the rich since the rich pay little FICA and SECA tax compared to their total income. Bush Sr and the Republicans were at it again in 1990, a year in which they raised FICA and SECA taxes to 7.65% for employees and employers and 15.3% for self-employed where they have remained to this day. So Bush Sr was not such a traitor to his class as one might think from just considering the income tax structure alone. The net effect was that he raised taxes on the poor and middle class much more than he raised them on the rich.
Bush Sr had a Democrat controlled Congress during his four year term and they managed to raise the capital gains tax from 28% to 28.93% in 1991, a piddling amount compared to the huge decreases which were to come later during the Bush Jr administration. So the rich had their capital gains taxes raised for the last year of the Bush Sr administration through no fault of Bush's own. It was the Democrats who pushed this tax increase through.
Clinton took over in 1993 and with a Democratic Congress unflattened the tax code even more adding two tax brackets at the high end. The following is the tax table for married couples filing jointly, inflation adjusted.
Despite the fact that Clinton raised only taxes on the rich and kept them the same on the poor and middle class, a fact that the vast majority of voters should have been happy with, Republicans managed to tag Clinton and the Democrats with the "tax and spend" and "big government" labels. FICA and SECA taxes remained the same under Clinton.
In 1994, half way into Clinton's first term, Republicans took over control of Congress. Despite that fact the income tax code remained substantially unchanged for the rest of Clinton's Presidency with the result that, by the time Clinton left office in 2000, there was a budget surplus and the nation was on track to eliminate the national debt entirely.
Capital gains taxes were a different story. They went from 28.93% in 1991 to 29.19% in 1993. The poor and middle class swallowed the Republican hogwash about Clinton raising their taxes and elected a Republican Congress in 1994. The Republican Congress slashed the capital gains tax all the way back to 21.19% in 1997 where it stayed for the remainder of the Clinton Presidency. So despite the fact that during the Clinton years income taxes were raised on the rich, capital gains taxes which affect primarily the rich were substantially reduced. The net result was that taxes on the rich were effectively lowered and despite that fact Clinton was able to run budget surpluses during his last few years in office. Go figure!
George W Bush was elected in 2000. Then the tax cutting which led to huge deficits began - with a vengeance. "You know how to spend your own money better than the government does." The Republicans were great at formulating slogans and defining the situation. What were the Democrats supposed to say to that: "The government knows better how to spend your money than you do"? Consequently, in 2001 the top tax rate was lowered by .5% from 39.6% to 39.1%. The middle three tax rates were lowered .1%, and the tax rate for the poor, the lowest tax bracket was not lowered at all. The net effect was to give the rich a big tax cut, the middle class a modest tax cut and the poor no tax cut. Here is the tax table:
In 2002 another half a percent was cut for the four highest tax brackets and in addition a new bracket was added at the bottom thus reducing taxes on the poor to 10% up till an income of $14,967. The 15% tax bracket was the only one not cut thus making a mockery out of tax cuts for the middle class. Here is the tax table for 2002:
Table 3 - 2002 - Married Filing Jointly
Marginal Tax Brackets Tax Rate Over But Not Over
10.0% $0 $14,967
15.0% $14,967 $58,246
27.0% $58,246 $140,752
30.0% $140,752 $214,464
35.0% $214,464 $382,967
38.6% $382,967
In 2003 there was another tax cut ... of course ... but only for the rich and upper middle class, not for the middle class or the poor!! 3.6% was cut off the top tax rate! 2% was cut from the next three tax rates leaving the bottom two tax rates all the way up to an income of $69,265 virtually untouched!! All the while the right wing propaganda machine was out to convince everyone that Bush Jr was cutting taxes for E..V..E..R..Y..B..O..D..Y. Here are the sad results:
Table 4 - 2003 - Married Filing Jointly
Marginal Tax Brackets Tax Rate Over But Not Over
10.0% $0 $17,072
15.0% $17,072 $69,265
25.0% $69,265 $139,810
28.0% $139,810 $213,039
33.0% $213,039 $380,409
35.0% $380,409
After 2003 the income tax cutting frenzy for the rich was over at least for the remaining years of the Bush Jr administration. The 2003 tax table was for all intents and purposes the tax structure that President Obama inherited when he became President in 2009. The same tax structure remains in effect till this day, Obama having failed to end the Bush tax cuts due to Republican intransigence and obstructionism and to raise the top rate back to the 39.5% that it was in the last years of the Clinton administration. As a consequence structural budget deficits continue to add immense sums to the national debt, and there is Republican pressure to cut spending on social programs like Social Security, Medicaid and Medicare but, of course, they don't want to reduce spending on the military. Obama may force their hand by ending the wars in Iraq and Afghanistan and talking up his desire on the campaign stump to spend half the savings on deficit reduction and half on rebuilding infrastructure, but he will need a Democrat controlled Congress to do anything of the sort.
In addition to the Bush Jr income tax cuts for the rich, he also cut capital gains taxes substantially during his term in office, an even greater boon to the rich than the income tax cuts. Capital gains taxes went from 21.19% in 2000 to 21.17% in 2001 and 21.16% in 2002. Then in 2003 they went all the way down to 16.05%. That was followed by a drop to 15.07% in 2006 and further down to 15.35% in 2008 where they remain today. The combined income and capital gains tax cuts which benefitted primarily the rich produced disastrous budget deficits, and, since structurally the Bush tax cuts remain in effect, the Obama administration is forced to run huge budget deficits which Republicans disingenuously blame him for although they refuse to raise taxes on the rich or let the Bush tax cuts expire which would ameliorate the situation.
Raising the top income tax rate back to 39.5% and the capital gains tax back to 28.93% (an almost doubling of capital gains tax) where they were under the Clinton administration would do a huge amount to eliminate the budget deficits that Obama is unfairly being tagged with. Adding more tax brackets for incomes above $382,967 where the highest rate now kicks in would also provide even more desperately needed revenue. Today when the Fortune 400 is composed exclusively of billionaires, tax brackets in the millions and billions of dollars are appropriate and only fair. Obama has presented this rather cleverly as the Buffet rule: a boss shouldn't be effectively taxed less than his secretary. Today most billionaires pay an effective tax rate around 15% since most of their income is composed of capital gains. The only way to implement the Buffet rule is to raise the capital gains tax since the income tax no matter how high it becomes for millionaires and billionaires will hardly affect them. In addition a financial transaction tax could raise as much as $100-$200 billion a year.
When I was a graduate student at UCSD in the midst of the anti-war movement, protesting the war in Vietnam, I went to the library and pondered what would make the world a better place, what could I do to contribute something that might make war less likely and peace time activity more likely. I concluded that more cooperation was needed. More ways to resolve conflicts big and small. For example, democratic voting systems resolve conflicts in such a way that solutions are found that are acceptable to all parties for the most part. I took it for granted that institutions that provided for more cooperation and less competition were more desirable. I thought that this was what the Enlightenment was all about. My heroes were the Enlightenment superstars: Jeremy Bentham, John Stuart Mill, Rousseau, Diderot, Voltaire, John Locke.
As I sat there and went through the stacks, I discovered another field and another set of superstars. Social choice has a long history going back to the French Enlightenment philosophers, the Marquis de Condorcet and Jean-Charles de Borda, and even further back than that. One of the 19th century superstars in this field was none other than the Rev. C. L. Dodgson otherwise known as Lewis Carroll, the author of Alice in Wonderland. These guys came up with voting systems which are essential to democracy and are essential to the whole notion of cooperation and conflict resolution. The most recent work in this field was by Kenneth Arrow who published a book Social Choice and Individual Valuesin the 1950s which attempted to generalize conflict resolution in society in both the political and economic spheres. Arrow concluded that this was impossible and came up with his famous Impossibility Theorem which was a generalization using sophisticated mathematics of the paradox of voting that was known to Condorcet hundreds of years ago. Therefore, Arrow concluded democracy was impossible and any economic system other than capitalism was impossible too. Hmmm, I thought, this is obviously a cop-out because some political and economic systems are more desirable than others and Arrow has done nothing except to throw cold water on any framework that could consider these. I took it as my self-assigned task to prove that Arrow was wrong, that social choice is possible. My work can be found on the website Social Choice and Beyond.
In “Social Choice and Individual Values,” Kenneth Arrow said , “In a capitalist democracy there are essentially two methods by which social choices can be made: voting, typically used to make ‘political’ decisions, and the market mechanism, typically used to make ‘economic’ decisions.” This paper resolves that dichotomy by developing a meta-theory from which can be derived methods for both political and economic decision making. This theory overcomes Arrow’s Impossibility Theorem in which he postulates that social choice is impossible and compensates for strategic voting, an undesirable aspect of decision making according to Gibbard and Satterthwaite. Thus the politonomics meta-theory spawns both political and economic systems which are indeed possible and which cannot be gamed. In a typical voting system the outcome of an election among several candidates results in one realized outcome – the winner of the election - which applies to all voters. In a typical economic system, a consumer may choose among a variety of possible baskets of consumer items and work programs with the result that multiple realized outcomes are possible with a unique or quasi-unique outcome for each worker/consumer. As the number of possible realized outcomes of a political-economic decision making process increases, the process becomes more economic and less political in nature and vice versa. We show that as the number of possible realized outcomes increases, voter/consumer/worker satisfaction or utility increases both individually and collectively.
I never considered, as I sat there pondering, that there would be people who would argue that what the world needed was not more cooperation but more competition, but, as I sit here today, I realize that the whole conservative right wing is in favor of just that. They want not more cooperation in either the political or economic realm but more competition believing that only winners should prevail and human progress is only possible when you give free reign to those among us who are the most talented, intelligent and ambitious. They believe that competition will result in the strongest among us winning just as Nietzsche believed that a good war hallows every cause. Their ethic is that the naturally gifted elite should prevail, and they are not concerned about what happens to the rest of us or of who is trampled in the process. This is also the philosophy of Ayn Rand as espoused in her novels Atlas Shrugged and The Fountainhead.
The debate today about increasing inequality in the world has to do with the prevalent conservative belief that only the strong should survive and be promoted and that freedom should preclude equality as a value. The rich should get more tax breaks because they are the true instigators of human progress and should be catered to at every turn. Perhaps a few crumbs will trickle down to the rest of us. This kind of thinking is counter to the Enlightenment and is fast returning us to a neo-Dark Age. No more is human progress to be measured in reduction of poverty and extension of basic services like health care to everyone. It is to be measured in terms of the great advances to human civilization like iPads, iPods and iPhones. People who are capable of coming up with these advances should be cut every break and none of the billions of dollars they make should be transferred by government to the least of these among us like the homeless, the poverty-stricken and the destitute because, well, they are the least among us, not the best among us who should be given every break.
Nevertheless, I remain in the camp of those who think that more cooperation in the political and economic spheres will do more for human progress than more competititon. I also have spent about 40 years in my spare time trying to prove that Arrow was wrong, that social choice is not impossible and that democracy in both the political and economic spheres is not only possible but desirable. This has a lot to do with voting systems, democratic institutions and constitutions but also with cooperative economic systems in which freedom is seen not as the freedom to make money at other people's expense (the losers in the competitive struggle) but the freedom to work as much or as little as one chooses and in accordance with one's preferences as much as possible. Freedom from work is for many people just as desirable a goal as the freedom to make billions of dollars, and wealthy people who don't have to work would be the first to tell you that. Economic democracy in my view is more desirable than cutthroat capitalism, and can be practiced not only at the national level, but at the enterprise level in the form of co-ops like the Mondragon Corporation.
Marx's famous definition of the "good society" was "from each according to his ability, to each according to his needs." This of course was perverted in defining communism as a society where all the wealth created by those who had a lot of talent and ability as well as a strong work ethic combined with those who had not so much in those categories would be thrown into a pot and then divided up in equal portions and handed out by the government. Such need not be the case in achieving the "good society." The "needs" part is pretty basic and could probably be accomplished with abouit 10% of the wealth that exists in the world today. Most people can provide for their own needs - no transfer necessary. There are some who cannot and to transfer a small part of the wealth of the wealthy to provide for their basic needs seems to me to be no more than humane. That still leaves the vast amount of wealth in the hands of the wealthy. In other words if you total up how much it would cost to provide for all the basic needs of everyone in the world and tote up how much wealth there exists in the world, it would take a fraction of all that wealth to provide the basic needs for everyone who cannot provide for their basic needs themselves who turn out to be mainly children, seniors and handicapped (whether physically or mentally) people.
A recent documentary by German TV station Deutsche Welle pointed out that half the world's production of food is wasted because super markets only want perfect vegetables and ones with slight blemishes are thrown out even though they are perfectly edible. Shelves need to be fully stocked with bread right up till closing hours even though any bread left over at the end of day will be thrown out as "day old." All the food that is thrown out by advanced nations is enough to feed all the world's hungry three times over although no governments or other institutions, much less the supermarkets themselves, seem to be interested in organizing that effort. This is what I mean by the fact that the basic needs of all the world's people could be satisfied without subtracting much if anything from the world's wealthy although a lot of them would admit they do not need incomes of millions of dollars a day like the Fortune 400 billionaires have.
Another documentary noted that Finnish school children have the highest test scores in the world despite the fact that they have one of the world's shortest school days with 15 minutes intermissions between classes during which time they are encouraged to go outdoors and play. All grades have large amounts of music, art and self-defined projects. They don't teach to the test. They are concerned with the development of each student as an overall human being not just as some super competitive cog in a nationally competitive machine. The Chinese on the other hand have the opposite approach demanding that children learn by rote methods and extra hours in school and at study. The Finnish schools are all public and everyone is accepted into every class. There are no advanced classes or tracking of students into lesser classes if they are not among the elite intellectually. Everyone is thrown in together; yet they have the best outcomes of any country in the world on standardized international tests. Egalitariansim seems to gain the best results.
An egalitarian ethic in which the concern is for the development of the whole human being rather than a promotion of just those who have superior abilities in accordance with a competitive ethic seems to me to be the most humanitarian way to treat both children and adults. The 1948 Universal Declaration of Human Rights already provides for most of the "from each according to their abilities, to each according to their needs" ethic. It calls for free health care which most advanced socierties, with the exception of the United States, already provide. It calls for free education and other public institutions and covers most basic human needs including food and shelter.
(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
(2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.
Article 26.
(1) Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit.
(2) Education shall be directed to the full development of the human personality and to the strengthening of respect for human rights and fundamental freedoms. It shall promote understanding, tolerance and friendship among all nations, racial or religious groups, and shall further the activities of the United Nations for the maintenance of peace.
(3) Parents have a prior right to choose the kind of education that shall be given to their children.
All the basic needs of everyone on the planet could be provided for without subtracting much of the wealth of the rich since most people can provide for at least their basic needs without any transfer of wealth whatsover being necessary. Interestingly, the US among other nations does provide food security for the poor through its food stamps program. And of course seniors are provided for through Medicare, Medicaid and Social Security, programs which conservative free marketers are anxious to change or eliminate.
I am with the Enlightenment thinkers especially the English utilitarians like Jeremy Bentham and John Stuart Mill who thought about the happiness of society as a whole and concluded that everyone counted, not only the ones with exceptional talent, ability and other admirable qualities. A society should be judged by how it treats "the least of these my brethren" which is the core and essence of Jesus' teachings but, sad to say, not the core and essence of Christianity as it exists in the world today. Perhaps we should start thinking about an alternative constitution for the US which has the world's oldest constitution (236 years old!) while being the world's youngest advanced nation. Other societies including most European societies while being older than the US have newer constitutions. As far-sighted as the Founding Fathers were, a new and updated constitution incorporating not only political but also economic rights along the lines of the UN Declaration of Human Rights would do much to right the wrongs and shortcomings of present day America and the world.
Republican politicians are in the habit of assailing President Obama with statements like the following: "I believe that President Obama is the worst President in American history." Really? Based on what facts? Was he worse than Willard Fillmore? Was he worse than Franklin Pierce? Was he worse then James Buchanan? According to every poll including the Chicago Tribune, the New York Times, the Wall Street Journal, C-SPAN and Sienna College, these Presidents are considered the worst. But never mind that. What Republican politicians and right wing talking heads like Rush Limbaugh, Glenn Beck, Sean Hannity and other right wingers do is to create an alternative reality based not on facts but on beliefs. They've constructed a completely fictitious alternative Barack Obama, one that is worthy of being detested and ridiculed and demeaned. Then their job is to sell that image of Barack Obama to the American public. The American public, most of them, have never met Barack Obama. They've never discussed politics, economics or anything else with Barack Obama. Their only knowledge of Barack Obama is whatever comes over the TV tube. So competing realities are out their for defining and either demonizing or angelizing Barack Obama. According to this view of reality, the side with the most TV and media output wins. Republican politicians and TV and talking head radio personalities are mostly either lawyers or people like lawyers with immense powers to persuade and convince people of practically anything. A good lawyer can convince a jury that an innocent man is guilty or that a guilty man is innocent. That is their job, and the better that the lawyer can distort the truth, the better lawyer he or she is considered to be.
When it comes to politics, the more right wing talking heads can convince people that Barack Obama is the worst President ever, the more money they make. The whole point is to demonize Obama by associating him with Muslims or Kenyans or the devil. They don't quite go so far as to associate him with Hitler. That seems to be one line even the lunatic fringe will not cross. But they tell you he is a European socialist despite the fact that he went all out to save the big banks, the very beating heart of capitalism, from complete collapse in the recent financial calamity. Despite the fact that not one fraudulent banker is in jail, Obama is a socialist. Too bad the Soviet Union no longer exists or they would be tagging Obama with the communist label. So now they are reduced in effect to accusing him of being sympathetic to the European Union! Gorbachev said that the collapse of the Soviet Union would deprive the US of its enemy. How right he was? The US was deprived of its chief bogeyman when the Soviet Union imploded. And they cannot very well demonize The Communist Party of China, our chief trading partner and financial co-dependent. So they are reduced to accusing Obama of being a European socialist.
The dynamic here is to demonize Obama based on beliefs not facts. And they have a lot of money to do it with. In many media markets there are no countervailing views. People are left to the imprecations of Rush Limbaugh and Fox News. So they hear day in and day out that Obama is A TERRIBLE PRESIDENT, the worst President etc. Knowledgable persons whose voices are hardly consulted might say that Obama's predecessor, George W Bush, was among the worst.
A 2006 Siena College poll of 744 professors reported the following results:
"George W. Bush has just finished five years as President. If today were the last day of his presidency, how would you rank him? The responses were: Great: 2%; Near Great: 5%; Average: 11%; Below Average: 24%; Failure: 58%."
"In your judgment, do you think he has a realistic chance of improving his rating?” Two-thirds (67%) responded no; less than a quarter (23%) responded yes; and 10% chose no opinion or not applicable."
Thomas Kelly, professor emeritus of American studies at Siena College, said: "President Bush would seem to have small hope for high marks from the current generation of practicing historians and political scientists. In this case, current public opinion polls actually seem to cut the President more slack than the experts do." Dr. Douglas Lonnstrom, Siena College professor of statistics and director of the Siena Research Institute, stated: "In our 2002 presidential rating, with a group of experts comparable to this current poll, President Bush ranked 23rd of 42 presidents. That was shortly after 9/11. Clearly, the professors do not think things have gone well for him in the past few years. These are the experts that teach college students today and will write the history of this era tomorrow."
A 2010 Siena poll of 238 Presidential scholars found that former president George W. Bush was ranked 39th out of 43, with poor ratings in handling of the economy, communication, ability to compromise, foreign policy accomplishments and intelligence. Meanwhile, the current president, Barack Obama was ranked 15th out of 43, with high ratings for imagination, communication ability and intelligence and a low rating for background (family, education and experience).
Bush doubled the national debt from $5 trillion to $10 trillion by giving tax cuts to the rich, an unfunded prescription drug benefit to seniors which was a giveaway to the pharmaceutical corporations and two unfunded wars in Iraq and Afghanistan. Obama took out the leadership of Al Quaeda including Osama bin Laden and Anwar al-Awlaki, brought or is bringing those unfortunate wars to an end and is doing his best to restore Clinton's tax structure which would raise taxes on the rich while keeping tax cuts for the middle class and poor. Obama's health care act, popularly known as Obamacare, would, among other things, end the insurance corporations' policy of rescission which denies insurance to people with pre-exisitng conditions, close the doughnut hole for seniors and keep young people on their parents' policies till age 26, an important consideration in an era of high youth unemployment. The fact is that Bush Jr was cavalier in implementing policies that were not only disastrous for the US including the war he lied us into in Iraq, but also ran up the national debt in a huge way. These policies are still in effect because of Republican filibusters that keep them in effect. Only now Obama is being blamed for them by the right wing talking heads, and using their powers of persuasion, they are doing their best to convince the American people that Obama is a spenthrift who only wants bigger government despite the fact that there have been massive job losses in the public sector and modest gains in the private sector.
So the fictitious President Obama is what Santorum, Romney, Gingrich, Limbaugh, Hannity and all the rest are trying to sell to the US public. They are fueled with billions of dollars from right wing billionaires like the Koch brothers and Sheldon Adelson for whom a million or two invested here or there is nothing more than pocket change. With an income of $1 billion a year, which translates to $1000 million a year or $2.7 million a day, these guys can well afford a day's pay to influence elections in their favor. That's pocket change to them. So they associate Obama with Satan. He's supposed to be in league with the devil. They send around emails showing a skunk, half black and half white, and associate that with Obama. There's no depth that they won't sink to to demonize Obama except of course they haven't sunk to the depth of trying to convince us that he's channeling Adolf Hitler. I guess Hitler's considered to be even worse than the devil! And of couse all this is based on statements like "I think that Obama blah blah..." and "I believe that Obama blah blah ...." Nothing based on facts because the facts are quite the opposite of the image they are trying to create
And the truth is that they don't give a rip about all the stuff they try to get the electorate riled up about like the social issues - abortion, birth control, God, gays and guns. These are all smoke screens to hide their real agenda which is tax breaks for the rich, deregulation for corporations and privatization of public schools. Of course they never talk about inequality or the fact that corporations only contribute 8% of Federal revenues instead of the 30% they used to contribute. They don't talk about the fact that the rich pay taxes at a lower rate than the poor. The last thing they want to talk about is the fact that there is $2.5 trillion in the social security trust fund because they want to eliminate social security on the grounds that it is running out of money.
So Obama is terrible, a failure (they love that tag), the worst President in American history based on not facts but beliefs. Except that these intelligent men don't really believe that at all. Just like the lawyer that knows his client is guilty and effectively and skillfully convinces the jury that he really is innocent, right wing talking heads including Republican politicians are trying to draw a picture of Obama as the worst President in American history and then convince you that this belief based reality is the real reality.
There's not much that comes out of conservative mouths these days that I find agreeable. However, Republican Governor of Indiana Mitch Daniels, in his rebuttal to President Obama's State of the Union Speech, mentioned an idea for saving the government money which I heartedly (I won't say whole- heartedly) endorse. He said:
"There is a second item on our national must-do list: we must unite to save the safety net. Medicare and Social Security have served us well, and that must continue. But after half and three quarters of a century respectively, it’s not surprising that they need some repairs. We can preserve them unchanged and untouched for those now in or near retirement, but we must fashion a new, affordable safety net so future Americans are protected, too.
“Decades ago, for instance, we could afford to send millionaires pension checks and pay medical bills for even the wealthiest among us. Now, we can’t, so the dollars we have should be devoted to those who need them most. [ed. note: Amen!]
...
"It’s absolutely so that everyone should contribute to our national recovery, including of course the most affluent among us. ... The better course is to stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy and do little or nothing to foster growth."
First I should add that there is $2.5 trillion in the Social Security Trust Fund so it is not exactly in dire need of reform and also eliminating the cap on income on which people pay Social Security and Medicare taxes will bring in additional money. Medicare, on the other hand, is in dire need of reform, but increasing the amount on which the rich pay into the system in Medicare taxes will help to fix that.
But why do liberals, like Thom Hartmann, disagree with the sentiment "to stop sending the wealthy benefits they do not need"? By Hartmann's convoluted logic we must continue to make payments to the rich just so they won't eliminate payments to the poor and middle class. Thom Hartmann says that this would be the "camel's nose under the tent" for those who want to destroy Social Security and Medicare. His logic is the same as those who say we must give tax breaks to big corporations just so they will continue to provide jobs. Means testing according to him will give Republicans all the leeway they need to eliminate Social Security and Medicare altogether. Bullshit! They don't need the pretext of "means testing" to accomplish that. Hartmann doesn't realize that all social programs in the US are under attack by the right wing and the only thing standing in the way of their entire elimination is the determination of the middle class and Democratic politicians to fight for their continuance and even expansion.
So liberals will resist even a rational idea for reform because it might lead to the complete destruction of these venerable programs? Let me tell you something. Their nose is already under the tent. They don't need this pretext for wanting to destroy Social Security and Medicare. Why they have already boldly proposed privatizing both of these programs. Check out Paul Ryan's plan, "The Path to Prosperity" (for the rich). For liberals or progressives to oppose a rational idea just because it comes from someone that I for one disagree with on everything else he is trying to do, like destroying unions in the state of Indiana, is utter irrational nonsense. It goes under the same principal of not giving subsidies and tax breaks to highly profitable corporations like the oil companies.
President Obama is proposing an alternative minimum tax for millionaires. Why not apply this alternative minimum tax to corporations? Why should Exxon and GE actually get back taxpayer dollars and pay absolutely nothing in? There should be an alternative minimum tax for them too. By the same token senior citizens who have retirement incomes in the $100,000. range or higher don't need another $1000. a month in social security benefits. The money would be better spent by giving it to people whose only retirement income is social security and whose social security income places them below the poverty line. If you are getting $10,000. a month in retirement income, you don't need another $1000. a month in Social Security. It's absolutely ridiculous. By the same token, you don't need Medicare either. You're perfectly capable of buying a gold plated private health insurance policy which the rich would probably do anyway since the finest doctors (unfortunately) do not even accept Medicare patients.
To take a truly conservative approach to government spending is to make everyone (including corporations which according to the Supreme Court are people) pay their fair share and to not receive government benefits which they don't deserve. By definition they don't deserve government benefits if they are fantastically wealthy in the first place although the rich have hired lobbyists whose main goal is to provide them with government benefits at the expense of the poor and middle class. This has turned the goal of reducing government spending on its head. According to them (in defiance of the hypocritical words that come out of their mouths) there is no government spending so large that goes to the wealthy that should be eliminated. Their goal is to shower government benefits on the rich while denying them to the poor. That's why there is so much inequality in the US - because they have been actively promoting it regardless of the hypocritical words they say. They are only for reducing the size of government when it comes to reducing government programs and subsidies which benefit the poor and middle class.
The top 1% of Americans own 40% of the nation's wealth. The bottom 80% own 7%. The top 1% take home 24% of the nation's income. In 1976 they took home just 9%. Their share of national income has almost tripled in just over 30 years. How was this accomplished? Not by hard work, but by incessant lobbying to change laws that benefit the rich like the 1999 Financial Services Modernization Act and the Commodities Futures Modernization Act of 2000 that overthrew Glass-Steagall leading to the merger of commercial and investment banks, unregulated derivatives, credit default swaps, collateralized debt obligations and all the other paraphernalia of the financialization and globalization of the US economy. Leveraged buyout artists or vulture capitalists like Mitt Romney can give $100,000,000. to each of his five sons without paying any gift tax while ordinary middle class folks pay taxes through the nose. On Romney's income of $21 million last year, for which he did no work to earn it, he paid less than 14% in taxes while most middle class folks are taxed in the 30% range. Romney also paid practically nothing in Social Security or FICA taxes. If he had paid FICA taxes on all his income, this would have helped to bail out Social Security and Medicare right there.
Capital gains is how the rich make their money and they are taxed right now at half the rate that the middle class is taxed. Here is the history:
In the 1970s under President Carter capital gains were taxed at 40%. In the 1980s under President Reagan they were lowered to 20% and under George W Bush they were lowered to 15%. All this was done under the noses of the middle class while they were sleeping or watching football on television. What me worry? Meanwhile lobbyists for the rich were hard and persistently at work. It's pretty clear that Democratic Presidents have raised capital gains taxes while Republican Presidents have lowered them.
A true conservative would want to conserve the safety net while insuring that the rich pay their fair share. Instead all they talk about is lowering taxes (primarily on the rich) while eliminating government programs which primarily benefit the poor and middle class. If they want to reduce the size of government a good place to start would be to reduce the size of the bloated military-industrial complex. Presdident Obama is already striking a populist tone with his talk about an "alternative minimum tax" on millionaires while Defense Secretary Leon Panetta is busy ending wars and reducing the size of the military-industrial complex. They should follow up by embracing Social Security and Medicare reform and by reducing or eliminating payouts of all kinds to the rich. They should also enact a Financial Transactions Tax to be used for debt reduction so that the banks can pay back their fair share to the taxpayers who bailed them out.
Streve Jobs, the book by Walter Isaacson, is of course about Steve Jobs, the person, who died last year at age 56 after a long bout with pancreatic cancer. He was the founder, along with his partner Steve Wozniak, of Apple Computer which is today the largest corporation on the planet in terms of market capitalization. Jobs and Wozniak were both college dropouts who had a passion for technology. After having developed and sold a "blue box" which allowed people to make phone calls anywhere in the world at no charge, they were among the first to develop personal computers after the Altair came out in 1976. Wozniak was the technical genius who developed the circuit boards and Jobs was the visionary who thought of himself as being at the "intersection of technology and the humanities."
Jobs was adopted by Paul and Clara Jobs shortly after his birth in 1955. Later in life he found his birth mother, and found out the fact that he had a full sister, Mona Simpson, with whom he developed a relationship. Although he had information about his birth father, Jobs decided that he never wanted to meet him, but had actually unknowingly shaken hands with him at a restaurant in Cupertino that his father had managed.
Apple Computer was started officially in 1977 based on the Apple II designed by Wozniak. Three years later they went public and Jobs went from having a net worth of zero to having a net worth of $256 million overnight. After touring the Xerox PARC plant, Jobs got the idea for the graphical user interface and the mouse which were embodied in the first Macintosh and constituted a truly revolutionary development. Even though the Mac never garnered the market share of the IBM compatible PCs, it was a product which expressed Jobs passion for great design principles that extended to not only the case of the computer and the angles of its bevels but also to the packaging. Bill Gates's criticism of Jobs was that he couldn't code, and Jobs criticised Gates as having ripped off the Windows interface from the Macintosh for Microsoft. Despite the rivalry, Gates continued to provide application software for the Macintosh.
Jobs was probably one of the few CEOs of a major corporation that maintained throughout his life that one of his three or four greatest experiences was dropping LSD. Jobs didn't suffer fools gladly and didn't mind calling them bozos and assholes to their faces. His "reality distortion field" was responsible for his being able to convince anybody of anything and winning in most negotiations including getting the music industry to disaggregate record albums and sell individual songs for 99 cents which were to be purchased by consumers from Apple's iTunes store. He didn't endear himself to people by calling their ideas the "biggest piece of shit I've ever seen", but could turn around and be irresistably charming when it suited his purposes. Having started with nothing his passion was primarily to create excellent products rather than to make huge profits. This caused both successes and failures. His behavior at times was so erratic that Apple hired John Sculley, the CEO of Pepsi-Cola, to be CEO at Apple in 1983 just prior to the introduction of the Macintosh which revolutionized personal computing. His main purpose was to rein in Jobs and to impart some sense of order at Apple. It wasn't long before they were at odds with each other, and Jobs ended up being forced to leave Apple, the company he founded, in 1985. Wozniak had long since gone his separate way.
After Jobs left Apple he started NeXT Computer with his own money, a venture that never really got off the ground thanks in part to Jobs perfectionism. Apple did not prosper either under Sculley continually losing market share to Microsoft. Jobs wanted complete control over every aspect of his products from the ground up including both hardware and software, and he wouldn't license the software to clone makers as Microsoft did. The Microsoft strategy was the more successful as it turned out that the market would rather have cheaper, clunky computers than more elegantly designed expensive ones.
While at NeXT, Jobs had the opporetunity to buy Pixar, a small struggling digital animation firm. He was able to cut a deal with Disney to produce Toy Story and took Pixar public right after Toy Story became a huge commercial success. All of a sudden Jobs was back in action. Both NeXT and Pixar might have been failures, but Jobs passion for excellent products resulted in Pixar's huge success. After Apple's slide into decreasing market share for the Macintosh, Sculley was eventually replaced as CEO in 1993. In 1996 Jobs came back to Apple at the Board's request initially as an unpaid consultant. Eventually, he again took full control as CEO. He was able to turn the company around with the iMac whose case he and his design team spent an enormous amount of time on getting just right. Design considerations were primary and the hardware guys had to cram their electronics into the unorthodox case in the best way they could.
Jobs managed to get Apple to buy NeXT thus ending that dead end. Meanwhile, he was CEO at both Apple and Pixar, a fact that he felt contributed to his health problems. Eventually, Pixar was sold to Disney, and a lot of Jobs' weallth came from Pixar rather than Apple. In fact when Apple gave him stock options, they ended up being worthless due to the depreciation of the stock value. During this time Jobs was working as CEO of Apple for $1 a year, something that appealed to his countercultural identity and his professed lack of concern about money.
Jobs' greatest success came in the 2000s, after he was diagnosed with cancer, with the introduction of the iPod, the iTunes store, the iPhone and the iPad. He took Apple from a computer manufacturer to a company that revolutionized the distribution of music, created the smartphone and brought other greatly popular consumer devices to market. Finally, Jobs passion for design and total control over product development paid huge dividends in ways that other companies couldn't match.
Jobs lost his battle with pancreatic cancer in 2011; Tim Cook took over the CEO position at Apple. This article in the New York Times about Apple tells the sad tale about how most of Apple's production is now done overseas. At one time Jobs built factories in the US which he designed himself right down to the color of white paint on the walls and the $20,000. office chairs. Those factories have long since gone to China. As the article points out, it is not only more profitable for Apple to contract out its production to Foxconn in China but it is also more expedient as Foxconn can provide workers who can be rousted out of their dormitory beds in the middle of the night to make last minute changes in products and work incredible numbers of hours to meet product launch dates.
Foxconn's penchant for working its workers to their limits has drawn unfavorable publicity like the following:
In 2010, there were 14 suicides and 18 attempts at Foxconn’s complex. In response, Foxconn raised salaries by one-third, from 900 yuan a month to 1,200 yuan, and set up an in-house counseling service -- complete with music therapy rooms. Buddhist monks were brought in to cleanse the factory of evil spirits. Most famously the company put up nets around workers’ dormitories, and created a somewhat dubious “no suicide” contract all employees were required to sign...
While Apple CEO Tim Cook will make $378 million this year, Foxconn workers are forced to live in squalid dormitories as reported by ThinkProgress:
At the same time that the company is handing such a huge package to its chief executive, though, the workers in China who make Apple’s most well-known products continue to toil in tough conditions. Last year, a report from Students & Scholars Against Corporate Misbehaviour (SACOM), a Hong Kong-based advocacy and research group found that the Chinese workers at the Taiwanese-based company FoxConn — who assemble the iPad, as well as other high tech gadgets for Apple, HP, Microsoft and others — were forced to work loads of overtime, stand on their feet 14 hours a day, and live packed together in squalid dormitories.
Such is the result of globalization. Consumers in the US and other advanced countries snatch up fancy tech gadgets which are produced by exploited workers in China while the richest 1% continue to receive huge paychecks. American workers are left out of the loop entirely. Jobs and his original Macintosh development team were willing to work 90 hour weeks to produce "insanely great" products. But now this work ethic or rather overwork ethic is being forced on Chinese workers who won't reap the financial rewards that Jobs and his original team reaped for their overwork efforts. Is this the real legacy of Steve Jobs and American entrepreneurialism?
In a pattern that has been repeated all over the world, most notably in Chile, Argentina and Bolivia, a country gets itself into huge debt and then comes to the IMF (International Monetary Fund) for a bailout. The IMF is nothing more than an arm of right wing ideologues of the Chicago School whose prescriptions and demands for the possibility of help turn out to be the ususal right wing nostrums: privatization, free trade and AUSTERITY. Naomi Klein nailed the IMF in her book Shock Doctrine:
Like the UN, the World Bank and the IMF were created in direct response to the horror of the Second World War. With the goal of never again repeating the mistakes that had allowed fascism to rise in the heart of Europe, the world powers came together in 1944 in Bretton Woods, New Hampshire, to create a new economic architecture. ... The World Bank would make long-term investments in development to pull countries out of poverty, while the IMF would act as a kind of a global shock absorber, promoting economic policies that reduced financial speculation and market volatility. When a country looked as though it was falling into crisis, the IMF would leap in with stabilizing grants and loans, thereby preventing crises before they occurred. The two institutions, located across the street from each other in Washington, would coordinate their responses.
Although the IMF originally was supposed to promote "economic policies that reduced financial speculation and market volatility," that hasn't turned out to be the case. In fact just the opposite has occurred. Klein continues:
John Maynard Keynes, who headed the UK delegation, was convinced that the world had finally recognized the political perils of leaving the market to regulate itself. "Few believed it possible," Keynes said at the conference's end. But if the institutions stayed true to their founding principles, "the brotherhoof of man will have become more than a phrase".
The IMF and the World Bank did not live up to that universal vision; from the start they allocated power not on the basis of "one country, one vote," like the UN General Assembly, but rather on the size of each country's economy - an arrangement that gives the United States an effective veto over all major decisions, with Europe and Japan controlling most of the rest. This meant, when Reagan and Thatcher came to power in the eighties, their highly ideological administrations were essentially able to harness the two institutions for their own ends, rapidly increasing their power and turning them into primary vehicles for the advancement of the corporatist crusade.
The colonization of the World Bank and the IMF by the Chicago School [a school founded by right wing economist Milton Friedman that advocated laissez-faire capitalist economic principles] was a largely unspoken process, but it became official in 1989 when John Williamson unveiled what he called the "Washington consensus." It was a list of economic policies that he said both institutions now considered the bare minimum for economic health - "the common core of wisdom embraced by all serious economists." These policies, masquerading as technical and uncontentious, included such bald ideological claims as all "state enterprises should be privatized" and "barriers impeding the entry of foreign firms should be abolished." When the list was complete, it made up nothing less than Friedman's neoliberal triumvirate of privatization, deregulation/free trade and drastic cuts to government spending [i.e. austerity!]. Joseph Stiglitz, former chief economist of the World Bank and one of the last holdouts against the new orthodoxy, wrote that Keynes "would be rolling over in his grave were he to see what has happened to his child."
So what is happening in Hungary today and througout the EU is nothing more nor less than that the IMF is demanding structural change according to its radical right wing ideology in return for an economic bailout. American rating agencies such as Fitch have downgraded Hungary's credit rating to junk status making it difficult for Hungary to borrow in the bond market to refinance its debt - the same old story as in Greece, Italy, Spain etc. etc. If Hungary then wants the IMF to help, it must accede to IMF demands which is to say it must give up some of its autonomy as a country.
Fitch kept a negative outlook on Hungary, indicating a more than 50 percent chance for another downgrade on the Central European nation of 10 million people within the next two years. The move followed similar action from Moody’s and Standards & Poor’s [also American agencies!].
Hungary’s shaky finances have been battered this entire week. Its currency, the forint, fell to all-time lows during two consecutive days and the government suffered through a rough bond auction Thursday in which the interest rates it had to pay to borrow jumped more than 2 percentage points in just a few weeks.
So let's be clear about the dynamic of what's going on here. An American rating agency downgrades Hungary's credit rating which causes the Hungarian currency to drop in value and causes investors, which are mainly large international banking institutions, to demand a higher interest rate just to roll over existing debt, not to borrow more money. It is widely known that speculators are involved in driving down the value of a nation's currency, and investors (who may be one and the same as speculators) control the interest rate that a country must pay. And now for the denouement, enter the IMF, helpfully offering to bail Hungary out in return for Hungary giving up its autonomy to the IMF and imposing austerity on its countrymen and women. And this all because Hungary is in debt to private banking institutions not to the publicly owned European Central Bank (ECB).
Fitch Ratings’ decision to cut Hungary’s credit rating one notch, to BB+ from BBB-, was triggered partly “by further unorthodox economic policies which are undermining investor confidence and complicating the agreement of a new IMF-EU deal,” said Matteo Napolitano, Director in Fitch’s Sovereign Group.
In other words you (Hungary) will do what bond market investors, the IMF and EU demand ... or else. This begs the question, why does the EU put its member countries in the position of being at the whims of international investors, i.e. the bond market, namely big banks such as Goldman Sachs and Deutsche Bank? Why doesn't the ECB (European Central Bank) bail out Hungary itself at least to the extent of stabilizing the interest paid on its preexisting bonds? The average Hungarian worker is not reponsible for this predicament. Why should he or she be expected to pay for it? It's the rising interest rates brought on by the rating agency's downgrades that are causing the financial crisis in the first place. Yet the price to be paid is the same old right wing price of demanding austerity and letting the IMF order them around. The EU seems to be complicit in this whole process.
Since sweeping to power in 2010, [Hungarian] Prime Minister Viktor Orban’s Fidesz party has tightened its grip on the media and the top constitutional court, taken over private pension funds and slapped Europe’s biggest tax on banks — prompting a series of international protests and unnerving markets.
The plot thickens! Orban had the temerity to socialize the pension funds. That's a no-no as far as the IMF is concerned. The IMF demands privatization of public assets, not socialization of private assets. And Orban slapped a big tax on banks - another no-no. The IMF wants the people to pay the price of Hungarian economic woes - austerity - not the banks. The Occupy movement's slogan, "The banks got bailed out, we got sold out," turns out to be true! This is just another mechanism to foist debt on the people and liberate the banks from taxes and regulation, just what Milton Friedman and the Chicago School wanted!
What is happening in Europe now is nothing new. The US backed IMF and World Bank has been carrying on the same road show for decades - first in Pinochet's Chile, later in Argentina and Bolivia. The neoliberal agenda was also prescribed for Iraq. Regarding Iraq Paul Krugman wrote:
... Bush appointees were obsessed with imposing a conservative ideological vision. Indeed, with looters still prowling the streets of Baghdad, L. Paul Bremer, the American viceroy, told a Washington Post reporter that one of his top priorities was to “corporatize and privatize state-owned enterprises” — Mr. Bremer’s words, not the reporter’s — and to “wean people from the idea the state supports everything."
Just another example of Naomi Klein's Shock Doctrine. Now Hungary is undergoing the Shock Doctrine and the IMF in collaboration with the EU is following in the tradition of Reagan and Thatcher and demanding higher tribute in taxes (on the poor, not on the banks!) and elimination of government jobs and programs in return for a handout. Oh, excuse me, a bailout. Please, Mr. IMF, could you spare a forint? And where is the ECB? MIA!
I've been thinking a lot about these issues but so far have not found the time to put my thoughts down. I think Europe has followed the US with the neoliberal (here called neocon) model involving privatization, austerity and kowtowing to the bond market and the large banks. I noticed today on the European news some kvetching about the fact that the US rating agencies are downgrading some European countries including Belgium and the fact that there aren't any European rating agencies.
The ECB is following the model of the US Federal Reserve which isn't allowed to loan money directly to the US government - only to the big banks. Similarly, the ECB isn't allowed to loan money directly to European countries. These laws or rules totally favor the private banking system at the expense of the taxpayers of the respective countries.
Once the banks get the countries in debt as they did in South America, then the IMF and the World Bank want them to institute austerity and privatization programs.
I thought the article I reprinted on the blog today was a good one about how the European philosophy has changed from Keynsian right after WW 2 to now neo-liberal, basically the same philosophy that's being implemented in the US - shutting down public institutions, austerity for the middle class and privatization to get money to pay debts on all levels - municipal, state and national.
Best,
John
John,
All the talk in so many circles that Europe is going down the neo-liberal route of the United States started at least 18 months ago and has been picking up steam lately in some provocative writings. For quite some time now, I too have been confronted with this fear by some Dutch people I have met in my lecturing and training sessions every week. Such talk has hit a crescendo lately because of the "tough love" i.e., austerity treatment that's being given to the financially bad performing countries.
As I''ve said to you before, without pretensions of perfect wisdom, I believe this fear is entirely overstated. WHY? Because the coalition governance systems prevalent in all EU countries will not allow such a neo-liberal transformation. Just yesterday, for example, the Dutch public voted the Socialist Party leader, Emile Roemer, as the most outstanding politician in 2010. Denmark's conservative ruling party coalition is expected to lose in next year's elections. So, as Steven Hill correctly noted and I have witnessed for over 35 years now, Europeans have the multi-party political, counter-balancing flexibility and institutions in place to adjust to new market/financial realities. And, they make adjustments when necessary, like in significant financial stress cycle we are in now -- a more severe recession followed by a financial crisis. BUT adjustments are not undertaken with the direct intention of impoverishing the middle class as is the goal of the ultra-extreme conservatism prevalent in the U.S. What's happening in Spain, Greece, Italy, Ireland, Portugal appears conservative, ruthless and mean only because these countries have sunk so badly deficit and debt- wise.
This has many causal factors ... some national, some EU related. EU authorities simply have never enforced the 3% of GDP deficit rule thereby allowing poorly managed countries to build up wild debts, low tax collection, corrupt budgeting and reporting processes, unsustainble retirement terms and pension plans. In addition, national rulers and financial authorities in the weak countries grew accustomed to living, spending, and speculatively investing beyond their countries' means resulting in a flood of evolving debt at both public and private levels.
Now the rest of the EU 17 countries --who generally followed financially responsible rules --must save the irresponsible countries and thus the euro. The well-run countries have already provided up to €100 billion euros so Greece and Ireland can pay their daily bills. BUT, the well-managed countries are correct, in my humble opinion, to insist on disciplined reforms and budget austerity for all High Debt and High Deficit members to master control of the very deeply infiltrated causes of their financial breakdown. Otherwise, the money that is currently being sent to Greece and the others and more that will be sent will simply be money down the drain for Dutch, French, German taxpayers, etc. If financial discipline doesn't take root, the financial breakdowns will repeat themselves, and that could well bankrupt all EU countries. So, the near term approach to the financial crisis is "tough love" as the Frances, Germanies, Hollands know how serious the financial consequences will be if Greece, Italy, Spain, Portugal, Ireland all at the same time were left to survive on their own without the euro currency. Might one or two of these countries ultimately willingly or forcibly be required to leave the eurozone? Yes, of course, but the goal for this to happen must be organized in an orderly way, much like any company bankruptcy.
