Rick Perry, Pay-for-Play Jailer

(How is this guy this crooked? And he wants to be president? He's exactly what other crooked powerful unethical people look for in a candidate...-jef)

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by: William Fisher, Truthout | News Analysis

Sunday 25 September 2011

Given what we know about Gov. Rick Perry's keen predilection toward "crony capitalism," we should not be surprised to learn that he's a big fan of private for-profit prisons.

Lobbyists and executives from that industry have contributed generously to Perry's re-election campaign, and he returned the favor by proposing policies that would benefit the prison industry.

"Coincidence?" asks Tim Murphy of Mother Jones magazine in a major article that examines the governor's relationships with the for-profit prison industry.

Murphy writes: "Under the banner of closing the state's $27 billion deficit last winter, Texas Gov. Rick Perry floated a proposal to privatize the state's prison health care network.

Whether the plan would actually save the state any money was a matter of debate, but one thing was clear: The move would have been a boon for private-prison executives and lobbyists, including Perry's former chief of staff, who had donated generously to his 2010 reelection campaign."

He added, "The plan met bipartisan resistance in the state Legislature, but it was just one of a handful of recent proposals by Perry's office that would have benefited the industry - all in the name of deficit reduction."

Murphy goes on to tell us that private prisons are a big business in Texas, where the combination of federal immigration policies and one of the nation's largest inmate populations has led to a boom in construction over the last two decades.

Murphy continues: "As governor, Perry, the front-runner for the GOP presidential nomination, has supported privatizing everything from public lands to highways, but according to Scott Henson, a criminal-justice watchdog who runs the blog Grits for Breakfast, the governor had remained largely quiet on the prisons issue - until this year.

That coincided with an influx of campaign contributions from private-prison executives and lobbyists, among them his former top aide, Michael Toomey, a political powerbroker who represents the nation's largest private corrections contractor, Corrections Corporation of America [CCA]."

CCA, per its web site "provides health care services to male and female inmates and youthful offenders who are housed in local jails, detention facilities, and correctional institutions around the country."

And there are more private prisons in Texas than in any other state in the country. In Texas, they are charged with supervising 75,000 inmates.

(Toomey told Mother Jones he had not lobbied Perry's office or the state Legislature on the prison health care plan; Perry's campaign did not respond to a request for comment.)

For-profit private prison companies primarily use three strategies to influence policy: lobbying; direct campaign contributions; and building relationships, networks and associations. The industry's so-called "think tank," known as ALEC (American Legislative Exchange Council), employs all three strategies and also undertakes to prepare "templates" for legislation that will benefit its members.

For example, there is significant evidence that ALEC worked with Arizona officials in the crafting of the infamous "papers please" legislation. It is also reported that, on the basis of that work, it was also able to help Alabama with the crafting of its immigration law.

Private prison companies make substantial contributions to help support ALEC, and senior executives from the for-profit prison industry often work there on temporary assignments.

Given Perry's record in similar situations - for example, the contributions from Merck & Co. and their relationship to Perry's executive order mandating HTD inoculations to help young Texas girls avoid cervical cancer - the Justice Policy Institute (JPI) was not a minute too late in issuing a new report, "Gaming the System: How the Political Strategies of Private Prison Companies Promote Ineffective Incarceration Policies."

The report examines how private prison companies are able to influence legislators and criminal justice policy, a collaboration that ultimately results in harsher criminal justice policies and the incarceration of more people, the JPI asserts.

The report says that, over the past 15 years, the number of people held in all prisons in the United States has increased by 49.6 percent. Private prison populations, during the same period, increased by 353.7 percent, according to recent federal statistic.

The providers of private prisons have been reaping the benefits. In 2010 alone, the CCA and the GEO Group, the two largest private prison companies, had combined revenues of $2.9 billion.

The JPI report says, "not only have private prison companies benefited from this increased incarceration, but they have helped fuel it."

The report notes a "triangle of influence" built on campaign contributions, lobbying and relationships with current and former elected and appointed officials. Through this strategy, private prison companies have gained access to local, state and federal policy makers and have back-channel influence to pass legislation that puts more people behind bars, adds to private prison populations and generates tremendous profits at US taxpayers' expense.

"For-profit companies exercise their political influence to protect their market share, which in the case of corporations like GEO Group and CCA primarily means the number of people locked up behind bars," said Tracy Velázquez, executive director of JPI. "We need to take a hard look at what the cost of this influence is, both to taxpayers and to the community as a whole, in terms of the policies being lobbied for and the outcomes for people put in private prisons.

"That their lobbying and political contributions is funded by taxpayers, through their profits on government contracts, makes it all the more important that people understand the role of private prisons in our political system," Velasquez says.

Paul Ashton, principal author of "Gaming the System," noted, "This report is built on concrete examples of the political strategies of private prison companies.

From noting campaign donations, $835,514 to federal candidates and $6,092,331 to state-level candidates since 2000, to the proposed plan from Ohio Gov. John Kasich to privatize five Ohio prisons followed by the appointment of a former CCA employee to run the Department of Rehabilitation and Corrections, 'Gaming the System' shows that private prison companies' interests lie in promoting their business through maintaining political relationships rather than saving taxpayer dollars and effectively ensuring public safety," Ashton says.

Other organizations have also investigated the private prison industry and have their own serious concerns about their political influence. "In the South and Southwest, the private prison industry has consistently targeted poor communities," said Bob Libal, the Texas campaigns coordinator for Grassroots Leadership.

"We believe that it's important to fight, particularly in these communities, to end for-profit incarceration and reduce reliance on criminalization and detention, and ultimately build lasting movements for social justice. This important report helps shed light onto this particularly troubling industry," he said.

Shakyra Diaz, policy director of American Civil Liberties Union (ACLU) of Ohio added, "Research has shown that private prisons do not save taxpayer dollars and can in fact cost taxpayers more than public prisons. Additionally, privatizing prisons may undermine cost effective sentencing reforms and increase recidivism rates.

"Despite these well­documented concerns, private prison companies continue to promote policies that put money in their pockets and people behind bars."