Another WHY neo-liberal transformation of EU is an overdone misplaced popular cry of researchers and pundits (especially from left-leaning economists in U.S.) is that they fail to understand that -- with exception of the weak EU countries that have put themselves in a dangerous financial situation over the last 20 years -- the strong countries have the Margin of Financial Cushion in their social nets and budgets to Squeeze their fiscal budgets in response to new market realities of a rapidly expanding aging of society exploding retirement/health care costs, and the slower GDP growth prospects given scarcity of basic resources and extreme, often unfair competition of China and India. BUT the mature EU countries will undertake a multi/task approach to austerity that includes progressively raising taxes and investing so as not to impoverish the middle class as America as been doing ... where social nets are ALREADY BAREBONE and yet are being cut further!! As I said in a prior writing, our social-economic situation is not too dissimilar from how the America team of brave soldiers summed up their situation and mission in the "Saving of Private Ryan" ... "FUBAR."
So, I sense the austerity situation and impact of same between the U.S. and the EU 17 healthy nations is entirely different and does not warrant the general claim that Europe is going down the socially destructive neo-liberal track America has followed the last 30 years. This apocalyptic assumption is also wrong because it fails to recognize that the EU states -- in terms of labor mobility, inherited cultural habits, norms, nationalism -- are all uniquely and light years historically different compared to the 50 U.S. states. This means each EU coalition government has always been, by necessity and by general public and cultural accomodation, first and foremost focused on an equitable and fair distribution of capitalism's rewards and punishments. I don´t expect this heritage to change. That's WHY EU democracies are referred to as "Social Democracies" which are slightly right, left or center. This is in sharp contrast to America's "Winner-Takes-All" in a die/hard liberal vs. conservative name calling democracy where quality of life, income and wealth levels
are at other extremes from the European patterns.
I'm not trying to say that all is perfect with Europe's struggle to save the euro, to sacrifice some sovereignty to achieve an independent oversight of national fiscal budgets. The struggle to go from monetary to include fiscal union where nations retain bulk of their sovereign decision power is by far not over. Nearly 50% of the ECB's capital reserves come from Germany and France, the most influential eurozone members ... both of whom are putting the brakes on opening the money printing press for expanding the European Financial Stability Facility (EFSF) from planned Euro 750 billion level to at least Euro 1 to 1.5 trillion, as some are recommending. This can be seen as a weakness of the ECB since it is not completely independent from the most dominant EU members. This can also be seen as an obstacle to be overcome for other EU members to have an equal voice in the final fiscal austerity mechanisms, and the effective implementation and operation thereof.
In my over 30 years of living and working in Europe, in my view what's going on now is Europe's usual pragmatic, step-by-step adjustment process to new challenges and market/financial realities. The adjustment task is slower and much, much grander this time ... more seriously testing EU unity given the interlocking depth of the financial breakdowns in weaker EU member countries. I have greater faith Europe will overcome the obstacles than I do that Republicans and Democrats will ever come together to solve our own equally, if not worse, financial and job development crises in a sane, constructive, fair way that brings ALL Americans foreward as opposed to only the top 1%, 5%, 10%, 20%
Time will tell who´s right about the claim Europe is also moving towards the kind of destructive, money-only-counts casino capitalism and oligarchic rule that has already taken over our democracy.
Best,
Frank
John,
Easing of the euro and credit crunch crisis by the ECB's just announced $639 billion loan liquidity offer -- at a very low benchmark interest rate of 1% and loan terms of 3 years -- to over 500 EU banking institutions BUYS TIME to solve longer-term issues such as:
reducing very high government or household debt among EU member countries noted in TABLE 1
achieving real EU 17 and EU 27 fiscal unity including: consistentcy and harmonization in financial reporting, transparency, and effective operation/enforcement of EU rules for government deficit and debt levels
implementing Basel III stricter capital (equity) reserve requirements for banks of 3% of total assets among other provisions
Concerning debt levels, the Dutch have come up with a thoughtful idea. Authorities are now serioiusly considering offering new and existing homeowners an income tax benefit if their home mortgages are paid off more quickly. As TABLE 1 shows, the Netherlands has an excessive level of household debt amounting to +-130% of GDP.
Over thirty years living in the Netherlands has taught me never to give up on the Dutch multi-party coalition governance to ultimately reach balanced solutions to serious societal challenges -- like the Dutch multi-faceted strategy approach to the current financial crisis of CUT, REFORM, RAISE TAXES, and INVEST. And the goal is to try to undertake these actions simultaneously so as not to create a long period of "stand-still" growth as the Japanese experienced in their 1992-2002 self-inflicted prolonged economic
stagnation.
Best
Frank
Frank,
Have you taken into account that the bond speculators are driving Greece into default by betting that they will default? This has nothing to do with how well European leaders respond to the crisis and everything to do with what international speculators may be doing to drive up Greek and Italian interest rates by shorting their bonds. Speculators prey on the weakest countries and can drive them into default by betting huge sums of money that they will fail. This is what caused MF Global to go bankrupt: they had bet their depositor's money that Greece would default, and then, when it didn't, they couldn't cover their bets.
There's still the business of naked shorts where the bettor doesn't even need to own any securities. I think the EU banking system is no different from the US banking system in the respect that it is private and not immune to the machinations of Goldman Sachs and the whole international banking crew and their mania for derivatives which can drive up interest rates for weak countries and ultimately could cause them to default. Huge sums of money are being bet on outcomes for Greece and Italy which could ultimately become self-fulfilling prophecies.
Is the ECB owned by the EU or is it private? Does interest accrue to the EU or to private bankers for the money it loans?
More next week...
Regards,
John
John,
I'll spare you before Xmas from a long email response about financial speculators. In short, suffice it to say one key goal of a financial transaction tax, I just wrote about at length, is to put a damper on all sorts of financial speculations and make them consummately transparent. It's a fast growing reprehensible out-of-control international activity close to or often actually being outright criminal. Sophisticated huge money players like Goldman Sachs and other greedy manipulators play the short and long speculation game.
George Soros, who I happen to admire, made billions as a speculator among other ways. Financial speculation has been around since stock/ bond/currency exchanges have existed. The ugly excesses and abuses are still ineffectively controlled. Recently though, I've noticed EU authorities are getting more and more behind a financial transactions tax, hopefully in spite of Geithner's opposition. It will be interesting to learn what the recent Basel III meetings and discussions have concluded, if anything, about this deeply-rooted problem that's just another form of casino capitalism benefiting the wealthy and powerful.
Will converse more with you on this subject later.
In her excellent book, "Web of Debt," Ellen Brown questions the whole notion that governments, whether they be the US or the Eurozone, should have to go into debt to private bankers such as Goldman Sachs and Deutsche Bank to get the money they need to finance their operations. Consider the Federal Reserve which is the primary creator of the money supply in the US. It is neither Federal nor is it a reserve. It is a private bank which creates money as an accounting entry on a computer screen. Recently, it loaned over $7 trillion to private banks at a ridiculously low .01% interest rate. That wasn't money it held in reserve; it was money that was "printed" or rather created out of whole cloth. And who do you think sits on the Board of the privately owned Federal Reserve? Jamie Dimon, CEO of JPMorgan Chase! Do you think that the Federal Reserve acts in the interest of anyone other than the large, too big to fail, banks? The banking system prints or creates money all the time, and not only central banks do it. It has been a longstanding practice of banks everywhere to loan out more money than they hold in deposits. This is called "fractional reserve" banking. For example, when a bank takes in $100 in deposits, it will loan out $1000 figuring that that will be sufficient for depositors who wish to redeem their deposits. Unless there's a run on the bank, that usually is sufficient. So money is created by the private banking system all the time and on a daily basis. Many multiples of the banks' deposits are then loaned out at interest.
Individuals, businesses, corporations and governments then borrow money from private banks to meet their needs for expansion and simply to pay their bills. The US government, for example, borrows the money it needs to function essentially from Goldman Sachs and other large banks and then pays interest to those banks. This happens because the US sells Treasury bonds to those large institutions in return for money to fund its wars and pay social security and medicare recipients among other things. The taxpayers are then on the hook for paying the interest on these bonds. Goldman Sachs got the money in the first place from the Federal Reserve so that by means of a little bit of subterfuge (the Federal Reserve cannot by law loan money directly to the US government), money is transferred from the privately owned Federal Reserve bank, which it created out of thin air, to the US government with interest to be paid by the taxpayers to private banking interests. This begs the question that Ms. Brown makes a central point of her book: if a private central bank can increase the money supply by creating money out of thin air as an accounting entry on a computer screen, why can't the government itself create the money to fund its needs? In particular, if the government created the money instead of the private banking system, taxpayers wouldn't be on the hook for the interest payments which are rapidly eating up an ever increasing share of the Federal budget. Interest on the national debt is projected to be $241.6 billion in FY 2012; it will only increase every year as the national debt goes up. The question is why should US taxpayers pay interest to private bankers on the money loaned to the US government which was created by private bankers when the US government itself could just as well have created the money interest free?
The same line of reasoning holds for the Eurozone which is caught up in a debt crisis in which the private banking system is raising interest rates for countries that it considers weak. The rising interest rates make countries such as Spain and Italy even weaker and all this is being fueled by speculators who are shorting the bonds of these countries. Derivative trading such as shorting drives up interest rates since it makes it seem that investors are selling rather than buying the bonds of those countries.
The process of shorting can be simply explained as follows. Suppose my neighbor buys a lawnmower for $500. I then ask to borrow my neighbor's lawnmower to mow my yard. As I'm mowing, another neighbor drives by and offers to buy the mower for $450. As it happens, I know about a sale at the local Sears where I can buy the same exact lawnmower for $400. So I sell the lawnmower for $450., rush down to Sears and buy another one for $400., return the mower to the neighbor I originally borrowed it from and then pocket the $50. profit. Now in the dark world of derivatives markets it's not even necessary to borrow anything from a preexisting owner in order to short sell. These trades are called "naked shorts." The whole effect will drive up interest rates in Greece and Italy making their borrowing costs to turn over their loans even more expensive and hasten the day when these countries will default. Speculators stand to make big money if and when a Eurozone country does default because they have placed large bets on this outcome. It is to be noted that the European Central Bank (ECB) has the same deal that the US Federal Reserve has in that it can't give money directly to one of its member countries. Monies have to be funneled through banks. This means that they are subject to the machinations of the bond market and speculators. If the ECB created the money directly and then loaned it to member countries, the interest rate could be maintained constant as speculators would be eliminated and it would be lower as the private bankers would not be getting their cut.
If the whole notion of a central government creating the money supply as opposed to a private central bank creating it seems radical to you, please bear in mind that this is exactly what Abraham Lincoln did to fund the Civil War and the economic expansion following it including the transcontinental railroad, the land grant colleges and the Homestead Act which gave away free land to settlers in the west. Greenbacks were government created currency which was spent into the market. Today Federal Reserve notes are created by the privately owned Federal Reserve and are the official US currency. Ellen Brown maintains that any government can create a fiat currency. This simply means that the government created currency is declared to be the legal currency of that government. It doesn't have to be backed by gold or anything else. It is the official currency just because the government says it is. Ellen Brown characterizes the Greenback era as follows:
How was all this accomplished with a Treasury that was completely broke and a Congress that hadn't been paid themselves? ... Lincoln tapped into the same cornerstone that had gotten the impoverished colonists through the American Revolution and a long period of internal development before that: he authorized the government to issue its own paper fiat money. National control was reestablished over banking, and the economy was jump-started with a 600 percent increase in government spending and cheap credit directed at production. A century later, Franklin Roosevelt would use the same techniques to pull the country through the Great Depression; but Roosevelt's New Deal would be financed with borrowed money. Lincoln's government used a system of payment that was closer to the medieval tally. Officially called United States notes, these nineteenth century tallies were popularly called "Greenbacks" because they were printed on the back with green ink (a feature the dollar retains today). They were basically just receipts acknowledging work done or goods delivered, which could be traded in the community for an equivalent value of goods or services. The Greenbacks represented man-hours rather than borrowed gold. Lincoln is quoted as saying, "The wages of men should be recognized as more important than the wages of money." Over 400 million Greenback dollars were printed and used to pay soldiers and government employees, and to buy supplies for the war.
The Greenback system was not actually Lincoln's idea. but when pressure grew in Congress for the plan, he was quick to endorse it. The South had seceded from the Union soon after his election in 1860. To fund the War between the States, these Eastern banks had offered a loan package that was little short of extortion - $150 million advanced at interest rates of 24 to 36 percent. Lincoln knew the loan would be impossible to pay off. He took the revolutionary approach because he had no other real choice. The government could either print its own money or succumb to debt slavery to the bankers.
So the war and the economic development following it were financed with goverment created fiat money, the Greenback. This would be perfect today for funding the $2 trillion in infrastructure repair and rebuilding that the IEEE claims is needed - in other words an infrastructure bank. This would solve a lot of the US' unemployment problems as well as bringing the US infrastructure up to par with China and other countries which are modernizing their infrastructure at rates far exceeding the US. The Eurozone ECB could also print or create euros without borrowing or funneling them through private bankers and subjecting the economies of certain countries to the whims of speculators. For the US it would be simple to move the Federal Reserve into the Treasury Department, transfer ownership to the public sector and keep the fact that the chairman would be appointed by the President. To keep its autonomy, Congress should not have the ability to interfere with the newly created Federal Reserve just as the situation exists now. So what would change? Only that the money created would be the equivlent of Greenbacks which would be non-interest bearing notes. Government created money would not be money that the government would have to pay interest on to private sector banks. These Greenbacks could coexist with Federal Reserve notes so that there would be two forms of currency in circulation both of which would be legal tender. Therefore, Federal Reserve notes would not have to be recalled. The new system could be created overnight with a minimum of disruption to commerce.
The Eurozone probably operates the same way. I'm not an expert but I surmise that the large European banks such as Deutsche bank, Societe Generale and ING loan money to Eurozone countries at interest. Even Goldman Sachs, since it is an international bank, probably has its finger in the pie of Eurozone money creation. Even money created by the ECB needs to be funneled through these banks before it gets into the coffers of the respective Eurozone countries. This means that not only are countries such as Greece and Italy paying interest to the large European and international banks but the interest rates they are paying are subject to market speculation which drives them up even more. If the ECB issued euros directly instead of letting the large banks do it, the interest rate could be carefully controlled, the rates wouldn't be subject to speculation and the interest paid would go into the coffers of the ECB instead of into the coffers of large private banks.
Individuals and families in the US and throughbout the world are increasingly indebted to private banks for mortgage debt, student loan debt and credit card debt. Easy credit and low initial interest rates as well as declining wages have induced much of the population to go into debt in the same way that countries have gone into debt. Ultimately, these levels of debt are unsustainable especially if today's historical low interest rates start to rise. Of course the banks' major goal is to have everyone in debt paying interest money to them as a major part of their expenditures. If everyone is a debt slave, the banks are in the position of owning most of society's assets. Ellen Brown's ideas about taking money creation out of private bankers' hands and putting it into the hands of central governments strikes at the core of capitalist economics which assumes that money creation remains entirely privatized. However, other countries such as China have shown that government owned large banks can be a boon to economic development and growth.
Also in the US state owned banks such as the Bank of North Dakota maintain that state in a healthy economic condition compared to the US as a whole. Interest collected on loans goes back into state coffers defraying taxpayer expenses. So lower taxes are the result of a state owned rather than a privately owned bank. The same could be true for countries as well. Also loans can be more carefully controlled so that they go for socially useful purposes rather than fueling speculative investment. Finally, many countries including China and Norway have sovereign wealth funds which act to make those countries more creditworthy than countries which have no assets and only debts. As any banker knows, an individual's creditworthiness represents the difference between his assets and his debts. The same holds true also for countries. If governments created their own money, it could be loaned directly to families that are being foreclosed on instead of relying on private bankers to work out deals with them which they have been reluctant to do thus exacerbating the foreclosure crisis. Greater leniency could also be granted to student loan debtors than is the case now.
Lincoln saved the US an incredible amount of interest repayments by issuing Greenbacks instead of borrowing the money:
In 1972, the United States Treasury Department was asked to compute the amount of interest that would have been paid if the $400 million in Greenbacks had been borrowed from the banks instead. According to the Treasury Department's calculations, in his short tenure Lincoln saved the government a total of $4 billion in interest, just by avoiding this $400 million loan.
Finally, a quote from Thomas Edison from an interview in the 1921 New York Times:
If the Nation can issue a dollar bond it can issue a dollar bill, The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution, pays noboldy but those who contribute in some useful way. It is absurd to say that our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People.
Therefore, the "full faith and credit" of the US government and the ECB could apply to currency as well as bonds, and private bankers and speculators could be eliminated from the loop.
Frank's remarks go first as he is living in the Euro zone and much more knowledgable than John. John's remarks, which are more speculative come later. Perhaps this can be an ongoing dialogue between our two correspondants.
Frank's Remarks:
On December 8, 2011, EU history was made as all EU 27 members (subject to Parliament approval by 3 or 4 countries) -- except the UK -- agreed to cede some sovereignty in accepting tough financial fiscal-budgeting rules that members had earlier pledged to follow under the original Maastricht Treaty. In short, apocalyptic expectations of the euro's demise have been proven wrong as the EU takes one small but great step towards fiscal and monetary union without an unbearable loss of sovereignty. More intensive discussions will no doubt occur on latter point.
The European Court of Justice will ultimately have central oversight of national budgets making sure that budget deficits do not exceed 3% of GDP and total overall debt does not exceed 60% of annual economic output. Debt brakes will be put into law or constitutions committing countries to these fiscal discipline measures. The 3% rule was put into effect in 1991, but it has been given scant attention and has never been enforced. Sound familiar? Politicians have a tendency of flouting, not standing behind, or resorting to subtle ways to shirk enforcement of their statutory legislative actions. But that behavior will be harder for EU members this time as serious sanctions face those who disobey the tough rules. Sanctions might include possible expulsion or willful withdrawal from EU membership.
Premier Cameron found the fiscal-budget oversight measures too much of a threat to UK sovereignty and an intrusion into the City's powerful financial trading services. Thus, his veto of the reinforced fiscal measures means the UK is stepping out of further discussions about the euro, deficits and debt reduction, and funding of the EU central bank. This is not surprising as Cameron has been under extreme pressure from party members who want no part of this development. The UK wants it both ways. They want to have influence but not pay the price of joining the eurozone. This veto means that only the EU 17 have formally or legally committed to accepted central fiscal oversight control and enforcement.
Once the detailed operating mechanisms are worked out, the next step will likely be a prudent, innovative plan to add liquidity to the financial system to restore confidence and put to rest any market panic. In the interim, the European Central Bank (ECB) will reduce the banks' benchmark interest rate from 1.25% to 1.00% to offset the current credit crunch. Also, the ECB will offer banks more long-term loans of up to 3 years versus current 13 months. This will make it easier for banks to lend money in the market place and will offset the flight of private investor capital from EU financial institutions.
To date the ECB has been modestly buying the distressed debt of Greece and Portugal. The ECB is strongly commited to intervene in the bond markets to keep interest rates under control for financially weak countries that are finding it more and more expensive to borrow money on the bond market. However, the ECB will do no more than that now and is not about to print money or buy a large amount of government bonds. The game is to keep the pressure on politicians of financially weak and strong countries to start carrying out tough fiscal measures and debt reduction to make sure this kind of crisis problem never happens again. The Netherlands, Finland and Germany have been the keen initiators of uniting on a policy of strictly enforced fiscal-budget discipline as a first step before exploring the role and funding of the ECB in bailing out insolvent governments, requiring a change to the Maastricht treaty. It's all about coming down hard on the financial recklessness of southern European countries while adhering to the original goal of European fiscal and monetary unification under the euro.
Another complication is that the ECB (unlike the U.S. Federal Bank) is prevented by treaty law from financially coming to the aid of EU member governments. The EU's single legal mandate is monetary stability. It can only aid companies/people by supporting the banks. And that's just what the Germans want and preferably no more. Bailing out and restructuring the bad debt of an insolvent government must be a very last resort action by the ECB after a country's belt-tightening actions have failed. The Germans and Dutch are uncompromising about this principle.
Europe does not want to get on the fast track of wholesale printing of money or selling of EU bonds (or buying up billions of bad debt) in the easy ways the U.S. money system works (e.g. trillions in quantitative easing and selling Treasury bonds). There are many reasons for this: first, the most obvious being the fear of inflation 3-5 years down the road -- a risk Paul Krugman and other economists erroneously consider as highly unlikely with very low inflation today --; secondly, there's the fear of exacerbated debt growth as some countries relax their controls thinking they will always be saved by the taxpayers of the finacially well-managed countries. It's called Moral Hazard.
Another concern is that printing euros on a large scale in Europe is far more inflation-risk intensive than in the U.S. This is because the euro is a relatively small regional currency while over the past 60 years the dollar is better protected against this kind of inflation-risk by being deeply distributed and planted in worldwide banking and transactions' systems. As stated, EU leadership is reluctant to open the money faucets until there is clear evidence of at least a "de facto" fiscal discipline in process. And in all cases the ECB should be the lender of last resort to governments. Presently, there is about €850 billion in the Euro Emergency Fund. Some are advocating this Fund should be increased to €1.5-2.0 trillion to scare the pants off the treacherous currency speculators. So far, EU officials are not buying this advice.
One thing is certain. It's not a question of choosing between the euro falling or fiscal unity. The vast majority of European leaders realize that suggesting or even contemplating the fall of the euro is NOT an option -- it's a self-fulfilling DISASTER scenario affecting the entire world economy. The globalization and advanced data transfer technology processes have bound the financial world into a tight, supremely complex, irreversible interconnection like the attachment of early twins in the womb. Abandoning the euro would trigger a wave of financial collapses, negative growth and a duplication of the 1930s depression. Allowing the euro to fail with the hope of building the system up again with multiple currencies is, as one financial advisor lightly remarked, "like thinking an egg can be broken up and put back together again." Impossible! Furthemore, one currency versus multiple fluctuating currencies makes it far, far easier to undertake long-term investments, cross border transactions and to grow businesses. But of course this requires that fiscal policies of EU 17 are brought in line. A common currency without fiscal and monetary harmony is very problematic as Europe is learning the hard way.
I'm confident EU countries will resolve the loss of sovereignty pain and come up with the right emergency funding actions to calm financial markets and assure long-term fiscal stability and debt control. Already, general agreement is near to raise the banks' reserve requirement to 9% from 6% which could be further increased as a bank gets globally bigger. This responsible financial thinking is in contrast to the U.S. where compromised politicians continue playing the banks' casino games with a paltry 6% reserve requirement and massive bonus payments. The EU bank bonus system will also be sharply reformed. Meanwhile, U.S. authorities cowardly pussy-foot around this insidiously destructive practice. Another more aggressive step being considered is legislation that will allow a failed insolvent (as opposed to illiquid) government to declare bankruptcy or to willingly withdraw from eurozone membership. But, of course this idea, if feasible, must be structured in a highly regulated, orderly way
This is a complex serious matter. The EU mature countries, with the Netherlands as an excellent example, are already taking a tough but balanced, equitable austerity approach to the ongoing recession and to maintaining fiscal sanity. The Netherlands' approach involves four strategies: CUT (for example: waste, culture/social-net budgets, foreign aid, possibly mortgage interest deduction); REFORM (health care, social-nets, financial institutions/systems); INVEST (in sustainable job-producing projects, i.e., education, infrastructure, green energy, R&D, Innovation; and RAISE TAXES (but not on lower income earners).
When European leaders finally come together as they have and say they are fully behind the euro and fiscal discipline, I'm convinced they mean business.
Best,
Frank Thomas
The Netherlands
December 9, 2011
John's Remarks:
I note that Germany and Angela Merkel are calling the shots here followed closely by the Netherlands, France and Finland. The northern European countries, which are far more economically successful and seem to have a much greater work ethic, are imposing their solution on the weaker southern European countries of Greece, Italy, Spain and Portugal. This bothers me in the sense that it could create a rift in the Euro zone with the weaker countries feeling that the austerity measures imposed on them by the stronger northern European countries are unfair. Of course, the northern European countries are maintaining that the southern countries need to get their act together, pull their own weight and not expect Germany to bail them out. This could backfire in that the average "middle class" Greek, for example, might find the austerity measures imposed on him unfair and unbearable especially if he loses his job because of them. A macroeconomic solution by itself might not play well in the microeconomic world.
In a way Merkel is playing the role of conservative Republicans in the US who want fiscal problems solved by cutting expenses rather than raising revenues. While the Occupy movement in the US is calling for taxing the rich to solve the deficit/debt crisis, Republicans and Merkel seem to be calling for cutting spending. Why isn't their a greater call for taxing the European rich? I did notice, however, that Merkel has called for a Financial Transaction Tax (FTT) which is why Britain backed out of the agreement which all the other Euro zone countries have agreed to. Why does Britain, which doesn't even use the euro, have any say in the matter whatsoever, and does this mean that there will be a FTT in the euro zone sans Britain? If so, this could alleviate some of the austerity which is being advocated.
I also notice the parallel between the Republican war on government workers in the US and the fact that there is a large percentage of the Greek work force involved in government work. I assume that it is Merkel's intention to cut that government work force as part of her austerity measures. But what are those laid off workers supposed to do? I don't think Greece has much of an export economy or even much of a private sector. If the austerity measures are too severe, there will be rioting in the streets as if there hasn't been already. But there will be more.
I think Merkel's approach will probably bring the speculative markets under control and allow Greece, Italy, Spain and Portugal to get a handle on their debt problems. It's interesting that the ECB cannot loan money directly to governments but only (for all intents and purposes) to banks. That is similar to the US Federal Reserve which has offered extremely low interest loans to banks - over $7 trillion of quantitaive easing at an interest rate of .01% - while not dealing directly with the average middle class citizen whose lot is to deal with the banks which offer them no such advantageous deal. The ECB seems to be relying on the fact that bailing out the banks (in advance) will help Euro zone countries with their debt problems because the banks then will be able to loan to the countries involved at a lower interest rate than would otherwise be the case. This still leaves the problem of what to do with all the unemployed workers who will lose their jobs due to the belt tightening.
Redistribution of wealth from the hardworking, thrifty and frugal northern Europeans to the "La Dolce Vita" loving Italians and the "Who me, pay taxes?" Greeks is something that Angela Merkel is adamant against just as in the US the Republicans are adamant that the "job creators" should not pay any more in taxes to help the poor. The rich, whether individuals in the US or countries in the EU, seem to think that they are entitled to keep what they perceive they have earned and not be forced to give it up to those who have squandered their resources. They have worked hard while the others have been lazy and goofed off so why should they have to bail them out?
However, redistribution from rich to poor, whether in terms of individuals as in the US or in terms of countries in the EU, might be the more preferable and humane solution compared to the prospect of rioting in the streets. In order to keep the wolves at bay, it might be desirable for the more conservative elements in both societies to give a little even as reforms are being implemented. It may be necessary for northern Europeans to "carry" their "little brothers" in the south for the sake of maintaining peace and harmony in the EU just as it may be necessary for the weathy in the US to give up some of their enormous gains in wealth and income over the last 30 years in order to stabilize society.
In the last 30 years average workers in the US have made hardly any wage gains while most of the gains have gone to the upper 5%. 30 years ago CEOs made about 30 times the wage of the average worker whereas today they make 300 times the average worker's wage. The middle class has only been able to keep its head above water by going into debt and participating in the bubble economy only to lose big time when the bubbles have burst - first the stock market bubble in 2000 and then the housing bubble in 2008. These two bubbles dropped the floor out from beneath the middle class. Since Europe, especially Britain, has followed the US in its fiscal and monetary policies to some extent over the last 30 years, I imagine that some of the maladies in the economy of the EU are similar to those in the US especially in banking.
In the final analysis, taxing the rich may be necessary in the interests of social stability as opposed to balancing budgets on the backs of the poor and middle class. Perhaps northern Europeans need to relax their work ethic while southern Europeans need to step up to the plate and strengthen theirs. All the countries of the EU need to pull together or it will come apart with disastrous consequences as has happened all too frequently in past history.
Frank's Further Remarks:
Your speculative analysis overall is excellent, but I feel goes way too far in equating EU country tough treatment of the weak nations to that of the Republicans treatment of "the losers" and poor in America. As noted in my writing, Europe will come to the aid of Spain, Greece, Italy, and Portugal eventually as a lender of lastresort but only after they show evidence of their committment to get their debt and fiscal house in order. I have no doubt that the EU Emergency Fund will be increased in a sane manner. Don't forget that 26 of the EU 27 countries have just agreed to sacrifice some precious sovereignty in accepting central oversight control of national budgets that will be enforced by tough penalties. This is a major, major change! These 26 nations reflect a population base of over 400 million. It's totally unimaginable that 99% of all states in America with 300 million people would ever agree to such a concept of central budget oversight control. This would be immediately met with screams of a "communistic tyranny" and "down with the government" !!
John's Further Remarks:
Similar to the poor and gullible in the US who took on sub-prime loans which they didn't have a prayer of ever paying back especially after the ARMs reset, the Greek government took on debt that it couldn't pay back which, if the banks didn't actually force on them, they certainly used pursuasion and encouragement to get them to go in debt way over their heads. So in both situations it was the banks who "helped" the Greeks and individual would be mortgagees in the US take on more debt than they should have. Sure one can blame the debtor who wasn't exactly forced to sign on the bottom line, but the banks surely acted as pushers to the debt addition both in the EU and in the US. Unfortunately, the weaker countries such as Greece, Italy and Spain fell for the banks' ploys just as weaker persons in the US fell for the easily obtained credit without realizing what they were getting themselves into.
This is why I think both the Greeks and debtors in the US should be cut some slack. In the final analysis, if it weren't for the banks' policies of making credit easily available to unworthy debtors, crises in both countries could have been avoided. The big banks encouraged individuals and countries to go into debt way over their heads.
Frank's Further Further Remarks:
Improved bailout resources, ECB's support of the banking sector, and fiscal austerity and overhauls where budget deficit and debt limits will be incorporated in national constitutions all give governments time to prove they are serious about financial discipline as well as to finalize a new intergovernmental treaty. The EU's firm, unified commitment that the euro does not fall also means no one is about to let the weak countries go down the tubes providing they move on the financial pack agreed to by the Euro Zone core 17 and the 9 remaining EU states.
This is the second in a two part series considering whether or not drugs and prostitution should be legalized in the US as many libertarians including Ron Paul have advocated. Part 1 can be found here.
Prostitution is legal in some form or other in many countries of the world. In many other countries, including Muslim countries, polygyny, which means that one man can have multiple wives, is completely legal. Does prostitution serve some beneficial social purpose or is it something entirely reprehensible that should be criminalized and prosecuted? Or is it a necessary evil that should be regulated and managed but discouraged while not being criminalized. We shall examine some of these ideas in this article. Of course prostitution isn't the societal problem that drugs are. There is no "prostitution war" equivalent to the "drug war" that is ravaging Mexico. Billions of dollars aren't involved in prostitution in the same way that they are in the lucrative drug trade. Prostitution as a societal problem is almost beneath the radar compared to the drug problem where competing cartels have waged war and numerous people have been killed.
There are some 13,000 porn films made every year in the United States, most in the San Fernando Valley in California. According to the Internet Filter Review, worldwide porn revenues, including in-room movies at hotels, sex clubs, and the ever-expanding e-sex world, topped $97 billion in 2006. That is more than the revenues of Microsoft, Google, Amazon, eBay, Yahoo!, Apple, Netflix, and EarthLink combined. Annual sales in the United States are estimated at $10 billion or higher. There is no precise monitoring of the porn industry. And porn is very lucrative to some of the nation's largest corporations. General Motors owns DIRECTV, which distributes more than 40 million streams of porn into American homes every month. AT&T Broadband and Comcast Cable are currently the biggest American companies accommodating porn users with the Hot Network, Adult Pay Per View, and similarly themed services. AT&T and GM rake in approximately 80 percent of all porn dollars spent by consumers.
Evidently, it's not illegal to pay a woman to have sex so long as it's packaged and sold as an illusion, and it adds to the bottom line of corporate profits and as long as the man paying her isn't the man who is actually having sex with her.
The web has made pornography accessible and free. A Newsweek article in the December 5, 2011 issue states: "An estimated 40 million people a day in the US log on to some 4.2 million pornographic websites, according to the Internet Filter Software Review. And though watching porn isn't the same as seeking out real sex, experts say the former can be a kind of gateway drug to the latter."
The problems with the profession of prostitution are mainly visited on the low end prostitutes, the street walkers and hookers, who are regularly brutalized and even serially murdered by their clients. Sex trafficing affects girls and women who are promised a ticket out of some miserable homeland only to find themselves landed up as sex slaves. If prostitution were legalized and regulated, the people who would be helped the most are the low end prostitutes, the poor prostitutes who are exploited by pimps and sex trafficers. Perhaps this is why prostitution remains illegal in the US where disregard of the poor is a tenet and bedrock belief of Republican philosophy. After all legalization and regulation would mean more government bureaucracy even though it might reduce violence and sexually transmitted diseases. In other countries legalization means that prostitution is regulated to make sure that exploitation and disease are minimized under the theory that human behaviour can't be legislated but it can be managed and regulated.
In Holland where prostitution is legal, prostitutes even have their own union! Prostitution is legal in many countries including Canada, Mexico, Israel, England, France, most other European countries, most all of South America including Brazil, Australia and New Zealand. Even Iran has "temporary wives" which can last for only a few hours. Legalizing prostitution not only protects prostitutes and their customers, but it represents a service that can be taxed and can bring in government revenues. Libertarians in the US are all for legalizing drugs and prostitution. The joke is that libertarians are Republicans who want to smoke dope and get laid. The question why do men go to prostitutes is of less interest here than the sociological question of whether legalization or criminalization of such activity produces a more healthful and more crime free society. Societies in which drugs and prostitution are legal tend to have lower incidences of rape and other violent crimes than the US according to the Liberator report. And the US is the world's chief hypocrite in this regard as it tolerates and even encourages prostitution in countries which contain US military bases due to demand from soldiers, sailors, marines and airmen.
Before I go on though, there is a joke along these lines: A middle aged couple went to the county fair. As they were perusing the livestock barns they came across the prize bulls, those who had won blue ribbons. The wife exclaimed to the husband, "Look at that bull. He sired 150 calves last year. That means he had sex 150 times. If that bull can have sex 150 times in a year, surely you can do as good as that bull. They walked a little farther and the wife exclaimed again, "That bull sired 250 calves last year. He had sex 250 times. If that bull can do it, you should be able to do it too. They walked a little farther and the wife said,"Look at that bull. He had sex 350 times last year because he sired 350 calves." Just then the husband piped up, "Yeah but it wasn't always with the same cow!"
The "same cow" syndrome, as I call it, or sexual boredom explains in part why men who seemingly have everything, including the most beautiful wives in the world, cheat. Why do such men as Tiger Woods, John Edwards, Eliot Spitzer, Arnold Schwarzenegger, Jesse James and now even Ashton Kutcher cheat? Rich and famous men in particular have more opportunities for one thing because women are attracted to them. Rock stars, professional athletes and entertainers have women throwing themselves at them in many cases. They have ample opportunities. These are people who can go out and buy anything they want. If they want another home they simply go out and buy it. Another car? No problem. Another yacht? Same thing. They are used to being able to have anything they want. So it seems that what a lot of these men want in addition to all the other stuff is to have sex with a woman other than their wives even when they are married to the most beautiful women in the world. Men who stay monogamous may have the same desires but don't act on them due to the consequences and loss, both financial and emotional, that would ensue if they were found out. They may be altruistic enough to consider the consequences of breaking the heart of someone they love even if they are attracted to other women. Men seem to be able to divide love and sex into two distinct, sometimes non-overlapping, compartments of their minds. A girlfriend told me once that love and sex are all mixed together in a woman's mind whereas for men they are two distinct phenomena.
Take the case of superstars and multimillionaires Jennifer Lopez and Marc Anthony who supposedly had a fairy tale marriage and two adorable twin kids. That lasted about seven years. Marc decided that he wanted to spend more time with his ex-wife, a former Miss Universe. Jennifer decided she wasn't "passionately in love" any more. Friends said Marc had an eye for other women. There you have it folks. The fairy tale didn't last. Someone I dated once told me that fairy tale relationships don't last. She and her ex-boyfriend initially had passion that wouldn't quit. They couldn't get enough of each other. Then the passion started to diminish and after seven years they were sleeping in separate bedrooms and couldn't stand each other. Is this where the seven year itch comes in? I think the lesson here is that passionate fairy tale marriages or relationships won't last without concomitant commitment and sometimes even committed relationships won't last particularly if the participants can have anything they want without restrictions of finance or opportunity.
"Till death do us part” is a compelling idea, but with the divorce rate exceeding 50 percent, many people would very likely agree that humans have a biological impulse to be nonmonogamous. One popular theory suggests that the brain is wired to seek out as many partners as possible, a behavior observed in nature. Chimpanzees, for instance, live in promiscuous social groups where males copulate with many females, and vice versa.
But other animals are known to bond for life. Instead of living in a pack like coyotes or wolves, red foxes form a monogamous pair, share their parental and hunting duties equally, and remain a unit until death.
For humans, monogamy is not biologically ordained. According to evolutionary psychologist David M. Buss of the University of Texas at Austin, humans are in general innately inclined toward nonmonogamy. But, Buss argues, promiscuity is not a universal phenomenon; lifelong relationships can and do work for many people.
So what distinguishes the couples that go the distance? According to several studies, a range of nonbiological factors can help pinpoint which pairings are built to last—those who communicate openly, respect each other, share common interests and maintain a close friendship even when the intense attraction wanes.
Monogamy which isn't prevalent in the non-Western world is having a rough go of it in the US despite the "family values" crowd. Despite their family values politicians such as Newt Gingrich and now Herman Cain turn out to be serial adulturers. Others such as Republican David Vitter and Democrat Eliot Spitzer have been found out for visiting prostitutes. Vitter was able to keep his job in Congress; Spitzer wasn't able to hold on to the governorship of New York.
Muslims can have multiple wives. And according to the Bible Solomon had seven hundred wives and three hundred concubines. King David had eight wives and ten concubines. The Biblical example doesn't bode well for monogamy as the bedrock of western civilization. Monogamy in the western world is undercut by serial marriage which movie stars such as Elizabeth Taylor (8 marriages) indulge in. The marriage vow "till death do us part" has become irrelevant for large numbers of people who fail to even include it as part of their marriage ceremony. And in the western world one can simply remain single and have multiple boy or girl friends. The sanction against sex outside of marriage no longer exists. But still for some people monogamy remains a strongly desirable value and way of life. The fact that there are many ways around monogamy including prostitution is probably a good thing as it relieves sexual tension and pressure for those who are unable or unwilling to maintain strict monogamy. This pressure relief valve probably prevents equivalent energy release in more anti-social and even criminal modalities.
Frank has written an excellent essay on prostitution in Holland where it is legal, as it is in most other countries of the developed and undeveloped world, which we present here:
LEGALIZED PROSTITUTION IN THE NETHERLANDS
Introduction
The Netherlands has undergone a long transformation of first viewing prostitution as a dishonorable profession with few rights under the law; to seeing the prostitute as a victim of criminal exploitation by procurers and traffickers; to adopting a public policy of regulated tolerance; to legalizing and accepting adult prostitution in 2000 as a legitimate “right” and form of occupation by consenting adults. The Dutch practical approach to prostitution was evident as far back as 1413 in a decree from the city of Amsterdam:
“Because whores are necessary in big cities and especially in cities of commerce such as ours – indeed it is far better to have these women than not to have them – and also because the holy church tolerates whores on good grounds, for these reasons the court and sheriff of Amsterdam shall not entirely forbid the keeping of brothels.”
One caution to readers. This writer makes no pretenses that the Dutch approach to prostitution today is transferable to the U.S. For every nation has its unique social-cultural history affecting attitudes towards social problems like prostitution, drug abuse, rape, abortion, teenage pregnancy, euthanasia. The legal spectrum for prostitution extends to the death penalty in some Muslim countries to treating sex workers as legally independent, tax-paying business entrepreneurs in the Netherlands. US public policy decisions on prostitution have long been driven by traditional religious-based moral values making prostitution a criminal offense. Costly time consuming court cases are pursued penalizing prostitutes while knowing prostitution is impossible to eliminate. U.S. officials often end up taking a schizophrenic blind eye to its presence and abuses.
Since the 17th century, the Dutch have slowly developed a more permissive culture of pragmatism and tolerance towards the “oldest profession.” Although Calvinistic moral absolutism strongly colored government policy on prostitution in the 17th century, the criminalization of brothels died down as old habits continued. Dutch authorities gradually left brothels alone if they were not a public nuisance. Moral arguments to justify certain laws came to be overshadowed by a jurisprudence based on a cultural value of utilitarianism. Thus, religion, sin, morality are rarely the driving emotions in policy-making for social phenomena in the Netherlands. The Dutch are above all a practical, realistic, open people … characteristics nurtured by centuries of doing business across continents in diverse languages with few pre-conceived prejudices about race, political creed, culture, or religion. No wonder, surveys show that 78% of Dutch citizens favor legalization of prostitution.
In contrast, Sweden sees prostitution as a sex-specific act of violence against women, as an act essentially involuntary and morally repugnant. Sweden’s goal is to suppress and ultimately abolish it. Prostitutes are seen as a victim group and prostitution as a “gross violation of a woman’s integrity.” Prostitutes need to be rehabilitated not punished. In 1999, Swedish law decriminalized the sale of sex and took the historical step of making it a criminal offense to pimp, traffic, and buy sex. Men who buy sex are subject to public exposure and fines or up to six months in prison. Thus, clients as well as pimps and traffickers are seen as oppressors. All face the threat of being punished under criminal law. This plus the Swedish threat of "naming and shaming" the client by publication are generally accepted methods of abolishing prostitution, achieving true gender equality, and protecting women from violence.
Officially reported results are positive. Street prostitution has been eliminated. The number of prostitutes has dropped 40%, and criminal human trafficking gangs tend to avoid Sweden.
Sweden’s abolitionist policy is very un-Dutch. People here regard prostitution as a social phenomenon that cannot be eliminated. Interestingly enough, however, the Dutch are now considering adopting Sweden’s practice of "naming and shaming" the client – to be directed to buyers of sex from women or brothels not legally registered or licensed, to buyers from prostitutes who are minors, and to buyers who commit acts of coercion or violence. Studies show most men who bought sex would likely be deterred by the risk of a pillorying by public exposure in the local newspaper. Heleen Mees, Dutch economist and lawyer, concluded that for many men (including former New York Governor Eliot Spitzer), the promise of anonymity may be the most appealing aspect of buying sex.
How the Dutch System of Legal Regulation Works
The Dutch have long believed banning prostitution makes it ever more difficult to control and counter abuses. Accordingly, prostitution itself has never been illegal in the Netherlands. A 1911 Act banning the owning of a brothel and profiting from prostitution was lifted in 2000. The 1911 Act had only been used against brothels and sex clubs engaging in criminal activities or disturbing public order. It was replaced by Article 250a of the Dutch Criminal Code which made it legal under strict conditions to operate a brothel or solicit clients for a prostitute while prohibiting exploitation of prostitutes.
Like the Netherlands, Germany also legalized prostitution in 2002. The criminal aspect and spiraling violence were overriding factors compelling both countries to legalize and regulate the sex industry.
Dutch law brings tough penalties for the following offenses:
Forcing another person to engage in prostitution, inducing a minor to engage in prostitution, recruiting, abducting or taking a person in prostitution in another country, receiving income from a minor or a person forced to engage in prostitution and forcing another person to surrender income from prostitution.
The Ministry of Justice formulated six key aims of the new Prostitution Act:
Improve monitoring and regulating possibilities for legal prostitution through a municipal licensing system for prostitution businesses and work/residence permits for prostitutes. Curb illegal prostitution and intensify efforts to combat exploitation and forced prostitution. Reduce if not stamp out trafficking of minors, illegal immigrants and individuals without a valid residence permit. Protect minors below 18 against sexual exploitation. Safeguard position, mental integrity, and rights of prostitutes. Separate prostitution from the criminal activities associated with it.
Criminal offences carry a fine and a sentence of up to six years extended to eight or ten years for aggravating circumstances related to exploitation, trafficking, forced prostitution and use/abuse of children.
Guidelines and regulations to control brothels, self-employed sex workers, sex clubs and streetwalkers are set by local municipalities. The Association of Netherlands Municipalities publishes a common set of guidelines. Police, urban district councils, and local municipal health services are responsible for enforcing the laws, formulating and implementing the rules and policies regulating prostitution. This includes safety, hygiene, fire precautions, condoms, panic buttons, hot and cold running water. This also includes warnings, issuing/withdrawing business licenses and sex-worker residence or work permits, temporarily or permanently closing down a business for violation of license conditions, relocation of brothels for reasons of public order.
Workers in the oldest profession are now beginning to feel the pressure of European austerity by paying taxes like everyone else. In the Netherlands, the sex industry generates over $800 million annually in gross revenues. The sex trade went almost entirely untaxed until legalization in 2000. Sex workers are registered as one-woman, self-employed businesses. Authorities are now actively pursuing prostitutes who should be paying an average 33% tax many have managed to avoid. Research indicates about 40% of window prostitutes in Amsterdam pay some income tax. A spokesman for the Tax Service said, “We began at the larger places, the brothels, so now we are moving on to the window landlords and the ladies.”