The JPI declared, "If states and the federal government are interested in providing cost-effective, proven public safety strategies, investments in private prison companies will not help achieve that goal. Gaming the System  includes a number of recommendations for criminal justice policies that are cost-effective and will improve public safety ..."

The report says that states and the federal government "should look for real solutions to the problem of growing jail and prison populations. A number of states are already utilizing innovative strategies for reducing the number of people behind bars in their state. Reducing the number of people entering the justice system, and the amount of time that they spend there, can lower prison populations, making private, for-profit prisons unnecessary, and improving public safety and the lives of individuals."

"Private prison companies have been very successful in their effort to promote harsher sentencing policies and the privatization of correctional systems, and when they win, we all lose," added Tracy Velázquez, executive director of JPI.

"Taxpayers lose when their money is used to generate profits for shareholders and to promote policies that increase incarceration; communities lose when policies proven to be ineffective for public safety are pushed through state legislatures, and people involved in the criminal justice system lose when they are locked up in underfunded and sometimes unsafe facilities," she says.

But they have not been anywhere near as successful in operating professional-grade lockups. The federal government and several states have shut down a number of facilities that were found to be overcrowded, unsafe and deficient in health and hygiene. There have been a number of deaths in detention. There has also been a lack of transparency in dealings between the public and several leading private prison companies.

According to Paul Ashton, principal author of the report, "While private prison companies may try to present themselves as just meeting existing demand for prison beds and responding to current market conditions, in fact they have worked hard over the past decade to create markets for their product. As revenues of private prison companies have grown over the past decade, the companies have had more resources with which to build political power, and they have used this power to promote policies that lead to higher rates of incarceration."

He added: "As policymakers and the public are increasingly coming to understand that incarceration is not only breaking the bank, but it's also not making us safer, will this shrink the influence of private prison companies? Or will they use their growing financial muscle to consolidate and expand into even more areas of the justice system?"

He continues: "Much will depend on the extent that people understand the role for-profit private prison companies have already played in raising incarceration rates and harming people and communities, and take steps to ensure that in the future, community safety and well-being, and not profits, drive our justice policies. One thing is certain: in this political game, the private prison industry will look out for their own interests," Ashton concludes.

Early success in cancer drug trial gives patients 'promising' future

A London hospital’s trial of a prostate cancer drug has been stopped early because it was so successful doctors felt it would be "unethical" to deny the treatment to other patients.

By Edward Malnick ~ 24 Sep 2011 ~ London Telegraph

Medics halted tests of the life-extending drug because it would have been “unethical” not to offer the treatment to all 922 cancer sufferers taking part in the trial.

Patients who were given the drug found that it eased pain and caused only minor side effects.

The new drug accurately targets tumours using alpha radiation, which doctors conducting the study said is the most effective form of radiation to eliminate cancer because it limits damage to surrounding tissue.

Dr Chris Parker, lead researcher on the project at the Royal Marsden Hospital, said: “It’s more damaging. It takes one, two, three hits to kill a cancer cell compared with thousands of hits for beta particles.”

The drug, Radium-223 Chloride – known as Alpharadin TM – will also do less damage to surrounding tissue because it accurately targets calls, the doctors said.

Speaking at an international gathering of cancer experts, Dr Parker, a consultant clinical oncologist, said: “They have such a tiny range, a few millionths of a metre. So we can be sure that the damage is being done where it should be.”

Patients taking the drug has a 30% lower rate of death compared to patients taking a placebo pill.

“It would have been unethical not to offer the active treatment to those taking placebo,” Dr. Parker said.

Radium-223 has “a completely different safety profile” to chemotherapy, he added.

The trial’s results were presented this week at the 2011 European Multidisciplinary Cancer Congress in Stockholm.

The researchers, who have pointed out the urgent need for an effective treatment for prostate cancer, will now submit their findings for approval by regulators.

Prof Gillies McKenna, Cancer Research UK’s radiotherapy expert said: “This appears to be an important study using a highly targeted form of radiation to treat prostate cancer that has spread to the bones.

“This research looks very promising and could be an important addition to approaches available to treat secondary tumours – and should be investigated further.”

The Crime of Punishment

The late Bill Stuntz was America’s leading thinker on criminal justice—and its hardest to categorize.
Lincoln Caplan

The Collapse of American Criminal Justice 

By William Stuntz • Harvard University Press • 2011 • 408 pages

Crime began to plummet in the United States more than 15 years ago, defying all predictions. It did so for nearly a decade. It happened in every part of the country and in every category of crime. While the rate of decline has leveled off in recent years, to many this social achievement has meant that the country need not worry about crime anymore: The problem has been solved. That view is wrong. In reality, the problem simply exists in two places most Americans (and the media) don’t often bother to look: in crime-ridden sections of cities where minorities live, and in the overcrowded prison system that gives America the world’s highest rate of incarceration. The good news masks an ever-worsening tragedy in criminal justice.

The black homicide rate across the nation is six times that of the white rate. Chicago’s Washington Square neighborhood is poor and close to 100 percent black. The city’s Hyde Park neighborhood is affluent and mostly white. The homicide rate in the first is 26 times that of the second.

The most compelling explanation for the different crime patterns for blacks and whites is the effect of the criminal justice system’s breakdown on poor young black men, who have continued to commit crimes at a high rate, including violent ones, especially against blacks, and who regard the system as dramatically unfair and unworthy of their respect. The rate of imprisonment among white men is the highest it has been in American history, yet the rate is seven times higher among black men.

America’s prison system is now studied largely because of its failure. The prison population is unsustainably high—petty offenders are locked away with hard cases, overcrowding makes conditions dangerous and unhealthy, and financial costs to states are through the roof. The last time the country significantly reduced them, however, in the 1960s and early 1970s, the rate of crime skyrocketed. Neither option is acceptable. So what do we do?

In his posthumously published book, The Collapse of American Criminal Justice, William Stuntz argues that reform today should involve putting more control over decisions about what and who should be punished—and for how long—in the hands of neighborhoods most hurt by crime and decimated by punishment. It should, he writes, involve many more cops on the street and many fewer convicts in prison.

But the book is less a blueprint for how to make things right than an explanation of what went wrong over the past century. Its value comes from seeing American criminal justice whole, in an elaborate analysis of a complex system, and challenging the theories of retribution and deterrence that lead to an emphasis on punishment and that have dominated thinking about the field for the past generation.

“Today,” Stuntz explains, “our cities are considerably more violent than before the great crime wave of the twentieth century’s second half, yet the nation’s imprisonment rate is quintuple the rate before that crime wave began. If punishment deters crime, we seem to be getting much less deterrent bang for the imprisonment buck than we once did. Add it all up, and the picture is quite different than the conventional wisdom allows.”

Stuntz’s thesis is that the misrule of politics has replaced the rule of law, with a ratchet of ever-expanding criminal laws giving boundless discretion to police and prosecutors, leading to a system that wrongly punishes too many poor young black men. When the law gives that much discretion, he writes, it stops functioning as law and instead becomes an assertion of power. The recent decline in crime is less a sign of success than of pathology. The encouraging numbers are misleading. They conceal devastating failure.

William Stuntz was one of the most influential and revered legal scholars of his generation, by acclamation the country’s leading thinker about criminal justice. His 25 years as a scholar, first as a law professor at the University of Virginia, then at Harvard, began when crime was a highly politicized issue and ended (tragically early—he died of cancer at the age of 52 in March) when crime had seemingly ceased to be an issue at all.

He developed an original, sweeping, and brilliant understanding of his field, which he sought to synthesize in this work. Three highly respected legal scholars to whom his book is dedicated—Carol Steiker and Michael Klarman of Harvard Law School and Daniel Richman of Columbia Law School—shepherded the essentially finished volume through production and into print after his death. While he co-authored a shelf full of respected textbooks about criminal law and criminal procedure, this is his only book for a general readership. It is his masterwork. The book is written in direct, energetic, and forceful prose, without stinting on nuance. It is a form of purposeful history, with close analyses of Supreme Court cases and doctrine; crime data by race, class, and geography; the workings of American politics at the national, state, and local levels; the interplay of legal, political, economic, and social forces; and attention to seminal documents of law and governance, especially the Constitution and its Bill of Rights.

The Collapse of American Criminal Justice is at once a far-reaching indictment and a vision tinged with hope. Stuntz was concerned with how to make sure that the criminal justice system charges and convicts those who deserve punishment while reducing the share of people caught in it who are innocent. He was convinced that “criminal punishment is both too severe and too frequent” and that “legal condemnation is a necessary but terrible thing—to be used sparingly, not promiscuously.” His biggest idea is that criminal justice can only be understood—by non-experts as well as experts—through a grasp of the interactions among its major elements. By showing that the division between criminal law (the elements of crime the government must prove to convict a defendant) and criminal procedure (the steps a police officer must follow to interrogate a suspect) that is respected by most scholars is in fact artificial and misleading, he demonstrated the benefits of approaching the field as a whole.

The history of criminal procedure, he showed, was “not really about procedure at all but about substantive issues, about what conduct the government should and should not be able to punish.” The most important change in this area came in Miranda v. Arizona, the landmark 1966 ruling requiring police, under the Constitution’s guarantee against self-incrimination, to give suspects taken into custody warnings about their right to remain silent and to call a lawyer, because that intimidating situation is likely to make a suspect feel he must talk. The purpose of Miranda was to give every defendant the opportunity to protect himself in the criminal justice system, not just wealthy suspects with access to skilled lawyers who could help make a case that a confession was coerced and therefore involuntary.

But the effect of Miranda was the opposite, Stuntz contended: The new rules gave suspects who could afford a skilled lawyer a “right to avoid police questioning altogether.” That was about one-fourth of criminal suspects. As for the other three-quarters, the warnings afforded few of them protection, because they didn’t understand what the warnings meant or, if they did, had no access to anyone who could enforce them. As long as the police could show they gave the warnings to the other three-quarters, they easily induced most suspects to waive their rights. Stuntz’s criticism underscored that, without provision of criminal defense lawyers for the poor, Miranda had much less beneficial impact than it promised.

Stuntz was a registered Republican and considered himself a conservative, and his reputation as such was buttressed by some truly conservative positions (for instance, he favored forms of profiling after the September 11 attacks). But it was more important to Stuntz that he appeal to both liberals and conservatives than that he be identified as either. The distinctiveness of his outlook was reinforced by his keenness to make his evangelical Christian faith part of his identity as a scholar. His best-known article about the role of Christian ideas in law suggests that Christianity’s most significant lesson in the face of the “arrogance” of contemporary legal theory is the faith’s “humility” about how hard it is to find definite answers to fundamental questions. His humility sometimes gave his writing the tone of an elegy.

Stuntz writes, “Discretion and discrimination travel together.” The percentage of adults who are black, white, and Latino using illegal drugs is roughly the same (10 percent, 9 percent, and 8 percent, respectively), but blacks are three times more likely than Latinos to do prison time for drug crimes and nine times more likely than whites. Why? The misrule of politics, according to Stuntz. Specifically, the misrule results from suburban voters in counties having a lot of say in who gets elected as prosecutors in the urban areas where serious crime is concentrated. As Stuntz writes, prosecutors “are usually elected at the county level” and “counties that include major cities have a much higher percentage of suburban voters than in the past.” Think here, for example, of Fulton County, Georgia, or of Wayne County, Michigan, both so much larger than Atlanta and Detroit, respectively, that they even include some rural stretches. In other words, it is voters for whom crime is largely an abstract problem who exercise sway, while residents for whom the problem is real have less power.

The disappearance of the jury trial symbolizes this shift. Almost all felony criminal convictions today—96 percent—come from guilty pleas obtained by prosecutors elected with the support of suburban voters, not from verdicts reached by juries drawn from residents in areas where crime is concentrated. The system, in Stuntz’s words, has become an “arbitrary, discriminatory, and punitive beast,” which is undemocratic in vesting decisions about punishment in those who aren’t part of the community where those being punished live. Stuntz’s main remedies for this include putting more cops on the street, making more lawyers available to represent criminal defendants, letting local rules about sentencing prevail, and shifting responsibility between local and state governments for who pays for local police and state prisons.