Of course, an option for the prostitute is to work in the unlicensed, illegal sector. But if the client can find a prostitute there, why can’t a Dutch tax administrator? The prostitute and business establishment thus face real risks of losing their residence/work permits and license to work plus fines and possible jail terms.
As part of the Tax Service’s new tactics, officials are touring the red light districts (Amsterdam, for example) checking that the ladies – along with their required residence/work permits – are aware they must be paying taxes and making sure they have filled in all proper forms. In a notice given in Amsterdam’s city newspaper, landlords and window prostitutes were told they would be audited in typically bureaucratic fashion, “Agents of the Tax Service will walk through various elements of your business administration with you, such as pricing, staffing, agendas and calendars. The facts will be used at a later date in reviewing your returns”
Planned drop-in sessions by tax inspectors will be key in helping the Dutch government receive its share of the lucrative sex industry. For tax enforcement and collection efforts to be really effective, communication is crucial as the first language for most women is not Dutch and few speak English. Around three-quarters of the women working in Amsterdam’s sex industry – involving 8,000 prostitutes of all kinds and 3,000 working behind windows – are from Eastern Europe, Asia, and Africa. Another complication is that the industry is an all-cash business making it problematic to apply tax law, despite the fact that sex workers have residence or work permits. As one lady of the profession said, “How can they tell how many people come inside each day or how much money changes hands once the curtain is drawn? Not many customers ask for a receipt.”
What Are the Lingering Problems With the Dutch System of Legalized Prostitution?
The Dutch have been busy reducing the size of the red-light district in Amsterdam out of fear the business is getting out of control in recent years – exacerbated by sharp increases in the flow of women from poorer, less-developed countries. The abuse of prostitutes and illegal trafficking activity have been on the rise. As Job Cohen, former mayor of Amsterdam said in 2008, “We’ve realized this is no longer about small-scale entrepreneur businesses, but about big crime organizations involved in trafficking women, drugs, killings and other criminal activities.” Mr. Cohen added, “It is not that we want to get rid of our red-light district. (Fifty percent of the business comes from tourists). We want to reduce it. Things have become unbalanced and if we do not act we will never again regain control.”
In 2008, Amsterdam authorities began reducing half of the city’s 400 prostitution windows and closing a third of its brothels and some of the city’s 70 sex clubs and marijuana cafes. Simultaneously, there has been an intense crackdown on human traffickers who deceive victims by offering work in hotels, restaurants or child care while later forcing them into prostitution. Recent prison terms for small crime gangs have ranged from 4 to 7.5 years. The police conduct frequent controls of brothels to pick up signs of human trafficking.
In 2009, the Dutch Justice Ministry appointed a special public prosecutor responsible for closing down prostitution and coffee shops connected to organized crime. As has been the practice since the legalization of prostitution, withdrawal or refusal to grant a brothel license may occur for moral or ethical reasons or if:
• The brothel owner is unable to produce a police clearance certificate issued by the local authorities.
• The brothel employs a minor or an illegal resident or any person under coercion.
• The intended location conflicts with zoning plans.
• It is in the interest of public order.
• It makes the area less desirable to live in.
Other proposed stiffening up of legal requirements now nearing the last stage of the approval process include:
(1) Minimum age of sex worker will be increased from 18 to 21.
(2) Prostitutes must receive a registration pass with a photograph and a registration number but no name and personal data; clients will be required to check this pass.
(3) License requirements will be extended to escort and internet agencies, home sex outlets, adult movie theaters.
(4) An advertisement of an individual prostitute or of a sex company must show the registration number and license number, respectively; the outside and inside premises of a sex company must display a sign showing it is licensed.
(5) Clients engaging in sex at unlicensed establishments, or with non-registered prostitutes or with minors, or clients guilty of unacceptable treatment of a prostitute will also be subject to a naming and shaming threat of public exposure similar to regulation practice in Sweden.
What Are the Benefits of the Legalization of Prostitution from the Dutch Experience?
From Dutch perspectives, the advantages of legalizing prostitution are several for all parties, i.e., prostitutes, local governmental authorities, communities:
• The rights of prostitutes are asserted as autonomous self-employed businesswomen in a legitimate form of labor offering all the protections/benefits of the labor laws (participating in pension planning and workman’s compensation) as well as the obligations related to tax and social insurance contributions. Prostitutes are self-determining. No longer under control by pimps, they can accept or reject clients, decide when to work and when to retire. Pimping services are disappearing helped by regulations prohibiting pimps from earning a livelihood off the wages of prostitutes.
• Prostitutes are able to report violent and abusive crimes (rape, assault, coercion, extortion) without fear of prosecution or abuse by law enforcement agents – thus being far less vulnerable to predators like clients, pimps, madams, crime gangs, police. Abuses are more easily detected when prostitutes operate publically and legally. Strengthening the rights of women engaged in the oldest profession is seen as the best way to combat sexual violence.
• Prostitution in the “open sunshine” as a registered and licensed profession means the health needs of prostitutes are more likely to be self-addressed by prostitutes and by local health authorities. By local law, brothels must allow health services or interest groups unrestricted access to their premises. •
• While medical checkups are not obligatory, prostitutes self-employed or employed in the legal sector generally comply with the request to have medical checkups four times a year. Employers of prostitutes must pursue safe-sex policies and encourage their employees to have regular checkups for STDs.
• Brothels must meet standards of housing safety, basic hygiene facilities, zoning regulations, quality of life of the community, confinement to designated areas leaving most parts of a community prostitution-free. Streetwalking is less than 5% of all prostitution in the Netherlands. Some municipalities refuse to license window prostitution and streetwalking.
There’s a special phone line for members of the public to anonymously report suspicious activities. This and regular inspections by law enforcement agencies produce valuable information to follow and prosecute offenders in both the regulated and illegal prostitution sectors.
Summary
The Dutch have had a long history of tasting the more prohibitionist, morally-driven approach to prostitution. Then in 1911 came a policy of prohibiting brothels and “living off the avails of prostitution”, (sharing in earnings of a prostitute) together with a discretionary enforcement of the law … a kind of de facto “regulated-tolerance.” Finally, legalization of brothels and formal legitimization and de-stigmatization of prostitutes came in full force in October 2000. Prostitutes can work as regular employees (with a labor contract), although the vast majority now work as independent contractors.
The Dutch approach to legalizing prostitution frees up the justice system from wasting enormous monies and time on nuisance cases. More time is available for getting better control and prosecution of the real vicious culprits … organized crime gangs who continue with the exploitation of minors, human trafficking, coercion, violence, and drugs. The Dutch realize they must do much, much better in breaking down the illegal clandestine underworld of prostitution. And they will get the job done. But they are also realistic in recognizing that banning social phenomena makes them much more difficult to get under control.
And now in true Dutch pragmatic fashion, the red-light districts can expect a business-only visit by the tax inspector. Besides the improving government oversight of all facets of the sex industry, there is the important spin-off of a grass–roots enforced tax policy which is expected to generate much needed tax revenues. Although the 2008 financial crisis was weathered fairly well by the Netherlands, the government ran a deficit of 6% of GDP in 2010. It is now cutting spending +-20% and raising taxes over the next four years in the hope of balancing the budget by 2015. The lucrative sex industry must do its part.
REFERENCES: Legalized Prostitution in the Netherlands ________________________________________________________________
1. “Human Trafficking and Legalized Prostitution in the Netherlands,“ by Dina Siegel Prof. of Criminology at the Willem Pompe Institute, Utrecht University of the Netherlands, March 2009
2. “Prostitution in the Netherlands,” by Radio Netherlands Worldwide, Sept. 18, 2009
3. “Does Legalizing Prostitution Work,” by Helen Mees, Feb.3, 2009
4. “Prostitution in the Netherlands – History,” Wikipedia
5. “Prostitution in the Netherlands Since the Lifting of the Brothel Ban,” by A.L. Daalder of the WODC (Wetenschappelijk Onderzoek en Documentatiecentrum), 2007
6. “The Legalization of Prostitution: Myth and Reality” – A Comparative Study of Four Countries (Including the Netherlands, pages 55-69), Naomi Levenkron of Hotline for Migrant Workers, 2007
7. “The Act Regulating the Legal Situation of Prostitutes” – Implementation, Impact, Current Developments: Findings of a Study on the Impact of the German Prostitution Act (which adopted somewhat the Dutch liberal drugs model), by Prof. Dr. Barbara Kavemann, Ass. Jur. Heike Rabe, Sept. 2007
8. “How the Dutch Protect Their Prostitutes,” by Patrick Jackson of BBC News, Dec. 16, 2006
9. “Legalized Prostitution – Regulating the Oldest Profession,” by Mark Liberator, Dec. 8, 2005
10. “Dutch Policy on Prostitution,” Questions and Answers: Publication by the Netherlands Ministry of Foreign Affairs, 2004
11. “Prostitution in the Netherlands: Transforming the World’s Oldest Profession into the World’s Newest Industry,” by Gary Feinburg of Crime & Justice International, July/Aug. 2003, Vol. 19, No. 75
12. “Prostitution Laws – Toronto, Ontario and Canada,” (Live off the avails of prostitution) Posted by Toronto Defense Lawyers (TDL), Mar. 8, 2010
End of Frank's Essay
Comments on Frank's essay by John:
Frank says: "US public policy decisions on prostitution have long been driven by traditional religious-based moral values making prostitution a criminal offense." But prostitution is legal, not a criminal offense, in Nevada. Currently eight out of Nevada's 16 counties have active brothels (these are all rural counties). As of June/July 2008, 28 legal brothels existed in Nevada.
Frank brings up the Swedish attitude of legalized prostitution but "naming and shaming" the clients or Johns. (In Holland the "naming and shaming" only applies to clients of illegal forms of prostitution such as intercourse with underaged girls.) In Sweden the women are viewed as victims, and prostitution, though tolerated, is viewed with disapprobation. This begs the question 'is there any individual or social good at all in prostitution or the exchange of money for sex?' I would maintain that there is a relative social and individual good in prostitution. First, under the right conditions, it allows certain women to make a good living who otherwise might be unemployed. Second, prohibition only drives the industry underground and makes exploitation and disease, more, rather than less, likely. Third, it provides an outlet for men who are not in a position, temporary or otherwise, to form a normal emotional, as well as sexual, relationship with a woman.
The Chinese government has intervened in commercial sex work in China in order to alleviate the growing HIV/AIDS problem there. Even though prostitution is illegal, the government thought it necessary to provide condoms, establish clinics to provide check-ups and other measures to prevent the spread of disease.
Consider the two cases of Eliot Spitzer and John Edwards. Spitzer was outed as having visited a prostitute, and, as a result, he was shamed into resigning as New York State Governor. But in short order he has rehabilitated himself and his public image having become a pundit on TV and having had his own talk show on CNN for a period of time. Since there was no emotional attachment, his wife, evidently, has forgiven him, and his marriage remains intact. Edwards, on the other hand, formed an emotional and sexual relationship, a full blown affair, with Rielle Hunter that resulted in the birth of a child while Edwards was married to his wife who was dying of cancer. Edwards has been much reviled and is facing five Federal counts for misusing campaign funds which may land him in jail and cause the loss of his attorney's license and the loss of custody of his children not to mention a stiff fine. If only Edwards had visited a prostitute instead of getting involved in a very personal affair, he might not be in the very serious situation he's presently in which could result in his children becoming parentless for an extended period of time if Edwards goes to jail. Edwards probably rues the day he ever got involved with Hunter not to mention the fact that his affair probably cost a hundred times more in monetary terms than did Spitzer's dalliance with a high priced prostitute. Spitzer has had to come to terms with his sexuality vis a vis his wife and why he felt it necessary to seek sex outside of marriage, but that is between him and his wife and is not a public matter.
End of John's comments.
Wesley's Comments:
As far as prostitution goes, in this country it should be regulated as it is in Holland. I have never been there or sampled the fruits of their labor, but from my readings in Newsweek, Time, and the like it seems to be working. At least by regulating it, organized crime's involvement is reduced and health standards maintained. All good, but in any government entity, there is inherent corruption; just not as violent and final as organized crime's methods that would necessitate laws to control it. More laws!!! That means more government employees to "supervise, enforce, document, inspect, study, propose more regulations", and the list is endless.
Take government out of the picture and street level entrepreneurs (pimps and organized crime) will fill the void. The best solution is the most expensive - as usual.
Our present laws are rooted in the colonial standards where one would be either jailed, stocked, dunked, or humiliated in some way for not attending church on the Sabbath. Witches and anyone else with talents that were not understood were executed. The carry over is our present prohibition on anything deemed sexually explicit.
It can be argued that such regulation serves the common good in that it sets the boundaries of moral conduct and makes for a stronger society. Is it OK for someone with supervisory control over children to abuse them in any way? Is it OK for someone to force a young person into prostitution? If that conduct were not prohibited, would our society be any less corrupt? In my view it would be disastrous and government control is the only viable option. At least the taxes and fees collected may cover a small portion of the cost to taxpayers for regulating it.
As to porn. A multi BILLION dollar world wide business and thanks to the internet, not sanctioned or controlled by our government. But they want to - desperately want to.
Who in the hell does it hurt? Psychologists maintain that it is the first step in the release of sexual repression that may evolve to violent sexual behavior. Is it like the first puff of MJ where some say that you are on the fast track to addiction? Is it a sign of underlying hatred or disrespect of the female gender?
BS! Guys have testosterone and their brain is wired differently - end of story. Maybe some do not get beyond the 3rd grade experience of sneaking a peek up a class mate's dress. Others wish they had and that peek becomes the top playground subject for the week. Could this be the foundation where reputations are built? After all, some guys and some girls will have one by their senior year and many sooner. Is this where porn is started? The unspoken desire to see more!
We are indoctrinated at a very early age "not to look". I heard it from my mother, grandmothers, teachers, clergy, and I can't count the rest that uttered that admonition. But I still did! And they knew it!!! Do I still? I'll never tell. So you head readers out there have fun with that. Am I or am I not a pervert?
Regulate it - Hell No. BUT then what about child porn and MBLA? Well, some regulation is in order. Now the pool of government workers grows a bit more. (Go back to the first paragraph).
There is not freedom without government regulation. With regulation there is not freedom.
As far as prostitution goes, no matter how legal it becomes there will always be a stigma because of those with religious beliefs, and those in public office will still be held to a higher standard if for no other reason than muck raking. In this case, Spitzer and the like might not have committed a crime, but might not have survived an election either. That will be interesting.
Legalizing would be an easy solution, but here again the bureaucracy governing the career field will run out of control. I use the term "career field" because with legalization it will supposedly be a choice freely entered into by the person. Person, because prostitutes come in both sexes and the male side has never been as fully disclosed as the female side.
Breaking the present hold on the "business agents" involved today will be difficult even with licensing, health inspections, and field agents. My original feelings were opposite, but after much consideration I feel that involvement of organized crime and street level pimps, gangs and the like will never be eliminated. In fact, keeping corruption out of even legalized entities will be nigh impossible because the dollar amounts are astronomical.
But if enacted into law, the passage of time will mollify public opinion and both prostitution and drugs will become socially acceptable to some degree.
End of Wesley's Comments
John's Comment on Wesley's Comments
As you point out, legalizing something does not mean that criminal elements will not continue to be involved. I think Frank pointed out that Holland recognizes that fact and provides for monitoring both the legal and illegal aspects of prostitution.
This is the first part of a two part article considering whether or not drugs and prostitution should be legalized in the US. Part 2 on the legalization of prostitution can be found here.
A recent documentary by Ken Burns on Prohibition brought to light the harmful effects of trying to outlaw an activity deeply ingrained in human culture - the drinking of alcohol - which was prohibited by constitutional amendment from 1920 to 1933 when the amendment was repealed. Not only did the prohibition of alcohol not diminish the actual drinking of it, nor did it reduce alcoholism, but prohibition opened up previously unavailable opportunities for organized crime. It also produced an epic level of hypocrisy among politicians who disparaged alcohol publicly while indulging in it privately. Revenues due to excise taxes which funded the Federal government for much of its history up till then dried up. Drug use and prostitution are related since many drug users are prostitutes and many prostitutes are drug users. Many people feel that you can't legislate morality so the government should stay out of trying to control people's personal habits. One such person is libertarian and Republican Presidential candidate Ron Paul. Listen to what he has to say.
Politicians, most notably Eliot Spitzer, former Governor of the great state of New York, have been embarassed, scandalized and driven from office over dalliances with prostitutes while rock stars, athletes and entertainers glorify and seemingly get away with drug use and sexual practices somewhat removed from the mainstream. While virtually no one is subjected to harsh jail sentences as a result of prostitution, minor drug offenses lead to jail time. The US has the highest incarceration rate in the world - about 1% of the entire adult population - largely due to minor drug offenses. What amounts to a war is raging on the US Mexican border due to criminal drug syndicates in Mexico which cater to the American appetite for illegal drugs. Of the two - drugs and prostitution - drugs are by far the greater problem due to the illegal importation of them, the killing in Mexico because of rival drug gangs fighting each other for dominance and the large incarceration rate mainly of African-Americans in the US. 9.2% of African-American adults were in prison in 2008. The prisons to house these inmates are costing taxpayers a huge amount of money while the taxes that could be collected on legalized drugs go uncollected in an economy that's in desparate need of revenue.
Jazz singer Anita O'Day in her autobiography "High Times Hard Times" commented about the fact that marijuana, which was legal in the US up till 1933, was made illegal precisely when alcohol was legalized again:
People ask me when I first smoked grass. Well, I smoked it before it became illegal in 1933, although it really wasn't legal for me to smoke anything then. But before going into our dance, George and I would share what we called a reefer. It was no big deal when I was twelve or thirteen. If you lived in the Uptown district, you could buy a joint at the corner store, if not nearer. I never read the newspapers so I didn't know when pot was outlawed and beer became legal. One night I asked George for a hit on a joint and I thought he was going to flip out. 'Do you want to get us arrested?' he hissed. Then he told me what had come down. It didn't make sense. One day weed had been harmless, booze outlawed, the next, alcohol was in and weed led to 'living death.' They didn't fool me. I kept on using it, but I was just a little more cautious.
Other famous jazz musicians such as trumpeter Louis Armstrong were lifelong devotees of marijuana. It didn't seem to hurt his career any. Pianist and composer Thelonious Monk was denied a cabaret card in New York City for many years which meant he could not earn a living playing in clubs, due to a minor drug offense. In some cases musicians were set up and drugs planted on them by police. Habits formed when marijuana was legal were hard to break particularly in the African-American community when marijuana became illegal in 1933. The persistence of cultural patterns of smoking MJ probably has something to do with the large number of African-Americans incarcerated today because of its use. The hypocrisy of a system which makes beer legal one day and marijuana illegal the next does nothing but breed disrespect for the law which is what happened during the Prohibition era.
The history of cocaine has a similar trajectory. Cocaine was perfectly legal in the US up to 1914. In early 20th-century Memphis, Tennesee, cocaine was sold in neighborhood drugstores on Beale Street, costing five or ten cents for a small boxful. In the 1890s the Sears & Roebuck catalogue, which was distributed to millions of Americans homes, offered a syringe and a small amount of cocaine for $1.50. Stevedores along the Mississippi River used the drug as a stimulant, and white employers encouraged its use by black laborers. In 1914, the Harrison Narcotics Tax Act outlawed the sale and distribution of cocaine in the United States. However, the use of cocaine was still legal. Cocaine was not considered a controlled substance in the United States until 1970, when it was listed in the Controlled Substances Act. Until that point, the use of cocaine was open and rarely prosecuted in the US. Since 1970 the jails have filled up with people prosecuted for minor drug use.
From 1898 through 1910 diacetylmorphine, the technical name for heroin, was marketed under the trademark name Heroin as a non-addictive morphine substitute and cough suppressant by the German corporation Bayer. The name was derived from the Greek word for Heros because of its perceived "heroic" effects upon a user. Bayer marketed the drug as a cure for morphine addiction before it was discovered that it rapidly metabolizes into morphine. As such, diacetylmorphine is essentially a quicker acting form of morphine. Contrary to Bayer's advertising as a "non-addictive morphine substitute," heroin would soon have one of the highest rates of dependence amongst its users.
In the USA the Harrison Narcotics Tax Act was passed in 1914 to control the sale and distribution of diacetylmorphine and other opioids, but allowed the drug to be prescribed and sold for medical purposes. In 1924 the United States Congress banned its sale, importation or manufacture. It is now a Schedule I substance, which makes it illegal for non-medical use in signatory nations of the Single Convention on Narcotic Drugs treaty, including the United States.
In 1923, the U.S. Treasury Department's Narcotics Division (the first federal drug agency) banned all legal narcotics sales, forcing addicts to buy from illegal street dealers. Soon, a thriving black market opened up in New York's Chinatown.
Today a majority of people in the US favor the legalization of marijuana. At the same time more deaths occurred last year due to prescription drugs than to illegal drugs. These two facts seem to indicate that prescription drugs are a greater problem than marijuana.
On the other hand, Zurich's experience with its "drug park" is a cautionary tale for the liberal tolerance of drug use and its legalization. The following article from the New York Times is so interesting and informative that we reprint it here in its entirety:
After years of steadily rising crime and other drug-related problems, this city once associated more with banking and solid civic virtue than with marauding groups of addicts has ended its innovative experiment with an open drug market in a public park here.
The smashed windows of a Chanel store and a central branch of Credit Suisse, as well as the shooting of an unidentified man on Thursday, betray the sharp tensions that have stemmed from the closing last week of the Platzspitz, a park where the illicit activities of thousands of drug addicts and dealers were tolerated in recent years in a policy of containment of the drug problem.
Andres Oehler, a municipal spokesman, said the City Council had decided to shut the park, now sealed behind 10-foot iron fences hastily erected on the adjoining bridges, because "it was felt that the situation had got out of control in every sense."
But closing the park left several unresolved issues, including the fate of what has become a large international community of addicts in Zurich and the question of what exactly went wrong with an initiative originally aimed at helping drug abusers.
Addicts were drawn from all over Europe in recent years by the Socialist City Council's decision to offer clean syringes, the help of health officials and a large measure of tolerance in the Platzspitz, a once-elegant garden behind the stately National Museum.
The city characterized its approach as an enlightened effort to isolate the drug problem in an area away from residential neighborhoods, curb AIDS and foster rehabilitation. Its policy reflected a strong current of feeling among some European experts that it is the illegal and clandestine nature of the drug business, rather than the drugs themselves, that causes many of the associated problems.
But the situation gradually degenerated. "You give a little finger, and they want the whole hand," said a senior city official who insisted on anonymity. "You turn a blind eye to the small deals, and the big ones come. It was a spiral."
Regular users of the park swelled from a few hundred at the outset in 1987 to about 20,000, with about 25 percent of them coming from other countries. Then, Mr. Oehler said, dealers from Turkey, Yugoslavia and Lebanon moved in last year. Thefts and violence increased, with 81 drug-related deaths in 1991, twice as many as in 1990.
"We were having to resuscitate an average of 12 people a day, with peaks of 40 a day on some days," said Dr. Albert Weittstein, the city's chief medical officer. "Our people were running up around the park blowing oxygen into people's lungs. We started with three doctors, but recently had to put in two more. It has become an impossible strain."
Groups of as many as 50 addicts now gather in the streets adjoining the park, where they are jostled by police officers with orders to disperse them. "This is a crazy decision, we'll be in the whole city now," said one young man, a syringe casually tucked behind his ear, as a policeman pushed him away. He declined to be identified.
On a nearby bench another youth, apparently oblivious to the approaching police officers, calmly tightened a belt around his upper arm before plunging a needle into a bulging vein below his elbow.
Christoph Schmid, a 21-year-old Swiss addict who has been using the park for the last two years, took a measured view of the action. He said the closing and the police crackdown would cause him and others "enormous difficulties" -- heroin has become harder to get and its price has already doubled to about $230 per gram -- but he also said the Platzspitz had recently become too violent. "Too many kids were getting hooked too easily," he added.
The park -- beautifully situated at the confluence of the Sihl and Limmat Rivers, which isolated it from neighbors despite its central location -- is now a monument to vain utopian hope and sordid devastation. "Anarchy is possible," proclaim graffiti scrawled across the National Museum. A bronze statue of a stag has been adorned with the word "Dope" in fluorescent orange paint.
On the ground lie thousands of discarded syringes and syringe packets, now being collected by garbage crews. The rhododendrons that once lined the paths are dead; so, too, are many of the trees. Most of the expanses of grass have been reduced to mud.
Peter Stunzi, the director of the city's parks, said that because the park had become what he called "Zurich's municipal urinal," the soil is such that it will be difficult to plant anything in the near future.
He added that he believed it was right to close the Platzspitz because "Zurich could not be responsible for the drugs of Switzerland and the rest of Europe." But he added, "My worst nightmare is that these people will now have nowhere to go."
The city government wants all those who are not from Zurich to leave. Signs have been posted around the city warning that the authorities will no longer tolerate the public shooting up or handling of drugs or gatherings of groups of addicts. All those not from the city should "go back to the communes, where they will be helped."
Checking for Outsiders
Mr. Oehler, the city's spokesman on drug matters, said that by April hostels in Zurich where addicts are allowed to sleep for about $3 a night will no longer accept anyone who does not have an identity card proving Zurich residency. But he conceded that "the problems will take a long time to resolve."
The city's new measures appear to be coming into force amid tensions in the nine-member City Council. One member, Emilie Lieberherr, who is responsible for social affairs, has protested the action as ill-considered. And there seems to be a general feeling that while mistakes were made, frontal attacks on drug abuse are not the answer either.
"We hoped we could minimize the social costs by creating an open market where people could get help," Dr. Weittstein said. "We thought we'd ferret out the dealers, but we failed, and we did not consider the dynamics of a still illegal business, which meant that dealers and users were attracted from far afield."
He added that the failure of the park did not, in his view, resolve the argument over whether drug prohibition makes matters better or worse. "I believe and most Swiss experts believe, that prohibition does a lot of damage," he said.
Drugs used in the park were still technically illegal. But attempts by plainclothes police officers to clamp down on dealers achieved little.
There are an estimated 30,000 drug addicts in Switzerland, a country whose industrious precision has created enormous wealth and a sparkling order, but also a conspicuous alienation among youths.
About $1.5 million will now be spent on renovating the park, Mr. Stunzi said, and it is hoped that a pristine Platzspitz might reopen by the spring of 1993 at the earliest.
By then, Zurich hopes, its self-created reputation as a drug capital will have faded. But for now, its streets are full of the confused ebb and flow of a disoriented mass of youths. Outside the park's closed gates, when the police move off, hordes of addicts quickly return to try to salvage with spoons some precious white powder that had spilled to the ground.
The lesson here, I believe, is to not create a central location for drug addicts, offer free needles and attract them from all over the world. Zurich effectively created a drug addict's nirvana while their efforts at rehabilitation were insufficient. They more or less said that drug users will inevitably always be with us so let's just herd them into one central location. Intervention as opposed to incarceration might be a better approach. This would mean taking the addict off of the street, denying them access to drugs and then offering them treatment and rehabilitation before letting them go free again. This requires societal resources, but might maximize the probability that a particular addict might stay clean once he or she goes back into society.
The question of drug legalization has to do with which drugs are to be legalized - just soft drugs like marijuana or hard drugs like cocaine, heroin and methamphetamine too. Ron Paul is for legalizing all drugs on the grounds that government should not dictate people's personal habits, and most people would not try heroin anyway even if it were legal. Certainly, legalizing marijuana would cut the cross border illegal trade considerably while doing nothing more than legalizing a substance which had been previously legal in the US up till 1933. The Prohibition era for marijuana would be over as it was for alcohol in 1933. The growing and selling of marijuana could provide jobs for many people in a jobless economy. Taxing marijuana could provide much needed government revenues. The diminution of the prison population would be a social good. I honestly don't see any downside. Probably taxes should be kept low for the first five years so that the crime syndicates in Mexico would not be able to undercut the price, and would be largely put out of business. For hard drugs I would advocate legalization also but very tough regulation and high taxation to make them very expensive. In addition to lowering the prison population, legalization of drugs would reduce the killing in Mexico and the cross border illegal shipments of guns and cash from the US. The border situation with illegal guns, money and immigrants could be normalized. It would be a step in the right direction towards increasing border security.
Along with legalization of drugs, education about the effects of using drugs and addiction in general whether it be drugs, food or sex as well as programs for getting people who want to quit the drug habit off of drugs should be stepped up. Public schools should teach students not only about drugs but other life skills such as how to deal with finances. Sex education is a necessity if for no other reason than US media culture is permeated and saturated with gratuitous sexual messaging. The cultural winds blowing on impressionable minds glorify sex, drugs, violence and consumerism. Public education needs to combat these forces. Perhaps this is why Republicans are dead set on destroying the public education system.
Wesley's Comments
As far as I am concerned if someone wants to indulge themselves with a present day illegal substance, let them. No stigma, but absolute enforcement of laws governing conduct, driving and work place sobriety standards. Give no quarter and make the penalties extremely severe.
I don't give a damn if someone dies of an overdose whether it be drugs or alcohol. If a person has so little self control, or self respect, perhaps society would be better off without them. You use it and end up hooked, you have no one to blame but yourself - suffer the consequences. If the government is involved (which it will be), there has to be a way of recouping expenses besides excise taxes. Those desiring rehabilitation can volunteer for it, and those convicted of non-injurious drug use should be sentenced to a project similar to the CCC or WPA of the Depression era. Anyone convicted of drug use resulting in injury or death of another should be executed.
You and some readers might think me insensitive and unreasonable at the least, and, more than likely, far worse. So be it. It is time our society wakes up to the fact that we, individually, are responsible not only to ourselves, but to society as a whole. It is not mine, nor anyone else's financial responsibility, to support the indulgent behavior of others, and that will be the 800 pound gorilla in the room. More public assistance to the weak willed, over and above the tax revenues collected, is not called for.
In my estimation the only things not eliminated by legalization of drugs are things for which one can be prosecuted due to other infractions of the law not having anything to do with drugs per se. Every other aspect whether legal or illegal should remain the same, but will probably get worse if drugs are legalized because of the additional laws and standards required. Catch 22 comes to mind.
I did not isolate my stand on drugs to MJ. Legalize them all just as it was up to the early parts of the 20th century. Opiates were an over the counter remedy for everything. Hells bells, there were even door to door salesmen peddling the stuff. Addiction, yes there was, but the primary difference today is that people are driving cars at 70 miles an hour. Now, thanks to OSHA, nearly all factory and work place tools and machinery are idiot proof so perhaps a mild buzz could be acceptable. Maybe even a little meth prescribed to senior citizens would speed up their reactions and the little old blue hair ladies that can barely see over the steering wheel can maintain freeway speeds.
I can foresee a definite improvement in traffic flow; and that time distance reaction thing, that is an acquired skill. I should know. I practiced steadily for a number of years with some of Kentucky's finest. Never had or caused an accident while under the influence of the stuff; it was the sober hours that were a problem. Probably a hangover thing and from what I have been told that is not a problem with MJ.
And as I wrote, if you cause injury or death while under the influence of drugs or alcohol, you should face a MANDATORY death sentence. No incarceration, no rehab, no counseling, no appeals. The sentence to be carried out right after being found guilty. NO delay.
End of Wesley's Comments
John's Comment on Wesley's Comments
Wayne, what about a minor injury? Surely you wouldn't recommend putting someone to death for that even if under the influence of drugs or alcohol. I can see it for a head on collision in which innocent people in the other car are killed. There was a case like that here recently. I think the drunk guy who lived got 20-30 years in jail. I am for capital punishment in open and shut egregious cases, but not for those convicted based on eyewitness testimony which is notoriously inaccurate resulting in the incarceration and death of a lot of innocent people. A drunk driver causing an accident, on the other hand, is pretty much an open and shut case.
Frank's Essay:
DUTCH POLICY TOWARDS HARD ANDSOFT DRUGS
Introduction
A country’s drug policy evolves slowly and reflects national conditions and culture. As punitive or other model drug laws have evolved in countries over the past century, so have the unique drug policy enforcement solutions pioneered by the Dutch. Their open minded attitudes toward illicit drugs, like toward prostitution, are driven by their peculiar societal values – a realistic, humane approach to social problems like drugs as a health-centered and social well-being matter, not primarily as a problem of the police and judiciary – values that embody:
First, a long history of tolerance and pragmatism.
Second, a strong belief in individual freedom, like deciding about private matters such as one’s own health, while also having a strong sense of responsibility for the community’s well-being.
Third, a view of drug issues as manageable health and harm reduction matters – as “normal social problems” with real-life, scientific distinctions in relative risks – not an alien threat, a “forbiddenfruit” perennially punishable by the criminal prosecution and imprisonment apparatus.
Fourth, a non-absolutist ideological approach to social problems where criminal law is not perceived as enforcing social or religious morality, and government is expected to act with reserve on issues involving religion and moral questions.
Fifth, a belief that hiding or taking a blind eye to negative social problems does not make them go away but only makes them more difficult and costly to control.
What is the Historical Trend in Drug Policy?
Repressive and indiscriminate drug policies adopted under the 1919 Opium Act slowly gave way to very grave doubts as to the effectiveness of that approach. In the 50s and 60s, harsh sentencing practices for drug offenses including cannabis did not deter a notable increase in consumption. So in 1976, the Dutch parliament amended the Act to focus on battling the risks of drug abuse for society and individuals rather than just fighting consumption itself. The pre-1976 policy of prohibition and penal measures paid scant attention to the human, social, psychological, economic fallout of hard and soft drug use and the need to prevent further human suffering and disease.
While the Opium Act criminalized drug possession, cultivation, trafficking, importing and exporting, the 1976 amendments and subsequent amendments have established two classes of drugs: (1) hard drugs deemed to be an unacceptable risk to public health including heroin, cocaine, amphetamines, LSD, ecstasy, hallucinogenic (magic) mushrooms; (2) tolerable traditional hemp-product soft drugs, marijuana and hashish. Dutch drug policy has pragmatically reverted to a new guideline of distinguishing drugs and related punishable acts based on their harm to the individual and to public health – a policy of minimizing the hazards and abuse of drug use rather than just suppressing all drugs … a policy addressing demand and supply that supports a certain degree of tolerance and non-prosecution rather than indiscriminate law enforcement.
The now amended 1976 Opium Act incorporates some unique strategies for reducing the harm of drug use and abuse:
The prevention or alleviation of social and individual risks caused by drug use.
A rational relation between those risks and policy measures, e.g., possessing, dealing in, selling, and producing drugs are criminal offenses with severe penalties for hard drugs. Drug possession for dealing is also more severely punished than possession for personal use which police generally take a soft approach to.
A differentiation of policy measures that considers risks of legal and medical drugs.
A police and judiciary that gives high priority to tackling the large-scale drug trade and production of drugs.
Recognition of the inadequacy of criminal law concerning other aspects (i.e., apart from trafficking) of the drug problem.
Not taking action against possession of small quantities of soft or hard drugs for personal consumption; tolerating (de facto legalizing) under strict conditions the consumption and traffic in soft drugs in youth centers and coffee houses where threshold quantities and the intent to deal determine personal possession, use, and trafficking offenses.
A high law-enforcement priority of cracking down, levying stiff penalties on hard drugs trafficking and production – including exportation and importation, large-scale commercial cultivation of cannabis, ecstasy, amphetamines, and LSD.
A “normalization” policy that treats drug problems as normal social problems, not as punishable deviant behavior only making societal control problems worse; a policy of integration and social rehabilitation of addicts; a policy of low threshold treatment acceptance, minimum paperwork, routine medical treatment services … all to avoid delaying care, marginalizing, stigmatizing, or isolating drug users.
Early focus on health promotion to young people in particular of the benefits of universal drug prevention … through curricular school-based programs such as, “The HealthySchool of Drugs” program – comprising lectures in secondary school on alcohol, tobacco and cannabis – and prevention outside school under the, “Going Out, Alcohol and Drugs” program – aimed at reducing health and safety problems among young people using drugs in recreational and party settings. Also, a wide range of support programs are offered to addicts with the goals to prevent and relieve risks of drug use for addicts, their immediate environment, and society as a whole.
What Are the Enforcement Principles and Rules?
The amended 1976 Opium Act still holds the possession of marijuana/hashish to be a petty misdemeanor today. But, even that offense is seldom enforced under the “expediency principle” in Dutch criminal law. This principle gives authorities discretionary powers to refrain from prosecuting certain offenses “on grounds derived from the public interest.” It applies to cases involving small quantities for personal use where there’s no dealing or other drug-related crime. Thus, cannabis and hashish are technically illegal but “tolerated.”
The “expediency principle” helps separate to the extent possible the recreational soft drug market – posing a minimal risk to society – from the true hard drug, criminal markets. The goal has been to separate distribution channels thereby greatly reducing the gateway from soft drugs to heroin and cocaine. It is felt this policy and the early educational school programs prevent experimenting youth from getting drawn into the dangerous criminal elements of the hard drug culture.
For the Dutch, drug use is a health matter not unlike the use of tobacco and alcohol. A paradigm of arresting and incarcerating thousands of citizens for minor drug possession or use offenses is not accepted. In stark contrast, Sweden views all forms of drug possession and use, regardless of quantities or drug type, as an abuse – while Portugal has decriminalized ALL drugs with favorable results. Each country must find its own way. For the Dutch, freedom to decide about matters relating to one’s own health is fundamental. So a visible, manageable retail market for cannabis was allowed to develop. But, as stated, wholesale dealers, traffickers, and large-scale cultivators of cannabis or hard drugs will be rewarded by the full force of the penal laws.
The Dutch do not see the separation of soft drugs from hard drugs and flexible law enforcement measures as some magical cure-all. The prime aim is prevention of health risks and the negative consequences for society arising from drug abuse. This involves educational measures where a restricted tolerance approach enables authorities to monitor and control better the social phenomena of drug abuse. Abuses are also fought by healthmeasures such as treatment monitoring centers, extensive demand reduction and detoxification facilities, a free methadone supply program for heroin users, a free syringe exchange program, and free testing of ecstasy pills.
The lure of stepping-up to hard drugs is checked by allowing purchase of cannabis in alcohol-free coffee-shops. For evidence shows this separation of the market for illicit drugs means youthful cannabis users are less likely to slip into contact with hard drugs. Also, surveys show the vast majority of Dutch people never try marijuana. Most who do try it don’t continue to use it very often, much less hard drugs. Moreover, users know that cannabis is far safer than hard drugs and less addictive than even caffeine, alcohol, tobacco, and many prescription drugs.
Coffee-shop regulations are very strict. Operators are legally and strictly bound to adhere to following rules:
No alcohol or hard drugs may be sold or consumed in a coffee house. Driving under the influence of soft drugs is considered as driving under the influence of alcohol. Police check for this.
No advertising, active promotion, web sites are allowed.
Cannabis can only be sold to people aged 18 or over. No minors are allowed around or in coffee-shop premises.
No sale of large quantities is allowed – the limit is 5 grams to one person in one day. This maximum amount is tolerated, not prosecuted, even though technically illegal.
The coffee-shop must not be causing a public nuisance, e.g., must not be located within 250 meters of a school.
The coffee-shop operator is allowed a maximum level of cannabis stock for selling of 500 grams, but local authorities can impose lower limits. Of course, no selling of hard drugs is allowed.
The decision whether or not to tolerate coffee-shops lies entirely with the local municipalities. Smoking cannabis is banned in public places. (As of 2005, 72% of the 467 municipalities pursued a zero policy with regard to the number of tolerated coffee-shops).
The local mayor is entitled to close a coffee-shop for violating any of the above rules (including being a public nuisance, e.g., disturbing a neighborhood’s public order and safety).
Why Drug Decriminalization and Tolerance?
The Dutch have normalized and decriminalized the soft and hard drug problem as a practical compromise between the extremes of an intensified war on drugs and legalization. Drug use is a fact of life. It must be discouraged, and the harm and risks minimized in a flexible, realistic manner. Under the Opium Act during 1919 to 1976, the Dutch learned this lesson the hard way when severe and disproportionate penalization failed to stop a steep rise in drug users and abusers. Continuing an all-out fight risked driving more and more drug users into the fringes of the underworld, making them hidden and beyond reach of any “helping” institution, other than the justice system. In short, a repressive, prohibitive approach led to negative side effects both for the individual and Dutch society.
The amended Opium Act of 1976 relegates criminal law to a relatively minor role in preventing individual drug abuse. However, as noted, cannabis and all other drugs are still statutorily illegal. But the law is not enforced for possession of small amounts for personal use or sale of small amounts in coffee-shops. So over the last 35 years, the goal has been to avoid situations where cannabis consumers suffer more damage from criminal proceedings than from use of the drug itself. A policy of tolerance for selling soft drugs in coffee-shops evolved on grounds it stops many users from contacting drug dealers and experimenting with hard drugs. Facts support this conclusion as the number of convictions, addicts, drug casualties in the Netherlands is one of the lowest in Europe and far below that of the US.
From Dutch perspectives, trying to eradicate drugs or drug addiction by criminal law makes the cure worse than the disease. On the other hand, unilateral formal legalization of soft drugs is not a goal and is unnecessary – not only because cannabis retail prices would drop further thus creating ever more “drugs tourism” – but mainly because Dutch courts have ruled that institutionalized non-enforcementin past years constitutes de facto decriminalization, i.e., a roughly legal regime for soft drugs. One thing is certain, however. Hard drugs are illegal and are unlikely to be legalized, at least in the near future. Some feel that the best argument for legalization is that it undermines outside-the-country drug cartels, often protected by terrorist groups. The Netherlands has never had the massive smuggling industry or a "next door" land route to the heart of drug country like the US has with Mexico. But imported drugs, for example, from Afghanistan to Dutch harbors and then channeled to the rest of Europe do remain a serious problem.
The outright banning of all coffee-shops is also not an option as it will not solve the problems of crime, street-drug trade, nuisance, and health. For the Dutch, it comes down to striking a careful balance between the rights of cannabis consumers and coffee-shop retailers and the Dutch government’s responsibility to public health and safety. This means setting fair and very strict limits of what can and cannot tolerated by all concerned.
Over-dramatization, criminalization, or moralization of the drug problem has thus given way to prevention,harm reduction and treatment policies… i.e., the promotion of healthylifestyles. While comparisons to other countries show the Netherlands’ tolerant policy has worked well for decades, the country has its share of drug problems. But these are no more and often far less than many modern democracies which have much harsher drug laws and penalties.
Serious attention is being directed to the nuisance related by cannabis use by “drugs tourism” and by foreign drug addicts residing illegally. Amsterdam and Dutch cities near Germany and France have been under strain from the flow of EU “drugs tourists” who are taking advantage of the Netherlands’ more liberal soft drug laws. In Maastricht alone, 70% of the 2 million visitors to Maastricht’s 14 coffee-shops come from abroad. This has increased nuisance complaints regarding the hazards of drug runners luring tourists to coffee-shops, petty crime, and the smell of weed smoke. In their constant efforts to correct such policy shortcomings, the Dutch are about to implement nation-wide a “weed-pass” system to contain “drugs tourism.”
Coffee-shops will be turned into private clubs requiring proof of membership by a pass issued to adult Dutch citizens for use in one club only. Maastricht has already banned foreigners’ access to coffee-shops except neighboring Germans and Belgians … at some economic cost. For example, foreign visitors to Maastricht’s or Amsterdam’s coffee-shops spend up to €75/day ($100/day) for cannabis compared to €125-250/day ($90-180/day) on shopping, eating out and lodging.
Cannabis Penalization Policies and Penalties
Dutch penalization policy makes a sharp distinction between drug users and drug traffickers. Drug use is seen primarily as a public health, harm-reduction issue poorly addressed by a paradigm of punishment-based prohibition. Adult people can buy, possess or use small quantities without criminal sanctions. Research clearly shows that cannabis is a very safe drug. But possession of this soft drug for commercial purposes is a serious criminal offense, subject to some tough penalties. In 2010, one of the largest Dutch cannabis-selling coffee shops was fined €10 million ($13.5 million) and a 4 month prison term for keeping more than the allowed 500 grams of stock cannabis in the shop.
Today, Dutch cannabis is grown locally and only up to 40% is sold locally – the majority is exported. Producing and exporting cannabis, ecstasy or amphetamines illegally is thus becoming a major Dutch enforcement and penal priority given organized crime’s rising interest in the lucrative European cannabis market. Dutch police are under pressure to aggressively pursue, prosecute, and punish large-scale possession, dealing and cultivation of cannabis.
In this regard, decriminalization of soft drugs has brought key manpower and income benefits that can be redirected to healthy and productive public ends: (1) it frees up police enforcement manpower from petty abuses to fight commercial drug trafficking and production; (2) it yields substantial police, judiciary, and detention cost savings, and it generates €400-500 million ($540-675 million) in coffee-shop tax revenues yearly. These funds finance a wide range of drug actions: aggressive prosecution of illegal trafficking and production; a high standard of preventive care, counseling and educational information, medical treatment services for addicts, and special housing for long-term addicts. Little wonder that the numberof addicts and deaths by overdose in the Netherlands is near the lowest in Europe and far lower than the US.
Furthermore, the Dutch government has announced it will classify cannabis with a THC level above 15% as a high potency, hard drug. Those coffee-shops selling cannabis with 17-18% THC levels today will have to use milder cannabis variants. This action plus strict regulation of a fast growing number of synthetic drugs; closure of coffee-shops within 250 meters of a school; shutdown of over 400 coffee-shops from 1179 in 1997 to ± 680 today (a 40% decrease) for reasons of nuisance, disturbance and other violations; a “weed pass;” and a stepped-up attack on trafficking and Dutch production of cannabis reflect a determination to adjust the country’s drug policy to new market realities – even if that means reversing tolerance policies.
Here’s a brief summary of the penalties for drug offenses:
Possessing up to 30 grams of cannabis for personal use is a minor offense with a maximum detention of 1 month (and/or a fine of €2,250/$3,000). But this penalty is not usually enforced.
Possessing more than 30 grams of cannabis, regardless of the quantity, is a criminal offense with a maximum detention of 2 years (and/or a fine of €25,000/$34,000).