More cops would mean fewer prisoners and more robust local democracy. More lawyers for criminal defendants would mean better-prepared cases, fewer coerced pleas, and more reliable outcomes. Letting local rules about sentencing prevail would reduce the severity and the racial disparity in sentencing, and, with judges presiding over this phase, reduce the power of prosecutors. Shifting responsibility for payment, by having local governments pay a larger share of prison costs and a smaller share of local police costs, would give them an incentive to sentence fewer prisoners—and remove a disincentive from hiring more cops.
 
Stuntz was troubled by “institutional design and incentives” in criminal law and politics that push toward ever harsher rules and sentences. Power over criminal law is allocated to the three branches of government—the legislature makes it, the executive branch enforces it, and the judiciary interprets it—but they are not checks on one another in this sphere. In fact, legislators and the executive branch’s prosecutors both benefit from “more and broader crimes”: Legislators get more power when they define crimes more broadly because they reduce the role of judges in deciding who is guilty; and prosecutors have more power because they have more discretion about what and how to prosecute. As a result, legislators and prosecutors tacitly cooperate with each other, leading to both more law and less: more on the books, and less on the street, in the sense that the laws are so broad the police and prosecutors get to decide whom to go after and find guilty. Those decisions are about power. In the “rule of too much law,” Stuntz advises, “too much law amounts to no law at all.”

His solution to this set of problems is to replace the vicious cycle that creates them with a virtuous cycle based on cultivating a relationship between those who break the law (or are tempted to) and those who enforce it. For most of the twentieth century in the Northeast and Midwest, the ratio of police officers to prison inmates was two to one. Today, it is less than one to two. “More than any other statistic,” Stuntz writes, “that one captures what is most wrong with American criminal justice.” More cops mean more deterrence. More deterrence means fewer arrests and fewer convictions. In the 1990s, New York City had the biggest drop in urban crime during the decade. It also had the biggest increase in its police force.

Another important component would be fewer prisoners. This would require reducing the severity of sentencing, which is now “more punitive than Russia’s,” reducing the discrimination that contributes to blacks outnumbering whites among prisoners, and reducing “excessive prosecutorial power”—which is “unchecked by law and, given its invisibility, barely checked by politics.” And too much power for prosecutors doesn’t mean there are enough of them: Stuntz calls for many more, so there are more lawyers to litigate cases and the pressure on them to obtain plea bargains is alleviated. That would also require more money for public defenders to represent defendants in court.

A more drastic aspect of his reform vision would be sweeping changes in criminal laws—defining more crimes vaguely so courts would need to resort to jury trials to decide who was guilty. This would excuse from liability for the most serious offenses the least guilty members of a group of criminals and would even allow some guilty defendants to claim that, though their conduct fit the definition of a crime, it wasn’t so “wrongful” that it merited punishment. This would mean “constitutionaliz[ing]” much of basic criminal law, by asking courts to define its boundaries instead of legislators and prosecutors—and giving courts more power when many perceive them to have too much power already.

This unlikely element of his vision is also the most inventive. Stuntz contends that the Warren Court, instead of fixating on procedures addressed in the Bill of Rights, could have focused on equality as called for in the Fourteenth Amendment. In case after case where it settled on a procedural solution, the Court could have insisted that a black defendant who was plainly treated differently and less respectfully than a white defendant be guaranteed the equal protection of the laws. He called for the Warren Court to do what its conservative critics have usually attacked it for: to take an approach to constitutional reform that was “less legally grounded, more intuitive than lawlike.” This would surely have been lambasted as extreme judicial activism. But Stuntz believed that the Warren Court did not go far enough. He was a conservative who criticized the liberal Warren Court for its conservatism because he was convinced it would have been better for the justices to take a radical path.

The United States of the years right after World War II is unrecognizable in major ways because of changes wrought by the Warren Court. Landmark decisions it rendered about racial equality, school prayer, voting rights, and freedom of the press, as well as criminal justice, made our democracy more inclusive, more representative, more tolerant, and better informed, not to mention fairer to people accused of crimes.

But Stuntz wanted more. His hunger for more justice and mercy and, as a result, less crime and punishment made his work great. In this brave book, as contrarian as it is utopian, he constructs a powerful explanation about the vast and costly failure of the American criminal justice system and why the quest to reform it must be a high priority. He left an inspiring model of how.

Breaking out of Zip-tie Restraints

As a public service to protesters everywhere on the eve of greater days...

The Big Plunge

(Hold on tight, we're finally going over the edge and it's a long way down. Look for the stock market to crash hard in October and really kick off the Next Great Depression...--jef)

No Shots Left in the Locker

by MIKE WHITNEY

While the Fed’s Open Market Committee (FOMC) promised more monetary easing on Wednesday, the announcement was overshadowed by an exceedingly gloomy report on the state of the economy.  The official statement warned of  “significant downside risks to the economic outlook, including strains in global financial markets.” That’s all it took to send shares tumbling as jittery investors jettisoned stocks and fled to the safety of risk-free US Treasuries. The Dow finished down 283 points on the day while the bloodbath spread overseas to Asian and European markets.


Here’s an excerpt from the FOMC statement:

“To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative….

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.”

The Fed is pounding down long-term rates (“Operation Twist”) hoping to fire-up the moribund housing market and ignite a credit expansion. At the same time, it’s recycling revenues from maturing bonds into mortgage-backed securities (MBS)  in order to boost housing sales and to provide another subsidy to the banks. Fed chairman Ben Bernanke hopes that a refinancing boom will help keep more people–who are currently underwater on their mortgages–in their homes. But that probably won’t happen. The fact is, most of these people will still be unable to refinance because of tighter underwriting standards or because they have no equity in their homes. Lower interest rates alone won’t do the trick.


So, for all the fanfare, the Fed’s new program is basically a bust; it’s just more arranging of deck chairs.  The perception now is that the Fed is out of bullets at the worst possible time, just as the economy is starting to crater. Here’s how MFR’s Joshua Shapiro sums it up:

“Nothing the Fed has left in its arsenal, including today’s moves, will have a large effect on real economic growth. The level of interest rates has never been an impediment to growth in the current recovery, and it certainly is not at the moment. Moreover, creditworthy borrowers have ready access to credit, and it is doubtful that anything the Fed may do is going to encourage banks to lend in great quantities to less creditworthy borrowers (nor should it).” (Wall Street Journal)

This is why the markets are in freefall, because the Fed has no more rabbits in its hat and because political gridlock precludes another round of fiscal stimulus. So, down we go.


But why is it that neither Bernanke nor Obama can figure out what needs to be done? Is there some dispute about how we got here or is this an ideological issue?


First, let’s look at this summary of recent events to see if we can agree about “how we got here”. That will help to determine what the policy should be. This is from an article by John Judis titled Doom:

“Today’s recession does not merely resemble the Great Depression; it is, to a real extent, a recurrence of it. It has the same unique causes and the same initial trajectory. Both downturns were triggered by a financial crisis coming on top of, and then deepening, a slowdown in industrial production and employment that had begun earlier and that was caused in part by rapid technological innovation…..

In each case, the financial crisis generated an overhang of consumer and business debt that—along with growing unemployment and underemployment, and the failure of real wages to rise—reduced effective demand to the point where the economy, without extensive government intervention, spun into a downward spiral of joblessness. The accumulation of debt also undermined the use of monetary policy to revive the economy. Even zero-percent interest rates could not induce private investment….

….when firms continued to cut back, unemployment continued to rise, and tax revenues dropped—creating a budget deficit—office….

Cutting spending and raising taxes to balance the budget had made things much worse….

To extricate themselves from this mess, the United States and other leading nations are going to have take the same kind of steps that the West took after World War II—steps that led to 25 years of prosperity. After World War II, governments came to play a much greater role in national economies, particularly in the United States…..In the future, the United States will once again have to raise rather than lower the level of federal spending as a percentage of GDP.” (“Doom!”, John Judis, The New Republic)

Great article. And, it really clarifies the main issues. When the economy is in a hole, stop digging. That’s the message. We can’t starve our way to prosperity nor can we induce people to spend money they don’t have when they’re already deep in the red. So, the government share of net spending has to increase or the economy will tank.


But Obama’s not doing that. The stimulus has run out and government spending is now contractionary, mainly because cutbacks at the state and local level have cancelled out federal transfer payments. So the economy is sliding backwards.  Everyone knows that, which is why 72 percent of the people think the country “is headed in the wrong direction”. It’s because it is.


Now look at this shocker from Scott Reckard at the LA Times:

"Bank deposits soar despite rock-bottom interest rates Americans are pumping money into bank accounts at a blistering pace this year, sending deposits to record levels near $10 trillion …In the last three months, accounts at U.S. commercial banks have increased $429 billion, or 10%, almost double the increase for all of last year.…

The large amount of cash only adds to expenses such as paying for deposit insurance premiums. ……

[Some banks are] stashing it in a safe but unrewarding place: Federal Reserve banks, which are paying them an interest rate of just 0.25% to tend the funds. Such deposits rose to more than $1.6 trillion at the end of August from about $1 trillion a year earlier, according to the Fed.” (“Bank Deposits increase Sharply”, Calculated Risk)

Have you ever seen a more damning indictment of Fed monetary policy? Three years after Lehman Brothers, and people are still so petrified that they’re slamming their life’s savings into deposits that earn zilch. What’s next? Stuffing money into mattresses?!?


There are no productive outlets for investment because the economy is dead. But that doesn’t matter, because people are not in a “wealth enhancing” mode anyway. They’re in a “wealth preservation” mode. The surge in deposits is a sign of panic; hoarding equals fear. And the reason people are scared is because the system is out-of-whack, the policy is wrong,  and things are getting worse not better.


Do you know why people cling to money when they get scared?


Bernanke doesn’t. Bernanke’s a technocrat who thinks that if he moves the right lever at the Fed, people will start borrowing again and the economy will kick back into gear. There’s just one flaw in Bernanke’s theory; it doesn’t work. After 3 years of trimming rates, expanding the Fed’s balance sheet with trillions in worthless bonds, and endless rounds of quantitative shell games; people are dumping more money in bank deposits than ever. Monetray policy has been a total flop.


On the other hand, there was someone who understood why people cling to money when they’re scared. John Maynard Keynes. Keynes understood that markets were driven by human psychology not interest rates.  Here’s a  clip from The General Theory that gives a sample of his thinking:

“Our desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future….

The possession of actual money lulls our disquietude; and the premium we require to make us part with money is the measure of the degree of our disquietude.”

Bingo. This explains why a sudden downturn in the market can quickly turn into a full-blown crash. Investors get antsy, withdraw their money and hunker down. Pretty soon, the equity share supporting the markets vanishes and a bank run ensues thrusting the economy into a long-term swoon. And it’s all because people are afraid, so they grab their money and hang on for dear life.


So, what’s the remedy?


We need to restore confidence, and building confidence depends on three things; jobs, jobs and jobs. When people are employed; they’re less fearful and more optimistic about the future. And, they spend money, too, which boosts demand, increases growth and leads to a virtuous circle. FDR said it best in his First Inaugural Address, March 4, 1933. Here’s a clip:

“Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing great — greatly needed projects to stimulate and reorganize the use of our great natural resources….

And finally, in our progress towards a resumption of work, we require two safeguards against a return of the evils of the old order. There must be a strict supervision of all banking and credits and investments. There must be an end to speculation with other people’s money. And there must be provision for an adequate but sound currency.

These, my friends, are the lines of attack.” –Franklin Delano Roosevelt, First Inaugural Address, March 4, 1933.

The End of the Road

Obama Should Quit

by PAUL STREET

 

On March 31, 1968, United States President Lyndon Baines Johnson told a national television audience that he would not seek and would not accept the nomination of the Democratic Party for another term in the White House. “When the address was over,” author Hampton Sides notes, “a euphoric Johnson leaped from his chair and bounded from Oval Office to be with family. ‘His air was that of a prisoner let free,’ the First Lady wrote: ‘We were all fifty pounds lighter and ever so much more lookin’ forward to the future’…The president described his mood this way: ‘I never felt so right about any decision in life.’”