Importing/exporting soft drugs is a criminal offense with a maximum detention of 4 years (and/or a fine of €45,000/$60,000). Penalties are increased for repeated offenses.
Buying, selling, producing, transporting soft drugs for commercial purposes is a criminal offense with a minimum detention of 1 month (and/or a fine) up to 8 years (and/or a fine of €45,000/$60,000) depending on the quantity.
Selling more than 5 grams to a client in any one day by a coffee-shop is a criminal offense. Coffee-shop owners or operators risk prosecution and being closed down (and/or big fines) for violating this or other coffee-shop rules as noted above.
What Are the Successes of Dutch Drug Policy?
Ambitious politicians, media, and other “experts” can’t resist spreading wildly exaggerated myths, misunderstandings, and misinformation in their disagreement with Dutch drug policy. This is not only dishonest but strange considering more and more global leaders have declared the “war on drugs” to be destructive and a failure. Many countries (and a small number of US states) have moved to various forms of decriminalizing low-level drug possession and adopting health-centered approaches to cut consumption, improve public health, and weaken the power of organized crime.
The pragmatic, pioneering Dutch approach of setting tolerance guidelines that make drug policy more visible are methods adopted by most EU countries. Decriminalizing the possession of soft drugs has not led to a rise in their use. There’s ample empirical evidence that removal of criminal provisions for cannabis possession does not markedly increase the prevalence of cannabis or any other illicit drug. Studies by the Trimbus Institute on drug addiction and mental health show that 5% of Dutch citizens smoked marijuana or hashish in the past year compared to an average of 7% in the rest of Europe. Supporting statistics are noted in TABLE 1:
The US percentage of total marijuana arrests was 52% of total drug arrests with arrests for possession increasing significantly from 34% in 1995 to 46% in 2010. No wonder US prisons are bursting with drug offenders, most of whom would probably not be in prison now if possession of 1 ounce or less had not been criminalized in a majority of states. As one expert said, “The U.S. has 5% of the world’s population but 25% of its prisoners.”
The above demonstrates that de facto legalization to purchase marijuana in the Netherlands has not given rise to marijuana levels of use – nor cocaine or heroin use – significantly higher than those in countries like France, Sweden and the US which pursue repressive drug policies. The Dutch intense policy of prevention and care has made drug addicts healthier and HIV prevalence even lower than in many countries where HIV infections are already very low. The Dutch government reports there are about 25,000 hard drug addicts or 1.6 per 1000 people. This is well below the EU average.
TABLE 3 illustrates the relative drug health treatment intensity for selected countries:
US, France, and Sweden have prohibitionist drug regimes for all drugs while Germany and the Netherlands have de facto decriminalization regimes for soft drugs. The US has at least 6 times more drug-user treatments/rehabs per 100,000 people than the Netherlands where HIV infections are also very low. This situation and the US doorway to a gigantic flow of drugs from its close-by neighbor, Mexico, make US legalizing or decriminalizing of drugs more complex and problematic. In contrast, the Dutch produce all of their cannabis consumption needs locally. And the level of hard drug consumption is very low. Another factor is that the Netherlands, third most densely populated country in the world, has 16.5 million people living on a land territory one-fourth the size of New York state (or one-half the size of my state of Maine). This also makes hands-on policy implementation, oversight and control of drugs relatively easier.
Tolerating cannabis use and taxing it works for the Dutch … with the exception of ongoing new market challenges that are causing a rethink of tolerance policies, e.g., drugs tourism, coffee-shops’ selling to minors and creating a public nuisance, potentially dangerous ecstasy and synthetic drugs, and illegal export of cannabis abroad.
Dutch success emphasizing prevention and health care shows up in the number of drug related deaths which are very low averaging 120/year or less than .75 per 100,000 people. Deaths related to overdose of cannabis are unheard of. Hard drugs, or synthetic drugs combined with alcohol or prescription drugs can have certain bad medical, even deathly effects. While hard drug users are seldom prosecuted and heroin junkies have vanished from the streets into heroin-assisted treatment centers, potential intensification of health hazards and toxic addiction are key Dutch arguments for sticking by their decriminalized “harm-reduction” policy rather than legalizing all drugs at this time. But, debate and studies of this option live on.
“The trend in cocaine and heroin addiction in theNetherlands is stabilizing, even decreasing. One percent of Dutch people aged between 15 and 34 is a recent cocaine user, well below the European average of 2.2%. The number of heroin clients in addiction care and rehabilitation facilities has decreased as well as has property-related crime ascribed to heroin users. But there are signs of an increase of (injected) heroin usage due to an influx of (mainly homeless) Eastern European immigrants.”
Summary
Rather than wage war on drugs or legalize all drugs, the Dutch have taken a public health approach emphasizing “de facto decriminalization” and “normalization”… aimed at harm reduction, the integration of drug users in society, and the avoidance of stigmatizing, marginalizing, and isolating drug users.
Decriminalization has not resulted in any unusual increase in cannabis and hard drug use or abuse that poses a public threat … as confirmed by a 30-year Dutch experience and a truly excellent 2004 study by Craig Reinarman, PhD and his associates, “The Limited Relevance of Drug Policy:Cannabis inAmsterdam and in San Francisco.” However, trafficking, production, importing and exporting of drugs necessitates a relentless police pursuit and judicial prosecution effort.
The Dutch demand and supply approach to reducing the risks and harm of drugs has proven to be sane and successful. Cannabis and hard drugs are better controlled openly in a safe environment rather than in the wilds of the dangerous street-drug trade or in a prison complex.
Since hard drug use is seen as a social and medical issue not punished for the behavior alone, the emphasis is on health risk reduction and treatment. The Dutch government is able to aid about 90% of help-seeking addicts for detoxification programs. Regional and local authorities are responsible for the organization, implementation, and coordination of addiction care. Treatment is mainly delivered by non-governmental organizations on a regional level, followed by private organizations including physicians, hospitals, and private clinics. And treatment costs are at least 6 times less than trying to reduce consumption by mandatory prison sentences .. more enforcement .. higher penalties .. all leading to a dead end.
Finally, there’s that very important cash flow from coffee-shop value added taxes and income tax revenues that can be applied to drugs enforcement, prevention and treatment.
REFERENCES : Dutch Policy Towards Hard Drugs and Soft Drugs ______________________________________________________
1. European Monitoring Centre For Drugs and Drug Addiction (EMCDDA), Annual Report 2010 – “The State of the Drugs Problem in Europe”
2. Report to the EMCDDA by the Reitox National Focal Point: “The Netherlands Drug Situation in 2010,” Dec. 22, 2010
3. “Trends in Drug Usage in Europe,” A Response to the EMCDDA 2010 Annual Report, 2011
4. Reaction of Trimbus Institut to the EMCDDA Annual Report 2011, by Margriet van Laar, Head of Drug Monitoring, November 15, 2011
5. “Dutch Reclassify High-Potency Marijuana As Hard Drug,” Associated Press, Toby Sterling, Oct. 7, 2011 and World News Netherlands, Oct. 7, 2011
6. Get the Facts- Drug War Facts.Org.: “The Netherlands Compared to the U.S.,” 2009
7.“The Limited Relevance of Drug Policy: Cannabis in Amsterdam and in San Francisco,” 2004, by Craig Reinaraman, PhD; Peter Cohen, PhD; Hendrien Kaal, PhD., 2004
8. “National Drug Policy: The Netherlands,” by Benjamin Dolin of Law and Government Division, Parliament of Canada, Aug. 15, 2001
9. “Dutch Drug Policy: A Model for America?” In press for: JOURNAL OF HEALTH & SOCIAL POLICY, by David F. Duncan, Dr. P.H. CAS, Thomas Nicholson, PhD, 1997
10. “The Dutch Harm Reduction Model of Addiction Treatment,” Addiction Services, Amsterdam Wiki, April 3, 2009
11. “Normalization of the Drugs Problem: An Outline of the Dutch Drugs Policy,” by Otto Janssen, June 1992
12. “Marijuana: The Myths Are Killing Us,” by Karen P. Tandy of DEA, June 17, 2005
13. “The Myths of Drug Legalization,” AMERICA, The National Catholic Weekly, March 16, 1996, by Joseph A. Califano, Jr.
14. “Drugs Policy in the Netherlands,” by UK Ministry of Health, Welfare and Sport, The Netherlands, April 1997
15. “Dutch Drug Policy In A European Context,” by Tim Boekhout van Solinge, Journal of Drug Issues – Vol.29, No.3, 1999
16. “Soft Drugs in the Netherlands,” By Radio Netherlands Worldwide, Sept. 2009
17. “Honor Thy Promise: Why the Dutch Drug Policies Should Not Be a Barrier to the Full Implementation of the Schengen Agreement,”BostonCollege International & Comparative Law Review (Vol.23, Issue 1, Article 8)) by Susan H. Easton, Dec. 12, 1999
Frank Thomas The Netherlands November 15, 2011
John's Comment on Frank's Essay:
Clearly, the Dutch methods are working and superior to those in the US. First, effective and thorough studies of the problem reveal what does and what doesn't work. Then Dutch pragmatism and a willingness to implement those policies that are working and reject those policies that are not working lead to a rational solution to the problem. Instead of viewing drug policy as strictly a law enforcement problem, the Dutch have an integrated approach which includes treatment while allowing for the recreational use of soft drugs which under well defined circumstances can even be considered a social good much as the recreational use of alcohol can be considered a social good when used in moderation. At a time when a majority of the American population favors legalization of marijuana, US policy makers should study the Dutch policy on drugs as an example of what works. Last year in the US there were more deaths from the misuse of prescription drugs than from illegal drugs. Drug use in general is a problem that needs to be solved by education, treatment and rehabilitation instead of relying on the criminal justice system while allowing for the moderate use of recreational drugs just as alcohol, caffeine and nicotine when used in moderation have been tolerated for many years. All in all the Dutch approach is intelligent and humane without a lot of moralizing or implementation of preconceived prejudices.
Greenspan's Fraud is the title of a book by Dr. Ravi Batra. In light of what's currently happening in Washington regarding the extension of the payroll tax cut, it is prescient. Greenspan engineered an increase in the payroll or FICA or Social Security tax in the 1980s at the behest of then President Ronald Reagan which effectively raised taxes on the poor while Reagan cut the income tax and effectively lowered taxes on the wealthy. The ostensible reason for this increase in payroll tax was a crisis in funding Social Security 35 years out (sound familiar). Republicans worked themselves and the American public up into a lather over a non-existent Social Security crisis. The real purpose of this supposed crisis was to shift the tax burden from the rich to the poor just as it is with Republicans today who don't really want to extend the payroll tax cut engineered by President Obama. Instead, they have pledged Grover Norquist not to raise taxes except ... they might make an exception for the payroll tax. In other words their pledge is to not raise taxes on the rich while they have no problem with raising them on the poor. They are showing their true colors ... again: protect the finances of the rich while exploiting those of the poor and middle class. Such was the brilliance of Greenspan's plan in the early eighties that hardly any Americans knew or realized what he was actually up to including the Democrats who went along with it. Personally, I've been self-employed since 1976, and I never realized that Greenspan had doubled my FICA taxes in 1983 so that I ended up paying higher payroll taxes than rich people paid in capital gains tax. Such is the reality of Republican subterfuge.
From Greenspan's Fraud, the book:
Greenspan's economics has extracted trillions of dollars in taxes from the American middle class and sharply enriched the rich, who are essentially people like himself and his friends - multimillionaires, politicians, and businessmen. ... His policies have led to the pooring of America as well as the world, while a tiny minority has raked in millions, even billions, in profit. He may be a legendary figure in the eyes of many, but when you carefully explore what he has wrought, the aura of public reverence around him can evaporate quickly.
This book will show that because of Greenspan's beliefs or support for certain policies, family income and real wages have declined for a broad swath of Americans, while CEOs have earned millions in stock options and capital gains; US manufacturing has been decimated and the country is saddled with more than half a trillion dollars of trade deficit per year; nearly two million lucrative jobs have vanished since 2000, and millions of people have been downsized.
In December 1981 President Reagan selected Greenspan to chair a blue ribbon commission to "save" social security. When it became obvious that the Federal budget deficit was ballooning due to Reagan's 1981 tax cuts, Greenspan ginned up the Social Security crisis which allowed the payroll tax to be increased, and, since Social Security and the general fund had been part of the unified budget since 1969, the increase in revenues from the increased payroll taxes masked the Federal budget deficits due to Reagan's tax cuts. In simple terms the excess revenues from social security taxes offset the deficit in the general fund due to Reagan's tax cuts. But rather than raise the income tax, which would have increased taxes disproportionally on the wealthy, Greenspan's plan was to raise the payroll tax which is a tax primarily on the poor and middle class. In addition Greenspan also later proposed cutting benefits for social security beneficiaries.
The Reagan-Greenspan theology required that the income [taxes] remain small even if it became necessary to coax money out of the destitute because this is essentially what the commission proposed in 1983. Instead of the general budget that actually faced a massive deficit, the commission insisted that the Social Security Trust Fund faced a giant shortfall, some 30 to 75 years in the future, when baby boomers would retire in large numbers. Never mind that in 1983 itself, the Trust Fund's receipts began to rise because of increasing employment, while the general budget suffered an even larger deficit of $208 billion.
In fact, by the end of the year, the Fund earned a small surplus. But the Greenspan commission relied on "forecasts" that showed a gargantuan deficit looming in the Fund, not five to ten years hence, but more than half a century later. It proposed eliminating the Social Security deficit expected from 1983 all the way to 2056 by overtaxing workers in advance, and generating an adequate surplus in the process.
So the money taken in in payroll taxes which was not used to actually make payments to social security recipients was transferred to the general fund and used to defray the budget deficits brought about by Reagan's tax cuts on the wealthy. In place of the money so used non-marketable Treasury bonds of an equivalent amount were placed in the Social Security Trust Fund (SSTF). Today they amount to $2.5 trillion. This is the amount owed to the SSTF by the general fund. Every year the surplus payroll tax revenues were spent in the general fund and IOUs of a similar amount were placed in the SSTF. The surplus dwindled over the years until today more money is actually being paid out to Social Security recipients than is being taken in in payroll taxes. That means that those non-marketable Treasury bonds in the SSTF must be cashed in and money taken from the general fund to make up the difference. Hence the general fund must accumulate an even larger deficit or it must raise taxes to make up the difference. This is why Republicans are again insisting that Social Security is in crisis. Pay-go demands that the amount paid out from the general fund to make up the difference between what is received in payroll taxes and what is paid out be paid for. Republicans want to make up the difference, as Greenspan wanted to do years ago, by cutting benefits. What they don't want to do is to raise income taxes on the wealthy to do so. Instead of honoring the special non-marketable Treasury bonds in the SSTF which would require either higher deficits or raising the income tax, Republicans want to cut benefits either by raising the retirement age or cutting the cost of living allowance. More extreme right wing Republicans, such as Paul Ryan, want to privatize social security so that the IOUs in the SSTF never will have to be honored. Both Paul Ryan and Alan Greenspan are devotees of Ayn Rand whose philosophy consisted mainly of unadulterated greed and to hell with the poor and middle class.
But Greenspan reserved his most draconian tax increase for the self-employed.
The Greenspan proposal would prove to be a crippling burden for the poor and the self-employed, because it sought to lift rates over and above those provided by a 1977 law. Today, [2005] a full-time minimum-wage earner, working for 2000 hours annually at a wage of $5.15 per hour, earns about $10,000 annually On that she has to pay a Social Security and Medicare tax of 7.65 per cent, or $765. which leaves her with $9,235. Add to this a state and local sales tax averaging 8% in big cities, and she forks over another $739 to meet her minimum consumption.
This sum of over $1500 in taxes can make a difference between homelessness and living in an apartment, between three meals a day and malnourishment, between a doctor visit and living with illness.This is why the commission's tax propopsals amounted to coaxing money out of the destitute, i.e., the millions who subsist on the minimum wage.
A worse outcome awaited for those working for themselves. Today [2005], a self-employed individual earning $30,000 a year, has to pay nearly 15% in Social Security taxes. Once $4500 is deducted in self-employment contributions, an individual is left with little to support a family, especially when his income is subject to the sales and income tax as well.
The Social Security or FICA tax is regressive; there are no deductions or exemptions. It's a flat tax that everyone, rich or poor, pays at the same rate. And it is only paid on the first $106,000. of income. All income over that amount is tax free as far as FICA taxes are concerned. This is why it's essentially a tax on the poor and middle class while the income tax which has higher tax rates for higher income earners is progressive and hits the rich more than the poor although today the highest tax bracket is 35% for income over about $380,000. That means that millionaires and billionaires pay income tax at the same rate as someone earning $380,000. There are no higher tax brackets for the truly rich.
Greenspan convinced his fellow commissioners and Congress to go along with his scheme and his proposals were enacted as Social Security Amendments in 1983. Greenspan's proposals also guaranteed that the maximum taxable wage base (which today is $106,000) would increase year after year so that Social Security taxes would increase on an annual basis. The reality of the situation is that the payroll tax increases of 1983 have been used primarily to fund the tax cuts of wealthy individuals and corporations. They don't want to give up the financial benefits they gained by having payroll taxes reduce their income taxes for 38 years. So they are in the process of reducing social security benefits by a combination of raising the retirement age, scaling back cost of living adjustments or possibly raising the payroll tax rates. The point is that there is no Social Security crisis if the non-marketable Treasury bonds in the SSTF are honored which is essentially the social contract entered into in 1983 by Greenspan and Reagan. If in fact these Treasuries were marketable instead of unmarketable bonds, they could be redeemed on the open market by the SSTF. In that case they would simply be rolled over by the Treasury Department and effectively become part of the ever increasing deficit and national debt. Alternatively, revenues could be sought from other sources most likely the income tax which has been kept low for decades due to the pilfering of the SSTF by the general fund.
Since Congress controls the rules regarding Social Security, they can change them at any time without any recourse by the American people. This means that they can bypass the implied contract to reimburse the IOUs in the SSTF with impunity effectively finessing the whole situation. A better way to place more money in the SSTF would be to lift the $106,000 cap on income subject to the Social Security tax meaning effectively that the rich would pay Social Security tax on all of their income, the same way the poor do.
Lockheed Martin has one client: the US government. They make no products which are sold to the general public. But they employ an army of lobbyists who have Congress men and women in their pocket. They insist on funding Lockheed Martin products like the F-22 Raptor fighter plane even though it has proven to be a piece of shit that the Pentagon doesn't even want. They lobby for war and the weapons of war at every turn because it is profitable for Lockheed Martin and Wall Street demands higher and higher profits. And like Northrup-Grumman, their partner in crime, they run TV ads to lobby and convince the general public that they are the good guys looking out for our interests. Northrup-Grumman sells no products to the general public. Yet they besiege us with their TV ads. To what end? Here's why. They want the TV networks to be dependent on a huge hunk of cash from them. This makes it less likely that any of the news magazines like Meet the Press or 60 Minutes will ever do a critical study of their industry with the extra added benefit of creating a warm, fuzzy feeling in the general public for their industry which is war. There is the same rationale for the oil, coal and gas industries. Their TV ads essentially amount to lobbying the TV industry and the general public. This is in addition to the amounts of money they spend lobbying Congress.
It is a striking ad. An intimidating combat aircraft soars in the background, with the slogan up front in all capital letters: 300 MILLION PROTECTED, 95,000 EMPLOYED. The ad—for Lockheed Martin's F-22 Raptor fighter plane—was part of the company's last-gap effort to save one of its most profitable weapons from being "terminated," as they say in standard budget parlance. The pro—F-22 ad ran scores of times, in print, on political websites, and even in Washington's Metro. One writer at the Washington Post joked that at a time when many companies had been cutting back on their advertising budgets, Lockheed Martin's barrage of full-page ads in February and March 2009 was the main thing keeping the paper afloat.
When an arms company starts bragging about how many jobs its pet project creates, hold on to your wallet. It often means that the company wants billions of dollars' worth of your tax money for a weapon that costs too much, does too little, and may not have been needed in the first place. So it is with the Raptor, which at $350 million per plane is the most expensive combat aircraft ever built. Secretary of Defense Robert Gates has suggested that the F-22 needs to be cut because even with wars raging in Iraq and Afghanistan, it has never been used in combat. In fact, in its first "mission"—flying to Japan for deployment at a US air base there—the plane had technical difficulties and had to land in Hawaii, far short of its final destination.
So the plane is a piece of shit, but it creates jobs, jobs, jobs. And jobs are what the country needs, right? And more profits for Lockheed Martin and higher salaries for Lockheed Martin's CEO. Not to mention the lobbying industry. Those poor suckers need jobs too—desperately.
Hartung continues:
But Lockheed Martin insists that the Raptor's unique capabilities more thsn justify its huge price tag. For example, did you know that it is the "first and only 24/7/365 All-Weather Stealth Fighter"? That it has a radar signature "approximately the size of a bumblebee"? Or that it provides "first-look, first-shot, first-kill air dominance capability"? Lockheed Martin has a lot to say, and it is serious about selling you its most profitable plane. How else to explain the statement from the F-22 Raptor web page that, "when we meet the enemy, we want to win 100—0, not 51—49"? It is hard to take this claim seriously. The Raptor has never seen combat—and it may never do so given that it was designed to counter a Soviet plane that was never built—so at best the score is 0—0. But the statement has a grain of truth—it describes Lockheed Martin's lobbying efforts a whole lot more accurately than its fighter plane's mission success rate.
The company never reached its goal of 100—0 support in the Senate, but not for lack of trying. As soon as there was even a whimper of a possibility that the F-22 program would be stopped at "only" 187 planes—about what the Pentagon wanted, but only half of what the Air Force and Lockheed Martin were striving for—the company started racking up big numbers on its side. By early 2009, months in advance of President Obama's first detailed budget submission to Congress—which would decide the fate of the F-22—Lockheed Martin and its partners in the F-22 project (Pratt & Whitney and Boeing) had lined up forty-four Senators and two hundred members of the House of Representatives to sign on to a "save the Raptor" letter. A similar letter was sent by twelve governors—including prominent Democrats like David Paterson of New York and Ted Strickland of Ohio. R. Thomas Buffenbarger, the president of the International Association of Machinists and Aerospace Workers (IAM), also weighed in. The governors' letter reads as if it was drafted by Lockheed Martin, which it probably was. "We urge you," it begins, "to sustain 95,000 jobs by certifying continued production of the F-22 Raptor—a defense program that is critical to our defense industrial base." After describing it as "the world's only operationsl 5th Generation fighter" (a popular Lockheed Martin description of the Raptor), the letter returns to the jobs argument asking the President to "carefully consider the economic impact of your decision."
Ah, there it is—their ace in the hole— the jobs argument! How can we cut the bloated military-industrial complex without eliminating jobs and making the unemployment situation even worse? Think of all those college graduates—engineers and the like—who work in the military-industrial complex. Think of all those good middle class jobs! Why Lockheed Martin is doing us all a favor by hiring Americans when every other corporation is outsourcing jobs to China. Lockheed Martin claims that the F-22 program created jobs in forty-four states including 132 lobbying jobs in Washington, DC. But other "job creators" don't have the well-oiled lobbying machine that Lockheed Martin can bring to bear. It has a bevy of ex-Senators and ex-Congressmen in its fold ready to deploy at a moment's notice to all the watering holes in Washington, DC and even to the House steam room to argue with this Senator or that Congressman about the fact that the country needs the F-22 Raptor or whatever other piece of crap weapon Lockheed Martin is selling lest the economic and defense base of the country fall into disrepute and disrepair.
...Lockheed Martin pulled out all the stops, deploying Republican ex-Senator Matt Mattingly of Georgia and former House members like Democrats "Buddy" Darden of Georgia and G. V. "Sonny" Montgomery of Mississippi as paid lobbyists. From a luxury box at a Baltimore Orioles game to the steam room of the House gymnasium—fair game to ex-members like Montgomery and Darden—the urgent message went out that allowing funding to slip for even a few months might strike a devastating blow to our security and our economy. Representative James Moran (D-VA) was taken aback when Sonny Montgomery confronted him in the House steam room: "We sat on the sauna naked together and talked about the F-22.... That's the advantage former members have."
Disgraced lobbyist Jack Abramoff has nothing on these guys. In fact Abramoff is coming forward, now that he's out of jail, and blowing the whistle on how the lobbying industry works. It's job security for ex-Senators and ex-Congressmen and their staffers. The promise of a lucrative job after the member or staffer exits Congress is enough to make the current House and Senate members drool at the possibilities. They can come back to Washington at triple their Congressional salary and use the same House steam room that they used before and sit naked chitchatting with their old buddies ... about the F-22 Raptor among other things. "Hey what did you think about that blonde who waited on us yesterday?"
But Lockheed Martin and their lobbyists never give up. They are a force of nature. Other forms of Federal spending—like education, health care, mass transit and weatherizing buildings—need to be cut so that dollars can be provided for Lockheed Martin and the military-industrial complex. These other prospects for Federal dollars lack the well-oiled lobbying machine of Lockheed Martin.
The F-22's growing cost caused its own concerns. It was so expensive that it threatened to crowd out spending on other combat aircraft. It was a question of blowing billions now on a plane with no clear mission or saving up some money to buy the planes of the future.
Why save up money when you have a cash cow in progress. A cash cow in the hand is worth two in the bush. And then there is the time honored boondoggle of the military-industrial complex—the cost-plus contract. The government pays all costs and then adds a fixed percentage profit over and above that so that Lockheed Martin's CEO and investors do not have to starve. This gives Lockheed Martin every incentive to run up the costs after they low bid and receive the contract. This is called "gold-plating."
At this point the plan was to buy 339 planes for a projected cost of over $62 billion—up from an initial proposal to buy 750 planes for a total price of $25 billion. That's less than half as many planes for well over twice the price. How could this happen? Unfortunately, all too easily. First, Lockheed Martin put in a low bid, knowing full well that the planes would cost far more than its initial estimates. This approach, known in the business as "buying in," allows a company to get the contract first and then jack up the price later. Then the Air Force [their partner in crime] engaged in what is known as "gold plating"—setting new and ever more difficult performance requirements after the plane was already in development. Last but not least, Lockheed Martin simply screwed up certain aspects of the plane's production, even as it gouged the Pentagon on costs for overhead and spare parts. ...this is a time-tested approach that virtually guarantees massive cost overruns.
And those cost overruns lead to higher profits because of the cost-plus contract. The tax paying public is being ripped off by the military-industrial complex to pay for the largest military budget in the world, more than all the rest of the world's military budgets combined. But don't forget about all those well paying middle class jobs it provides. Why the unemployment rate would go up by several points if all of a sudden the Pentagon's budget were to be cut in half back to the level it was when George W Bush came to office in 2000. So the US is stuck in an ever increasing spiral of militarization and mobilization for war simply because it provides so many jobs and such high profits. No rational conversion to a peace time budget could ever take place without a massive transfer by the Federal government of funds spent on war to funds spent on peaceful projects like health, education and welfare. Because the US can spend in an unlimited fashion on war and the preparations for war without any bloviating from the right wing, but as soon as it spends on health, education and welfare—well, that's socialism. The old socialism argument trumps everything, and we're right back to the point that spending on war is the only way to keep unemployment down and to create profits. That's capitalism, don't you know?
Much has been said about Occupy Wall Street's lack of particular demands. However, their inchoate demands are numerous and plentiful, and what they amount to when totaled up is a complete repudiation of the organization of business and government and the way they are now constituted which isn't the way the Founding Fathers envisioned them at all. The way business is being conducted in the US amounts to a transmogrification of American values under the guise of an evolution of those values. America has morphed into a pseudo republic based on lies and hypocrisy, on militarism in the name of rationality, on the worship of money and the legitmation of any means to obtain it. Without getting specific the Occupy movement represents a repudiation of these abhorrent values which represent the corruption of everything Americans used to hold dear in the service of unmitigated greed and a glorification of unlimited wealth regardless of the plight of the vast majority of the people.
What the Occupy movement really wants in a vague indefinite way among other things is
(1) Getting money out of politics. That encompasses two ideas: that political campaigns should be publicly funded instead of funded by Wall Street and other wealthy interests and that lobbyists should be gotten out of Washington. Right now 40,000 lobbyists swarm Capitol Hill writing legislation in favor of the corporations that pay them an average of $300,000. starting salary to obtain legislation that stacks the cards in the corporations' favor. Is it any wonder tax policy favors the rich and exploits the poor? Does anyone truly think that getting money out of politics can be accomplished without a revolution? No way. The wealthy and the powerful will never back off. They have morphed American democracy into a plutocracy, and Democrats, who by and large have been bought off by the same wealthy interests, are not a true opposition party. They talk out of one side of their mouth while fund raising out of the other. True democracy cannot exist again until politics becomes something other than the tool of monied interests.
(2) The rich must pay their fair share of taxes. Tax policy as a result of frenetic lobbying has favored the rich while exploiting the poor. That's the whole purpose of lobbying: to seek tax advantages for the rich at the expense of the poor. That's the whole raison d'etre for lobbyists getting paid their obscene salaries. Reagan and Greenspan were experts at raising taxes on the poor while lowering them on the rich and at the same time obfuscating what they were doing and convincing the middle class that taxes were being fairly raised or lowered on everyone. Not true. Implicit in the tax code is favorable treatment for the upper 1% and an albatross around the neck of the poor and middle class - the 99%. Wealthy Wall Streeters pay only a 15% capital gains tax and benefit from "carried interest" which gives them the same tax rate no matter how many billions they make. And Republicans fight like hell to preserve these tax advantages for the rich, every last penny of them. They will never agree to tax capital gains as ordinary income, a millionaires's tax or a financial transactions tax. Does anyone think that any of these things can be accomplished without a revolution?
(3) The filibuster rule. The most antidemocratic tool of the Republican dominated Senate. A return to democracy would require the abolition of the filibuster rule. Does anyone think this can be accomplished without a revolution? The filibuster rule means that the majority does not rule and never will again as long as the present regime holds sway.
(4) Health care as a right. Medicare for all. Medicare's overhead is 3%. Private health insurance's overhead is 30%. Health insurance corporation CEOs made an average of $11 million last year while the highest salary paid to anyone in Medicare administration was less than $200,000. That's the reason why health care is becoming so expensive with paltry outcomes. Private health insurance corporations are under Wall Street's thumb. Wall Street demands higher and higher profits and increasing returns for investors. The result comes about from reducing the Medical Loss Ratio (MLR) which is the percentage paid out for actual medical care compared to the percentage paid out to investors and CEOs. I'ts a classic case of profit over people and again Wall Street is the culprit. Is there a theme developing here? Wall Street has its finger in every pie of the economy demanding that profits be placed over people. The Occupy Wall Street movement has pointed its finger at the exact culprit in every facet of American life that needs changing and Wall Street is at the heart of it. Does anyone think the US will join the rest of the world in providing a universal, cost contained health care system without a revolution? There is no way that "reform" will accomplish this. Obamacare was a valiant effort, but, ultimately, it is no complete solution, and its provisions are subject to being rolled back at the first opportunity by Republicans who want to eliminate not only Obamacare but also social security, Medicare, Medicaid and any other social program benefitting the poor and middle class.
(5) The student loan crisis. The heart of the student loan crisis is the privatization of the student loan industry. Instead of assisting or subsidizing students to get a college education, privatization has led to the exploiting of students in order to maximize profits. Again Wall Street is at the heart of the problem demanding higher and higher returns for investors. Instead of assisting students, the private student loan industry exploits them burdening them for life with debt which cannot be discharged in bankruptcy. Republicans and Wall Street worked together to change the law in 2006 which now requires students to pay for life to discharge their debt even going so far as to allow garnishing of their social security benefits. Democratic legislation under Obama has rolled back some of these draconian measures but has done nothing to reverse the bankruptcy law of 2006. Again Wall Street has been catered to and profits have been placed above people. Does anyone think students will ever be able to dischartge student loan debt in bankruptcy without a revolution?
(6) The foreclosure crisis. Wall Street was allowed to get completely off the hook with regard to mortgage loan modification. The performance of Obama's Home Affordable Modification Program (HAMP) has been underwhelming at best. Housing experts say the $1,000 payments mortgage servicers get for successful modifications, and the lack of consequences for disobeying program guidelines, don't provide enough incentive to modify many mortgages. The well intentioned Obama administration made mortgage modification voluntary on the part of the banks. Guess what? Wall Street has decided it would not "volunteer" to reduce its profits by giving underwater home owners a break. Again the middle class gets screwed in order to maximize Wall Street profits. What was Obama thinking? Does anyone think Wall Street will write down mortgages giving themselves a voluntary haircut without a revolution? Does anyone think Republicans will have a change of heart and suddenly decide to do the right thing with respect to the middle class against the wishes of Wall Street as long as they control at least one branch of Congress or even if Democrats control both branches of Congress and the Presidency as long as the filibuster rule is in effect? Does anyone think mortgages will ever be modified favoring the middle class without a revolution?
(7) Jobs. Does anyone think the government will ever create jobs directly by reinstating an FDR style Works Progress Administration (WPA) or Civilian Conservation Corps (CCC) or even an infrastructure bill without a revolution? Will it ever be the policy of the US to be the employer of last resort without a revolution? It'll never happen. Instead, homelessness on an ever increasing scale will become a "normal" part of American life because this is perfectly consistent with capitalism. The impoverishment of millions will become normalized. As Herman Cain says, "If you don't have a job, blame yourself." THe US will join the rest of the underdeveloped world in a world class regression to a society composed of the very rich and an extremely impoverished class of everyone else.
(8) Corporations are people; money is speech. The Citizens United Supreme Court decision verified that corporations are people and money is speech. In particular corporations can spend as much money as they want on political advertising. They have an unlimited right to spend as much as they want to get the candidates elected who will do their bidding. They can propagandize to their heart's content, and the easily led lemmings will buy it and follow them off a cliff. There is no other consideration in electoral politics than money. Democracy is irrelevant; plutocracy shall rule the day. Does anyone think that anything short of a revolution will change this state of affairs?
(9) The war in Afghanistan should be ended, and the $2 billion per week that the US is spending there should be spent on improving the lives of American citizens. The military-industrial complex budget should be cut in half. The US spends more on its military than all the rest of the world combined. It has over 1000 military bases located in just about every country in the world. This money is being wasted because defense contractors have some of the strongest and most prolific lobbyists on Capitol Hill. According to Prophets of War, Lockheed Martin and the Making of the Military-Industrial Complex by William D Hartung: Lockheed Martin "spent $15 million on lobbying and campaign contributions in 2009 alone. Add to that its 140,000 employees and its claim to have a prescence in forty-six states, and the scale of its potential influence starts to become clear. And while its current political activities are perfectly legal, the company has also been known to break the rules: It ranks number one on the database on contractor misconduct maintained by the Washington-based watchdog group Project on Government Oversight (POGO); according to POGO, Lockheed Martin has '50 instances of criminal, civil or administrative misconduct since 1995.'" So the military-industrial complex of which Lockheed Martin is the leading exponent uses its poltical influence in Washington to make sure it keeps its profits high as Wall Street demands. Again Wall Street is implicated as it demands the highest possible profits for its investors in the military-industrial complex.
Instead of overspending on the military-industrial complex, the US should adopt the model that was successfully used recently in Libya. Military goals were accomplished by joining with NATO partners to spread the cost, and not one American life was lost. Does anyone think the powerful defense contractor lobby will back down, and American taxpayer money will be spent primarily on benefitting the American people instead of trying to control and dominate the world without a revolution?
The social contract which implied that, if you studied hard, obtained a college degree and tended to your knitting, you would be rewarded with a good job has completely broken down. Corporations have no responsibility to provide anyone with a job. Instead their only allegiance at the behest of Wall Street is to their bottom line. Wall Street demands that they increase profits. They do so not by providing American jobs but by outsourcing jobs to wherever in the world labor is cheapest. Then they turn around and demand that their taxes be lowered and regulations be gutted, and say disingenuously that that is the only way they will hire more people. But they continue to outsource jobs even though their taxes are the lowest of any historical period since the Great Depression and they are sitting on $2 trillion in cash that they prefer not to use employing people. Instead they buy back their own stock and gamble on Wall Street.
So what is a college education worth these days? Not much. It does not represent the promise of a happy future but instead a burden of debt which may last a life time. The education industry goes on an advertising binge to convince potential students that the only way they will have a promising future is to matriculate and borrow money. Hopefully, students are waking up to this sham. A college diploma used to be a ticket of admission to employment with a corporation. Certainly most college diplomas do not prepare one to become self-employed, only employed by others. If a person seeks to be self-employed, they do not need a college diploma in most cases. They don't need a ticket of admission to the corporate world in order to start their own business. Steve Jobs had no college diploma. Bill Gates has no college diploma. Larry Ellison has no college diploma. These are billionaires in the world of high tech. They do, however, want their employees to have college diplomas, and it matters little to them whether these employees come from the US, India, China, Korea or someplace else. In fact they prefer overseas college graduates because they will work cheaper. Most contractors and tradesmen do not need college diplomas, and the work they do for the most part is localized and can't be exported. A word to the wise ...
Each and every public space and institution is under attack by Republicans. Public schools, public parks, public libraries are being defunded as are public teachers, park rangers, librarians, police and firemen. Republican goals are to diminish public spaces and the jobs supporting them so that they can "drown them all in the bathtub" as Grover Norquist wants. Public spaces are being impoverished at the same time private wealth is being enhanced by every means available. Public America is being turned into poverty while private America gains. And when public spaces and public jobs are diminished, the poor and middle class suffer because the rich only use private spaces - private resorts, private universities, private security companies, private libraries, private schools. A country can be rich in private wealth but poor and in debt with respect to public wealth. Such is the fate of the US under Republican rule.
The Occupy Wall Street movement is joining with movements all over the world in waking up to the fact that Wall Street is at the heart of the world's problems. They are wise not to particularize their demands because then they would be offered some sham, watered down solution which would do nothing to curtail Wall Street's power and its dominance over not only America's but Europe's political systems. Neither the US nor the euro zone has the guts to stand up to Wall Street and its extensions in Europe because this might lead to another recession. Instead, they put bandaids on the present system in the hopes that they will be able to normalize things even though "normal" means the impoverishment and the indenturization of the majority of the people.
What a difference 40 years makes! The New Left radicals of the sixties treated the middle class with about as much respect as Rush Limbaugh treats liberals. The middle class was put down, demeaned and vilified. Today the protest movement is all about defending the beleaguered middle class. The middle class and the treatment thereof is the axis on which turns the raison d'etre of the two movements. It's why the movement of the sixties failed and why the Occupy Wall Street Movement may very well succeed in radically restructuring the US government and economy.
First of all in the sixties the protest movement was basically a cultural rather than a political movement despite the attempts of the New Left to make it political. The protest was mainly an anti-war movement combined with cultural overtones. It was the Age of Aquariius. There was a big change coming because Bob Dylan and the Beatles told us there was. It was Blowin' in the Wind. If you didn't wear bell bottoms and grow your hair long you were not part of the movement. Magic was in the air. But when it came right down to it, the Beatles didn't want a revolution because after all they were making too much money. So was relatively speaking the middle class, Nixon's silent majority. They were pretty well off in the sixties and early seventies. They just wanted the US out of Vietnam so their sons wouldn't have to be drafted. Hardly anyone had a student loan. College was relatively free compared to today.
Where I went to school at the University of California San Diego in the late sixties, tuition was free. There was a $73. a quarter incidental fee, and I rented a room for $40. a month. Middle class wages came with benefits - a pension and health care. Wives didn't have to work outside the home to make mortgage payments. I bought my first home for less than what you pay for a mid range car today. There were no adjustable rate mortgages. Everybody had it pretty good. Is it any wonder that the vast middle class did not join the radicals in their attempt to foment a revolution? People were too well off. And the cultural aspects were easily co-opted by commercial interests. You want tie dye. Hey, we'll sell it to you. You want bell bottoms. You can find them at Macy's.
The put down of the middle class was mainly a put down of middle class mores. Things like staying a virgin until you were married, buying ticky tacky houses in tract developments, having to go to church on Sunday, participation in the Rotary club. People didn't want to buy their Grandfather's Oldsmobile. So capitalist society geared up to sell them something else. You want long hair. Hey there's the Broadway musical, Hair. Down to here. Down to there. The same old imperatives to sell, sell, sell - only updated for a new generation. The Students for a Democratic Society were isolated because what people really wanted was new mores to replace their parents' mores. They didn't want to do away with capitalism. Capitalism had been very, very good to them.
Today the situation is different. The middle class is under siege. Far from putting down the middle class, today's Left is trying to defend it. The right wing is reduced to trying to defend the very wealthy, the upper 1%, using their vast wealth for TV advertising and smoke and mirrors. The 99% have lost the prosperity of the sixties. The Occupy Wall Street Movement is aimed right at the heart of capitalism - Wall Street. College tuition at UCSD is over $13,000 today. Along with room and board, books and other expenses, the cost for a year of college education at UCSD is almost $30,000. A far cry from when I was paid to go there as a graduate student with a research assistantship and expenses were minimal. One of my classmates even took flying lessons with the money that was left over from his assistantship. No one went into debt to go to college. Student loans were unheard of. People could work their way through college as I did as an undergraduate on the co-op plan where I worked for a quarter and went to school for a quarter. People could work their way through college with a waitressing job at Howard Johnson's.
Foreclosures are running rampant. People are being forced out of their homes even though the banks don't have the proper documentation to prove ownership. People whose homes are underwater, meaning they owe more than their homes are worth, are stuck there not being able either to refinance or to sell. Their choice is to go on paying exhorbitant mortgage payments every month or to walk away to an uncertain fate and ruined credit. 50 million people have no health care. Jobs are hard to come by. Recent college graduates are lucky to get a job as a barrista at Starbucks. Teachers, firemen, librarians and policemen are being laid off in droves. Manufacturing has moved to China. The middle class is under attack. That is the difference between the demonization of the middle class in the sixties and the attempt to save the middle class that is happening today.
Ed Schultz who has a talk show on msnbc was the first person I know that made a point of defending the middle class, long before it became fashionable, on his previous radio talk show. Now everyone is jumping on the bandwagon. Why? The upper 1% owns most of the wealth and makes most of the income, and they are accelerating their financial predominance. The bankers on Wall Street, having been bailed out by middle class taxpayers and the Fed to the tune of trillions of dollars, are giving themselves even larger bonuses today than they were before the financial crisis which they precipitated. Unions are under attack in Wisconsin, Michigan, Florida and elsewhere where Republican governors and legislatures are in control of state governments. The American Dream has turned into the American Nightmare for masses of people. People are waking up to the fact that government has been taken over by the large corporations who pay politicians, all the Republicans and a number of Democrats, to do their bidding. 30,000 lobbyists swarm Capitol Hill. They are not there to protect the interests of the middle class. They are there to curry financial favors for the upper 1%. Their money floods TV with ads favoring their politicians and their interests. Money runs politics and the American government.
The American government is gridlocked and dysfunctional. Republican filibusters kill any legislation President Obama would like to get enacted to create jobs, forestall the student debt crisis, or help underwater home owners. So now he is trying to get something done by executive orders, but so far it's just frittering around the edges. He needs to make much bolder moves by executive order such as starting an infrastructure bank and reincarnating FDR's CCC and WPA. If the American divided government continues on its present path it will inevitably be replaced by a more functional political system such as a parliamentary system or some system that can't be gridlocked and obstructed to death. Republican intransigence is just making the need for a different system of government more obvious. And it's not about replacing the American government with socialism or communism. It's about replacing a democratic system that doesn't work or only works in the interests of the rich with another democratic system that works in the interests of the middle class. As far as an economic system, there is not a country in the world that has a purely socialistic or communistic system. Even China's economic system is a synthesis of communism and capitalism. So no one in his right mind is advocating replacing capitalism with pure socialism or pure communism. There are societies which have adopted the best features of a number of disparate systems to create societies that are democratic both politically and economically. Economic democracy, in which the middle class is predominant and not beholden to the big banks which sit at the beating heart of American capitalism, is indeed a real possibility. The Occupy Wall Street Movement will eventually have to demand radical changes in the American system in order even to accomplish its minimal goals. Bankruptcy protection for student loans, which was taken away by the Bankruptcy Act of 2005 will have to be reestablished, and that will be an arrow aimed at the heart of capitalism and in particular Wall Street. But what was changed six years ago can be changed back. It's not so set in stone. It's a fight worth fighting.
So the New Left radicals of the sixties were way ahead of their time in wanting a political and economic revolution. The vast middle class was too comfortable and well off to support such a major change. Cultural revolution was co-opted and amounted to nothing. Today, however, with more and more income and wealth flowing upward to the 1% leaving the 99% further and further in the dust, with a political system which is wholly owned by the wealthy, with poverty at record levels and more and more people falling out of the middle class, there is the possibility of a true political and economic revolution in the US which would take back democratic control in favor of the vast majority and create a fairer and ultimately more prosperous society.
Marx's chief criticism of capitalism was that it led to the centralization and concentration of capital. In a society comprised of small scale enterprises such as the yeomanry and small scale farmers of early America, an America romanticised and favored by Thomas Jefferson, capital was widely dispersed in the form of small land holdings and businesses which replicated themselves throughout the US with different owners in every community. For example, each small town had a blacksmith shop owned by a single person who owned one and only one blacksmith shop. He didn't franchise his blacksmith shop operation all over the country calling it perhaps "Blacksmiths Are Us." He didn't go public with his blacksmith shop attracting investors from all over the country who bought shares in his blacksmith shop. He didn't acquire other blacksmith shops and merge with yet more blacksmith shops. He didn't expand into other towns creating blacksmith shop megastores and forcing Mom and Pop blacksmiths out of operation. He didn't open a furniture store as an accompaniment to his blacksmith shop. All the techniques of modern capitaliasm - mergers and acquisitions, franchise operations, big box megastores - produce a centralization and concentration of capital or ownership in fewer and fewer hands. Instead of capital being dispersed in many hands, capital is concentrated in the hands of a few and the rest are left to be employees with zero capital assets.
The statistics are startling. Today the richest 400 Americans own more wealth than the bottom 150 million American citizens. According to Senator Bernie Sanders, six of the biggest banks own wealth equivalent to 60% of US GDP. Two of these banks, Citibank and Goldman Sachs, have been convicted of fleecing investors by selling them securities they knew were bogus and then betting that those securities would go bad. The top 1% earn 25% of the nation's income and own 40% of the nations's wealth. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. Despite owning the lion's share of wealth and income, three years ago American taxpayers provided the wealthy banks with the largest bailout in history. Furthermore, the Federal Reserve provided more than $16 trillion in low-interest loans to every major financial institution in this country, huge foreign banks, multi-national corporations, and some of the wealthiest people in the world. Meanwhile 43 million Americans live in poverty and millions have lost their homes through foreclosure. Countries with less income inequality than the US include Cambodia, Vietnam and Morocco.
Is it any wonder then that the Occupy Wall Street protesters are proclaiming "We are the 99%." The 99% who are being left in the dust with no jobs, huge student loans, homes that are underwater or have been foreclosed on. No bailouts here. Thanks to Republican legislation, the terms of student loans are draconian. Unlike credit card loans student loans cannot be discharged in bankruptcy. They will follow you to the grave. And defaults due to lack of jobs can triple the amount owed. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was signed into law by President Bush and made possible by Republicans in Congress. It was designed to make it impossible to discharge student loans in bankruptcy and opened the way for a lucrative private loan industry to flourish. David Cay Johnston in his book Free Lunch says, "The idea that young minds should be a source of immediate profit is among the most coldly calculated changes in government which, over the past three decades, have taken from the many to enrich the few." Legislation to restore bankruptcy protection to student loans has been reintroduced in Congress by Democrats. Fat chance it will pass though with Republicans controlling the House and having the filibuster rule in the Senate.
People are facing retirement with no pensions, their 401ks having lost value or having been spent before retirement just to keep financially afloat. The 99 per centers include students, recently graduated students with huge student loans and no jobs, middle aged unemployed folks who are not being rehired, African Americans whose unemployment rates are sky high, people who have lost their homes to foreclosure - all those people who were not bailed out while the banks who were bailed out profit at their expense. The Obama administration failed to put sanctions on the banks allowing them to continue to profit with no accountability. No banksters went to jail. They made mortgage write downs voluntary on the part of the banks and so far banks have refused to volunteer. The cards have been stacked on the side of the banks and against the middle class. Is it any wonder then that people are occupying Wall Street whose CEOs make on average 300 times the salaries of average workers?
Johnston details a part of the process of how advanced US capitalism with government support centralizes and concentrates capital, ownership wealth and income in the hands of a few. He details how Mom and Pop stores are put out of commission by large mega stores which, with government help, take over retail trade while forcing former Moms and Pops to become employees rather than owners and concentrating wealth. He tells about Jim Weaknecht who had a little sporting goods store in Hamburg, Pennsylvania. In 2003 a sporting goods super store, Cabela's, opened a few miles away. But far from being an exercise in free market capitalism, Cabela's demanded $32 million in government subsidies or else they would take their six acre store elsewhere. Cabela's wanted exemption from paying local property taxes for years to come and tax-exempt status for the "museum" part of the store in perpetuity. In addition they wanted to pocket the sales tax. The store was 100 times bigger than Weaknecht's and stocked more guns and reels and hunting jackets than Weaknecht could sell in a lifetime. Their pitch was that people would come from miles away just to shop there bringing tourist dollars to Hamburg's restaurants and hotels. Shortly after Cabela's opened, Weaknecht's sales fell more than 70%. In less than two years he was out of business. Now Weaknecht works as an assistant manager at a grocery store chain and holds down a second job too. His wife, who previously devoted full time to their children, now also works two jobs. This is how, with government help, wealth and income along with political power is concentrated in the hands of a few. Cabela's has also opened numerous other super stores across the nation putting Mom and Pop operations out of business nationwide.
Johnson details how Wal-Mart pioneered the super store approach. "In seeking these subsidies, Cabela's was not inventing a new scheme. It was simply improving on a technique pioneered by an icon of retailing success, Sam Walton. The Walton story was not about the brave capitalist taking on risk and proving his mettle by being smarter than the other guy, no matter how carefully the Wal-Mart company has polished and sold that fairy tale. Sam Walton practiced corporate socialism. As much as he could, he put the public's money to work for his benefit. Free land, long-term leases at below-market rates, pocketing sales tax, even getting workers trained at government expense were among the ways Wal-Mart took every dollar of welfare it could get."
Fifty years ago, people shopped at a number of Mom and Pop stores rather than at one super store. For instance, there were paint stores, lumber stores, hardware stores, electrical supply stores all under different ownership and all under different ownership in different towns and cities. Now in one trip to Home Depot, you can buy all these items in one centralized location with the result that the smaller Mom and Pop stores have been put out of business and wealth has been centralized and concentrated. There are Home Depots in practically every large and middle sized town and city in America. The same holds true for large super market chains. Previously, shoppers went to a meat market for meat, a dairy for dairy items, a bakery for baked goods etc. Now one trip to a super market does it all and wealth has been centralized and concentrated in the hands of a few while the remaining population have become employees with no accumulation of wealth except for their houses which have drastically decreased in value in recent years.
The US has concentrated private wealth in the hands of the 1% while at the same time creating a concentration of debt in the government. Government debt has fueled private wealth as the government has been used just as a tool for benefitting private capitalists. The privatization of government functions has increased government debt while increasing private wealth. China, on the other hand, has a wealthy class including billionaires, less inequality than the US and a concentration of wealth in the hands of government. So wealth is dispersed at least between public and private entities and to a larger extent even among the public than in the US. China's sovereign wealth fund holds approximately $2 trillion of US debt. So while the US is a wealthy nation in terms of its cumulative wealth, that wealth is mostly in private hands and in the hands of the upper 1%. The US government itself is next to bankrupt. The US represents private wealth amid public squalor. 46 million people live below the poverty line as of 2011. Minorities are hit hardest. Blacks experience the highest poverty rate, at 27 percent, up from 25 percent in 2009, and Hispanics rose to 26 percent from 25 percent. For whites, 9.9 percent live in poverty, up from 9.4 percent in 2009. Asians were unchanged at 12.1 percent. The number without health insurance is on the rise. 43 million use food stamps to survive.
Marx foresaw that capitalism would lead to the concentration and centralization of wealth ownership in fewer and fewer hands. It is easy to see why. To recapitulate, mergers and acquisitions lead to larger and larger enterprises forcing smaller firms out of business. Franchise operations lead to replicating the same stores in every community with profits flowing to one centralized location. Think of MacDonald's, Wal-Mart, Home Depot and Starbucks which force less well capitalized Mom and Pop stores out of business. Loans and money from investors in equity shares is available to large scale enterprises but not to small Mom and Pop stores. The corporate form dictates that companies pursue the bottom line over all other possible goals. Owners of small scale enterprises are reduced to employees living paycheck to paycheck rather than owning capital which would tide them over economic downturns. So even though the corporate form was relatively new in Marx' day, he was remarkably prescient in showing how the dynamics of capitalism would centralize and concentrate wealth in fewer and fewer hands. That dynamic, along with the addition of political power to use government as a tool for the further accumulation of wealth which Marx did not foresee, is playing out today as Republicans go on the warpath against unions and government employees which will result in an even larger return to the owners of wealth while wages and benefits to workers remain stagnant or even decrease. The addition of computers and automated machinery means that workers will become increasingly irrelevant as they are replaced by capital equipment.
With the Occupy Wall Street movement gaining momentum nation wide and joining with other protest movements from Greece to Tunisia, it seems that the youth of the world are fed up with sucking hind tit while the 1% of bankers and hedge fund operators continue to suck the world dry. Banksters created the financial crisis and are in the process of continuing it. Here's the important fact regarding Greece. As Greece's credit rating declines, it gets more expensive to borrow money. Hence Greece's debt goes up precipitously. Why? Because more speculators are piling on betting that Greece will default. The more speculators that pile on, the more Greece's credit rating declines. The more Greece's credit rating declines, the more money it needs to borrow. The more money it needs to borrow, the more the strong EU countries such as Germany need to lend to prevent Greece's default. It's a freakin vicious circle. And it's all due to the private banking system, the beating heart of capitalism, which is allowed to drive up Greece's debt through speculation.
The Arab Spring was brought about by young college educated people with no jobs, no prospects and nowhere to go while dictators sucked the countries dry. The Occupy Wall Street movement represents the American Fall or Autumn if you prefer. College educated youth with tens of thousands in student loan debt and no jobs or at least no jobs that give them the prospect of a half way decent way of life while the debt is being paid off. The debts escalate as soon as the ex students with no jobs start to default on their student loans. And unlike credit card debt these debts can't be discharged in bankruptcy. The banks have them by the balls. Student loan debts will follow them to the grave. They will garnish their social security if need be to get their pound of flesh. The students would have been better off to have charged their college tuition and other debts to their credit cards rather than taking out student loans. That way they could have gone bankrupt and gotten rid of the debt accumulated to obtain an increasingly worthless college degree.
People have bought the ridiculous premise that to get anywhere in life you need a college degree. Not so. Steve Jobs, who died a couple days ago, created an "insanely great" corporation having dropped out of college after one semester. Bill Gates, another "insanely rich" man was a college dropout. Many of the other "Forbes 400", the richest men in the US never went to college or dropped out. Larry Ellison, number 3 on the Forbes 400 list, dropped out of two colleges. Michael Dell, #11, is a college dropout. In 2005 I wrote a blog article, "4 of the Top 5 Wealthiest Americans Are College Dropouts." Not much has changed since then. Meanwhile, all the pro-college hacks will bombard you with "statistics" that show that people with college degrees earn more over the course of a lifetime than do high school graduates. Here's the key: 1) those statistics do not include the likes of Bill Gates and Steve Jobs in their data set; 2) those statistics are based on the college graduates of 10 to 30 years ago who already hold jobs and graduated under different circumstances than the college graduates of today. Just because it might have been advantageous to have a college degree 30 years ago doesn't mean that the same circumstances obtain today. Today's college graduates are receiving nothing but life long debtor status as the reward for their efforts and burning the midnight oil to pass exams. And that's exactly what they have in common with students and recent college graduates all over the world. When I graduated from the University of California San Diego 40 years ago, tuition was free. That was before Ronald Reagan was elected Governor. He started charging tuition with the result that today's students are going deeply in debt to obtain a diploma.
People want their pound of flesh taken out of the hide of Wall Street. Wall Street, which was given trillions of dollars to bail them out, has continued to foreclose on middle class homes. Wall Street, which holds those student and credit card loans, has continued to maximize profits in the face of mass protests. Bank of America has instituted a $5 monthly charge for debit card use in order to make up for the fact that the Dodd-Frank banking reform bill won't let them overcharge merchants any more each time a credit card is swiped. So they take their pound of flesh elsewhere. It's almost impossible to imagine the millions of dollars Wall Street CEOs take home every year while gouging their customers. How many mansions do they need to live in? How many corporate jets? How many yachts? How many servants? How much jewelry for their rich wives and mistresses? The Lords of Wall Street have not only taken over the country, they've taken over Washington, DC as well. Lobbyists swarm over Capitol Hill, the mission of each to extract favorable financial consequences for their rich patrons. Are they there to get health care for the poor? Hardly. Are they there because they want Congress to favor "social issues"? No, they could care less about social issues: abortion, religion, guns, gays. NO, THEY ARE THERE FOR ONE REASON: MONEY! They are there to make sure the rich can continue to profit. They are there to make sure that the budget is balanced, to the extent that it is, on the backs of the poor and middle class. They are there to make sure that Congress does the bidding of its corporate sponsors, the guys that make politics an endless round of money grubbing and favoritism. Most Congressmen become lobbyists themselves when they quit Congress "to spend more time with their families." Yeah their corporate families who funded their careers in Congress in the first place.
The 99% have been left to their own devices. No longer do they have any value except to the education for profit industry which wants to charge them exhorbitantly to increase its own profits. Therefore, the myth that they "have to" go to college needs to be maintained. Young people are better off learning a trade which can be undertaken locally rather than to get a college degree which qualifies them for an expendable job in the global work force, a job which can be outsourced and downsized at the whims of their corporate overlords. Young people are saying enough of this game. They don't want to be expendable profit centers any more. They don't want to be consumers of education, consumers of houses, consumers of consumer goods, consumers of debt. The US has become the world's uberconsumer, dependent on consumption to keep its economy afloat. Corporations locate plants wherever in the world is the most profitable and then look to Americans as the consumers of first resort. Buy their stuff or the US economy will implode, but don't expect to be provided with a job, least of all with the government. The corporate overlords don't want their income to be redistributed to job seeking government employees. That's why they're in the business of demonizing teachers, policemen, firemen and other government employees except those who are employed by government in the military-industrial complex, of course.
The big banks which the nation bailed out to the tune of trillions of dollars have continued ungratefully to suck the blood of the American people dry. It's just business as usual with no sense of social responsibility to write down principle on home loans or to give up anything which would help the middle class and the poor. They pay taxes at half the rate of the middle class which pays FICA taxes through their noses on every dollar they earn - NO LOOPHOLES, NO EXEMPTIONS, NO DEDUCTIONS! Capital gains are taxed at half the rate of most middle class taxes. Occupy Wall Street wants some bankers in jail. As President Obama explained, what they did was immoral, "it was not illegal." And just why was it not illegal? Because of deregulation. Deregulation is just another word for making what was formerly illegal ... legal. The Financial Services Modernization Act of 1999 repealed the Glass-Steagall Act of 1933 which forbade the merger of commercial and investment banking. It led directly to the meltdown of 2007. So what would have been illegal before 1999 was legal afterwards DUE TO DEREGULATION. What do the Republicans want more of? DEREGULATION. Why do they want it? So they can rip off the country entirely legally and not have to do jail time.
Economists should stop focusing on GDP. GDP is not that important. What's important is that everyone who wants one should have a job. GDP can go up and unemployment can increase at the same time. On the other hand GDP can go down and unemployment can decrease. The conventional wisdom is that it works the other way: when GDP increases, so does employment. Since 70% of GDP is due to consumption, the conventional wisdom is that jobs will be created when everyone goes out and buys stuff. But that's not true any more because most of the stuff is made in China, and a lot of stuff is made by machines requiring little human labor. And a lot of GDP is made up of stuff that people are better off without. Look at the Fortune 400 billionaires and you will see that a lot of them made their money off of leveraged buyouts (which destroyed jobs), casinos (which caused people to waste their money), fast food (which caused people to become obese), etc. In other words a lot of economic activity and GDP come from things that people are better off without. The correct focus is not on economic activity - getting people to buy stuff that for the most part they don't need - the correct focus is on jobs and investment which is another component of GDP. The best advice you could give to people is DON'T go out and buy stuff - pay down your debts instead and save your money for a rainy day. If this lowers GDP, so be it. But then where will the jobs come from? They will come when people become self-employed and create their own jobs rather than wait around for someone to hire them, and they will come from the government when the government realizes that all its other indirect methods of job creation haven't worked and the only remaining option is to create jobs directly as FDR did during the Great Depression. This may come when everyone realizes we're in the Second Great Depression.
Allen L. Sinai, chief global economist at Decision Economics, a consulting firm, said he supported the president’s jobs plan and estimated that it could create about 500,000 to 600,000 new jobs. But he said that even companies that are profitable are hesitant to part with their cash to hire people.
“C.E.O.’s are paid to grow shareholder value,” [he] said. “They are not paid to hire people if demand isn’t there and if they can substitute machines for people. That’s a no-brainer for the people who run companies.”
President Obama can get on the stump and promise action to create more jobs, tax the rich, defend the middle class, have the government provide more Pell grants, take care of children in poverty, whatever... But he need not say all that because, even if he's reelected, he can provide none of it unless the Democrats have a majority in the House and a filibuster proof majority in the Senate which translates to 60 Senators. If the statistics in Congress don't align, Mr. Obama will accomplish exactly nothing even if he gets four more years. Therefore, the most honest campaign speech he can make is "If you elect a majority of Democrats in the House and 60 Democrats in the Senate, I will give you x number of jobs on Day 1 of my second term. Otherwise, you will get nothing but gridlock for the entirety of my second term because the Republicans in Congress will block everything I propose." All this emphasis on what Mr. Obama can or cannot do is ridiculous if he doesn't have the power to do it, and the only way he will have the power to do anything is if he has a Democratic Congress and a filibuster proof Democratic Senate. Mr. Obama has shown that he is not bold enough to defy convention, and the conventional wisdom is that the executive branch in and of itself can do nothing except fight wars and plead with Congress.
Sure now it seems Obama has gotten over his predilection for appeasing the Republicans in Congress realizing that it's absolutely futile to believe in "compromise" with that bunch of jive turkeys. Today he's talking tough, but he's resigned to doing nothing. Might as well start campaigning now for 2012 because nothing will be getting done by government until after the election a year from now. But nothing will get done even then if Mr. Obama doesn't have an agreeable Congress to go along with him, and, reading the tea leaves, it doesn't seem that Democrats will be elected in large numbers unless Democrats including Mr. Obama start making that clear now. Congress has a low approval rating, 12%, which tells the American people "throw the bums out," the good ones along with the bad. In other words the American people will throw out the baby with the bath water unless they start to discriminate between Republicans and Democrats in Congress and start to realize that the blame for nothing getting done lies with the REPUBLICANS IN CONGRESS and not just with some kind of generic CONGRESS. Americans are simple minded. You have to spell it out for them. The campaign of 2012 is not just for the Presidency as if that were the all important thing. No, it's for the Presidency AND Congress combined, and, if the right balance isn't achieved, that is to say a Democrat in the White House and a Democratic controlled House and Democratic controlled filibuster proof Senate, then the American people might as well say bye-bye to solving the deficit problem by taxing the rich and solving the jobs problem by government direct creation of jobs.
The fact of the matter is that corporations and the wealthy are sitting on $2 trillion in cash. They could hire more workers if they wanted to without any additional tax breaks or loans from Wall Street, but they obviously don't just want to hire workers for the sake of hiring workers. They will only hire workers if it adds to their bottom line. A lot of Democratic oreiented economists like Reich and Krugman are saying they will only hire workers if there is more demand so, therefore, we need to use Keynesian economics to pump money into the economy to create demand. However, why would corporations hire more workers even if there were more demand when instead they could make more capital investment in automated and computerized machines? If they are given economic incentives, they will preferably use the money to invest in robots and other computer driven equipment to increase output like they've been doing for the last 20 years. They have driven up productivity not by hiring more workers but by investing in intelligent machines and laying off workers. There is no reason to believe they will do anything different even if demand suddenly increases. Therefore, Obama's economic advisers are full of you know what. Nothing the government can do in the way of giving incentives to corporations to hire more workers will actually work because it makes more sense to them to invest in capital equipment which can work 24 hours a day and doesn't require expensive health insurance.
So where does that leave the government's role in creating jobs even if, come 2012, there should happen to be elected by some miracle a Democratic President and a Democratoc Congress. As I see it, it only leaves one alternative: direct job creation by the Federal government as was used during the Great Depression when FDR created jobs with the Civilian Conservation Corps and the Work Projects Administration. And money has to be funneled off of the most profitable upper few percent of the population who have obtained the lion's share of the national income over the last 30 years in order to make this possible so that the nation doesn't go even more deeply into debt. Class war, anyone? It comes down to taking from the rich in order to dole out welfare benefits or taking from the rich in order to put the poor and lower middle class to work in CCC and WPA type jobs. Lord knows, there's tons of work both in conservation (think environmental rehabilitation) and infrastructure repair and development so that direct government job creation in those areas would be anything but make work. Jobs in those areas are much needed and vital to the overall economy not to mention the general welfare of the people. And private enterprise will never create those jobs unless it is given contracts to do so by the government which would entail much more money in order to build in large profits to the private sector which are not necessary if government provides the jobs directly. Think about all the money that has been wasted by lavishing it on private contractors in Iraq and Afghanistan.
Obama's economic team including Fed Chairman Bernanke seems to think that the key to getting the economy moving is to make interest rates so low that loans will be easy to get as if the only thing holding the private sector back from expanding and hiring workers is the ease with which they can get a loan. But this is belied by the fact that the corporations don't need loans to expand: THEY ARE ALREADY SITTING ON $2 TRILLION IN CASH. Why do they need to borrow money? Duhhh! How stupid are these people? They are deluded to think that the only way things get done in this economy is to create more debt. Why would I borrow money to do something if I am sitting on all the cash I would ever need to do it and more? Obama made the mistake of taking advice from Larry Summers and Tim Geithner, Wall Street types who think the only way to get the economy moving is to cater to Wall Street and appease the rich by giving them even more favors: deregulation and lower taxes. This top down approach hasn't worked. That should be obvious by now! Instead the rich are richer than ever, more and more money has been funneled to the top 2% and middle class interests have been neglected. People have lost their homes who shouldn't have had to if the government had acted in their interests. Now investors are sueing the big banks because they were screwed. But what about the people who lost their homes to foreclosure? Little if anything is being done in their behalf.
All in all, it's not all about Obama. If he's not elected in 2012 and Republicans run the table, God help us. The US will become a nation of serfs and a small class of economically powerful and dominant aristocrats. The safety net will be eliminated and more and more people will become homeless and die on the streets for lack of health care. Children's growth will be stunted and they will become increasingly ignorant and uneducated. The country will be by, for and of the rich and powerful. Better to have Obama reelected and a Republican Congress which will mean nothing will get done for four more years, but even that is better than sliding back into another Dark Age. The best scenario, however, would be that Democrats control the Presiency and Congress. This would also guarantee that a liberal would be appointed to the Supreme Court when a vacancy occurs which is very likely in the next 5 years and which would tilt the balance there from the conservative oriented majority which now obtains. If such were the case, then America might well be back on the path towards being a sane and progressive nation again instead of the repudiation of Enlightenment values it was founded on which it is now in danger of becoming.
In yesterday's speech President Obama stopped pussyfooting around with the Republicans in Congress. He called out Boehner by name as being "not smart" and "not right," in other words WRONG and STUPID! He said millionaires and billionaires should not be taxed at a lesser rate than plumbers and secretaries. It looks like he has given up on the folly of trying to appease Republicans in the hopes of getting a compromise on a jobs bill. It should be obvious to Obama and everyone else by now that the Republicans in Congress will do nothing to pass any legislation that Obama favors. Instead they will pooh-pooh it as Boehner did yesterday calling it "class warfare" and muttering about "tax the rich, tax the rich." Damn right, it's class warfare. Republicans have been waging class warfare on working people and the middle class in this country for 30 years. It's about time Democrats acknowledged it and started taking them on. The Congress of the United States is totally dysfunctional in the sense that Republicans control any legislation that might benefit the American people, and they will not pass anything except tax breaks for the rich and deregulation for the corporations. They have set the narrative for far too long with only tepid responses from Democrats. Obama himself has tried to compromise with them in order to get anything done and now, finally, he realizes that approach is futile. They will diddle him around over legislation, but they will pass nothing that will in any way benefit the working or middle class or the poor.
This class war has been going on for years without the Democrats even realizing they were being attacked. All the income and wealth increase for the last 30 years has gone to the upper 2% making inequality in the US worse than in Pakistan, for God's sake. The middle class has seen their jobs go overseas, the property values of their homes drop through the floor and their sons and daughters accumulate an immense amount of student loan debt all the while being encouraged to accumulate more since "statistics show you will make more over the course of a life time with a college degree than you will with just a high school diploma." What they fail to tell you is that those statistics don't include recent graduates who have $50K -$100K in student loan debt, who can't get a job and who, most likely, will be lifelong debtors (unlike credit card debt student loan debt can't be discharged in bankruptcy) while their student loan debt mushrooms to $200,000 or more due to defaults and penalties. What the college and university industry doesn't want you to know is that what may have been true for college graduates 20, 30, 40 years ago is no longer true today. While other countries give their young people free schooling up through the PhD, the price of college tuition has gone up 600 percent since 1980, and total student loan debt is projected to pass the $1 trillion dollar mark this year. What was free for me when I attended the University of California 40 years ago now costs a fortune. That's all thanks to Ronald Reagan who instituted tuition at UC.
But I digress. The media attributes Obama's recently discovered fighting spirit to politics. Well, it's more than that. Finally, he is making clear what has been going on for the last 30 years - the screwing of the middle class at the hands of the rich. Republicans, confident that they can cause Obama to spin his wheels and waste his time for the next year or so, until the 2012 elections, are, I hope, in for a gloves off battle come hell or high water in the elections of 2012. It should be an all out education by the Democrats on what's been happening to the US at the hands of the Republicans. Obama is finally wising up that to actually think that Republcians would pass any of his proposed legislation, even in watered down form, would be a waste of time and energy - in fact would be self-defeating. His proposed legislation is for educational purposes only. But he needs to get even tougher. When they talk about JOB CREATORS, he needs to point out that rich corporations and individuals are actually JOB DESTROYERS, having moved more jobs overseas than they've created here at home. Contradict them at every turn. Turn their insipid and inane slogans on their heads. Refute their fairy tale logic. Dominate the media with your message.
But Obama needs to do more. While realizing that his legislation won't pass and using this as an opportunity to educate the American public and gear up for the 2012 elections, the fact remains that the nation is hurting both in terms of unemployment and in terms of debt reduction. Increasing revenues and job creation are both priorities. Anything Obama gets accomplished in the next year will have to be done by bypassing the Republicans in Congress. They are a total roadblock and impediment to any progress that might be made. Obama, the most powerful man in the world as US President, needs to create jobs totally with the resources within the executive branch. He needs to not be stymied by Congress; he needs to go around Congress. I can't believe that there aren't ways to shift already allocated money around within the executive branch in order to create jobs directly. Any job creation involving Congress would be indirect job creation. Republicans say give tax breaks to the rich and they will create jobs. This, even if it were true which it's not, would be indirect job creation. You have to hope that the rich would use the extra cash to create jobs. Instead they will probably add it to the $2 trillion stash they are already sitting on. Why do they need more money in tax breaks to create jobs when they won't use the money they already have to create them? When FDR set up the WPA and CCC this was direct job creation. In just a few months FDR created thousand of jobs. This is what Obama needs to do - not hope that giving tax breaks - even to the middle class - and getting people to spend money will indirectly create jobs, but create the jobs singlehandedly and by himself. He needs to find money for Americorps, today's equivalent of the Works Projects Administration and Civilian Conservation Corps. He needs to create low end jobs because these are the most labor intensive and these are the jobs that anyone can do, not just those with advanced degrees. Even road building has been highly mechanized thus employing fewer people. That was the advantage and wisdom of the CCC - anyone could build trails. There are tons of trash along the freeways, for instance, that need picking up.
We need to get beyond the conventional wisdom that in order to create jobs all we need to do is get people better educated and get them to spend more money. GDP is not even all that important any more as most things that people buy are imported from overseas, are made with Chinese labor. In order to create jobs here, the government needs to be involved in the process. What they are doing right now is not working for the American people. While the Chinese economy is going gangbusters with huge amounts of infrastructure being built and Chinese millionaires and billionaires being created in droves, the American economy is sputtering. Not only that but the European economy is on the skids. There is talk of prevailing on China to bail them out! So what is China doing right that the US and Europe are not doing right. China has an industrial policy and a sovereign wealth fund. Rather than basing their economy on debt as the US does, rather than having a bank-centric economy as the US has, China accumulates wealth and doesn't let banks dominate their economy. In the US and Europe banks dictate to the rest of the economy what is possible. Not so in China. In the US it's all about getting the banks to loan money to business. Not so in China. Europe has gotten it partially right in terms of their governments actually working to promote the interests of the middle class. But the European Central Bank is dependent on the private banking system to loan European governments money and their bureaucrats in Brussels let the Greek situation get too far out of hand before they stepped in to try and do something about it.
But I digress. My point is that Obama is doing the right thing to take Republicans on and have it out with them. So far, so good. But he needs to take the next step and create jobs directly, bypassing Congress, using the resources within the executive branch. C'mon Obama, get creative, get bold. Find the money somewhere. Warren Buffett? The Federal Reserve? Goldman Sachs? Borrow the money for an infrastructure bank to be paid back with tolls. He needs to counter the Republican status quo rhetoric. When they say job creators, he needs to say job destroyers. That's what Romney certainly did at Bain Capital. Obama needs to keep talking about the Buffett rule. Throw Warren Buffett in their face. He needs to keep on fighting.
I was pleased with Obama's firm, serious plain English talk void of elevated oratory .
I was pleased to see Obama finally place job development at the top of his priorities with an aggressive $450 billion plan ... comprising $240 billion temporary payroll tax incentives and $140 billion for infrastructure, schools, $35 billion aid to states to prevent massive teacher firings and encourage rehirings, etc. Equally important, he said all this will be paid for and, therefore, will be deficit neutral. However, he was vague on the specifics (e.g., a financial transactions tax, closing tax loop holes, actions having negligible if no impact on aggregate consumer demand) of how to achieve this goal, other than to say he would propose an even more ambitious target for reducing the long-term deficit.
Of course the Cantor/Ryan Republican Congress members immediately stood up and clapped enthusiastically when Obama mentioned expansion/extension of payroll tax cuts for employers and employees under the American Jobs Act ... while they remained seated and almost "stone still" when he described the very modest job stimulus part of the plan. Tax cuts fit the Republican mission to "starve the government beast" as amplified further by Sarah Palin's recent speech in Iowa (Sept. 2) where she advocated "an end to all corporate taxes."
(Digressing here a bit, QUITE SURPRISINGLY and COINCIDENTALLY, I also learned today that Palin's Iowa talk did contain some substantive points on the nature of our nation's governing paralysis THAT I HAVE JUST WRITTEN ABOUT IN GREAT DETAIL -- including David Korten's research. Her threefold condensed remarks were:First, the U.S. is now governed by a permanent political class, drawn from both parties, that is increasingly cut off from the concerns of regular people. Second, that these Republicans and Democrats have allied with big business to their mutual advantage to create what she called "corporate crony capitalism." Third, that the real political divide in the U.S. may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private) -- Source; Anand Giridharadas of International Herald Tribune, Sept.11-12).
Back to Obama's speech. Unfortunately, as I've noted in a prior writing (U.S. Fiscal-Economic Quagmire: Some Solutions), all evidence shows that temporary tax cuts result in significantly less net tax revenues (thus are deficit inducing). In other words, they do not pay for themselves and do a poor job of generating jobs, especially over the short term. In fact, most respected enonomists conclude that tax cuts are ineffective in stimulating an economy on a temporary basis. But, given the explosion in scarce commodity/fuel prices and systemic wage stagnation of the working class, this tax cut move makes sense now for employees caught in a tight cash squeeze, but probably makes less sense for employers who will hire people when DEMAND increases. Obviously, increasing jobs and decent wages has a far greater effect on aggregate consumer demand than temporary tax cuts.
I have no illusions the jobs stimulus part of Obama's plan will not be cut to pieces by Tea Partiers on the PHONY financial grounds it will increase deficits and debt but tax cuts won't do the same. Their robotical argument is that the real problem is Big Government and the mountain of government regulations on corporations, small firms, and entrepreneurs. This spiritual Resurrection of a version of Saint Newt Gingrich's farcical Contract With America will likely render Obama's job stimulus action as ineffective, helping to insure his defeat in 2012.
But, Obama's awareness of this twisted, dumb logic, and propaganda is on high alert by now. So I have high hopes he will fight the dangerous ultra right thinking as fervently as he spoke last Thursday night for the middle class. Going across the country to explain his plan directly to the American people is a GREAT TAKE IT TO THEM Harry Truman approach! I wish him every success.
Best,
Frank
John: Liselotte and I read about your electrical blackouts in California and were wondering about you and Judy. We're glad everything has returned to normal.
Frank,
Obama's speech was good as far as it went. Unfortunately, the power went out here a half hour before I was all set to watch it! However, I think there is still too much emphasis on tax cuts. His strategy of selling it to the American people and blaming Congress if they don't pass it is good. If anyone thinks the Republican Congress will do anything except tie this legislation up in knots and delay, delay, delay while pretending to negotiate, they are sadly mistaken. Obama shouldn't be so nieve to think that any portion of it will pass including the payroll tax cuts. Republican Congress persons will pretend to be interested, and then do everything they can to consume time and energy while causing Obama to look like he's spinning his wheels, accomplishing nothing.
What Obama should do is to leave the pretend negotiations up to his lieutenants in Congress such as Harry Reid and Nancy Pelosi and then devote his time and energy to finding a way to shift already allocated funds to Americorps or another WPA style program in order to put long term unemployed, minorities and youth back to work immediately. I'm sure it can be done in such a way that bypasses Congress if he only has the will to do it. Meanwhile, the other parallel effort requiring Congressional approval could proceed on another track. Also he needs to figure out a way of funding an infrastructure bank either enlisting the help of billionaires or working out some deal with the big corporations and banks that are sitting on $2 trillion in cash or working out a deal with Fed Chairman Ben Bernanke to funnel money to it in the form of loans instead of funneling money to the big banks. He needs to get creative and try something that's never been tried before to get the money to put people to work immediately. Time is of the essence. Republicans knowing this will do everything they can to waste it so they can run in 2012 on the basis that Obama has failed to create jobs.
All of San Diego County as well as some parts of Orange County, Arizona and Mexico exerienced a blackout for about 12 hours Thursday, September 8, 2011, one of the hottest days of the year although the blackout had nothing to do with air conditioning overload or any other kind of overload to the system. It was all caused by some electric company employee in Yuma, Arizona tripping the wrong switch accidentally or replacing defective monitoring equipment depending on which story you want to believe. Just think what could happen if someone such as a terrorist deliberately and determinedly wanted to cause harm to the six million people who were affected by the blackout! This blackout should be considered a dry run to what might happen if there were a major emergency, an actual cutting of the 500,000 volt transmission line between Yuma and San Diego. How easy would it be for someone to merely bomb one of the transmission towers in some remote area and bring the whole system down not to be recovered so easily as merely turning the power back on which is all San Diego Gas and Electric had to end up doing. Even that took them 12 hours!
This power outage should be considered a dry run for such a terror attack or other major emergency, and, obviously, the system failed catastrophically for little reason. The entire electrical grid is in dire need of being overhauled and redesigned so that this type of failure caused by one person doesn't happen again. There is no reason for a local power outage to be transmitted over the entire system. That's totally ridiculous and unnecessary. There should be enough failsafe built into the system such that local failures are confined to local areas. This is a huge failure of centralized power generation and transmission. Instead the power grid needs to be redesigned as a distributed system. Power generated locally including solar or wind power should be able to power local needs without the possibility of being shut down by a systemic event. Distributed power generation rather than centralized power generation is the key. I have blogged previously about the need for local power generation by means of solar panels on rooftops which could provide for local needs. This is more efficient because a huge amount of power is needlessly lost on transmission lines hauling electricity from the point where it's generated to the point where it's needed. Government needs to allow local rooftop generation to be sold onto the grid by home and business owners as was done in Germany, and the grid to be smart enough to isolate local areas from systemic failures. This also distributes the profits freom power generation to a larger group of people which is precisely why the power companies don't want it to be allowed and instruct their lobbyists accordingly
The other lesson to be learned is that San Diego County was totally unprepared for this relatively benign disaster compared to the weather disasters experienced in other parts of the country. It was a totally self-inflicted wound as the result of the mistake of one person which is almost unbelievable. Here are some of the scary scenarios that resulted. People were trapped in elevators. Most gas stations shut down so that people trying to get home ran out of gas on the freeways contributing to huge traffic jams. Ambulances ran out of fuel. Cell phones and landlines went dead. All supermarkets and grocery stores closed making it impossible to buy ice, water or even food. Restaurants closed even fast food places. Sewage pumps failed causing contamination of drinking water. People confined to their homes without air conditioning, the ability to cook, without the ability to make contact with family or friends, with the contents of their refrigerators spoiling were the lucky ones compared to people stranded on the freeways.
Here's what needs to be done. BACKUP GENERATORS. For the lack of backup generators, gas stations closed, super markets and grocery stores closed. ATMs shut down. Even water machines didn't work. The only facilities that continued to operate successfully were the hospitals that had backup generators. It needs to be mandated or otherwise encouraged that at least some strategic services in each neighborhood have backup generators in the event that some huge catastrophe such as this need not happen again. It could even be an advertising promotion for some supermarkets and service stations that their faciilty is "disaster ready" and would continue to function in the event of a power outage. They could even have a little logo posted at their site that they were "disaster ready." The same goes for phone service.Their facilities should be required to be operational in the event of a power outage. Such simple solutions as requiring ATMs and water dispensing machines to not be grid electricity dependent would go a long way. How about solar panel backup for ATMs and water machines not to mention traffic lights?!?
This whole disaster dry run, I imagine, was very educational for potential terrorists. The only thing needed to wreak havoc on and shut down an entire region affecting millions of people was simply blowing up one transmission tower thus cutting the Yuma to San Diego Powerlink. That would have accomplished the same thing as throwing a switch turning off the power. The fact that the power line between Yuma, Arizona and San Diego County was effectively cut caused the San Onofre nuclear generating station, another source of local power, to shut down. Why? It could have continued to function supplying electricity to San Diego County. Instead it effectively said, "Well if Yuma isn't going to provide electricity, neither will I." At the time it was most critically needed, it shut down. Isn't this a complete design failure of the electrical grid? Clearly, the electrical grid, a major component of infrastructure needs to be totally redesigned for the 21st century so that in the event of a major catastrophe, vital services are not completely cut off leaving millions of people to fend for themselves. This should be a lesson to the entire nation!
Grover Norquist has never been elected to office yet Republican politicians are pledging their obeisance to him. Norquist is one of the most powerful unelected men controlling US politics. His motto is "I want to shrink government down so small that I can drown it in the bathtub." Elected representatives are supposed to swear an oath to uphold the Constitution; instead they are swearing an oath or, if you prefer, making a pledge, to Grover Norquist that they won't vote for any legislation that will raise taxes. BUT, there is a big exception looming on the horizon. As it turns out, Norquist is ambivalent whern it comes to raising taxes on poor and working people. President Obama wants to extend a temporary tax cut of 2% on employees' share of FICA or social security taxes, but Republican politicians are balking. The FICA tax is a tax that affects mainly poor and middle class workers. There are no deductions or exemptions so everyone that works for a living pays FICA taxes on the first dollar they make. Even if they make less than $5 a year they will pay FICA taxes on that $5. On the other hand the rich only pay FICA taxes only on the first $106,000. of their income. Anything they make over that, they pay no FICA taxes on at all. Hedge fund managers and others whose income is mainly capital gains - in other words unearned as opposed to earned income - pay absolutely nothing in FICA taxes. Self-employed people are especially screwed by FICA taxes as they pay both the employer's and the employee's share or in other words double which presently amounts to 15.3%. This double payment for the self-employed is thanks to President Reagan and Alan Greenspan. They invented the social security Ponzi scheme which involves taxing the working class, transferring the money to the General Fund (so income taxes need not be raised on the rich), and then piling up worthless IOUs in the Social Security Trust Fund. The fact that they are worthless can be easily deduced from the fact that Republican politicians now say social security needs "reform" although $2.5 trillion supposedly exists in the Trust Fund, a fact they will never mention.
The most telling Republican reaction to the president's proposal to extend the lower rate has been one man's equivocation. The man is Grover Norquist, author of the anti-tax-increase pledge that the vast majority of House Republicans have signed. On Tuesday, pressed by a number of journalists (most prominently, The Post's Greg Sargent) to state his position on raising the payroll tax, Norquist sought to quietly steal away. "One would have to see the final legislation," his spokesman, John Kartch, told Sargent, to determine "what is the net effect on total taxes."
But unless Congress votes to extend it, the lower rate will expire on Jan. 1 regardless of its effect on total taxes. Norquist flat-out opposed letting the Bush tax cuts expire - though he did tell The Post's editorial board that it didn't technically violate the pledge, a position that he has since tried to obfuscate. Now that the payroll tax is slated to expire, though, Norquist is lost in contemplation (or something). Congressional Republicans inclined to increase the payroll tax - and I'm not aware of any who have come forth to oppose that idea - can do so, apparently, without fear of being labeled tax-increasers just because they've increased taxes.
So Republicans are showing their true colors - they don't mind tax increases on the poor and middle class, but they will never vote for tax increases on the rich. The Bush "temporary" tax cuts which affected mainly the rich will never be allowed to be temporary if Grover Norquist or the Republicans have anything to do with it because Grover has proclaimed that any increase in taxes due to the end of a "temporary" tax cut is in fact a tax increase, but this logic doesn't apply to the increase in FICA taxes caused by the expiration of the "temporary" 2% tax cut. None other than Michelle Bachmann, who abhors tax increases, has objected to the extension of the FICA tax cut due to the fact that "we can't afford it." Oh, but we can afford the much more costly Bush tax cuts which are due to expire at the end of 2012. If Obama loses the Presidency in 2012, how much do you want to bet that the Bush tax cuts will be made permanent? Bachmann has also said that we can't afford any additional unemployment benefits. We just can't afford it.
Obama needs to come out and call the Republicans out in no uncertain terms about the game they are playing: give every advantage to the rich while taking away anything that benefits the poor and middle class. Is this class warfare? You bet it is. Democrats don't need to shy away from the term. And yet Obama wants to make believe that Republicans in Congress really want to do what's best for the American people. The only American people they represent are the richest American people, and why Obama wants to play this silly game that they are really well-meaning and want to come up with good legislation that benefits everybody if only all parties are willing to compromise, I can't fathom. They particularly will do nothing that will improve the economy or create jobs because their whole goal is to have Obama be a one term President. The best way to insure that in their minds is to eliminate jobs wherever possible. That is why Republican Governors are laying off public employees and starving state budgets as much as they possibly can. The resultant loss of jobs is adding a couple of percentage points to the unemployment rate.
Here's what Obama needs to do. In conjunction with the Federal Reserve, create an infrastructure bank that doesn't require any Congressional approval. If the Fed can pump money into the large banks surely a method can be devised for the Fed to fund an infrastructure bank. Then Obama can use that money to pay for badly needed infrastructure projects all over the US. This would create jobs directly and not require any Congressional approval, because if Obama thinks Congress will approve any program that would create even one job, he's kidding himself and the American people. His compromising days should be over. The handwriting is on the wall. He will get nothing passed through Congress in the next year and until after the 2012 elections. He may as well take an ideological position as the Republicans have done and at least educate the American people about what the stark alternatives are. And in order not to be totally impotent as President he needs to create jobs totally and entirely by executive order. He shouldn't waste his time and spin his wheels negotiating with Congress. His "jobs program" should be mainly talking points to educate the American people because there is no chance any part of it will pass Congress. Then he should circumvent Congress and use executive orders to create jobs directly.
Another executive order Obama could give would entail demanding that Federal contracts actually be given to small businesses instead of being diverted to large corporations. This could create a de facto jobs program entailing some $200. billion a year. This is not rocket science and it is something Obama could do independent of Congress:
The Small Business Act defines a small business as independently owned. That definition excludes any publicly traded companies. Also, when determining if a business is small, the number of employees of any parent company and all affiliates must be considered. Therefore, no Fortune 500 firm or publicly traded firm can be considered a small business.
Yet, in fiscal year 2010, 61 of the top 100 small business federal contractors were actually large firms. During a July Senate hearing aimed at discovering why large corporations like Lockheed Martin received billions of dollars in small business contracts, Senator Claire McCaskill expressed dismay that the SBA had allowed this to happen. She said it is "time for all of us to take a hard look at the way the government does business."
I could not agree more. If President Obama wants to create jobs and stimulate the economy, a simple executive order stating that government agencies can no longer report contracts awarded to publicly traded companies as small business contracts would suffice. Considering the federal acquisitions budget is around $1 trillion, this would redirect upwards of $200 billion per year in existing federal infrastructure spending to small businesses and the middle class.
The key phrase is "existing federal infrastructure spending," which means it does not require new taxes or new spending. This is money that the government currently spends. President Obama just needs to redirect it to companies capable of creating jobs. Furthermore, it would solve a ten-year-old contracting scandal that has been covered by virtually every major newspaper, television and radio outlet in the country.
That brings us back to Grover Norquist and the question why should elected representatives of the people in a democracy take a pledge to some unelected power broker whether it's Norquist or Rush Limbaugh or the Koch brothers. Before money comes to completely dominate the American political system, someone needs to stand up for the little guy and point out the truth about what's going on. And I think Obama should be that guy. He needs to abandon the fiction that compromise is the way to go, the way that will produce results. It should be clear to him by now that compromise will produce nothing except his own political emasculation and ignominious defeat in 2012. Obama needs to take matters into his own hands in terms of job creation and that means using his power as President to use executive orders to get the job of job creation done.
The Tea Party wants to get "government off 'our' back." But is government really on our back or is the case really that corporations and wealthy interests are on government's back? There are 40,000 or more lobbyists in Washiongton, DC. They are there for the purposes of extracting taxpayer money for their corporate sponsors' benefits and for no other reason. The notion that taxpayer money goes to provide benefits for taxpayers, especially middle class taxpayers, is rather nieve. Taxpayer money goes to provide benefits for large corporations and the wealthy because the poor can't afford lobbyists. And the union movement is practically dead so union money is not influencing legislators to any great extent. Republican Governors like Scott Walker are doing their level best to kill off the remaining unions so that corporate sponsored lobbyists will have full sway in Washington. They aren't there to help the middle class; that's for sure. They are there to write legislation favorable to their own interests whether they be defense contractors lobbying for more money for military hardware or corporate flacks trying to drill holes in the tax code or lower the corporate tax rate. The notion that a lower corporate tax rate combined with closing the loopholes is preferable is nieve since lobbyists will only then proceed to drill new loopholes into the tax code at the lower rate.