Harassed and depressed by antiwar demonstrators, urban riots, rampaging youth, unruly professors and reporters, and a deadly colonial quagmire in Southeast Asia, Johnson felt that (as he later told historian Doris Goodwin) he “was being chased on all sides by a giant stampede coming at me from all directions.” And by Bobby Kennedy.

He wanted out.  He left and it felt good.

Barack Obama might want to think about that happy moment experienced by an earlier failed Democratic president as he reflects on the revolting re-election season ahead. Along the way he should imagine a beautiful picture: he and his wife and two daughters relaxing on a beautiful beach on a sunny day in Hawaii on January 21 2013, one day a day after Mitt Romney, Rick Perry or Hillary Clinton is sworn in as the nation’s 45th president on January 20, 2013. As he looks out across the rolling waves of the blue Pacific, he takes a nice long drag on a cigarette he doesn’t feel compelled to hide from the press.  Reflecting on all the “ideological extremists,” “unrealistic” zealots, “partisan dividers” and opportunists who criticized him in office, he can take comfort in the fact that “they won’t have Barack Obama to kick around anymore” an d in contemplating the many millions of dollars he will be slated to rake through future speaking, writing, and other fees.

What does Obama have to look forward to in the future if he insists on trying for a second term? The stalled profits system seems ready to double dip back into full technical recession (the human recession never stopped beneath the mild statistical recovery), fitting him with the same fatal yoke of economic powerlessness that deep-sixed Herbert Hoover, Jimmy Carter and the first George (H.W) Bush’s hopes for second term.  Unemployment remains sky high, contributing to a recent low in American history: the largest number U.S. citizens (46 million) ever recorded below the federal government’s notoriously inadequate poverty level. Obama’s job approval is at an all time low (43 percent), 7 points under his disapproval rating (50 percent). A preponderant majority of Americans say that the country is “on the wrong track.”

Four months after his empty, politically calculated execution and sea-dumping of Osama bin-Laden., Obama is widely perceived as weak and ineffective, as too eager to compromise with – and as incapable of standing up to – his (supposed) right-wing enemies.  His party has recently lost two special House elections and one of those defeats came in a district Democrats had previously held for 88 years in a row. He has staked his future prospects on a highly flawed jobs bill – legislation that may well not pass the House and that is scaring off many conservative Democratic legislators.  Most Americans think the bill won’t work.

The president is starting to look like the potential victim of a landslide in November of 2012.  The Democratic base is widely disillusioned with him. Even many among his fake-progressive pseudo-liberal dead-end defenders sometimes squawk about his conservative corporatism and unwillingness to govern in accord with his idealistic campaign promises.  Liberal and progressive Democratic elected officials in the House and Senate have been grumbling about his center-right proclivities for some time now. It is one thing to rightwardly triangulate on the backs of welfare mothers and declining unions in the mode of Bill Clinton; it is another thing to do so at the expense of the broadly popular programs Social Security and Medicare, all while passing on hyper-regressive Republican tax cuts for the obscenely rich and powerful.

After years of overexposure, the Obama brand has gone toxic to a degree that may well be terminal. Leading Democratic political consultant and media pundit James Carville recently offered a single word of advice for Obama: “PANIC.” According to Bill Burton, a former White House spokesman and senior political strategist, “Democrats should be very nervous.” Unless Obama can somehow rally his party’s progressive base, Burton thinks, “it’s going to be impossible for the president to win.” But how is the deeply conservative Obama (accurately described in 1996 by Dr. Adolph Reed Jr. as  “a smooth Harvard lawyer with impeccable credentials and vacuous-to-repressive neoliberal politics”)  going to do that in the middle of a center-right presidency hat has been a shining monument to the power of the United States’ “unelected dictatorship of money” (Edward S. Herman and David Peterson’s term) and to John Dewey’s observation notion that American politics is “the shadow cast on society by big business”?  Obama’s “liberal” defenders complain that he is checked in his supposedly progressive ambitions by the power of right wing congressional Republicans.  But what did the nation get from their “liberal” president and the Democrats in his first year, when he enjoyed a clear and filibuster-proof Democratic majority in Congress?  Expansion of the monumental bailout of hyper-opulent financial overlords, refusal to nationalize and cut down parasitic financial institutions,  a health “reform” bill that only the big insurance and drug companies could love (consistent with Rahm Emmanuel’s advice to the president: “ignore the progressives”), an auto bailout deal that raided union pension funds and rewarded capital flight, the undermining of global carbon emission reduction efforts at Copenhagen, a  refusal to advance serious public works programs (green or otherwise), the green-lighting of escalated strip mining and hazardous deepwater oil drilling, the  disregarding of promises to labor and other popular constituencies (remember the Employee Free Choice Act?) and other betrayals of its “progressive base” (the other side of the coin of promises kept to its corporate sponsors), and the  appointment of a Deficit Reduction Commission “headed [in economist Michael Hudson’s words] by avowed enemies of Social Security”

Along the way, the “new” White House escalated Superpower violence in South Asia, passed a record-setting “defense” (Empire) budget, rolled over George W. Bush’s not-so counter-terrorist assault on human rights (in the name of “freedom”), extended the imperial terror war to Yemen and Somalia, disguised escalated U.S. occupation of Haiti as humanitarian relief, aided and abetted a thuggish right wing coup in Honduras, and expanded the Pentagon’s reach in Columbia/Latin America – a fascinating record for the winner of the Nobel Peace Prize. It called progressives who dared to criticize these and other White House policies “fucking retard[s] (former Obama chief of staff Rahm Emmanuel) who require “drug testing” (former Obama press secretary Robert Gibbs).  Leftists and sincere liberals were accused of being “purists” who do not live in the real world, who make “the perfect the enemy of the good” and fail to grasp the necessity of “compromise” to “get things done.”