Republicans argue that any expiration of a "temporary" tax cut such as the Bush tax cuts is actually a tax increase, but Michelle Bachman said on Meet the Press that she wouldn't be in favor of extending the "temporary" reduction in the payroll tax rate because "we can't afford it." Yet we can afford, according to her, to continue the temporary Bush tax cuts which amount to a whole hellava lot more. Why won't Bachman apply the same logic to the temporary payroll tax cuts? I'll tell you why. Because the payroll tax affects mainly the poor and middle class. It's a regressive tax that's used to pay social security recipients and for many years the excess was just combined with income tax revenues and spent in the General Fund. So General Fund expenditures were partially funded by a regressive tax on the poor. Right wingers love to point out that the poor and lower middle class pay hardly any income tax. What they don't point out is that they pay excessive payroll taxes, taxes that allow for no deductions or exemptions. For instance, if you're a poor self-employed worker earning $10,000 a year, you will pay over $1500. in payroll taxes no matter how many children you have or how many medical expenses or anything else. You will pay at a tax rate of 15.3% (except for this year for which there is a 2% reduction for employees), more than a hedge fund manager pays. Capital gains are taxed at only 15%. Is that fair? Of course not. As long as the money is being spent in the General Fund and treated as income tax revenue, deductions and exemptions should be allowed for payroll taxes which affect mainly the poor just as they are for income taxes which affect mainly the rich. When right wingers point out that the poor don't pay any income tax, they fail to point out that the poor, especially the poor self-employed, pay a higher rate, when you consider payroll taxes, than rich hedge fund managers including Warren Buffet. Please note that the rich pay hardly any payroll taxes and have voluminous deductions and exemptions on their income taxes.
So instead of getting government off our back which is the movie right wingers want you to see, instead we should be trying to get corporations off government's back, which is the reality they want you to ignore, so that government can better serve the interests and needs of the poor and middle class. The right wing makes no bones about this being class warfare. They flat out come out and say that they are in power for one reason and one reason only: to serve the needs of the rich corporate class. That is their purpose in life. They don't even try to hide it. Michelle Bachman is not in favor of extending unemployment benefits for the long term unemployed because "we simply can't afford it." Yeah, but we can still afford more tax breaks for the rich because they are the "job creators." Really? REALLY?? If they are the job creators, then where are the friggin jobs? They've had 30 years of supply side economics (or voodoo economics as the first George Bush christened it) and the job situation is worse than it was in the Great Depression in absolute numbers of people out of work and on the verge of desperation. We "can't afford" to allow them to subsist which would cost a paltry amount, but we can afford to give gargantuan tax breaks to the corporate class because - hint, hint - they might create a job or two somewhere down the line. Give me a break. The only jobs they are creating are overseas. Cheap labor combined with automation produces all the goods and most of the services that the US needs. Free trade has allowed the global labor force to be concentrated in the country where labor is cheapest and the finished product shipped to wherever it can be sold. Increasingly, this is not in the US where consumers have cut back on their spending finally realizing that their houses can no longer be used as ATMs.
We don't need small government, weak government, a government that corporate lobbyists can ride roughshod over; we need smart government, strong government, "right sized" government, a government which has the audacity to kick lobbyists out of Washington and get money out of politics. Most Republican Senators and Congressmen are merely front men for corporations. They are merely "political personalities" able to garner votes and get themselves elected. They are not legislators. Lobbyists write the laws. As front men for corporations, Republican Congressmen's paychecks are provided by the corporations they represent. They need big money to get elected. When their time in Congress is finished, they can look forward to a cushy job working for the corporations they represent and making use of their inside contacts in Washington to funnel more taxpayer money and taxpayer funded contracts to the corporations they first represented and later worked for. Small government simply means government dominated by large corporations which exists to extract taxpayer money, mainly from the poor and middle class, and transfer it to the wealthy in terms of tax breaks and government contracts. It's not the poor who are feeding off the government trough; it's the rich. They want you to watch this movie over here about welfare queens and ignore that reality over there about the transfer of wealth to the already wealthy. They want you to abhor the redistribution of wealth from the government to the poor and middle class in terms of entitlements and unemployment insurance while ignoring the transfer of wealth from the middle class to the rich.
And why should unelected political underworld figures like Grover Norquist be in the position of extracting a pledge from every elected Republican Congressman that they won't raise taxes? They were elected to do the public's bidding not Grover Norquist's. Unelected rogues like Karl Rove, Dick Army, the Koch brothers and Grover Norquist are trying to control the American political system just as unelected lobbyists swarm the Capitol. And as for getting money out of politics, who benefits the most from keeping money in politics? The TV and cable channels who receive huge sums of money in the form of political TV ads. That's where most of the money is spent. Consequently, you will never hear anything about getting money out of politics on Meet the Press, Face the Nation or on any cable news infotainment show. There are vested interests which want to keep money in politics, the more the better. The Citizens United Supreme Court decision was a windfall for media news channels. No wonder they give as much air as possible to charlatins like Sarah Palin and Christene O'Donnell; their paychecks could just as well be endorsed by big right wing money. Instead of getting people on their shows who are really intelligent and insightful, they get airheads and then look forward to another infusion of right wing cash. The exception is CNN's Fareed Zakaria who always books intelligent and articulate experts.
Getting government off corporations' backs implies a rational world in which corporations want nothing more than to compete freely in the free enterprise system without being interfered with by government. They just want to go merrily along competing with their competitors, providing jobs, serving the public interest and providing value to their shareholders. In reality this hands off approach is a total lie. Corporations are totally hands on when it comes to government. They spend big bucks on lobbyists to make sure that government cash and legislation is funneled their way. They are not simply competing with other corporations in the free marketplace. They are using government to their advantage, and they are making sure that the middle class does not get to use government to its advantage. They don't simply want to get government off their backs. They want to climb on the back of government. They want to make sure that government does not tell them what to do, whether or not they can destroy the environment or cheat consumers. They want to tell government what it can do which is to say remove any regulations which might protect the public or the environment and lower their profit margins. They want to get government out of their way so they can exploit foreign labor and American consumers because this will maximize their profits, and that, my friend, is their bottom line. They are here to serve themselves not the public and they will use every lever of government in order to do so.
The private sector has added jobs in recent months, but government has lost jobs because Republican Governors are firing public workers. In July total private sector employment rose by 154,000 over the month, reflecting job gains in several major industries, including health care, retail trade, manufacturing, and mining. Government employment continued to decline mainly at the state and local levels which lost 39,000 jobs. The Federal level added 2000 jobs so the net new job creation was 117,000 jobs. At the state and local levels they are doing their level best to eliminate jobs and increase the unemployment rate at a time when the unemployment rate is approaching 10%. Republican Governors like Scott Walker in Wisconsin, Rick Scott in Florida, Rick Snyder in Michigan, Chris Christie in New Jersey and John Kasich in Ohio are doing everything they can to make the job situation worse so that Obama won't be reelected. If all those teachers, policeman, firemen and snow plough drivers hadn't been laid off, the unemployment rate would be a couple per cent lower. With the unemployment rate above 9% Obama's chances of being reelected are nil and Republicans aim to keep it that way.
Now they are going after the Post Office which is considering laying off 120,000 workers! This fiasco is being precipitated because the Republican Congress is forcing the Post Office to make overly huge payments into their pension fund thus causing a budget crisis. The fact that most U.S. citizens are using fewer USPS services due to improved electronic and computer communication, turns out not to be the main source of the problem. It turns out that the Post Office budget crsis has been totally manufactured by Republicans in Congress.
Postmaster Donahoe testified on Wednesday in the House of Representatives before the Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy on Oversight and Government Reform, a very long name for members sitting in judgment on how the USPS goes about its business.
In proposing more cost cutting for fiscal year 2011, Donahoe said $2 billion more will be eliminated from the Postal Service budget. Despite that and the $9 billion from the last couple of years, USPS cannot make ends meet without deficit spending and borrowing, in a mini-version of the total federal budget woes.
The fact that most U.S. citizens are using fewer USPS services due to improved electronic and computer communication, turns out not to be the main source of the problem. Congress learned from the Postmaster General that the decrease in usage and the attendant fees that they have taken out of the system rank second to “...the result of an inflexible business model due to the laws that govern the Postal Service.”
Most particularly, Donahoe cited a federal regulation instituted in 2007 that "...required the Postal Service to pre-fund retiree health benefits (RHB) in amounts of approximately $5.5 billion per year." There is no other entity in the federal bureaucracy that must abide by similar rules. There is a direct correlation, said Donahoe between the Postal Services' budget woes and the institution of the rule on RHB.
Audited financial results for the four years prior to RHB taking effect show the USPS running in the black. But for the requirements of the RHB, the Postmaster General insists the Postal Service would still be running within its budget and showing revenue above and beyond that. In addition to asking Congress to reconsider its decision to burden the agency in this way, Donahoe reiterated some familiar and introduced some new remedies for the budget woes.
Republicans are eliminating jobs and exacerbating the unemployment situation which dovetails very nicely with their "small government" quest. Just like Scott Walker created a budget crisis in Wisconsin by giving huge tax breaks to corporations and then attempted to balance the budget on the backs of the poor, the middle class and the unions, the Bush tax cuts are bankrupting the Federal government, and Republicans are calling for cuts in Social Security and Medicare. At all levels, Federal, State and Municipal, Republicans are creating crises and then calling for the elimination of public service jobs. It's the Shock Doctrine which they perpetrated unsuccessfully in South America, but now they're using it on their own country in order to turn the US into a banana republic just when the so-called banana republics are throwing off the yoke of neocon conservatism. The more jobs eliminated, the less the chances of an Obama reelection. God help us if a demigogue like Rick Perry gets into the White House!
Some Democrats have boldly suggested that the Federal government should create jobs directly, a move that Republicans would surely label as "socialist." Congresswoman Jan Schakowsky has a great jobs creation plan reminiscent of the Works Progress Administration and Civil Conservation Corps, plans developed by FDR during the Great Depression which Republicans are desperately trying to revisit. According to the Huffington Post:
WASHINGTON -- Rep. Jan Schakowsky (D-Ill.), a member of the Congressional Progressive Caucus, announced on Wednesday that she will introduce a progressive-minded budget outline aimed at putting more than two million people to work.
Titled the “Emergency Jobs to Restore the American Dream Act,” the plan would cost $227 billion and would be implemented over two years. It would be financed by separate legislation introduced by Schakowsky called the "Fairness in Taxation Act," which would raise taxes for Americans who earn more than $1 million and $1 billion. It would also eliminate subsidies for big oil companies while closing loopholes for corporations that send American jobs overseas.
The congresswoman said that her plan would create 2.2 million jobs and decrease the unemployment rate by 1.3 percent.
"If we want to create jobs, then create jobs," Schakowsky said in a press release. "I’m not talking about "incentivizing" companies in the hopes they’ll hire someone, or cutting taxes for the so-called job creators who have done nothing of the sort. My plan creates actual new jobs."
Schakowsky’s proposal reads more like a progressive wishlist than legislation likely to be signed into law. But it does provide a template of sorts to help Democrats frame their budget argument as lawmakers enter the high-stakes super committee negotiations.
Under her plan, the following policies would be implemented:
The School Improvement Corps would create 400,000 construction and 250,000 maintenance jobs by funding positions created by public school districts to do needed school rehabilitation improvements.
The Park Improvement Corps would create 100,000 jobs for youth between the ages of 16 and 25 through new funding to the Department of the Interior and the USDA Forest Service’s Public Lands Corps Act. Young people would work on conservation projects on public lands including the restoration and rehabilitation of natural, cultural, and historic resources.
The Student Jobs Corps would create 250,000 more part-time work study jobs for eligible college students through new funding for the Federal Work Study Program.
The Neighborhood Heroes Corps would hire 300,000 new teachers, 40,000 new police officers and 12,000 new firefighters.
The Health Corps would hire at least 40,000 health care providers, including physicians, nurse practitioners, physician assistants, nurses, and health care workers to expand access in underserved rural and urban areas.
The Child Care Corps would create 100,000 jobs in early childhood care and education through additional funding for Early Head Start.
The Community Corps would hire 750,000 individuals to do needed work in communities, including housing rehab, weatherization, recycling, and rural conservation.
In addition, the bill would give priority to the longterm unemployed -- the so-called "99ers" who have exhausted both their state and federal unemployment benefits. Federally extended unemployment benefits are set to expire this year, even though nearly 14 million Americans remain out of work and it takes the average worker nine months to find a new job.
“The worst deficit this country faces isn’t the budget deficit," Schakowsky said. "It’s the jobs deficit. We need to get our people and our economy moving again.”
So jobs would be created directly by the Federal government and the program would be funded by raising taxes on millionaires and billionaires. It would be a tax (on those who can afford to pay) and spend (in order to create jobs) bill. It would not add to the Federal budget deficit or national debt. What's not to like about this bill? Do you want "small government" or government which can cause an amelioration of the American peoples' lives? Do you want jobs and tax fairness or the present system of government of, for, and by the wealthy? Do you want "small government" in which swarms of lobbyists write the laws and drill holes in the tax code favoring large corporations or do you want government that provides social services like public schools, libraries, parks, post office, police and fire departments? Americans better get their heads on straight and stop voting for "political entertainers" like Michelle Bachman and Rick Perry.
If the American people demand that government should create jobs directly and tax the rich to do it, the unemployment rate will come down. The Republican controlled Congress would never pass such a bill so the only thing that can be done is to make sure that the elections of 2012 produce a Democratic controlled House, Senate and Presidency. Then maybe the US could be pulled out of its present morass and slough of despond. Otherwise, Great Depression II here we come!
There was no hue and cry when George W Bush was doubling the national debt. Bush started two illegal, unpaid for wars, gave huge tax breaks to the wealthy and instituted a pharmaceutical benefit for seniors that was again unpaid for. All these programs which were inherited by Obama were based on borrowed money and hence their net effect was simply to increase the national debt. In order to get the national debt under control all that would be necessary would be to reverse these Bush era programs, but Republicans want to stick Obama with these Bush institutionalized deficits instead. Republicans and Democrats went along with all this dutifully raising the debt limit whenever Bush asked them to. Now Republicans are screaming bloody murder about the debt, but they have not deinstituted Bush's programs that are still causing it. They haven't let Medicare negotiate prices with the pharmaceutical industry; they haven't done away with the Bush tax cuts although Obama has tried to get them to. Instead, they put Obama's back to the wall and demanded that the Bush tax cuts continue. They are due to expire at the end of 2012, and that is the primary reason why Obama insisted on a debt ceiling deal that would carry us through 2012. If there had been another debt ceiling fiasco around Christmas of 2011, Republicans would have held Obama hostage over the Bush taxs cuts forcing him to not let them expire or they would shut the government down. The current debt deal wisely avoids this scenario. Obama is trying to wind down Bush's stupid wars in a way that doesn't raise Republican ire, but he is not doing it fast enough. They are still consuming far too much money.
The debt ceiling deal provides for a commission that will get absolutely nowhere which will result in an automatic spending trigger which will provide for significant cuts to the Pentagon in addition to scaling back social programs. The fact that there will be significant cuts to the Pentagon is a stroke of genius on Obama's part. So I don't think the debt deal was such a bad agreement from Obama's point of view. He managed to put off the most significant cuts in social programs until the "out years." This means that nothing much will happen until after the next elections. If Democrats win big at that time they can undo whatever damage was done by any deals they made with Republicans. Nothing is set in stone that the next Congress cannot fix.
The Republican modus operandi for some years has been to vote against anything that would make a Democratic President look good in order to get the American people to vote against him in the next election putting a Republican in the White House. So this creates the conventional wisdom that a Democratic President doesn't know how to get anything done no matter how good his ideas or proposals are. Democrats have then obligingly gone along with Republican Presidents to get things done because they are not quite as venal and dastardly as Republicans and are more interested in helping out the American people. Consider Richard Nixon. Although no dirty trick was beneath him in order to obtain the Presidency, Nixon governed as a liberal. He established the Environmental Protection Agency, ushered in the first Earth Day, made an opening to the Chinese communists, something no Democrat would have dared to have done because of the expectation of a huge Republican outcry, tried to put together a National Health Care plan which was cut short by his impeachment, imposed wage and price controls, created Supplemental Insurance Income and on and on. The Republciacn MO in those days was to give the American people what they wanted but only when a Republican was in the White House. Otherwise, fight against any improvement in the lot of the American people thus convincing said people that the only way to get anything done was to put a Republican in the White House.
Then along came Jude Wannisky with a better idea, the Two Santa Claus Theory. The part about resisting any progress when a Democrat was in the White House remained the same. But instead of governing as a liberal, what the Republicans would do was to give everybody a tax break and put it on the American credit card. The idea was to run up the debt as much as possible, spend like a drunken sailor, create the ambiance of prosperity and then scream bloody murder about the debt after a subsequent Democrat was elected President. This would put Democrats in a bind because they would not be able to implement any social programs such as those implemented by Nixon. Their only job would be to clean up the elephant poop after the parade was over. This would further contribute to the conventional wisdom that the only way to get anything done was to elect a Republican President. This worked because Congressional Democrats were not as shameless as Republicans and would go along with Republican initiatives, if they thought they would benefit the American people, even when they did not hold the Presidency.
These techniques have been raised to an art form under the Obama Presidency. Republicans will not let any legislation pass that would in any way be considered a victory for Obama even if the legislation represents Republican ideas and no matter how much the lack of it harms the American people. By so doing they hope that the American people will blame Obama for not getting anything done and not notice that the real reason nothing gets done is Republican Congressional obstructionism. Even when Democrats controlled both Houses of Congress, as they did during the first two years of the Obama Presidency, Republicans used the filibuster in the Senate to prevent a whole slew of legislation, such as the legislation that would have closed the loophole giving tax breaks to corporations that ship American jobs overseas, from getting passed. Now that they control the House, their mission is even easier. They simply will not bring to a vote any Democrat inspired legislation, or if they did, they would simply vote it down because they have a majority. They don't even need to use the filibuster.
Only this time, after they get a Republican elected President in 2012, he or she will not pull a Nixon and govern as a liberal. Their far right philosophy is too much ingrained for that to happen. This time, even though the American people might be yearning for a "can do" President, what they will get instead is the opportunity to jump out of the frying pan and into the fire. If Republicans control both Houses of Congress and the Presidency after the 2012 elections, what the American people will get is the complete elimination of all social programs unless Democrats use the filibuster in the Senate to stop them. They will get lower taxes for millionaires and billionaires and higher taxes for the poor and middle class. (Expect payroll taxes to increase.) They will get class warfare in the extreme while being called out for engaging in class warfare themselves by the likes of Rush Limbaugh. One Republican tactic is to accuse the other side of doing the very thing they themselves are doing. The Tea Party will stop worrying about the National Debt because that will be what their minders want them to do. Instead the push will be on for "revising" Medicare, Medicaid and Social Security, deregulating corporations, lowering corporate taxes while lobbyists drill new loopholes in the "lower" taxes, privatizing public schools, parks, libraries, fire and police forces, getting rid of unions and converting all public employee defined benefit pension plans to 401ks. What's happening in Wisconsin, Ohio, Michigan and some other states will have been only a prelude to what will happen on a national scale. The American people, despite opinion polls to the contrary, will not figure into any Republican calculations and their way of life will be decimated before their very eyes with them powerless to do anything about it. This is the morass that the conventional wisdom - that a Democrat can't get anything done while a Republican "can do" - will lead us into. This is the race Mitt Romney is gearing up for.
While the Republicans in Congress are determined not to give the Obama administration any "victories" which might actually make the lot of the American people better, and to force his back to the wall and demand that he implement the Republican agenda, the American people are too dumb to figure out what's happening. They will be swayed by the billions of dollars which will be poured into TV advertising that Obama's administration was a bust and that, in order to have "Morning in America," they must elect Republicans in 2012. If they are so led and if they so comply, they will be treated to Republican economic policies which will eliminate even more American jobs while creating tons of them overseas, the homeless population will mushroom, middle class people will be forced out onto the streets in droves while the economy goes into a tailspin. But while this is happening corporate balance sheets and CEO salaries will continue to skyrocket. Any talk by Democrats of a "jobs program" will be branded as socialism. The next Republcian President will fill a couple of Supreme Court vacancies with hard right Republicans thus guaranteeing that Republcian policies and laws will prevail into the next millenium. Any agencies that protect the American people will be defunded even if they are allowed to continue to exist. Workers will lose all the rights that their forefathers fought so hard for. Federal tax receipts will come less from corporations and billionaires and more from the working poor. The sick, the elderly and the disabled will have to rely on church based charity and forego any hope of help from their government. Hoovervilles (Romneyvilles?) will spring up all over the country.
Republicans are recreating the Great Depression and doing it with a vengeance. Their policies are ideologicaally based, not pragmatic, and they are bound and determined to thwart the will of the people in order to create a libertarian utopia. It doesn't matter to them how much harm they do to the average American or what the average American wants from government. Their mantras of small government, privatization of any and every public agency or program will carry the day despite any cost. According to them the Great Depression should have been allowed to proceed as long as corporate profits were up. The fact that unemployment was 25% was no big deal. Their advice to the unemployed: "Get a job, you lazy, shiftless suckers!" The prison-industrial complex will continue to expand especially for people of color who will find themselves incarcerated for drug offenses and petty crime while fraudulent bankers and rating agencies will only be bailed out when they get in trouble. Thus a libertarian utopia will have been achieved in which there is a small class of very wealthy people while the vast majority becomes increasingly immiserated. Sure, there will be a few lone voices crying out in the wilderness, a few disgruntled people who won't go along with the Republican program. They will be characterized as losers, socialists and people who have renounced the American dream.
Republicans want to "reform" social security. They say social security is broke. Not so. There's $2.5 trillion in the Social Security Trust Fund (SSTF). The way the funding for social security works is this. Workers pay a payroll tax otherwise known as a FICA tax. The rate is 7.65% of gross earnings up to $106,000 for employees. Employers pay a similar amount. Any money earned above $106,000. is not subject to the FICA tax. 6.2% goes to social security and 1.45% goes to Medicare. In 2011 the rate was temporarily lowered to 5.65% for employees to spur the economy. If you're self-employed, you pay both the employee's and the employer's shares which amounts to 15.3% of your gross earnings which is more than what a hedge fund manager pays. They pay the capital gains rate of 15%. There are no deductions or exemptions for the FICA tax. So no matter how poor you are, there's no escaping paying 7.65% if you're other-employed or 15.3% if you're self-employed. Even if your income is so meager that you pay no income tax at all, you still pay FICA tax.
In 1983 and 1984 President Ronald Reagan conspired with Alan Greenspan to raise the FICA tax and reduce benefits ostensibly to protect the long term security of social security. They made social security benefits taxable income for one thing. This resulted in more money coming in in FICA taxes than was being paid out to social security recipients. Reagan and Greenspan took the balance of the money, after social security recipients were paid, and put it in the General Fund along with income tax receipts. They then put a similar amount in the form of a non-marketable, "special" Treasury bond in the SSTF. The ostensible rationale was that, when payouts exceeded FICA receipts at some later date, the SSTF would simply cash in those Treasury bonds as any investor would and use the money to make up the difference between FICA receipts and payouts to recipients. These "special" Treasuries supposedly had the "full faith and credit" of the United States Government. Only in reality they didn't. The reality is that Reagan raised taxes on the poor so that he didn't have to raise progressive income taxes on the rich. There is no $106,000. limit on income taxes. You pay income taxes on the full amount of your income not just the first $106,000. of it.
Well, the time is here when social security payouts exceed what is collected in FICA taxes. So the SSTF should simply be cashing in those "special" Treasuries to make up the difference, right? So why are Republicans in a tizzy about reducing social security benefits? Because the Reagan/Greenspan plan was a scam from the beginning. It was a Ponzi scheme on top of a fraud. They knew that at some later date Republicans could raise Holy Hell about social security and the American people would be too dumb to demand their benefits based on the $2.5 trillion that still exists in the SSTF. Instead they paid their regressive FICA taxes for years only to reach the point where those "special" Treasuries were supposed to be cashed in to continue paying out to social security recipients at the same rate. But what happens when the "special" Treasuries are cashed in? Why that amount has to be paid out of the General Fund back into the SSTF so that it can make payments to recipients. That means that the government either has to raise income taxes or other forms of revenue or has to borrow the money which is to say that it has to issue marketable Treasury bonds to investors which it has to pay interest on. These marketable Treasuries then get added to the deficit and the national debt whereas they weren't counted as part of the debt as long as they existed in the SSTF in the form of "non-marketable" Treasury bonds.
So the government either has to issue marketable Treasuries to investors or raise taxes to pay back the SSTF when it cashes in its Treasury bonds in order to make up the difference. But you will never hear Republicans mention the fact that there is $2.5 trillion in the SSTF which has the "full faith and credit" of the US government. Instead, they have their panties in a wad over the fact that taxes would have to be raised or the national debt would have to be increased every time the SSTF cashes in some of the Treasuries it holds. So Republicans want you to believe that social security needs to be "reformed", that benefits must be reduced in order to keep taxes low and reduce the deficit. They want you to watch the movie over here while ignoring the reality over there. I have explained all this in a previous blog.
So all that would be necessary is for Americans to demand their rights based on the fact that they have paid into social security with the understanding that the money in the SSTF would be paid out to social security recipients and, until that money is depleted, there should be no reason to lower social security payouts or benefits, just as Reagan and Greenspan promised and under the "full faith and credit" of the American government. But here is the shocker. As it turns out a Supreme Court decision (Flemming vs Nestor) determined that no individual American has a claim on the funds in the SSTF even if he or she paid into it over their whole working career. Furthermore, Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." So all that would be necessary to do away with social security altogether is for Republicans to gain control of all three branches of government. They then could just abolish social security completely and legally. Think it couldn't happen. Consult the Tea Party crowd and the rabid right wing libertarians and the Ayn Rand acolytes.
I maintain that Reagan and Greenspan knew exactly what they were doing. They created a regressive tax on the American poor and lower middle class that they knew could be scammed at a later date when payouts exceeded what was paid in or in other words when the regressive tax had lost its usefullness as a supplement to the General Fund. With all the concern about the debt crisis today and all the anxiety over whether or not the US will default on its debts, no one is the least bit worried over whether the US will default on its "special" Treasuries held in the SSTF. The default on Treasuries in the SSTF is not even on anyone's radar - least of all the bond market's. The rating agencies are not the least bit concerned about downgrading the US AAA credit rating because of default on the "special" Treasuries. Why? Because it knows that Congress can simply change the rules at any time either by reducing benefits or by raising FICA taxes to guarantee that these non-marketable "special" Treasuries will never be converted into marketable Treasuries! So the Reagan/ Greenspan plan consisted of a fraud on top of a Ponzi scheme. All that would have been necessary to guarantee the legitimacy of the bonds in the SSTF in the first place would have been to make them marketable Treasury bonds. In a previous comment Art a Layman said that the SSTF actually did have the right to purchase Treasuries and other securitites on the open market. If so, why didn't they do it? They simply could have purchased Treasuries and other securities on the open market when FICA taxes exceeded payouts. But then that money couldn't have been transferred into the General Fund and used for Federal expenditures! However, the bonds held by the SSTF would have been redeemable or salable just like any other investor owned Treasury. The SSTF would then have had enlarged fiduciary reponsibilities to invest and manage their investments wisely. This is what most countries which have sovereign wealth funds actually do. Norway's sovereign wealth fund which provides pensions for Norwegians actually invests in the open market in a basket of securities. But Reagan and Greenspan knew what they were doing when they didn't reform social security in this way. They knew that they were essentially raising taxes on the poor and lower middle class in lieu of raising taxes on the rich.
The Federal receipts from FICA taxes are almost the same as the Federal receipts from income taxes - both FICA taxes and income taxes constitute approximately 40% of Federal revenue receipts. This was the plan all along. Now when the Democrats want to raise taxes on the rich, Republicans call this heresy. They won't stand for raising taxes on the rich, but they didn't have a problem when regressive taxes on the poor were raised by Reagan and Greenspan, and these have been in effect for over 30 years. And the American public is not even aware. Again it's watch this movie over here and ignore that reality over there. Congressman and Tea Partier Joe Walsh doesn't want to have his children have to pay off the national debt, but the fact that he's over $100,000. behind in child support payments doesn't seem to bother him at all.
I am not against social security reform, only the kind of social security reform Republicans would bring us which amounts to cutting benefits on the poor and middle class and raising regressive FICA taxes. Instead, what I propose is a drawdown of the "special" Treasuries in the SSTF. This would provide benefits at current rates for the next 25 years or so. At that point social security FICA taxes could be enhanced very simply by raising the cap which presently is $106,000. By taxing the rich on their whole income instead of just the first $106,000., social security could be made solvent into the indefinite future. Any positive balance in the SSTF at that time should be invested in marketable securities including but not limited to US Treasury bonds. Furthermore, benefits could be reduced for the rich while enhancing benefits for the poor. People with retirement incomes over $100,000. don't need an additional $1000. a month in social security benefits. This money would be better spent enhancing the incomes of those with little or no retirement income other than social security. However, social security should still be there if for some reason the retiree with $100,000. in retirement income suddenly lost that income. So increasing benefits for the elderly poor while reducing benefits for the elderly rich would be a social security reform that I would endorse. Not all social security reform is bad, just social security reform brought to you by Republicans. Democrats should embrace social security reform based on democratic principles not simply reject any and all reform out of hand.
But again Republicans are demagoguing and being their usual duplicitous selves when they say social security is in trouble. It's not. They want you to watch their movie over here while ignoring the reality over there. Granted their movie is more entertaining than the reality, and American consumers would have to exert some effort to find out what the reality actually is. They might have to pull themselves away from their reality shows and football games to do some research. What! Should the average American be expected to do "research" instead of relying on the "research" conducted by Fox so-called News and Rush Limbaugh? And as this movie is being played out, the reality is that the Republicans in Congress just want to reneg on the "full faith and credit" of the American government when it comes to the Treasuries in the SSTF while the bond market could care less because after all those Treasuries represent money owed to the American people, not to wealthy investors.
Tueday, July 19 (my 70th birthday) the San Diego City Council voted 7-1 to move forward with a Memorandum of Understanding to create pedestrian only, car and traffic free zones in Balboa Park. The council chambers were crowded as over 100 people spoke in favor of or in opposition to a plan developed by Dr. Irwin Jacobs, former CEO of Qualcomm, that would eliminate traffic from core areas of the park. Save Our Heritage Organization (SOHO) Executive Director Bruce Coons spoke out against the Jacobs plan basing most of his opposition on the fact that a by-pass bridge would change the historic view of the entrance to Balboa Park from the west. However, at the present time the view of the area where the bridge would be located in entirely obscured by trees and other landscaping. If the bridge were in place now, it would not even be visible from the west. Surely, the same view could be preserved with intelligent landscape architecture after the bridge is actually built. Mr. Coons presented a slide showing the by-pass bridge stickling out like a sore thumb. This need not be the case with intelligent landscape architecture. It could be blended in with existing structures and vegetation, and even be totally obscured if necessary preserving the present "historical" view completely if that were deemed desirable.
Therefore, if on the one hand we weigh the fact that cars and traffic would be completely eliminated from core areas of the park, the fact that several acres of asphalt would be converted to parkland and the fact that every museum in the park would be accessible by pedestrians without having to cross traffic once against the fact that the view from the west of the facade of the park might be slightly altered, I think the scales tilt in favor of the Jacobs plan.
Many citizens spoke out in oppossition to the Jacobs plab based on wanting to keep the park exactly as they remembered it from growing up. But this is a rather selfish attitude because the park is not only a destination for San Diego residents, but it is also a destination for travelers and tourists from all over the world. Already one of the top rated parks in the world, creating pedestrian only zones would place Balboa Park in the highest echelon of park destinations and be the focal point of tourism for travelers. These improvements to the park would catapult it to the top spot in park ratings and would be in keeping with the pedestrianization of parks, plazas and other urban areas that is happening world wide. These changes are necessary to bring the park up to 21st century standards while maintaining historical values, the main one of which is the founders' view that major areas in the park would be for pedestrians and not automobiles. This historical value overshadows the historical value of the park's facade viewed from the west which in fact can be mostly preserved anyway.
Another factor that should be considered is that Dr. Jacobs, who has been San Diego's chief benefactor in recent years contributing money to museums, the Symphony, educational institutions and more, would be putting up most of the money for this project himself along with money raised from other philanthropists. With the city practically broke the only thing that can even keep the park a world class destination and not allow it to fall into disrepair is private money. San Diego is fortunate to have such a civic minded citizen in its midst. There is currently over $200 million in deferred maintenance to Balboa Park. The Jacobs proposal while making major improvements inevitably would also pick up some of this backlog in maintenance. Philanthropists' money has been responsible in getting construction under way on the new Central Library which is being built without any San Dego City money. So San Diego has been able to maintain itself as a world class city not by means of taxpayer money which is pretty scarce right now but by means of private philanthropy. As citizens we owe a debt of gratitude to Dr. Jacobs and others that they have stepped forward to make up for the fact that San Diego as a city is flat broke. However, it's our good fortune to have people like Dr. Jacobs among us.
In his book, "Empire of Illusion: The End of Literacy and the Triumph of Spectacle," Chris Hedges has a whole chapter on pornography, "The Illusion of Love". The title of this blog is taken from a quote from Andrea Dworkin which Hedges uses as a lead-in to the chapter. Recently, Michelle Bachmann has garnered some media notice for signing a pledge put out by the FAMiLY LEADER, an Iowa conservative group, to rid the country of pornography among other things. The pledge has gained notoriety for a phrase suggesting that African-American families were better off during slavery than they are today. But there is little discussion of the substance of the pledge including its stance on pornography (as usual the media is only interested in the most sensationalized aspects of reality). Bachmann, whom many have characterized as a right wing nut case, has championed Christian conservative family values including the definition of marriage as being "between a man and a woman." Irregardless, the Left has been mute regarding pornography which suggests that it adopts the "live and let live" attitude it has about homosexuality and marriage and the family in general which is really a libertarian attitude. After reading Chris Hedges' chapter on pornography, the Left might reconsider this stance at least with regard to pornography. What Hedges has to say is truly shocking and the faint of heart might consider discontinuing reading this blog right here.
Suffice it to say that pornography has gone mainstream. According to Hedges:
There are some 13,000 porn films made every year in the United States, most in the San Fernando Valley in California. According to the Internet Filter Review, worldwide porn revenues, including in-room movies at hotels, sex clubs, and the ever-expanding e-sex world, topped $97 billion in 2006. That is more than the revenues of Microsoft, Google, Amazon, eBay, Yahoo!, Apple, Netflix, and EarthLink combined. Annual sales in the United States are estimated at $10 billion or higher. There is no precise monitoring of the porn industry. And porn is very lucrative to some of the nation's largest corporations. General Motors owns DIRECTV, which distributes more than 40 million streams of porn into American homes every month. AT&T Broadband and Comcast Cable are currently the biggest American companies accommodating porn users with the Hot Network, Adult Pay Per View, and similarly themed services. AT&T and GM rake in approximately 80 percent of all porn dollars spent by consumers.
And Obama thought he was saving the American auto industry! Instead he saved one of America's largest porn purveyors! The mainstreaming of porn has openly flouted obscenity laws which like other regulatory laws have been largely missing in action. According to the website HULIQ, "According to Miller v. California (1973), the "Miller Test" became a Supreme Court-sanctioned ruling that set up a three-part array in which "community standards" could be used to determine whether or not an item was pornographic, obscene, and of no redeeming value. This allowed communities and regions to set their own obscenity standards, which is in keeping with Tea Party standards (as a federal law banning pornography would not)." So where are the community standards especially in the red Tea Party states that would ban pornography? Or is it OK because there's a lot of money in it? So what's the problem with the mainstreaming of pornography? It's innocuous adult entertainment, isn't it? Hardly. According to Hedges, "The largest users of Internet porn are between the ages of twelve and seventeen. And porn producers increasingly target adolescents." I've even heard this demographic referred to as "children"! "The age demographic has moved downwards, especially in the UK and Europe," explained Steve Honest, the European director of production for Bluebird Films. "Porn is the new rock and roll. Young people and women are embracing porn and making purchases. Porn targets the mid-teens to the mid-twenties and up."
Hedges interviewed porn star Patrice Roldan who has starred in nearly two hundred films including Lord of Asses, Anal Girls Next Door, Monster Cock Fuckfest 9, Deep Throat Anal, Trophy Whores, and Young Dumb & Covered in Cum. Roldan made good money in the porn industry so to say that these girls who entered the industry voluntarily were exploited is not wholly accurate. In addition to the money they made filming, they could go on "dates" with their fans who they met at the annual Las Vegas porn convention at $3000 -$5000 a pop and up. Some made great money as hotel-bound prostitutes. Just imagine if you could have met Marilyn Monroe or Lana Turner or Sophia Loren at an annual convention and "dated" them! But in those days movie stars couldn't even sleep together onscreen in the same bed much less "date" their adoring fans. But that's de rigeur in the porn film world. Tres ordinaire et normale. After Roldan's first film, she was handed $600. and contracted gonnorhea. Hedges again: "She began, once she had treated her gonnorhea, to do films three or four times a month. She would have several more bouts with gonnorhea and other sexually transmitted diseases during her career. She got pregnant and had an abortion. The demands on her began to escalate. She was filmed with multiple partners. Her scenes became 'extremely rough.' They would pull my hair, slap me around like a rag doll."
"The next day my whole body would ache," she recalls. "It happened a lot, the aching. It used to be that only a few stars, people like Linda Lovelace, would once do things like anal. Now it is expected." And this is how our teen-agers are learning about love, sex and relationships?! This is how they are developing their concept of how to treat a woman!
The physical pain and numerous surgeries to repair torn vaginas and anal tissues lead most porn stars to use excessive amounts of drugs and alcohol to deal with the pain and the emptiness of their emotional lives. Most end up being junkies and alcoholics. Hedges again: "Roldan would endure numerous anal penetrations by various men in a shoot, most of them 'super-rough.' She would have one man in her anus and one in her vagina while she gave a blow job to a third man. The men would ejaculate on her face. She was repeatedly "face-fucked,' with men forcing their cocks violently in and out of her mouth. She did what in industry shorthand is called 'ATM,' ass-to-mouth, where a man pulls his penis from her anus and puts it directly in her mouth." She explained that she washed herself good so this didn't bother her too much except when the man pulled his penis from another girl's ass and put it in her mouth because she didn't know about the other girl's standards of cleanliness!
"What does it say about our culture that cruelty is so easy to market?," Robert Jensen, author of Getting Off: Pornography and the End of Masculinity asks. "What is the difference between glorifying violence in war and glorifying the violence of sexual domination? I think that the reason that porn is so difficult to discuss is not that it is about sex - our culture is saturated in sex. The reason it is difficult is that porn exposes something very uncomfortable about us. We accept a culture flooded with women who are sexual commodities. Increasingly, women in pornography are not people having sex but bodies upon which sexual activities of increasing cruelty are played out. And men - maybe a majority of men - like it."
Finally Hedges sums up why pornography represents the "illusion of love":
As porn has gone mainstream, ushered two decades ago into middle-class living rooms and dens with VCRs and now available on the Internet, it has devolved into an open fusion of physical abuse and sex, of extreme violence, horrible acts of degradation against women with an increasingly twisted eroticism. Porn has always primarily involved the eroticization of male power through the physical abuse, even torture, of women. Porn reflects the endemic cruelty of our society. This is a society that does not blink when the industrial slaughter unleashed by the United States and its allies kills hundreds of civilians in Gaza or hundreds of thousands of innocents in Iraq and Afghanistan. Porn reflects back the cruelty of a culture that tosses its mentally ill out on the street, warehouses more than 2 million people in prisons, denies health care to tens of millions of the poor, champions gun ownership over gun control, and trumpets an obnoxious and superpatriotic nationalism and rapacious corporate capitalism. The violence, cruelty, and degradation of porn are expressions of a society that has lost the capacity for empathy.
Why would the Left cede this family values issue to the likes of Michelle Bachmann? Surely a libertarian attitude towards pornography acquiesces in the mainstreaming of pornography and the profits accumulated by large "respectable" US corporations like GM and AT&T. It also acquiesces in the purveying of pornography to young adolescent males who make up a large share of the audience and the attitudes that are being formed by exposure to such trash. American culture has gone in a few short years from one that was overly puritanical to one that is awash in degradation, obscenity and debauchery by anyone's definition. The sexual liberation of the 1960s, initially a salubrious renunciation of repression, has been thoroughly exploited and degraded by the commercialized pornography industry of the 2000s. It is the culture of the Roman Empire before its fall, of Caligua and Nero, a culture of debasement and depravity. Surely, it should not be left to the likes of Michelle Bachmann to point this out. While I don't agree with her on her stance against homosexuality or the definition of marriage, I do heartily endorse the fact that she purportedly is taking a stand against pornography. The American culture is so hypocritical that it outlaws legalized prostitution but mainlines pornography. I think legalized prostitution might serve an actual purpose for those who cannot find satisfaction in a normal relationship with a woman, but pornography is not helpful in formulating salubrious attitudes between the sexes nor is it protective of women who enter the industry despite the fact that they are paid well and do so voluntarily. When a "live and let live" libertarian attitude results in the degradation of a class of women and results in unhealthy attitudes towards sex, it should be prohibited while encouraging healthful relationships, not necessarily, but including, marriage.
"As Republicans and Democrats grapple over spending caps and tax structures, and as our national legislature stays virtually locked-up with a Democratic Senate and a Republican House, it’s worth wondering how we got here. The United States is one of a bare handful of countries across the world that uses a two-party system of government. Third parties are typically repressed in such an environment and, indeed, members of either or the two parties in the United States serve as the overwhelming majority of elected officials at all levels of government.
"The voting system that the United States uses for legislative districts - as well as the Electoral College system for Presidential elections -encourages a two-party system. This voting system, called often called “winner-take-all”, means that in each election in each district, the winner of the election will win the seat. It seems simple and intuitive, but many other countries do things slightly differently. Proportional representation is often used as a voting system in countries with multi-party systems. Simply put, these seats are filled according to the percentage of the vote that each party received. To illustrate the difference, say that a party wins 15% of the national vote but won no seats in individual elections. Under the American “winner-take-all” system, that party would receive no seats in the legislature. In a proportional representation jurisdiction, however, that party would receive 15% of the seats. Countries that employ some proportional representation sometimes have a certain quantity of legislative seats set aside to be filled in this way in addition to those seats assigned to geographical districts, whose winners will fill the seat. Our Electoral College system, likewise, is a winner-take-all system. Winners of the plurality of the votes in each state win all of a state’s electoral votes. Only Maine and Nebraska split electoral votes according to proportional voting. This environment teaches voters that votes for third parties are often “wasted”, and it teaches third parties that they must fuse to have any hope of promoting an alternative to either of the dominant parties.
"Disadvantages to two-party systems are obvious. The system bars fringe, extremist and issue parties from winning seats and therefore wielding influence. It also discourages cooperation between the two dominant parties. In a multi-party system, parties often have to form “coalition governments” - alliances with other parties which, in exchange, allow the agendas of the smaller parties into the majority. The system does have its advantages, however. It promotes centrism and discourages extremism. In order to appeal to a wide-enough swath of the electorate, the parties must be moderate. It also promotes political stability which is often an indicator of economic growth. By contrast, multi-party systems can go months or even longer with no government in power due to disagreements and fractures among the parties. This instability has notably plagued Italy for much of its modern history.
"The United States has been a two-party system for most of its history. Today’s Democrats trace their founding to Andrew Jackson and the ashes of the early Democratic-Republican Party in the 1830’s. Their primary foes were first the now-defunct Whig Party and later the emergent Republican Party. Somewhat strangely, they were very weak in populous New England but very strong on the frontier and in the mid-Atlantic states. The Republican Party was founded in 1854 to combat the expansion of slavery into the territories and was, perhaps consequently, strong in the North and very weak in the South. One founding father - George Washington - who was venerated for his wisdom and leadership as well as the examples he set, warned of the insidious influence of political parties in his farewell address, and charged the United States to avoid them, saying
“ 'There is an opinion that parties in free countries are useful checks upon the administration of the government and serve to keep alive the spirit of liberty. This within certain limits is probably true; and in governments of a monarchical cast, patriotism may look with indulgence, if not with favor, upon the spirit of party. But in those of the popular character, in governments purely elective, it is a spirit not to be encouraged. From their natural tendency, it is certain there will always be enough of that spirit for every salutary purpose. And there being constant danger of excess, the effort ought to be by force of public opinion, to mitigate and assuage it. A fire not to be quenched, it demands a uniform vigilance to prevent its bursting into a flame, lest, instead of warming, it should consume.' ”
"Despite his best efforts, however, the United States has largely institutionalized its two-party system. Despite recent third party relative successes, such as Ross Perot in the 1990’s, the chances of sweeping change remain remote."
The following is my rebuttal:
The article states:
"The system bars fringe, extremist and issue parties from winning seats and therefore wielding influence. ... In order to appeal to a wide-enough swath of the electorate, the parties must be moderate. "
This is not true if one of the parties becomes an extremist party in and of itself.
Right now the two party system is not working. Far from coming to some kind of compromise between the two parties leading to a "centrist" government policy, the Republicans are going to the rightward extreme and then holding the Democrats hostage to their position. There is nothing inherent in the two party system that leads to compromise. Republicans have shown that they can prevent any excercise of legitimate government functions even if they are in the minority by using the filibuster. They can filibuster every federal judiciary appointment and even every appointment to head an agency as they've prevented Elizabeth Warren from heading the Consumer Financial Protection Commission. They can literally bring government to a standstill and even destroy the US if they so choose by not raising the debt ceiling. They have threatened to do all of this if they don't get totally their own way. Thus the two party system is fatally flawed.
Their sole goal is to get rid of Obama in the 2012 election, and they are not willing to do anything even if it is beneficial to the American people, even if polling shows 80% of the American people would prefer it, that gets in the way of defeating Obama. Their sole aim is to prove that Obama is ineffective and can't get anything done. Such a system of government cannot last. If the Republicans take the White House in 2012, they will have achieved their goal, and, if they then start passing some legislation that would benefit the American people, the public will think that Republicans know how to get things done while Democrats don't. The only reason they might be able to get some things done is that Democrats won't filibuster every piece of legislation that might benefit the American people just for political advantage because some of them still care about the American people.