When Obama’s center-right corporate-imperial presidency yielded the predictable consequence of demobilizing the Democratic Party’s “progressive base” in the mid-term elections and thereby enabling an historic right wing sweep in Congress, the president quickly moved yet further to the business-friendly right like a hungry lion leaping on a faltering zebra. In the debt-ceiling fiasco last July and August (a preposterous drama he could have prevented), Obama ignored majority progressive opinion (as usual) and accepted the Republicans’ reactionary framework, according to which (i) the nation’s main imperative was deficit-reduction, not job creation and (ii) the way to reduce the deficit is to cut spending and attacking working people and the poor, not to raise taxes on business and the filthy rich.

Good luck “rallying the progressive base” with that sort of corporate-imperial track record and as the economy sours yet further!

It is possible, I suppose, that the Republicans’ nomination of the doltish Christian  Dominionist, mass executioner and arch-plutocrat Rick Perry could activate enough of the Democrats’ base and scare enough moderates and independents to push Obama over the top in November, 2012..  But does Obama really want an encore? Second terms have not been kind to returning presidents.  Think Watergate (Nixon), Iran-Contra (Reagan), the Monica Lewinsky impeachment (Clinton), Katrina, and the financial meltdown of 2008 (George Bush the Lesser). A second Obama term could well coincide with Republican control of both the House and the Senate.  Obama can expect many of his administration’s top staffers to exit in droves, leaving the second string to finish out a truly lame-duck term, headed by a temporizing, boring, and distant figurehead to whom the populace has long been overexposed.

If he cared about his party, Obama would step down and give the nomination to Hillary Clinton, determined by a recent Bloomberg poll to be “the most popular national political figure in America today.”  Ms. Clinton has distinct advantages over Obama in running against Perry or Mitt Romney in 2012.   She is not a member of Congress, which has even lower popular approval than Obama. She is associated with economic prosperity thanks to the long neoliberal Clinton boom of the 1990s.  And she carries a reputation for toughness, quite different from Obama’s emerging legacy as a 98-pound weakling who gets kicked around on the policy beach by bullies like John Boehner, Sean Hannity, and Eric Cantor.  (For those of us on the radical left, a Hillary Clinton presidency might have the benefit of inducing at least some less confusion and tepidness among progressives than “the first black president.”)

My sense is that quitting is unthinkable for the current president.  Obama is far too convinced of his own special qualities and qualifications for Mount Rushmore to seriously entertain standing down. Personalities and money and candidate brands have trumped traditional parties and party needs in U.S. politics for some time now. Obama’s narcissistic desire to be at the center of the action is too strong for him to seriously contemplate stepping down at the end of just one disastrous term. Relinquishing power would go against every grain of his being.

His campaign for a return engagement should be an especially nauseating chapter in the expression of what the still-left Christopher Hitchens once accurately described as “the essence of American politics….the manipulation of populism by elitism.” That was the basic nature of Obama’s 2007-08 campaign, of course. It’s going to be a harder and uglier sell this time around – a path worth not taking.

Shutdown Closer as Senate Blocks Spending Bill

by: Jennifer Steinhauer, The New York Times News Service | Report

Saturday 24 September 2011

Washington - An impasse between the House and Senate over a bill to keep the government open after Sept. 30 and provide aid to natural disaster victims deepened Friday as the Senate easily shot down a House measure passed just hours before.

House members, considering their work done, headed home to their districts for a week’s recess, trailing uncertainty behind them since no resolution to the standoff appeared imminent. The Senate set a procedural vote for Monday evening in an effort to advance an alternative, but it was unclear whether it could draw sufficient support or whether Republican leaders would call members of the House back to consider it even if did pass the Senate.

The dispute meant that less than six months after the fiscal throwdown that left the government at the precipice of a shutdown last spring, Congress has brought the nation there again. While the government has until next Friday before it runs out of money, the $175 million in an emergency aid fund for disaster victims is set to run dry as early as Tuesday.

After House approval of its stopgap bill after midnight on Friday, the Senate voted 59 to 36 to set aside the House bill, with a handful of conservative Republicans joining with Democrats to deliver a quick and decisive rejection. Democrats opposed the measure because the disaster relief effort was offset by spending cuts to other programs dear to them. Conservatives appeared to feel their House colleagues had failed to cut short-term spending deeply enough.

The House bill, which had passed on the second attempt after cuts were added to appeal to conservatives, provided $3.65 billion in disaster relief. The money was offset by cuts to an Energy Department loan program for energy-efficient cars and another department program that was used to guarantee a loan for Solyndra, the solar equipment manufacturer that filed recently for bankruptcy protection.

After that measure failed in the Senate, the Senate majority leader, Harry Reid of Nevada, said he would counter Monday with a new bill that would embrace the House disaster relief amount, far less than the $6.9 billion the Senate had sought, but still reject any offsets, which Democrats and some Republicans say set an uncomfortable precedent. Asked by a reporter if another form of offset would be acceptable to Mr. Reid, he snapped, “No.”

However, Mr. Reid declined to allow a vote on his bill on Friday, saying he needed the weekend to try to cut a deal with Republicans. “Take a weekend, work with us, cool off,” Mr. Reid said in a news conference. It is also likely that Democrats hope Republicans come under pressure in their districts over the weekend to pass quickly a bill with disaster relief.

But the ticking clock may work against Mr. Reid. If his bill cannot pass the chamber — and Senator Mitch McConnell of Kentucky, the Republican leader, said it would not — he will be left with just hours before the federal emergency money runs dry and a House scattered through the nation.

House members were told Friday that no votes were scheduled until Oct. 3, though the House will be in pro forma session next week. Representative Steny H. Hoyer of Maryland, the No. 2 Democrat, said Friday that he believed that if the Senate bill received 60 votes, it could pass the House by unanimous consent without lawmakers returning, an optimistic assessment given the partisan atmosphere.

Indeed, 24 Republicans voted against their own party’s bill early on Friday morning, because it did not cut enough current-year spending even though an agreement reached in July with both parties to raise the debt ceiling set the spending levels.

Without an agreement on a bill to pay for federal operations beginning Oct. 1, the government would run out of money before lawmakers returned unless some resolution was found. The Federal Emergency Management Agency has postponed several repair projects, and the money in its disaster bank is at its lowest levels in history.