However, since the Republican party is a wholly owned subsidiary of large corporations and the wealthy, the chances of their passing much in the way of legislation that would benefit the middle class is nil. Instead once they get their hands on all the levers of power, the US will go the way of Wisconsin, Michigan, Ohio, NJ and other states where Republicans control all three branches of state government: privatizing public institutions including Social Security and Medicare, deunionizing, demonizing government workers, lowering taxes especially on the rich and corporations, cutting spending including unemployment insurance, welfare and the safety net in general. Then Democrats will have no choice except to filibuster all proposed Republican legislation. However, Republicans might throw a few crumbs to the poor and middle class all of which Democrats will heartily endorse because they are not as totally heartless as Republicans.
We have been talking about a constitutional amendment along the lines of movetoamend.org which is advocating a constitutional amendment which would seek the following:
"We, the People of the United States of America, reject the U.S. Supreme Court's ruling in Citizens United, and move to amend our Constitution to:
* Firmly establish that money is not speech, and that human beings, not corporations, are persons entitled to constitutional rights.
* Guarantee the right to vote and to participate, and to have our vote and participation count.
* Protect local communities, their economies, and democracies against illegitimate "preemption" actions by global, national, and state governments."
In addition there is a need to get money out of politics namely the money that goes into lobbying and political campaigning.
Sorry I've been out of commission as we took some vacation time and had a 10 day visit by a dear friend from Connecticut whose husband suddenly passed away not long ago. Thanks much for keeping me informed of your give and take on the A Code for Corporate Citizenship constututional amendment idea.
Regarding this effort, American corporate law is caught up in the normative consensus that the shareholder-centered corporate goverance model offers greater efficiencies in a growing world network of corporate intermediaries . A standard questionable argument is that the interests of other participants in the firm or nonshareholder constituencies such employees, customers, creditors, merchants in a firm's local community, extended interests of those concerned about a well-preserved environment can be best protected by existing efficacious legal mechanisms outside corporate law. For workers, this embraces antidiscrimination law, health and safety law, pension law, labor contracting law. For consumers, it includes product safety regulation, antitrust law, warranty law, tort law governing product liability, mandatory disclosure of product contents, performance specifications, etc. For the general public, it includes environmental law, mass torts, and nuisance law. The argument is that investor rights cannot be well-protected by contract but only by having exclusive, strong control and representation rights.
In contrast, Germany and the Netherlands have adopted stakeholder models that include investors andworker representatives in the board of directors, while also protecting societal and corporate interests through similar contract and regulatory law devices noted above. For example, German law allows workers to elect representatives for almost half of the supervisory board of directors. This applies to public and private firms with 2000 or more employees. In addition, employees in Germany and the Netherlands are entitled to elect a works council (Betriebsrat) according to the Industrial Constitution Act. The employer is not active in this election process but is responsible for all costs that arise through the works council. Each plant with more than 5 employees must have a works council.The council represents employees' interests as distinct from that of the employer and trade unions. It also has rights in dismissal and recruitment as well as codetermination on issues not regulated by law or collective agreements.
This practice has been in place for many years and insures rather stable and productive worker participation in corporate affairs without unduly paralyzing or damaging management and board decision making. It has enabled Germany to have +-20% of its workforce in high-value added manufacturing vs. less than 8% in the U.S.
One U.S. version of this broader stakeholder corporate governance model is the so-called fiduciary model. Here, if stakeholders are not given a direct representation at the corporate board level, they are protected by the board's greater discretion to represent not just shareholder interests but other stakeholder interests as well. However, experience often shows courts to be ineffective in formulating well and enforcing adequately fiduciary duties that make sure managers act fairly in the interests of all constituencies, including society as a whole.
But this shareholder model does not come close to the collective representation models existing in mature EU countries. Sweden, for example, has a one-tier system with codetermination where employees are given seats on the board of directors. In fact, in all EU countries there is employee representation by trade unions and/or by a works council.Trade unions are voluntary affiliations covering collective bargaining agreements. They are of great importance in France but of less importance in Germany, although over 60% of employment contracts refer to them. A works council represents all employees in a company and is constituted by statute.
For the last 30 years, the U.S. has been going diametrically in the opposite direction of systematically destroying unions to maximize corporate freedom to set wages, hire and fire, and maximize profits. U.S. management by itself and in secret can make strategic decisions as to whether to close a plant or reduce manpower levels. This has been backed up by U.S. Supreme Court decisions holding that an employer need not bargain with its employees over whether to shut down part of its business. Things just simply don't work that way in Europe.
Europeans tend to feel that employees acquire a property rightinterest in their jobs over time. The more senior the employee the greater is property interest built up in his or her job performance . Thus, appropriate severance pay is legally required (a minimum of one month for each year of employment in the Netherlands) as compensation for the taking of that property interest by dismissal. Such norms reflect substantial cultural and business morality differences between U.S. labor practices and how Europeans view and value the role of workers.
In the U.S., people do not commonly accept or believe anyone is entitled to a job. Employees can be dismissed with little notice. Legally required severance pay is low and is viewed as a human cushion to help the dismissed until a new job is found. As mentioned, U.S. law gives the employer and entrepreneur flexibility to do almost as they wish with their employees. U.S. corporations, particularly global firms, have one principle objective -- maximum profit for shareholders using all job elimination means (outsourcing, automation, robotization, downgrading, etc.). Under German law, the works council must approve any dismissal or any plant changes, relocation, and merger or any co-determination issue that might result in serious disadvantages to employees. If it does not approve, then parties must appear before a labor court or an arbitration committee for a binding decision.
Again, the "old world"and the "new world" societies are leap years apart on how they treat workers and how they view corporate social welfare and shareholder responsibilities.
I will return to this whole subject whether the pursuit of profit will solve the larger problems of society -- pollution, war, a higher standard of living for all citizens, making things better for workers and communities.
I have in mind another writing on the continuing U.S. JOB DEBACLE -- where politicians are playing irresponsibly dangerous brinkmanship and blackmailing tactics concerning raising the debt ceiling -- while the world watches in disbelief and +-28 million American remain unemployed or underemployed. Obama appears to be wallowing in leaderless compromised nothingness.
Paul Keleher wrote in response to my suggestion that we look at other countries which have already successfully solved these problems:
I agree with everything and have begun to read Max Chafkin's piece. Interesting.... whole towns in Norway smell like rotten fish?!?!
What I take from this reply is that more research into existing models and examples of what works is needed before a draft text should be attempted. Perhaps we don't need to invent a new "American" model for socially responsible business when working models already exist that we can learn from and adapt for our own use. I wonder what moral authority in the Norwegian government has guided the country to adopt the regulations you describe. For what I'm talking about is the drafting of just such a moral authority for the US.
Obviously, there is much work to be done here. But I think that the vast majority of the American people also believe that the country will be better off if money is barred from the political process. However, given the recent history here, a change of course is needed, because Citizen's United just pushed it the other way, big time. To effect such a change, the restrictions of money found in Europe could never be put through this Congress without first passing a moral guideline in the form of a constitutional amendment passed by referendum ballot initiatives in the states in which the people express a direct voice, and only then might we be able to force Congress to consider such a resolution.
While the nation is close to a catastrophe of global proportions, the mass media treats us to one spectacle after another. Instead of discussing the jobs crisis or the debt crisis or the worst recession since the Great Depression, we are treated first to the saga of Anthony Weiner's weiner followed closely by a 24/7 immersion in the Casey Anthony case. All cameras were on when Nancy Pelosi stepped before them to announce that she was not going to discuss Anthony Weiner but she was there that day to discuss jobs. Immediately, the mass media cut her off and went back to the studio to discuss Anthony Weiner. Jobs was not an important enough topic that we should want to hear what one of America's leading politicians had to say about it. No, far more important was to keep the spotlight on Weiner's weiner. And in a stroke of genius the media created another spectacle out of the Casey Anthony case. Back to back spectacles; it doesn't get any better than that! Without discussing the merits or the tragedy of the case, suffice it to say that it didn't need to have been made into a media spectacle. The wheels of justice could have ground slowly on without the general American public knowing much of anything about it just as it knows little or nothing of the hundreds of other similar cases that go to court every year. This was totally a media created spectacle.
In his book, Empire of Illusion: The End of Literacy and the Triumph of Spectacle, Chris Hedges explains what's happening. The media are only interested in the bucks they can command from advertisers based on the number of eyeballs that are glued to the tube. Therefore, they are not interested in reporting or discussing the issues of the day that are affecting whether or not the US will default on its debt or have enough money to pay social security or what is the best way to create jobs. They are only interested in patching together one media spectacle after another because that is where the money is and their only interest is money not the issues of the day. I'm sure they're working very hard right now to find a replacement for the Casey Anthony spectacle now that it is drawing to a close. What'll be next?
The Anthony Weiner saga would have amounted to nothing if the media hadn't gotten involved. There was no sex, consensual or otherwise, but there were pictures and the media loves pictures. And it loves appealing to the prurient interests of the general public. Weiner's resignation was a heads up to the media to find another spectacle and they found Casey Anthony. Instead of people discussing issues of national importance, they are led to the trough of discussion of the many facets of the case, a case which had no significance whatsoever for the lives of American citizens and a case which is replicated over and over again, unfortunately, almost every day of the year so there was nothing even unique about it. So the media had to create the illusion that this was the most important thing an American citizen should be concerned with, at least until it's replaced by another spectacle. Instead of Nero fiddling while Rome burned, we are treated to the spectacle of corporate induced fiddling by the American public while America burns. The public is systematically dumbed down so that media corporations can maximize their profits.
Hedges points out that all this mind numbing television has reduced Americans to a nation of functional illiterates:
Functional illiteracy in North America is epidemic. There are 7 million illiterate Americans. Another 27 million are unable to read well enough to complete a job application, and 30 million can't read a simple sentence. There are some 50 million who read at a fourth-or-fifth-grade level. Nearly a third of the nation's population is illiterate or barely literate - a figure that is growing by more than 2 million a year. A third of high school graduates never read another book for the rest of their lives, and neither do 42 percent of college graduates. In 2007, 80 percent of families in the United States did not buy or read a book. ...
Television, a medium built around the skillful manipulation of images, one that can overpower reality, is our primary form of mass communication. A television is turned on for six hours and forty-seven minutes a day in the average household. The average American daily watches more than four hours of television. That amounts to twenty-eight hours a week, or two months of uninterrupted television-watching a year. The same person will have spent nine years in front of a television by the time he or she is sixty-five. Television speaks in a language of familiar, comforting cliches and exciting images. Its format from reality shows to sit-coms, is predictable. It provides a mass, virtual experience that colors the way many people speak and interact with one another. It creates a false sense of intimacy with our elite - celebrity actors, newspeople, politicians, business tycoons and sports stars. And everything and everyone that television transmits is validated and enhanced by the medium. If a person is not seen on television, on some level he or she is not important. It is the final arbitrator of what is important in life.
Hour after hour, day after day, week after week, we are bombarded with the cant and spectacle put out over the airwaves or over computer screens by highly-paid pundits, corporate advertisers, talk-show hosts, and gossip-fueled entertainment networks. And a culture dominated by images and slogans seduces those who are functionally literate but who make the choice not to read. There have been other historical periods with high rates of illiteracy and vast propaganda campaigns. But not since the Soviet and fascist dictatorships, and perhaps the brutal authoritarian control of the Catholic Church in the Middle Ages, has the content of information been as skillfully and ruthlessly controlled and manipulated. Propaganda has become a substitute for ideas and ideology. Knowledge is confused with how we are made to feel. Commercial brands are mistaken for expressions of individuality. And in this precipitous decline of values and literacy, among those who cannot read and those who have given up reading, fertile ground for a new totalitarianism is being seeded.
And all this is happening because of the capitalist imperative to maximize profits. News and discussion doesn't sell as well as spectacle and illusion. What does it matter if American citizens have a distorted sense of values and are politically and intellectually ignorant if media corporations can continue to maximize profits? Entertainment is more important than political or scientific reality. Facts don't matter. Being mediagenic matters. That's why Michelle Bachmann is way ahead of Tim Pawlenty and Jon Huntsman. People are more interested in her because she comes across as attractive even though she's a whackadoodle in terms of her ideas. If only spectacle and illusion are important, then whether or not we are destroying the environment is a subject not for scientific inquiry but is up for debate with the most attractive and mediagenic, not the most informed, winning. Have you ever seen a reputable scientist discussing global warming on TV? No, but we are treated to the opinions of uninformed ignoramuses on a daily basis whose main claim to fame is that they can persuade us of falsehoods without batting an eye. And they can go on non-stop by the hour.
Spectacle has triumphed over reason when we can be convinced that evolution is only a theory on the same par as creationism, when President Obama's birth place is a subject for debate, when climate change caused by carbon dioxide emissions is only a theory. When people are too lazy to search out the best opinions and facts on any subject, they are pawns in the hands of media manipulators who will amuse them to death in order to maximize profits.
Everyone is talking about how to get the economy moving again and how to create jobs. President Obama talks about "winning the future." This means more education, more entrepreneurialism, more new industries, more new products for consumers to buy. Surely, all this new economic activity is exactly what we need or is it? Since the GDP of the US is dependent on consumers consuming to the tune of 70% of the entire economy, it stands to reason that for the economy to expand, consumers need to consume more. But wait a minute. We are already stuffed to the gills with products rammed down our throats by TV advertisers. Maybe what we need is less consumption. Americans are already experiencing an epidemic of obesity. We should be consuming less fast food. But that would bring the profits of McDonald's down. They might even have to lay off employees. Their stock might plummet. Wal-Mart offers us a plethora of cheap crap made in China. But if we stopped buying it, Wal-Mart's profits would go down, their stock price would tumble and the Dow Jones average might even find itself in bear market territory. Everyone agrees that this would be terrible for the economy. But it might be good for the citizens.
I say we need to participate less in the market economy and be more self-subsistent. This would result in a decrease in GDP, but an increase in citizen independence. The more we rely on ourselves to fulfill our needs, the less we rely on the market economy and the better off we are when that economy goes kerflooey. The recent economic meltdown was all about Wall Street and their shenanigans. It was of paramount importance to bail out Wall Street and then all good things would follow. Such was the conventional wisdom. Only good things didn't follow. People's homes were foreclosed on en masse even when banks couldn't prove that they held title to the houses. Main Street, the middle class - they were not protected at all. The culprits who caused the crisis were bailed out. The average citizen who lost his job and his house and maybe even his wife was not bailed out at all. In fact Republicans are doubling down on destroying what remains of the safety net which might have helped these unfortunates to maintain the skeleton of a half way decent way of life. Congress has continued to sponsor and uphold legislation that encourages corporations to outsource jobs. The budget is to be balanced on the backs of the poor and middle class and not by asking the rich to contribute a little more. We are rapidly retreating to the Dickensian era where to ask for a little more porridge was to be answered with a "certainly not!"
What we need is not more consumption of cheap Chinese produced crap or even newly minted crap from our own entrepreneurs. What we need is a better system of distributing the immense amount of stuff that we are already capable of producing. And in particular we are in need of a more widely distributed system of ownership so that profits redound to the average citizen and not to the upper .1% who are becoming immensely wealthy far beyond their needs while the poor and middle class are being reduced to penury and poverty. What we need is a government that looks out for the little guy, not one who is all for the competitive struggle to produce more and more goods and win the future that way. How about winning the future by taking back our ability to be self-sustaining? We need to return to an era when people produced a large amount of their own food by growing it themselves instead of relying on the marketplace of consumer provided food by large agricorporations which use pesticides, herbicides and hormones to provide us with food which in most cases will not kill us right away. That will take place in 30-40 years when cancer sets in. But in a lot of cases of e coli and salmonella brought on by filthy conditions for animals in factory farms, it will kill us or sicken us immediately. So profits are concentrated in the hands of a few corporations instead of being widely distributed which would take place if there were widespread family gardening which also produces healthier foods. If everyone farmed to some extent, we would all be better off but GDP and corporate profits would decline because we wouldn't be participating to such a great extent in the market economy.
Sociologists decry the fact that in many parts of the world people are living on $2. a day. But those in this category that are rural may in fact be 98% self-subsistent. In other words they are providing for their own needs without participating in the market economy or are only participating to the tune of $2. a day. On the other hand the urban poor who are living on $2. a day may not be in a position to be self-subsistent, and they are truly poor because they have to meet all their needs by means of the market economy and $2. a day doesn't go very far. Just recently many Americans met probably 75% of their needs without participating in the market economy. Take my grandparents, for example. My Grandfather lived and worked on a small dairy farm. They had chickens and hogs and a large garden. So they provided perhaps 90% or more of their own food instead of buying it at the market. They sold milk into the marketplace in exchange for dollars which they used to purchase what they could not provide for themselves. Instead of buying oil or gas, my grandfather farmed with horses and he grew the fuel that they consumed with the result that he did his own energy production and did not have to depend on Exxon Mobil or Chevron for energy. And as a bonus horses did not pollute. Since chemicals were not available, his farming was organic by default. He learned carpentry and built his own buildings with the result he didn't have to hire a contractor. They were largely self-sufficient and self-subsistent. Of course, they made their own clothes instead of buying them in a store. Women had a whole variety of functions within the household instead of vying for jobs in the marketplace, another way in which they were self-sufficient. They actually weathered the Great Depression quite well since they weren't dependent on the market economy. Even my parents who had government jobs as teachers, the kind that Republicans are attacking today, raised chickens and had a really large garden from which they provided much of their own food. And women used to bake instead of buying prepared foods.
So maybe the answer to the economic malaise that we find ourselves in today will be solved not by creating new industries to manufacture more and better stuff but by figuring out ways to be less dependent on the marketplace and more self-sufficient. Profit centers need to be more widely dispersed instead of profits ending up in the hands of the Fortune 400. Think about it: when you participate in the market economy, the money you spend ends up in the hands of a very few and select group of corporations and wealthy individuals and families. These individuals, families and corporations have effectively captured government through their paid lobbyists so that government operates solely in their interests. Jefferson envisioned a country of independent yeoman, small farmers and craftsmen. In today's America, there are hardly any such people. Instead most rely on a job to provide them with income which they use to provide for all their needs by purchasing goods and services in the marketplace. As more and more people lose their jobs because the jobs are outsourced or are replaced by automated machines, there is no place to go but down. But the self-employed, the self-sufficient and self-subsistent will be able to provide for themselves and their families irregardless of what is happening in the marketplace. Those absolutely dependent on wages to make a living are already becoming neo-serfs needing two or three minimum wage jobs to make a go of it. The worst off are dependent on charity.
Why is unemployment so high? Simply put it's because corporations and businesses can produce a surfeit of consumer goods without the need for additional human labor. Since 125,000 new faces enter the work force every month, there should be new jobs created for these people if they are to make a living since most people, but not all, make their living through work. Some, however, the rentier class, make their living from stocks, rent, dividends and interest, but not very many. But the American and even the world - since we're in a global economy - production machine doesn't need additional workers; it needs more consumers. Everything can be produced with a diminishing number of workers. Why? Consider automation, robotization, computerization. In short today machines do most of the work. You only have to watch one of those shows on the Science Channel to appreciate this: "How Stuff is Made." You see that most industrial processes have been completely automated.
Back in the old days production was very labor intensive. Stuff was made by hand. Machines were very primitive or non-existent depending how far you go back. The land was tilled and crops planted by hand whereas today huge tractors and automated farm machinery mean that one man can do the work that was done by hundreds a hundred years ago. What little labor is needed in today's world can easily be outsourced to wherever labor is cheapest. We have gone from an economy which was very labor intensive, one that required a lot of hands for the production of goods, to one that requires very little labor to keep the machines and robots humming. And the process of mechanizing and automating production processes continues. Robots are getting ever smarter.
So where does that leave the average person who is trying to make a living? Not in a very good position with the current economic model. It essentially leaves him or her in the position of a serf begging for a job and competing with thousands of others for work. The serfs were even better off because at least their labor was needed. Today's industrial reserve army is not really needed by the capitalists and corporatists who control the economy. That means two things: 1) the value of labor is depreciated because so much of it is available and unneeded and 2) there is a growing percentage of the population that must either be sustained by some form of welfare or unemployment compensation or cast to the wolves to beg, borrow and steal.
What is needed is a new economic paradigm which recognizes that very little labor is needed and machines can do most of the work. What would that new economic model look like? There would need to be a much larger leisure class than now exists. The wealthy are very few in number as a percentage of the population as a whole. They don't have to work because they have a steady stream of income which represents a return on their assets. Ownership of real estate produces a return in the form of rent. Ownership of stock produces a return in the form of dividends. Interest income is at an all time low because interest rates are so low, but when they go up again, people will be able to make a living if they have enough money in money market, CD and savings accounts. Unfortunately the distribution of wealth is way out of whack. Those in a position of being able to make a living off of so-called unearned income are very few. Those in the position that their only recourse is to make a living from their labor are the vast majority. What is needed is to turn this situation around so that the vast majority can make a living off of return on assets and only a small minority, whose labor is actually necessary for the functioning of society, will be necessary to make money from work. Or the work could be spread around so that everyone might work a few hours a week and make their living mainly on the return on assets or acquired wealth and a small portion of their living off their labor.
This is effectively what advanced societies (not including the US) have done. A large portion of the wealth of the society is held publicly. This does not preclude the private acquisition of wealth, but insures that the distribution of wealth is not as skewed as it is in the US. This makes it possible for the less fortunate, the less able and the unemployed to make a living as a return on public wealth. The fortunate do not need public assistance, but the unfortunate do. Public wealth can provide for free health care, free education and free unemployment compensation among other things. By taxing the rich, money is redistributed to the poor so that the processes of production and consumption can continue. Or public wealth in the form of natural resources can be sold and the profits divided evenly among the people. Many countries use their oil assets as a form of public wealth. Otherwise, all the money ends up in the hands of the wealthy and production stops because the vast majority of people have no money to consume. When money is redistributed or recycled from rich to poor, the production and consumption processes can hum merrily along. So taking money from the rich in the form of taxation and redistributing it to the poor is very important for the healthy functioning of society especially in advanced societies where most of the work is done by robots and human labor is increasingly unnecessary.
So all this banter about the rich being job creators is a bunch of hooey. The rich are not job creators; they are robot acquirerers and job destroyers. They make capital investments of a nonhuman variety because they are more efficient in the production process than are humans. For one thing machines can whiz and hum 24 hours a day. Humans need their rest. Safety standards for machines are more lax than they are for humans. Maintenance is simpler. Machines don't get sick or disgruntled. All in all if a capitalist can replace a human with a machine, he will do it. Capital investment in machines is more desirable than an investment in human capital.
So what does that say about the value of education? Essentially a college education is of diminishing value. Sure some will chase the fantasy of more and more education in order to better compete for fewer and fewer jobs. In the long run the student loan debt required to obtain a credentialization in some field will not be worth it. Since more and more people will be left to their own devices instead of hired, the sensible thing is to prepare for a life of self-employment. Instead of preparing to participate in the global economy with its attendant risks of outsourcing and downsizing, prepare to participate in the local economy in a job from which you cannot be fired and which cannot be outsourced. A college education prepares one mainly to be a servant of a corporation. It shows that one was docile and compliant enough to follow years and years of instruction, sit in classrooms and take tests successfully. It shows the employer that a potential hiree has the requisite qualities of docility and compliability to make a good employee, one who won't make waves or criticize the corporation, one who will adopt the ethos and become enculturated in corporate values, one who, in other words, will sell his soul to the corporation.
Another way to fight back against the job destroyers (not creators) is to form cooperative work enterprises such as the Mondragon corporation which is wholly employee owned. The employee, in addition to acquiring a paycheck, acquires a share of the profits as well. So the worker becomes an owner and makes part of his living from a return on assets just like the wealthy do. Wealth, therefore, is more widely distributed and can be further distributed by reducing the work week, hiring more employees and distributing wealth even more widely.
In an age in which there is a diminishing need for human labor and most work in the production process is done increasingly by machines, the rational thing to do is to distribute the necessary work more widely (i.e. reduce unemployment), reduce the work week and create a situation where each individual makes a portion of their living off of acquired public wealth. In Norway, for instance, the old age pension system is entirely funded by profits from a publicly owned asset: oil. These profits then are invested conservatively so they will be available to future generations.
San Diego has missed a chance to catapult Balboa Park from a merely great destination into a top of the line world class destination and pissed off billionaire benefactor Irwin Jacobs whose philanthropy has benefitted UCSD, the San Diego Symphony (to the tune of $100 million), Balboa Park's Museum of Photography and many other San Diego institutions at the same time! After Mayor Jerry Sanders asked Jacobs to come up with a plan to rid Balboa Park of automobiles before the 2015 hundredth anniversary of the park, Jacobs went to work. He put his own time, energy and money into it, hired an architectural firm to draw up plans and came up with something that would not only allow pedestrian access to every museum in the park without crossing traffic but also allowed automobile traffic to continue through the park to an underground, centrally located parking garage. Sanders has mentioned that the city couldn't take care of the park any more and that the new model would be that funding for the park in general would be based on philanthropic contributions. In other words he would henceforth rely on private donations not only for creating a traffic free zone with which he tasked Dr. Jacobs, but he would rely on philanthropists for improvements and maintenance in general.
All well and good until the Jacobs plan started to generate its detractors among them the Save Our Heritage Foundation (SOHO) which complained that a proposed bypass around what amounts to a warehouse with a blank wall would detract from its historical value. Then the sparring and criticism began. SOHO came up with its own plan which would allow traffic through the main plaza of the park just as occurs now but would eliminate a few parking places in the plaza. While the Jacobs plan would cost $20-$30 million, the SOHO plan would only cost around $500,000. However, Jacobs pledged to raise the money from his millionaire buddies and throw in a generous amount himself. Then around June 9, 2011 the San Diego City Council Rules Committee voted not to give Jacobs a "memorandum of understanding" which would have allowed him to proceed with his plans for the park. Jacobs immediately suspended all activities.
At just the moment when City Hall is trying to build a new financial model based on philanthropy to assure a sparkling future for San Diego’s priceless gem, Balboa Park, the City Council Rules Committee this week essentially turned its back on $25 million in philanthropy for the park. This cannot be allowed to stand.
There is, according to city studies, a backlog of at least $240 million in infrastructure repairs needed at Balboa Park. The city, needless to say, does not have that kind of money. Spurred by Mayor Jerry Sanders and Councilman Todd Gloria, the city created the Balboa Park Conservancy, still in its infancy, to raise private donations to whittle away at the infrastructure backlog.
It has also been the dream of urban planners and many park lovers for decades to remake the central Plaza de Panama, now a parking lot, and the roadway leading past the Spreckels Organ Pavilion, which now carries up to 7,000 vehicles a day, into a grand plaza and esplanade for people.
Mayor Jerry Sanders asked Irwin Jacobs, the Qualcomm co-founder and philanthropist, for help in ridding the plaza and esplanade of traffic in time for the 2015 centennial of the historic Panama-California Exposition, a celebration expected to draw hundreds of thousands of additional visitors to the park. That’s no easy task, given the lack of time and money, and the many park stakeholders – the museums, the zoo, other institutions, historic preservationists, surrounding neighbors and other groups – who all want and deserve a voice in what happens in the park.
Jacobs took the ball and ran with it, as he has so many times before on behalf of San Diego, spending hundreds of thousands of his own dollars on engineering and design plans. What his team came up with was a controversial plan to build a bypass road off the Cabrillo Bridge that would divert vehicles around the plaza and esplanade, connecting to a largely underground parking garage behind the Organ Pavilion topped by grassy fields. Jacobs said it would cost $40 million, to be financed with garage parking fees and $25 million in private donations he pledged to raise.
Before going further, he wanted conceptual approval of the plan from the City Council. But the Rules Committee balked, refusing to give it a favorable recommendation, prompting Jacobs to balk, suspending his efforts.
It is not our purpose today to argue on behalf of the specifics of the Jacobs plan. It is our purpose to argue that there is too much at stake for Balboa Park and, indeed, the broader San Diego community, for the process to fall apart now.
The leadership challenge is for the mayor, the council and the many stakeholders who love the park but sometimes have conflicting goals to find a way to come together – and fast.
A dagger it most certainly is. Here is a guy who voluntarily complied with the Mayor's request to rid Balboa Park of automobile traffic, spent money to come up with plans for doing so, and then was rebuffed by San Diego after having already given city institutions hundreds of millions of dollars! Maybe San Diegans just like saying no to a billionaire. Talk about looking a gift horse in the mouth. The City Council even complained about the horseshit in the stable! Perhaps the problem is with the language "bypass off the Cabrillo Bridge" which implies altering the structure of the bridge itself. According to the plan, this is not the case. The bypass has nothing to do with the bridge, and is located a good distance from it. It is really a bypass around the Plaza de Panama which happens to be a bridge not to be confused with the Cabrillo Bridge. Even CalTrans got into the act concerned about the bypass' alleged infringement on the Cabrillo Bridge. The mistake is calling it a "bridge bypass" which suggests that it somehow ties into the structure of the Cabrillo Bridge itself. Such is not the case.
SOHO is in the unenviable position of defending the historical right of automobiles to traverse the park. They want cars in the park because they were always there so they have a right to be there. It's traditional! It's historic! Car traffic represents the American Way of Life. Car free zones are so very European. Pedestrians love to breathe exhaust fumes and play chicken with cars while crossing the street. And what's more San Diego doesn't need any friggin billionaire's money. The city will be glad to pay for any improvements to the park. Oh, what's that? The city's broke! So instead of building this model of relying on philanthropists to take care of the park, after rejecting the Jacobs proposal, the city now will allow the park to deteriorate, maintenance to go undone and improvements to languish by the wayside. But Balboa Park will keep its historic character!That's the important thing.
City Councilman Todd Gloria twittered "Mark my words, the community's vision for a parking free/pedestrian friendly Plaza de Panama in #BalboaPark will be achieved by 2015." Yeah, right. Maybe the cheap charlie version of one. And future philanthropic projects in San Diego? You can't use a billionaire as a pinata and expect to get any. He just might take his marbles and go home!
War is immensely profitable; that's why there is so much of it. It's the only domestic industry to speak of. All the rest have been outsourced. War constitutes almost the entire GDP of Afghanistan while enriching the corrupt Karzai and his henchmen. War is immensely profitable to Pakistan too - $2 billion a year profitable. Lockheed Martin, General Dynamics, Boeing and other defense contractors would see their profits sag if it weren't for their lucrative contracts from the Defense Department. Although war is essentially the only domestic industry, we're still dependent for parts for cruise missiles and smart bombs from China. Senator Bernie Sanders had to actually introduce a piece of legislation to get the Smithsonian gift shop to stop stocking busts of Washington and Jefferson MADE IN CHINA! While the US pours billions of dollars down the rathole of war, other countries are using their resources to build up their infrastructure, provide free education to their citizens, free health care and a decent quality of life. THe US is drowning in debt precisely because it has squandered its resources on its war economy. Where other countries have built bridges, the US has destroyed bridges. The destructive power of the US is second to none while its politicians squabble over whether or not to provide a few crumbs for the poor.
And as for the countries we have expended so much blood and treasure on, they essentially say to us: "don't bang your ass on the door on the way out." Are they grateful? No. Are they glad we came? No. They use us for the money that we bring with the wars we fight. Our "puppet" leaders such as Karzai want the long green so they go along with our ridiculous assertions of bringing them freedom and democracy, and then they ridicule us when the gravy train runs out. Today President Obama gave a very rational explanation of his troop withdrawals from Afghanistan. It was very precise and rational, almost mathematically tautological. We will bring out so many now, so many next year, so many the year after that etc. And as our troops stand down, their troops will stand up? Where have I heard that before? At least we can't be accused of cutting and running. However, President Obama said nothing about withdrawing the money from Afghanistan. That's what I want to hear. Like, for instance, we withdraw $200 million per week (of the $2 billion per week we're spending now) followed by another $500 million per week next year etc. Withdrawing troops is almost irrelevant if we are continuing to spend the same amount of money there. The American people want the money withdrawn as well as the troops with the money being spent at home instead of over there. But there was nary a word about who's going to pay all those Afghani soldiers who are standing up as ours stand down (hint: it's us) or who's going to keep on paying all those expensive private contractors about whose prescence there's not even a mention. And when the money gravy train dries up, all those Afghani soldiers just might switch sides if the other side offers to pay them. Or maybe they might do it anyway just for the hell of it. If anyone thinks they are loyal to the corrupt Karzai, they have another think coming. And just as soon as American money dries up, Karzai himself will be off to his Swiss villa and his Swiss bank account: MISSION ACCOMPLISHED! As the US leaves Afghanistan they will probably be treated to the same refrain: don't bang your ass on the door on the way out!
The US has spent $1.3 trillion on two wars in the past decade while ballooning the national debt. And all this has done is to give the US the reputation as an overlord and an occupier in most of the developing world. Karzai freely calls the US an occupier and doesn't mind criticising us to his heart's content. The same is true of Pakistan. With friends like these we don't need enemies. We give Israel between $2 and $3 billion in aid each year despite the fact that they don't host any of our military bases. Instead we put bases in places like Bahrain and other Arab dictatorships. We give Egypt $2 billion a year despite the fact that there are no military bases there either. It's simply a bribe for their good behaviour in not attacking Israel. Meanwhile, we starve the American people, throw them out on the streets, cut unemployment aid to the bone, deny poor people health care and do everything we can to increase the homeless population. Charity begins at home yet we throw billions at foreign dictators in an attempt to control and rule the world. We think we can buy the rest of the world off, and all it's doing is bankrupting us here at home.
A smart policy regarding terrorism would be to declare that we will hunt down terorists wherever they are found using our intelligence resources and take them out wherever they are found using drones and SEALs. Please note that this would cost very little compared to an invasion of a sovereign nation using ground troops. This policy was actually carried out with regard to the killing of bin Laden. Let's execute the same policy with regard to al Zawahiri, al Quaeda's new number 1. We have satellite imagery of everywhere on the globe combined with the ability to monitor cell phones and bank accounts. We don't need full scale invasions followed by nation building. Terrorists can launch an attack from anywhere on the globe. It's ridiculous to believe that an attack could only come from Afghanistan or Pakistan, and, therefore, we must stay there on and on and root out all the Taliban. Terrorists don't need the Taliban or Afghanistan or Pakistan. They can strike from anywhere and we can take them out anywhere. Why don't we confine our attention to the kind of raids that killed bin Laden that don't require invasions and occupations or bribes paid to dictators? You go in, you take out the target and then you go out. Mission accomplished without a lot of money being expended. And save billions in "foreign aid."
On Monday, the United States Conference of Mayors made that connection explicitly, saying that American taxes should be paying for bridges in Baltimore and Kansas City, not in Baghdad and Kandahar.
The mayors’ group approved a resolution calling for an early end to the American military role in Afghanistan and Iraq, asking Congress to redirect the billions now being spent on war and reconstruction costs toward urgent domestic needs. The resolution, which noted that local governments cut 28,000 jobs in May alone, was the group’s first venture into foreign policy since it passed a resolution four decades ago calling for an end to the Vietnam War.
And in a speech on the Senate floor on Tuesday, Senator Joe Manchin III, Democrat of West Virginia, said: “We can no longer, in good conscience, cut services and programs at home, raise taxes or — and this is very important — lift the debt ceiling in order to fund nation-building in Afghanistan. The question the president faces — we all face — is quite simple: Will we choose to rebuild America or Afghanistan? In light of our nation’s fiscal peril, we cannot do both.”
Demonstrators describing themselves as “angry jobless citizens” said they would picket the Capitol on Wednesday to urge members of Congress to use any savings from Mr. Obama’s troop reductions to create more jobs. The group sponsoring the demonstration, the Prayer Without Ceasing Party, said in a statement on Tuesday that it was “urging the masses to call their congressmen and the president to ensure that jobs receive a top priority when the troops start returning to America.”
Spending on the war in Afghanistan has skyrocketed since Mr. Obama took office, to $118.6 billion in 2011. It was $14.7 billion in 2003, when President George W. Bush turned his attention and American resources to the war in Iraq.
The increase is easy to explain. When Mr. Obama took office, he vowed to aggressively pursue what he termed America’s “war of necessity” (Afghanistan) and to withdraw from America’s “war of choice” (Iraq). He has done so; the lines on Iraq and Afghanistan war spending crossed in 2010, when the United States spent $93.8 billion in Afghanistan versus $71.3 billion in Iraq, according to the Congressional Research Service.
If the US, which has a greater Defense budget than all the rest of the world's countries combined, does not wake up and realize that it is more important to build a strong domestic society at home than it is to try and control the world, the US will end up a hollowed out, bankrupt country approaching Third World status - the only developed country to descend to that level. And it is all because of our value of spending far more on war than on domestic tranquillity. It is all about the fact that we have kowtowed to corporations which a few short years ago contributed 30% of Federal revenues and now contribute 7%. It is all about political power which now has little relationship to the wishes of the people and is more and more a handmaiden of rich corporate interests whose lobbyists actually write most of the laws and whose tax lawyers spend their days figuring out how little their employers have to pay in taxes. And capital gains are taxed at a low, low 15% instead of 29% which was the rate in much of the 1990s. The tax burden, therefore, is shifted to the working stiffs, and the upper 1% gains a fortune.
While we create job programs in Afghanistan, we eliminate them at home:
“Do we really need to be spending $120 billion in a country with a G.D.P. that’s one-sixth that size?” asked Brian Katulis, a national security expert at the Center for American Progress, a policy group with close ties to the Obama administration. “Most Americans would be shocked to know that we’re spending that kind of money for jobs programs for former Taliban, and would wonder where are our jobs programs for Detroit and Cleveland?”
In 2010, Congress — at the Obama administration’s request — set aside $100 million to support programs in Afghanistan aimed at moving former insurgents off the battlefields and into the country’s mainstream economy. Those efforts — similar to what the Bush administration did in Iraq — have yet to bear much fruit; the 1,700 fighters . who have enrolled in the reintegration program represent only a fraction of the estimated 20,000 to 40,000 Taliban insurgents, The New York Times reported Monday.
US priorities are totally out of whack. The reason why so many of the world's other developed countries are doing so well and provide so many benefits to their citizens is precisely because they spend so much less on war. The war economy of the US combined with preferential treatment for the wealthy in terms of tax cuts is precisely why the quality of life in the US is aiming towards its nadir. Public anything is to be eliminated with the privatization of every function of domestic life. Public schools are to be eliminated in favor of private schools. Public health care is to be eliminated in favor of the privatization of health care. More and more perks and privileges are to be heaped upon the already wealthy. Private wealth is to replace public wealth. Infrastructure is allowed to crumble because this mostly affects the public while the private wealthy can spend their way around any crumbling infrastructure. Other countries still have the arcane notion that the country's worth has something to do with the welfare of the majority of its people. The US is only concerned with the welfare of its wealthiest citizens.
Republicans in Congress, while having failed to impose their neocon values of privatization and tax cuts for the rich on other countries, are going all out to at least impose those values on its own citizens making the US the bastion of the war economy and favoritism towards the wealthy and large corporations. This combined with a totally dysfunctional political system in which money rules is making the US a country which is totally out of step with the rest of the world and is sacrificing its people on the altar of war.
The Republicans have Obama exactly where they want him: a failing economy with no chance for any significant job creation program. Why isn't there any chance for a job creation program? Because Republicans control the House and have veto power in the Senate. Obama would just be spinning his wheels even to suggest one. What he could do is to take an ideological stand decrying supply side economics, tax cutting and deregulation for the failures they are, but that would just turn off his campaign donors who are the same ones who supply Republicans with cash so why even bother. So Obama is fenced into a corner hoping that the economy will recover on its own when all indicators are that it won't.
There are two main things that are tanking the economy: joblessness and the continued erosion of the real estate market caused by record numbers of foreclosures. In fact the housing market is worse than the Great Depression in terms of the reduction in value of houses. And there is no upturn in sight. Obama should have made the HAMP (Home Affordable Modification Program) program mandatory instead of leaving it up to the discretion of the banks whether or not to make mortgage adjustments in order to keep people in their houses. Now it's too late. Another mistake Obama made was to make a bargain with Republicans to extend the Bush tax cuts for two years while extending unemployment benefits for only one. Now starting in 2012 the rich will still be enjoying their extended tax cuts while the unemployed will fall off the rolls creating even more misery among the populace just as the campaign season begins. Obama's goose is essentially cooked. He doesn't have any room to operate. He's tied down with the Republicans playing the roll the Lilliputians played with Gulliver.
What Obama could do even at this late date is to say the hell with it and come out and take a strong ideological stand which is opposed to the Republican tax cutting, deregulation small government nonsense. He could devote himself to educating the American people even though he's not in a position to do anything about their plight. The country needs to understand that the Democrats represent a clear choice in contradistinction to the Republican ideology. That clear choice is that the government should be the employer of last resort. The clear choice is that deficit reduction should mean not only spending cuts but revenue increases. The clear choice is that corporations should be regulated. Revenue increases mean more taxes on the wealthy and corporations, closing loopholes, a financial transaction tax and above all elimination of the Bush tax cuts on the wealthy. At least Obama has pledged to end the Bush tax cuts in 2013. Too bad he probably won't be in office to see it. By the time they end he will have lost the election.
The die has been cast. Obama chose to have economic advisors that represented Wall Street instead of the Robert Reichs and Paul Krugmans of the world. He chose to be Republican "lite" instead of representing a clear ideology on the left. He placed his bet that the economy would recover on its own. If it had, he would be sitting pretty for next year's election. At this point the best we can hope for is that Democrats will retake the House and hold onto the Senate. This will ensure four more years of gridlock as a Republican President would veto any constructive job creation legislation, but at least Medicare and Social Security will be safe. Meanwhile, the economy will continue to deteriorate as lobbyists chip away at whatever constructive legislation the Democrats passed during Obama's first two years in office. Case in point: the banking regulation that demanded that the Commodity Futures Trading Commission (CFTC) put position limits on commodity speculation by January 2011. What has the CFTC done in fact? Nothing. It has completely ignored this mandate citing its need to further "study" the situation. The result is that speculators have added $30 - $40 to the price of a barrel of oil and consumers are paying a dollar or more per gallon of gas at the pump. Senator Bernie Sanders has recently sponsored legislation that would order them to put the position limits in place, but c'mon Bernie, do you think it will really pass in the Republican controlled House? Bernie Sanders, God bless him, is whistling Dixie past the graveyard.
The best the Democrats can do at this point is to take a strong ideological stand against the Republicans in an attempt to educate the American people even though they don't have much of a prayer of getting any meaningful legislation passed in the near future. Why don't they do it? Why don't they support the middle class "awakening" in Wisconsin where there is a movement to recall state Senators who supported Governor Walker's union busting policies? There's nary a mention of this budding movement from the White House or Halls of Congress. Again they don't want to turn off their campaign donors. Remember that Obama's largest campaign donor in 2008 was Goldman Sachs. There are only a few honest voices crying out in the wilderness like Dennis Kucinich, Anthony Weiner and Bernie Sanders, and they will be eliminated by one means or another as Weiner recently has. Kucinich is in the process of being redistricted out of his safe constituency.
The net result of the antediluvian, archaic and gridlocked system of government known as the US Constitution is that more efficient and singleminded nations are going to eat our lunch until it is plain and obvious to all that the US is clearly not any longer a superpower. All Obama's brave talk about winning the future, investing in education and high speed rail is only a lot of hot air. The future is what is happening in Wisconsin, Michigan, Ohio, Texas and Florida where ideological Republicans are snuffing out unions and balancing their budgets on the backs of the poor and middle class. A Republican controlled Federal Government will only serve to make those state policies into national policies and end democracy as we know it. Money will rule absolutely, and the middle class will wake up some day and realize that they have been transformed into a bunch of serfs fighting for a place on a freeway exit in which to hold up their sign which says "Will Work for Food.".
Obama seems to be counting on the fact that the economy will recover on its own after the initial stimulus package. It's starting to look like this was a bad bet. The Republicans of course have their job creation plan in place: lower taxes especially on the rich, less government spending and more deregulation or, in other words, the continuation of the transfer of wealth from the poor and middle class to the rich. However, this is precisely what has ruined the economy. As Robert Reich, Bernie Sanders, Paul Krugman and others have been saying repeatedly, the government has to spend more to create jobs and raise the money to do so by a variety of mechanisms like a financial transaction tax, doing away with subsidies for oil and agriculture, closing tax loopholes for corporations, raising taxes on millionaires and billionaires etc. Obama is in the weak position of not having an ideological counter to the Republican ideology. The Democrats need to develop an ideological position based on Keynesian economics to counter the Republicans. Obama's "Republican lite" philosophy will probably result in his losing the next election if the economy continues to sputter and stagnate. His position seems to be the Republican position only not quite as severe. What is needed is a complete repudiation of trickle down economics, union busting, the "small government" mantra, and the wealthy as "job creators." The Democrats need an ideological consistency to counter the Republicans who are extremely ideologically consistent.
Most of the jobs being created are temp jobs and lousy jobs at less than a living wage. The Democrats are not addressing this and they need to. The Democrats need to state loudly and clearly that the government needs to be the job creator of last resort. If private enterprise cannot create the jobs to provide for a full employment economy, then government must step in and fund infrastructure repair projects and even a WPA style work program. We need to get over the notion that the only legitimate government job creation program is in the military.
Obama's Administration and the Republicans are either brain mute or unwilling (out of fear of increasing America's indebtedness now with CONSTRUCTIVE PUBLIC DEBT financed investments ) to recognize the deeply structural character of our nation's declining rate of job generation shown in Frank's 30 year trend summary (The U.S. Ongoing Structural Unemployment Calamity).
The 50,000 job generation in May doesn't surprise us. In the 80s and 90s decades about 36-38 million jobs were created (averaging 18-20 million per decade: see Advance and Rutgers study). In the first decade of the 21st century, depending on which study numbers one uses, U.S. job generation was either a shockingly negative -0.4 million up to-2.1 million including labor force growth.
To summarize again this disastrous trend based on Advance & Rutgers 1982-2009 and BLS 2010-11 data:
ANNUAL AVE. JOB GROWTHTOTAL
Nov.1982-July 1990 Expansion 2,401,800 18.4 Mil.
Mar. 1991-Mar. 2001 Expansion 2,150,000 21.5 Mil.
Nov. 2001-Dec. 2007 Expansion 1,020,550 6.2 Mil.
Jan. 2008-Dec.2009 RECESSION - 4,600,000 (a) -9.2 Mil. (a)
Jan.2010- Dec. 2010 RECOVERY 850,000 0.9 Mil.
Jan. 2011- May 2100 RECOVERY 700,000 0.7 Mil.
(a) Includes unfulfilled job need of 1.7 million to meet labor force growth.
As everyone has learned a few thousand times over by now, we have 14 million officially unemployed and another 8-10 million underemployed (the latter at below-subsistence wage levels). As was reported in a recent writing, this overall situation is far worse than that of the better performing, mature European countries (excepting the high jobless levels in Spain, Ireland, Greece and Portugal).
AUSTERITY (get rid of waste), REFORM (Medicare, Soc. Security, Defense Spending, Tax System/Avoidance) and INVEST (in high-return projects, training) to produce jobs should be Obama's no-holds-barred leadership call. We are on the path of being mired in a long lasting economic malaise similar to Japan's experience during 1992-2002 -- where their debt as a % of GDP rose from 62% to 174% in 2004 and even higher now. Japan covered their explosive annual debt cost with exceptionally strong net export surpluses up to 2008. Now, with sharply deteriorating net export balances, their high debt level is becoming an unquestionably dangerous financial burden.
If we migrate to a Japan 10 year stagnant-type malaise, we will be in BIG financial trouble because we have no trade surpluses, only enormous annual trade deficits simultaneously with a mountain of public debt escalated in the Great Recession bubble of Bush's Presidency and by the government's costly rescue efforts of selected financial institutions.
As repeated many times, our economic growth model of extreme dependence on CONSUMPTION (70% of GDP vs. 60% in Europe) with almost Zero Savings (vs. 10-12% in Europe) and net export deficits of $45-60 billion a month, along with low PUBLIC and PRIVATE Investments (vs. higher infrastructure and R&D investment levels in Europe) is NOT SUSTAINABLE. European countries, like Holland, Germany and others, realize that Public investment spending, joint private-public ventures and sensible, affordable military spending (+-1.7% of GDP vs. +-5.5% in U.S.) much more significantly and effectively increase GDP, jobs, incomes and tax revenues in the short and long term. All this means that we need new ideas to get our social-economic model structurally as well as fiscally balanced to improve societal well-being ... to stop the destruction of human capital through impoverishment of the middle-class.
The Democrats need to fine tune their ideological stance and confront the Republican ideology head on. They can't just be pragmatic. Pragmatism looks a lot like wishy-washiness when confronted by an aggressive, confrontational ideology like the Republicans espouse. And Obama cannot simply cross his fingers and hope that the "experts" are right when they say that the American economy will just recover by itself and on its own without any further efforts on his part.
The US modus operandi in the past has been to give lip service to democracy while supporting authoritarian regimes and using the CIA to overthrow democratically elected governments so it comes as a radical change in US foreign policy when President Obama actually supports the Arab Spring uprisings instead of the middle east dictators that past US Presidents have supported. I imagine it also comes as a surprise to those dictators who thought the US valued stability above all else. And Obama can pull this off since the right wing echo chamber can hardly criticize him for taking the side of democracy much as they would like to do so. What are they going to say: "Obama should be supporting authoritarian regimes and dictators because stability is in the US interests, and we don't know what will happen when the ragtag mobs take over." They can hardly give a nuanced message like this to their bumper sticker mentality listeners so for the most part they have to sit still and bite their tongues while Obama actually supports democratic movements instead of just giving lip service to them while supporting right wing dictators.
The US has a long sorry history of supporting dictaors from the Shah of Iran to Pinochet in Chile. I compiled a partial list of this history in a blog post entitled A Short History of US Overthrow of Democratically Elected Regimes or Why the Rest of the World Hates Us. This foreign policy was pursued under both Republican and Democratic Presidents sad to say. I wish I could just blame Republicans for this but I can't. This is what I wrote about the overthrow of the democratically elected regime of Mohammed Mosaddeq in Iran in 1953 during the Eisenhauer administration:
The 1953 Iranian coup d’état was the Western-led covert operation that deposed the democratically-elected government of Iranian Prime Minister Mohammed Mosaddeq. The coup was organized by the United States' CIA and the United Kingdom's MI6, who aided and abetted anti-Mosaddeq royalists and mutinous Iranian army officers in overthrowing the Prime Minister. CIA officer Kermit Roosevelt, Jr. organized Operation Ajax to aid retired General Fazlollah Zahedi. In the CIA history called TPAJAX, the TP preceding AJAX meant that it was a covert operation taking place in Iran.
After deposing Iran's popularly elected leader who was taken to jail, CIA operative Kermit Roosevelt carried out the plan devised by CIA agent Donald Wilber to install Imperial Guard Colonel Nematollah Nassiri to establish a pro-US and pro-UK government, by bribing Iranian government officials, reporters, and businessmen.
This Anglo–American coup d’état was to ensure Western control of Iran's petroleum resources and to prevent the Soviet Union from competing for Iranian oil. Moreover, the Iranian motivations for deposing Prime Minister Mosaddeq included reactionary clerical dissatisfaction with a secular government, fomented with CIA propaganda.
Thus the much hated Shah of Iran was installed in power by the US. His secret police SAVAK was known for its brutality
The Shah appreciated the coup, Kermit Roosevelt wrote in his account of the affair. "'I owe my throne to God, my people, my army and to you!' By 'you' he [the shah] meant me and the two countries—Great Britain and the United States—I was representing. We were all heroes."
Then there was the coup in Chile in 1973 under the Nixon Presidency which deposed the democratically elected Salvador Allende and replaced him with the brutal dictator Augusto Pinochet. Here's what I wrote:
Salvador Isabelino Allende Gossens served as the President of Chile from November 4, 1970 until the U.S. backed September 11, 1973 coup d'etat that ended his democratically elected Popular Unity government. He was a physician and the first democratically elected Marxist socialist to become president of a state in the Americas.
In office, Allende pursued a policy he called "La vía chilena al socialismo" ("The Chilean Way to Socialism"). This included nationalization of certain large-scale industries (notably copper), of the health care system, continuation of his predecessor Eduardo Frei Montalva's policies regarding the educational system, a program of free milk for children, and land redistribution. The previous government of Eduardo Frei had already partly nationalised copper by acquiring a 51 percent share in foreign owned mines. Allende expropriated the remaining percentage without compensating the U.S. companies that owned the mines.
Chilean presidents were allowed a maximum of 6 years, which may explain Allende's haste to restructure the economy. Not only did he have a significant restructuring program organised, it had to be a success if a successor to Allende was going to be elected.
At the beginning there was broad support in Congress to expand the government's already large part of the economy, as the Popular Unity and Christian Democrats together had a clear majority. But the government's efforts to pursue these policies led to strong opposition by landowners, some middle-class sectors, the rightist National Party, financiers, and the Roman Catholic Church (which in 1973 was displeased with the direction of the educational policy). Eventually the Christian Democrats united with the National Party in Congress.
The land-redistribution that Allende highlighted as one of the central policies of his government had already begun under his predecessor Eduardo Frei Montalva, who had expropriated between one-fifth and one-quarter of all properties liable to takeover. The Allende government's intention was to seize all holdings of more than eighty basic irrigated hectares. Allende also intended to improve the socio-economic welfare of Chile's poorest citizens; a key element was to provide employment, either in the new nationalised enterprises or on public works projects.
The Chilean coup d'état of 1973 is a landmark in the history of Chile and the Soviet-American Cold War. On 11 September 1973, the government of President Salvador Allende was overthrown by the military in a coup d’état.
The coup occurred two months after a first failed attempt, the Tanquetazo — Tank putsch — and a month after the Chamber of Deputies (with an Opposition majority) condemned President Allende’s alleged breaches of the Constitution. President Allende died during the coup; the cause of his death remains disputed.
General Augusto Pinochet assumed power after deposing President Salvador Allende, establishing a military government that ruled until 1990. This right-wing military deposition of an elected Socialist president by a U.S.-sponsored caudillo licenced the U.S.S.R. to retract from Russo-American détente in pursuit of foreign policy ambitions in the Third World.
Alan Greenspan personally instructed Pinochet in how to run his economy based on free market principles of privatization, deregulation and laissez faire capitalism. These policies enriched the upper class while making the lives of Chile's peasants more miserable.
I refer the reader to the original blog post for more examples of how the US via the CIA overthrew democratically elected regimes and installed right wing dictaors all the while giving lip service to democracy. Now along comes Obama and instead of being a hypocrite like former US Presidents actually supports democratic movements like the Arab Spring against the interests of the Arab authoritarian regimes. Naturally the Arab dictaors are totally confused as to why the US would be supporting the rabble in the streets against them. They thought they had an understanding: the US military would support them in the name of insuring a free flow of middle east oil and stability in the middle east while giving lip service to "freedom and democracy." But instead what they now are finding out is that Obama is supporting the Arab street against the interests of the Arab dictators. It must seem to them that the world has turned upside down. And there is little that Rush Limbaugh can do to criticize without seeming to be on the side of dictators and right wing regimes (which he actually is) and against the interests of democracy and freedom.
This alone makes Obama a unique US President since he has quietly radically changed US foreign policy without raising a hue and a cry and put the US squarely behind the young people crying out for democracy in the middle east.
President Obama has said recently that the solution to the Israeli-Palestinian conflict is to go back to the 1967 borders with "mutually agreed upon swaps." Really?? Since when have these two parties "mutually agreed upon" anything? The mistake in my opinion is to think that the Palestinians and the Israelis are adult enough to sit down and negotiate and compromise and come up with a solution acceptable to both. It's not going to happen.
They are like two children arguing over a bunch of toys. Each child maintains that all the toys belong to him. Now an adult comes along and says, "Now children you must negotiate a solution in which each of you agrees to give up some of your toys. Go ahead now." What do you think will happen? They will continue to fight and haggle ad infinitum and this is exactly what the Israelis and the Palestinians have done. Left to their own devices they will never come to a solution. The solution to the two children fighting over their toys is not for an adult to encourage them to negotiate; it's for an adult to decide on a rational and fair solution and then say, "Children this is the way it's going to be whether you like it or not." Then both children are going to cry and complain and say the solution is unfair. But after a while they'll get used to it because they have no choice.
Everbody that has looked at the problem has agreed that a two state solution with a Palestinian state living side by side with the Israeli state is the best solution. But each side would rather pursue its own perceived interests than to accept a two state solution if it were to be left up to them. The Israelis say "We're not going to negotiate with the Palestinians unless they say Israel has a right to exist." What difference does it make what the Palestinians "say"? What if they said, "Oh yeah, we recognize the right of Israeli to exist", and then, after the peace treaty was signed, invaded Israel the next day. This is almost precisely what happened in the days leading up to World War II when the British PM Neville Chamberlain agreed to let Hitler annex the Czechoslovakian Sudetenland where many ethnic Germans were living in return for "peace in our time." Hitler promised to go no further in his territorial ambitions, but shortly thereafter invaded Poland which was the start of World War II. The point is that whatever the Palestinians say is not as important as coming up with a solution in which the Palestinians cannot harm Israel regardless of what they say because in the final analysis what they say means nothing just as what Hitler said about "going no further" meant nothing.
What is needed in the Israeli Palestinian situation is a strong adult who will enforce a fair and rational solution on both parties just as what is needed in the case of the two children who can't resolve the "who owns what toys" issue needs a strong adult to resolve it for them. The US is not that adult! The US gives an enormous amount of military aid to Israel. Obama's FY 2011 budget called for a record-breaking $3 billion in military aid to Israel. Netanyahu has said, "Israel has no better friend than America. And America has no better friend than Israel." Well, at least half that statement is true. Here is what activist Roi Maor who lives in Tel Aviv had to say:
The US has many better friends than Israel
Among the many troubling statements in Netanyahu’s speech before the US congress yesterday, it was something that he said at the very outset, which really stood out:
"Israel has no better friend than America. And America has no better friend than Israel."
The first sentence is true. Indeed, it is probably an understatement. The US extends to Israel support and assistance which it provides to no other country in the world (perhaps not even to some parts of the US itself).
The second sentence is false. The US has plenty of better friends than Israel. There are countries in the world that have put their soldiers in harm’s way when the US was attacked on September 11th. Others have changed policies or offered diplomatic support despite the internal and external price they had to pay.
Certainly, they have done so for their own interests, or because the US had done the same for them. But both considerations apply to Israel as well. And yet, this country refuses to show any consideration for US interests, even when the price to pay is tiny.
The settlement freeze debacle and the ugly, and pointless, confrontation between Netanyahu and Obama over 1967 borders are just the most recent examples. Israel has repeatedly embarrassed the US, and undermined its initiatives and policies, for the last few decades, on issues ranging from human rights to nuclear disarmament. It backed down from selling US technologies to China only under monumental pressure, recruited spies in the US to get information the Americans would not share, and many other acts of ingratitude.
It is a well-known psychological phenomenon, that a person is often more bound to another by extending help rather than receiving it. The more you assist someone else, the more you feel committed to her, rather than the other way around. The US-Israel relationship is a perfect example of that.
Israel has no US miltary bases there while we station our troops in Qatar, Bahrain, Kuwait and other less friendly countries. You'd think that for $3 billion a year at least they would let the US have a base there! But the point is that, because of the unique US-Israeli relationship which has historically strongly favored the Israelis over the Palestinians, the US cannot be an honest broker in the denouement of the Israeli-Palestinian situation. The US has been Israel's enabler for far too long. It's as if we expected one of the children's mothers to decide which child got what toys. So who would be an honest, fair and objective broker then? Perhaps the EU which has shown much more equity and balance in its relationship with both parties. Therefore, what I propose is that a commission set up by the EU should decide on what the borders for the two state solution should be and then just say to both the Israelis and the Palestinians, "Hey, these are your borders period." This is similar to the situation in which a fair and relatively objective adult (not one of the kids' mothers) tells them 'this is who gets what' period, end of story. The kids will squawk, cry and scream just as the Israelis and Palestinians will do, but this is really the only way out of this morass.
Then the next component of the solution is to station an international peacekeeping force along the Palestinian/Israeli border tasked with protecting the territorial integrity of both countries. It should have the muscle to go after any offenders just as once the objective adult has decided on which kid gets what, she would have to enforce the solution. Both the Israelis and the Palestinians themselves should be relatively demilitarized so that there is parity between them militarily and they should not enforce the borders. If that international peacekeeping/military force had to be kept in place for 100 years, it would still be cheaper than letting the conflict go on unabated because it would be the cornerstone of peace in the middle east and would do more to curb terrorism than any other action. And it would save the US some $3 billion a year because I would expect other countries to chip in. And while the US was at it, it might as well stop giving Pakistan $2 billion a year. Why does the US think it has to buy the friendship of countries where they're either unwelcome or not appreciated especially at a time in which the US is in a profound debt crisis?
As to the disposition of Jerusalem, it should be made an international city open to all parties and again protected by an international peacekeeping force. The Palestinians and the Israelis will both kick and scream at this solution but they both must - as children must - learn the lesson that it is more important to share than to carry on a raging conflict saying, "Mine. Mine. That toy is mine. God gave it to me." They both must learn that in the final analysis peace and cooperation is more important than ownership.
We hear all this blather about how the US is such a wealthy nation. Not true. Before Ronald Reagan became President, the US was the world's largest creditor nation. People and countries owed us more money than we owed them. Now some 30 years later the US is the world's largest debtor nation. This is the definition of a poor - not a rich - nation. China on the other hand holds $3 trillion in international reserves including $1 trillion of US debt. Other nations have sovereign wealth funds which contain vast amounts of money. The US has only a huge pile of debt - some $14 trillion worth. The US used to be the world's largest importer of raw materials and exporter of manufactured goods. Now we're the world's largest exporter of raw materials and importer of manufactured goods with a trade deficit of some $600 billion a year. At the present time the US has a deficit of some $2 trillion in needed infrastructure repairs while China is building high speed rail track at such a rate that it will soon have more miles than the rest of the world combined. Meanwhile, the US spends more on its military establishment than the rest of the world combined while cutting safety nets and education for its own citizens.
Americans have pulled the wool over their own eyes. Despite having a national debt of $14 trillion, despite having gone from a net creditor nation to a net debtor nation in little over 30 years, despite having enormous trade deficits month after month, year after year, despite having an infrastructure in need of $2 trillion worth of repairs, Americans think they live in a wealthy nation. The truth of the matter is that the US is a poor nation within which live a lot of wealthy individuals. China on the other hand holds a little over $1 trillion of US debt making it a fairly wealthy nation albeit with a large but diminishing number of poor people. China is building new infrastructure at an astonishing rate. It's a fallacy to think a wealthy nation is a nation comprised of a large number of wealthy individuals. In fact many Banana Republics are comprised of a small class of wealthy individuals surrounded by a sea of poverty. The US is on track to becoming one of those. A recent survey showed that there is a higher level of inequality in the US than exists in Pakistan, Ethiopia and Ivory Coast.
It is not hard to diagnose why the US is a poor nation which thinks itself rich while China is a rich nation which passes itself off as being poor. All the free trade agreements like NAFTA and CAFTA have resulted in the decimation of the US manufacturing base. US factories are closing in droves:
2010 comes in the midst of a stunning wave of U.S. factory closings that stretches from coast to coast. Once upon a time America was the greatest manufacturing machine that the world has ever seen, but now it seems as though the only jobs available for working class Americans involve phrases such as “Welcome to Wal-Mart” and “Would you like fries with that?” Even though the population of the United States has exploded over the last several decades, the number of Americans employed in the manufacturing sector today is smaller than it was in 1950. America has become a voracious economic black hole that ”consumes” as much as possible and yet actually produces very little. The United States is becoming deindustrialized at a blinding pace, and it is becoming increasingly difficult for blue collar American workers to find jobs that will actually enable them to support their families. The sad truth is that American workers don’t have a whole lot to actually celebrate this Labor Day. 14 million U.S. workers are “officially unemployed” and tens of millions of others have been forced to take part-time or temporary jobs that they are overqualified for just so they can survive. Unfortunately, this is not just a temporary situation for American workers. As millions of good jobs continue to get outsourced and offshored, Labor Day celebrations in coming years will be even more depressing.
Since 2001, The U.S. Has Lost 42,400 factories. The "giant sucking sound" that Ross Perot predicted has become a point of actual fact. But this doesn't seem to bother America's leaders. They are dedicated to the policy that US consumption drives US GDP and as long as US GDP is the largest in the world, who cares? Sales are up! However China, as the world's second largest economy as measured by GDP, is on track to overtake the US in the near future. American politicians only care about transnational corporations, nominally American, and how they can maintain the US consumer appetite (and their profit margins) for buying their goods even though most of those goods are produced overseas. They coddle these corporations by lowering their taxes, having their lobbyists drill loophioles in the tax code and giving them a "tax holiday" during which they can "repatriate" their overseas capital and bring it "home" without any tax consequences.
The model of trickle down economics, long since discredited, is still being championed by right wing politicians with the result that the fig leaf of prosperity is being shredded to reveal a naked transfer of wealth from the middle class to the upper one per cent. Naked power grabs are becoming the order of the day as the recent vote to extend taxpayer subsidies to the five Big OIl companies, despite their being the most profitable corporations in human history, reveals. At the same time those same right wing policticians are demanding that the budget be balanced on the backs of the poor and middle class. While countries such as Norway fund their safety net with royalties from oil drilling, the US gives away its natural resources to oil corporations including BP which is not even headquartered in the US. The neocon model of privatization and eliminating safety nets, although unsuccessful in Argentina and Brazil, is achieving considerably more success when practiced here at home. Trade unions are being decimated. States are being turned into fiefdoms and dictatorships. Public education is being defunded. There is an all out assault on teachers, police and other public workers. The notion that government doesn't work and can't be trusted is being fostered.
The US is becoming the very definition of a Banana Republic. It is becoming a nation largely bereft of a middle class, a nation in which there exists a small class of extremely wealthy individuals surrounded by a sea of impoverishment, a nation of antiquated infrastructure, a nation in which there is no there there. All that exists is a diminshing probablity of getting rich or even making it into the middle class. Students are being saddled with immense and obscene amounts of student loan debt. Middle classers are losing their homes to foreclosure. Poor people are being shunted aside as food stamp programs are being shut down and home heating oil allowances are drying up. The war on the poor is raging. And the American people continue to vote the guys that are screwing them into office because they pander to them with promises of unlimited rights of gun ownership and promises that they won't allow gays to marry
The US in point of fact is not a wealthy nation despite attempts to brainwash us that it is, and it's becoming poorer by the hour. But instead of implementing a rational health care system, we continue to give away billions to the pharmaceutical companies that we wouldn't have to if the government weren't prevented by law from negotiating with them. We continue to give away billions in subsidies to Big Oil and Big Agriculture. We continue to give away billions in tax breaks to the rich. We continue to pour billions down ratholes in Afghanistan, Pakistan, Iraq, Israel and many other places. .
These countries are taking us for a ride, and the Israeli President Netanyahu lectures our President on why he won't cooperate to bring about mideast peace. They are manipulating us out of our money while actually working and fighting against us as revealed by Pakistan's harboring of bin Laden. If Obama had tried to coordinate bin Laden's capture with Pakistan instead of going it alone, bin Laden would probably have been tipped off with the result that the Seals, to Obama's embarassment, would not have found bin Laden at home. What, no bin Laden? Just innocent women and children.
As China eats the US' lunch and the rest of the world rips off Uncle Sucker for billions of US taxpayer dollars, the American people should get used to the fact that we're not number 1 any more. Far from being the world's richest nation we're fast becoming one of the world's poorest nations where some of the world's richest people happen to reside. But don't worry about them. They also own villas in France, Italy and Spain. They only continue to hold US citizenship as a convenience. They could live anywhere. They could headquarter their corporations anywhere. It's still convenient for them to headquarter here so they can use their lobbyists to rip off American taxpayers and sell into the American consumer market. But as time goes on most of their sales will be to emerging consumer markets in China and elsewhere.
Dutch taxpayers are up in arms over bonuses paid to Amsterdam based ING bank executives. Unlike the US, they are doing something about it. Their (unbought) politicians are proposing a 100% tax on all bonuses until the banks' bailout debts are paid back.
Yes, I'm quite aware of the taxpayer furor caused when top managers of Holland's ING bank --which received a Dutch government crisis bailout of euros 10 billion (+$14 billion) -- decided to award themselves bonuses of up to1.25 million euros ($1.8 million and within the legal limit set by the Dutch government). Such bonuses are of course a mere pittance compared to U.S. and UK top management bonuses!
This was being proposed when ING pensioners have seen their payouts frozen and while many employees were awarded a pay increase of just 1% in 2010. The public and union reactions were so fierce that within days it caused ING's CEO Jan van Hommen, awarded a 1.25 million euro bonus, to waive his bonus and to tell other directors to do the same. The normal culture here is that everyone expects banks that were bailed out by the state should be exercising modesty in this area.
Now politicians have voted legislation to implement a 100% tax on all bank bonuses paid to executives that received state aid as result of the financial crisis. This means no bonuses until the debt is repaid. Also, the union is advocating a law that makes sure executive pay NEVER amounts to more than 20 times the lowest-salaried employee. We shall see what the final vote will be, but it will be realistically fair and tough as Holland and most of Europe is not into fundamentalist market capitalism that rewards the minority and impoverishes the majority.
As I have noted before on this blog, European CEO salaries and bonuses are relatively much, much smaller compared to an average worker's wages as opposed to the correspondingly outrageous relationship of U.S. corporate top management's remuneration. The latter is driven by the culture of Shareholders & Management First and -- Workers Last , thrown survival breadcrumbs and begger benefits.
Regarding the Dutch bonus levels, Prof. Domhof in his study, Wealth, Income and Power, shows 2010 average median compensation for U.S. CEOs as follows:
All industries:....................................$3.9 million.....or 100 times median worker´s pay of $36,000
Standard and Poor´s 500...............$10.6 million.....or 300 times median worker´s pay of $36,000
Dow Jones Industrial Average........$19.8 million.....or 500 times median worker´s pay of $36,000
Diverse studies indicate that the overall ratio of CEO pay to worker pay is approximately ±250 to 1 in the US versus ±25 to 1 in Europe.
Britain has a rival when it comes to bashing bankers. After a furious row over pay packages at Amsterdam-based ING in which thousands of customers threatened to make mass withdrawals, the Netherlands is now vying for the title of Europe's most bonus-hating country.
A growing Dutch political storm could end with a blanket ban on bonuses to financiers who work for institutions bailed out by the taxpayer.
ING customers mobilised on Twitter and other social networks to protest at bonuses paid to bosses at the bank, one of the biggest in the country. The threat of direct action raised the spectre of a partial run on ING, terrifying the Dutch establishment. Fred Polhout, union organiser at the bank, says: "People were outraged. We heard about the bloated sums being paid again in the City and in New York; but suddenly the issue exploded on our own front door."
Compared with the packages awarded to bankers in the US and UK, the Dutch bonuses were small potatoes. Jan Hommen, ING's chief executive, was due to receive a £1m bonus – a pittance when you consider that Stephen Hester, head of state-controlled RBS in the UK, is in line for up to £7.7m, Bob Diamond of Barclays is to collect as much as £6.5m, and some senior bankers at Goldman Sachs and JP Morgan are looking at windfalls of about £40m each.
"Perhaps we are so upset because we are a small country that prefers to set an example, rather than follow others," suggests Polhout.
So severe was the public reaction to Hommen's bonus that within days he had agreed to waive the award and told other ING directors to do the same.
Now the Netherlands is going through a painful period of introspection and soul-searching. Politicians have voted to implement a 100% retrospective tax on all bonuses paid to executives at institutions that received state aid as a result of the financial crisis. In other words, no banker should get a bonus until the debt is cleared, and they should return payments made since 2008.
ING was thrown a €10bn (£8.7bn) lifeline to stop it going under, while ABN Amro was nationalised. Numerous other Dutch financial firms received capital support, including Aegon, SNS Reaal and ASR Nederland.
On the streets of Amsterdam, there is little sympathy for the bankers. Emma Rohl, who works at an English bookshop in the city centre, says: "They shouldn't get bonuses at all. Why should people be paid vast sums for going into work and doing their jobs? It's utterly ridiculous."
Erick Koenig at a nearby restaurant says: "We rescued the banks from their own follies, and now they expect to be paid extra. I think they should work for free for at least five years."
At a dusty office in a northern suburb of Amsterdam, Henk van der Kolk, head of the country's biggest trade union, FNV Bondgenoten, does nothing to conceal his frustration: "Everybody is angry about what happened at ING. The board isn't in tune with public opinion. What were they thinking of? ING pensioners have seen their payouts frozen, while many employees were awarded a pay increase of just 1%."
Van der Kolk's union is pushing for a law that would ensure that executive pay should never amount to more than 20 times the wage paid to the lowest-salaried employee. As for bonuses, the union feels payouts should not exceed 50% of a director's salary. Hommen's bonus was worth 92% of his €1.35m package.
"Remuneration for bankers was linked to financial machismo, which encouraged irresponsible lending. We want to get away from the bonus culture," says van der Kolk.
But given the payouts to ING directors were relatively small, some Dutch bankers are shocked they have received another public mauling.
One ING insider suggests the country was in the grip of a "typically Dutch Lutheran and Calvinist backlash" which cultivates the view that excessive wealth is somehow morally reprehensible and in contravention of traditional Dutch, Christian values. The source says: "We went through this during the boom when ministers railed against stock options and bankers were accused of exhibitionism, and enriching themselves to the detriment of the nation."
The bankers' response that high remuneration is vital to retain talent and prevent Dutch financiers from defecting to overseas banks is given short shrift by Polhout. He says: "Let them go abroad if they don't like it here; there are plenty of clever people who will take their place and work for less. Good riddance, as far as I am concerned."
Moderate opinion in Holland seems united in its belief that banks which received state aid should not be shelling out bonuses. And Dutch parliamentarians are saying the same thing, demanding the government take immediate action. ING may have made a net profit last year of more than €3bn, but it still owes the taxpayer €5bn.
The uproar against Hommen's bonuses and those earmarked for the bank's senior executives have forced ING to rethink its position. Hommen promises no more bonuses till 2012/13 when the bank expects to have repaid all state aid. In a letter to Dutch newspaper De Volkskrant, he said: "We have underestimated the signal we sent to society. [We] have [risked] renewed damage to the recovering trust of our customers."
Few doubt a critical factor behind ING's volte face was the boycott threatened by consumers.
A spokesman for the bank admitted the payment of bonuses "prompted a reaction from our customers via emails and telephone messages to our call centres". But he said only a few hundred people had actually closed their accounts.
Now the ball is in the court of finance minister Jan Kees de Jager, who must decide how to respond to a proposal by parliament calling for the return of bonuses by all executives at state-supported banks. On a recent television show, he said such a law would be difficult to implement and would hit bankers on average salaries who receive bonuses of just a few thousand euros. But in today's highly charged political atmosphere, de Jager knows that doing nothing is probably not an option.
Wow, am I perspicacious or what? Three days ago I blogged that, despite Cheney's and Rumsfeld's assertions to the contrary, torture played no role in the capture of bin Laden. Since President Obama and his spokemen initially left the door open by not categorically stating that torture played no role, Cheney and Rumsfeld were all over the TV last weekend claiming that torture played a major role thus giving themselves and the Bush administration some backdoor credit. Here's what I said:
Cheney and Rumsfeld were all over last Sunday's TV talk shows trying to eke out an iota of credit for the Bush administration in the capture and killing of bin Laden by way of talking about how the torture they espoused played a role in locating him. It was a pathetic attempt to exonerate themselves and at the same time claim a share of the credit. The fact of the matter is that waterboarding played no role in the killing of bin Laden whatsoever and all the credit should go to the Obama administration. However, Obama administration spokesmen will not come flat out and say that. Instead, they want to leave the door open to give Bush some kind of credit by saying that bits and pieces of the puzzle were gleaned from a variety of sources. Obama has bent over backward not to criticize Bush and his henchmen. What he should have done in my opinion was to come right out and say, "Torture played no role in the capture of bin Laden." But he is too nice a guy so he leaves the door open for Cheney and Rumsfeld to grasp at straws in an effort to vindicate their lack of competence.
I actually had no proof that torture "played no role in the killing of bin Laden whatsoever." It was just a hunch. But wonder of wonders, yesterday none other than one of Cheney's and Rumsfeld's REPUBLICAN colleagues, Senator John McCain, came on the TV and stated categorically that "torture played no role in the capture of bin Laden," thus making fools out of Cheney, Rumsfeld and Bush. I blame Obama to some extent for not stating that categorically at the outset. Instead, Obama, hesitant to criticze Bush and his henchmen, left the door open for them to create a false impression in the American public. Obama and his administration should have taken full credit for the killing of bin Laden while at the same time slamming the door shut on the efficacy of torture and denouncing it. Instead he gave the Bushies and the righties an opening which they were overeager to take him up on. This, evidently, was just too much for the maverick, John McCain, who was tortured himself in Vietnam. Even though he ran against Obama in the last election, McCain came forward to essentially denounce Cheney and Rumsfeld for being the fools that they are and for trying to give themselves a modicum of credit for bin Laden's capture.
This is an unprecedented blow to the right wing who will grasp at straws to denounce or to not give credit to Obama and instead will lie in order to credit Bush and other Republican incompetents and clap traps. How good it feels to have the record set straight in this instance! And let this be a lesson to Obama. Don't not tell the whole truth in order to give your ideological opponents a little credit when they deserve none. Obama is too nice a guy, and he's up against a bunch of cutthroats. When he's totally and completely in the right and they're totally in the wrong, he need not go out of his way to give them some of the credit. One of his spokemen on last Sunday's talk shows repeatedly danced around the question, "Did torture play any role in the killing of bin Laden?" He repeatedly refused to give a "yes" or "no" answer and instead implied that it might have. So when Cheney and Rumsfeld jumped at the opportunity to state that torture did play a role thereby giving themselves and Bush a heapin' helpin' of credit, I guess this was too much for McCain, CIA Director Leon Panetta and perhaps even Obama himself. To my total amazement it was a fellow Republican who called them out and made total liars and fools out of them.
Cheney and Rumsfeld, apologists for Bush, were trying to rewrite history. Instead they only served to make Bush look like a bigger fool than he already appears to be. This is one for the history books. The information about the courier which led to bin Laden's capture and killing was gleaned from a foreign source, McCain stated, and was obtained by conventional interrogation methods not "enhanced interrogation techniques," a pseudonym for torture.
This article from the Washington Post is worth quoting in its entirety:
“
John McCain to Bush apologists: Stop lying about Bin Laden and torture
By Greg Sargent, June 12, 2011
This is getting really good. As noted below, John McCain in an Op ed this morning skewered the claim that the killing of Bin Laden vindicates torture. But just now, on the Senate floor, he uncorked a new broadside that is quite remarkable, taking direct aim at Bush apologists who are reviving this debate in order to claim Bin Laden’s death as part of the Bush legacy.
McCain amplified his case, and called on former Bush attorney general Michael Mukasey — whose recent op ed claiming torture led to Bin Laden has been widely cited by the right — to retract his claims. McCain’s speech is worth quoting at length:
“With so much misinformation being fed into such an essential public debate as this one, I asked the Director of Central Intelligence, Leon Panetta, for the facts. And I received the following information:
“The trail to bin Laden did not begin with a disclosure from Khalid Sheikh Mohammed, who was waterboarded 183 times. We did not first learn from Khalid Sheikh Mohammed the real name of bin Laden’s courier, or his alias, Abu Ahmed al-Kuwaiti — the man who ultimately enabled us to find bin Laden. The first mention of the name Abu Ahmed al-Kuwaiti, as well as a description of him as an important member of Al-Qaeda, came from a detainee held in another country. The United States did not conduct this detainee’s interrogation, nor did we render him to that country for the purpose of interrogation. We did not learn Abu Ahmed’s real name or alias as a result of waterboarding or any ‘enhanced interrogation technique’ used on a detainee in U.S. custody. None of the three detainees who were waterboarded provided Abu Ahmed’s real name, his whereabouts, or an accurate description of his role in Al-Qaeda.
“In fact, not only did the use of ‘enhanced interrogation techniques’ on Khalid Sheikh Mohammed not provide us with key leads on bin Laden’s courier, Abu Ahmed; it actually produced false and misleading information. Khalid Sheikh Mohammed specifically told his interrogators that Abu Ahmed had moved to Peshawar, got married, and ceased his role as an Al-Qaeda facilitator — which was not true, as we now know. All we learned about Abu Ahmed al-Kuwaiti through the use of waterboarding and other ‘enhanced interrogation techniques’ against Khalid Sheik Mohammed was the confirmation of the already known fact that the courier existed and used an alias.
“I have sought further information from the staff of the Senate Intelligence Committee, and they confirm for me that, in fact, the best intelligence gained from a CIA detainee — information describing Abu Ahmed al-Kuwaiti’s real role in Al-Qaeda and his true relationship to Osama bin Laden — was obtained through standard, non-coercive means, not through any ‘enhanced interrogation technique.’
“In short, it was not torture or cruel, inhuman, and degrading treatment of detainees that got us the major leads that ultimately enabled our intelligence community to find Osama bin Laden. I hope former Attorney General Mukasey will correct his misstatement. It’s important that he do so because we are again engaged in this important debate, with much at stake for America’s security and reputation. Each side should make its own case, but do so without making up its own facts.
This is taking on the makings of an old-fashioned, barn-burning senatorial crusade, and it’s unclear if anyone of McCain’s stature is going to step up and make the pro-torture case. For all his flaws, McCain carries great authority on this issue because of his own past experiences.
It’s becoming clearer that despite the Obama administration’s desire to avoid relitigating the torture debate, this is precisely the time to do it. The emerging evidence is on the side of torture opponents: A careful and extensive New York Times investigation concluded that torture “played a small role at most” in tracking down Bin Laden. Beyond this, the larger dynamic is perfect: The president that has been widely derided by the right as weak for ending torture tracked down and killed the world’s most wanted terrorist. That’s a pretty strong starting point for this argument.
Republican Senators are apparently set to grill David Petraeus and Leon Panetta at their confirmation hearings over torture’s role in getting Bin Laden. So in addition to McCain’s increasingly high profile on the issue, we may soon see the popular Petraeus reiterating his opposition to torture in a high-visibility setting — after the Obama administration killed America’s number one terrorist foe. Gettin’ mighty interesting.
President Obama not only got Osama bin Laden; he did it in such a way that made me proud. First, he had the determination and the stick-to-itiveness to task the CIA with finding bin Laden after President Bush had given up the search and dismantled the CIA unit known as Alec Station that was supposed to find bin Laden in the first place. Obama made up for Bush's dilatoriness and negligence by again firing up the search for bin Laden as soon as he became President. CIA director Leon Panetta deserves much credit for keeping his eye on the prize. Then the way Obama went about getting bin Laden is the thing I'm most proud of. He did it with the minimum amount of collateral damage and at minimum cost. He could have done it with a drone strike that would have killed everyone inside bin Laden's compound. That included, reportedly, 23 children and 8 women. Compounds have been bombed before killing innocents in order to get one high value target. This is unjustified. In many cases the high value target wasn't even home, perhaps having been tipped off by the Pakistani ISI. So all that was accomplished was the killing of innocents. In this case the strike was entirely surgical so that, while accomplishing their mission of killing bin Laden, there was little other loss of life especially to women and children. This is the thing that makes me the proudest of Obama.
The US has been criticised again and again for killing innocent civilians including whole wedding parties in some instances. This is why stealth operations using Navy Seals and Army Rangers are the way to go when what is sought is the elimination of particular individuals. This is the antidote to terrorism not land invasions of sovereign nations. The Israelis pioneered this approach tracking down and eliminating all those involved in murdering the Israeli Olympic team at the 1972 Olympics in Munich. Recently, they have been reportedly involved in eliminating Iranian nuclear scientists by attaching magnetic bombs to their cars while en route and hacking their computers. All these methods make sense because they minimize collateral damage especially the loss of innocent life. Rather than bomb Iran they throw a wrench in the Iranian nuclear effort. Their methods are targeted and surgical. Makes sense, doesn't it?
The remaining high profile figures in al Quaeda must be quivering in their sandals since they know the US has the capability for tracking them down and taking them out by means of the same methods. These methods cost pennies on the dollar compared to a full scale invasion. Maybe it's the Pentagon who should be quaking in their boots as it becomes apparent that trillion dollar military-industrical complex budgets are unneccesary and are running the US into financial ruin - just the scenario that Obama was intent on achieving. The operation that killed bin Laden cost practically nothing. The CIA and Navy Seals involved were all going to receive their paychecks regardless of whether this mission was carried out or not. So the major cost was the loss of one helicopter. Other than that there was the cost of a few bullets compared to the half million dollar Cruise missiles and other highly expensive weaponry used in more conventional operations. The amazing thing about this mission, in addition to its surgicality which minimized the loss of innocent life, was that it minimized costs and was so inexpensive. A few bullets compared to a bomb, the sheet to bury bin Laden in - these were the only costs involved. If it weren't for the mishap with the helicopter, that would have come back intact too. One wonders why a helicopter should lose lift while hovering over bin Laden's compound. A design flaw perhaps?
The Pakistanis are up in arms because they weren't informed of the impending operation. But if they had been informed, they probably would have tipped off bin Laden and he would have been out of there. Previous operations have confirmed the liklihood of this happening. In some cases bombs have been dropped on compounds killing everyone there - including innocent women and children - except the high value target. Many of these people were and are being sheltered in Pakistan. So Pakistan has some splainin' to do. Instead they have gotten righteously indignant at the US for not informing them. But Obama did the right thing. How embarrassing it would have been if the operation had been carried out and there was no bin Laden there, but there would still have been minimal loss of life compared to dropping a bomb on the compound. bin Laden must have wondered why the Pakistani military, that were supposed to tip him off, failed to do so. At any rate Obama's intelligence outsnookered the Yahoos in Pakistan who aren't really our friends although they dearly love the $20 billion we've squandered on them which brings up the following question? Why do we have to buy off every military dictatorship in the world? Couldn't that money be better used at home if for no other purpose than lowering the deficit which everyone is so upset about? The US is spending a fortune paying corrupt governments all around the world. This is ridiculous. And many of them turn around and lambast the US. The US is acting like a total masochist. We give them money to essentially buy them off, and they kick us in the face in return. Take Hamid Karzai, for example. He never tires of trying to kick the US out of his country while raking in billions under the table. Meanwhile, he's sold off Afghanistan's mineral rights to the Chinese. The US has been snookered again. Uncle Sucker has been bamboozled. And that goes double for Iraq where the oil rights have been sold off to other countries after the US spent hundreds of billions of dollars there. What did we get for it? Nothing. This has got to stop. It's ridiculous to go into debt to fight wars that accomplish nothing. They don't gain us friends (unless we keep paying them) and they don't gain us treasure.
So what is our attitude when Karzai tell the US to leave his country? We shovel in more money and say in effect that we can't take Karzai at his word. He doesn't really mean it. And we are going to stay there anyway regardless of what Karzai, who happens to be running one of the most corrupt regimes in the world, says. Meanwhile, we are firing teachers, librarians, police and firemen here at home because there is no money to pay them. Yet we shovel money to corrupt regimes that tell us to get out of their freakin country. Could anything be more idiotic? As we're being kicked in the teeth we say, "You want more money; here is more money." We'll give you more money that we have to borrow from the Chinese. But that's OK. It's OK to run up our budget deficit and cut services for the American people themselves because after all our first duty is to protect the American people even if we impoverish them in the process and even if we run the US into bankruptcy at which point we won't be able to protect the American people any more.
So while I'm proud of the way that Obama got Osama, I would be prouder still if he declared that there was no need to keep large scale troop deployments in Afghanistan and Iraq and that, henceforth, his model for dealing with terrorism was going to be essentially the one he used to get Osama - stealth and surprise attacks using a small number of elite, highly trained troops, surgical targeted operations to take out high value targets. And as a footnote, the fact that bin Laden was killed and not captured did the US and the world and even bin Laden himself a big favor by not subjecting everyone to a big media brou ha ha that would go on and on until Osama was eventually killed anyway. And it would cost a lot of money.
Study without desire spoils the memory, and it retains nothing that it takes in.
- Leonardo da Vinci
Advertising may be described as the science of arresting the human intelligence long enough to get money from it.
--Stephen Leacock
Canadian economist & humorist (1869 - 1944)
They can't put you in jail for what you're thinking.
--Clifton E Lawrence
If we can't create a good impression, we can at least try to create a bland impression.
-- Ben Weinbaum, my supervisor at General Dynamics
Men are generally idle, and ready to satisfy themselves, and intimidate the industry of others, by calling that impossible which is only difficult.
-- Samuel Johnson
There's a vas deferens between us.
--Paul Desmond to a girlfriend
Lawrence, how do you manage to go through so much shit and come out smelling like a rose?
--a college classmate
Lawrence, you're better on paper than you are in person.
--Guy Carlisle
Lawrencie, you're smart in school, but dumb in life.
--Arthur Hill
In politics you must always keep running with the pack. The moment that you falter and they sense that you are injured, the rest will turn on you like wolves.
--R. A. Butler
Don't put off till tomorrow what you can do today.
--Florence C Lawrence
There's no time like the present.
--Florence C Lawrence
One hand washes the other.
--Clifton E Lawrence
You have to take the bitter with the better.
--Clifton E Lawrence
An inventor is simply a fellow who doesn't take his education too seriously.
--Charles F Kettering
A problem well stated is a problem half solved.
--Charles F Kettering
Any sufficiently advanced technology is indistinguishable from magic.
--Arthur C. Clarke, "Profiles of The Future", 1961 (Clarke's third law) English physicist & science fiction author (1917 - )
The least of learning is done in the classrooms.
--Thomas Merton
Tastes pretty good for an old dead cow.
--Clifton E Lawrence at a family picnic
If the shoe fits, wear it.
--anonymous
If the shoe doesn't fit, don't wear it.
--John Lawrence
Doug Ramsey: Take Five: The Public and Private Lives of Paul Desmond This is a great book! Paul Desmond and Dave Brubeck formed the heart of one of the best all time jazz groups. Paul was the quintessential intellectual, white jazz musician. A talented writer, he never published anything. However author, Doug Ramsey has collected Paul's letters here. How ironic that now his writing in the form of letters to his father and ex-wife, among others, is finally published showing another window on the mind of this talented person.
A sideman, for the most part, his entire life, the Dave Brubeck Quartet might never have happened at all due to the fact that Paul had managed to offend Dave to the point where he never wanted to see him again. It had to do with a gig that Paul actually was the leader of. Paul wanted to take the summer off to play another gig, and Dave wanted Paul to let him take over the gig at the Band Box in Palo Alto, CA. Paul wouldn't let him and Dave, married with two children, proceeded to starve.
Due to an elaborate publicity campaign, when he realized the error of his ways, Paul managed to worm himself back into Dave's good graces. The rest is history.
This book is remarkable for the insight it gives into a working jazz musician's mind, wonderful pictures and interviews with the significant figures in Paul's life. Author Ramsey, not a remarkable penman himself, has nevertheless done a magnificent job of assembling all these various materials. Unlike a lot of jazz authors, he doesn't overly idolize his subject with the result that you get the feeling that you have met a real person and not a idealized version. That's high praise indeed for any biographer. (*****)
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