On Friday, four governors from states hit by natural disasters — Andrew M. Cuomo of New York and Bev Perdue of North Carolina, both Democrats, and Chris Christie of New Jersey and Tom Corbett of Pennsylvania, two Republicans — issued a statement criticizing the Congressional impasse.

“Within 10 days of Hurricane Katrina, Congress passed and the president signed over $60 billion in aid for the Gulf Coast,” the governors wrote. “It’s been 28 days since Irene and Lee started battering our states. We urge this Congress to move swiftly to ensure that disaster aid through FEMA and other federal programs is sufficient to start rebuilding now.”

For the entire day, both Democrats and Republicans expressed outrage and confusion over events. Senator Jon Kyl of Arizona, the No. 2 Senate Republican, appeared to be instructing Senator Kelly Ayotte, a freshman New Hampshire Republican, on what precisely they were voting on the floor of the Senate. Spokesmen for various leaders of both parties exchanged Twitter barbs. News conferences in overly air-conditioned conference rooms were held, with Republicans and Democrats accusing one another of bad faith.

Speaker John A. Boehner said Friday that the only way to advance the legislation would be for the Senate to capitulate and accept the House bill. “With FEMA expected to run out of disaster funding as soon as Monday, the only path to getting assistance into the hands of American families immediately is for the Senate to approve the House bill,” he said. “This is no time for delay.”

As the spending bill stalled, a spokesman for President Obama expressed alarm at the inability of Congress to reach a deal.

“The members of Congress work for the American people,” said the spokesman, Jay Carney, in a briefing with reporters. “They work for the constituents who sent them here, in their districts and states. We are absolutely confident that the vast majority of those constituents are not asking very much when they insist that Congress perform the basic functions that they were sent here to perform, and that they do not let politics get in the way of what should be a relatively straightforward exercise of funding the government.”

Class Warfare My Ass

by: William Rivers Pitt, Truthout | Op-Ed

Saturday 24 September 2011

I have to live for others and not for myself: that's middle-class morality.
- George Bernard Shaw

I have been saying this for years upon years, but it bears repeating: the most awesome, fearsome, and effective weapon in the arsenal of the modern Republican Party is their total, utter and complete lack of shame.

That weapon - the ability to say or do anything, literally anything, even as it flies in the face of on-the-record comments made just the day before, or contradicts thousands of votes cast in congresses past - is the equivalent of a battlefield-deployed tactical nuclear weapon. It clears the field, but good, and if everything is ashes in the aftermath, so be it. So long as effective spin makes the news cycle, it's a victory for them, and screw the people who get hurt.

The GOP wins when that is the contest, and that is all they care about...and the awful irony comes when the very people getting screwed are up on their feet cheering after the deal goes down, because "their team" won the day.

Watching these recent GOP debates has cracked me up for any number of reasons, but nothing can top watching those millionaires square off in an attempt to prove who among them is the most "folksy," the most in tune with the working stiff. Mitt Romney, whose personal fortune roars deep into nine figures on the left of the decimal, actually claimed he was a middle class guy during a recent campaign appearance.

Ah, yes, the irony again...just think, if people banking nine figures of personal wealth were actually considered middle class, all of our problems would be solved, right?

Or something.

Which brings us to the subject of "class warfare." The term has been a favorite broadside of the right-bent rich-people-first set going on forty years now, and in times past has always reaped them rich rhetorical benefits. We're a classless society here in America, don'tcha know, so accusations of "class warfare" have all too often sent lily-livered liberal-leaning politicians scuttling for the exits, for the apology, for the eventual retreat. 

Oh no, it isn't class warfare, this is only fair...which earned, invariably, a reply of "CLASS WARFARE SOCIALISM WHAAARGARBLE"...which, in turn, earned another hasty retreat instead of a proper and just reply.

Which is, should have always been, and should now be: kiss my ass, you leech, you bloodsucker, you greedy whore, you war profiteering glutton, you disgrace, you betrayer of America.

Oh, I know the argument. I know it as well as the spit I leave on the sidewalk when there is a bad taste in my mouth. The rich are better than us, they are the ones making the jobs, they have earned their esteemed position through a Randian process of natural economic selection, etc...except for the sneaky fact that a large number of these "business titans" inherited their wealth, and today increase their wealth not through hard work, but through favorable interest rates and even more favorable tax rates on money that is already in the bank.

The top-earning businesses in America today, across the board, are wallowing in record profits, and yet somehow hiring is stagnated. Why is that?

Could it be that these titans are holding off on hiring in order to affect the number of jobless Americans, so as to influence public opinion as we head into an election season? God almighty, to have such astonishing reach...to be able to keep millions out of work in order to put one black guy out of a job...now that's real power.

Class warfare, indeed.

Poverty has increased locally and nationally across the board, joblessness is reaching Great Depression-era levels, and millions have lost houses to those whose own homes resemble castles, to those who are secure in both funding and foundation. Money does not disappear. It has to go somewhere; what is lost is always found. Most all of us have spent the last several years losing money hand over fist, while Forbes tells us that the richest among us have increased their wealth by vast amounts in one year.

Try to contain your shock.

There is work available for the doing, on infrastructure and new technology fields and any number of other areas, but the GOP majority in the House of Representatives won't have any of it, because their marching orders are to screw the American economy in as many orifices as are available to try and unseat the sitting president. Period, end of file, and if you still think that isn't their intention, I have a big red bridge over San Francisco Bay to sell you.

Class warfare? These cretins have the unmitigated gall to accuse other people of class warfare?

It is a wonder of American politics, this absolute and astonishing lack of shame on the part of the modern GOP. They have spent the last thirty years stifling a minimum-wage increase, they blocked legislation to help 9/11 responders pay for very present health concerns, and spent the latter part of this last week trying to screw disaster relief funding for people who lose homes to tornadoes, floods, wildfires and earthquakes. They hate Social Security and Medicare down to their gold-plated bones. Now they are deliberately and intentionally stifling the very economy they themselves tore up, for no other reason than to win the next election.

How are they doing it? Money and power, power and money, and be damned to those who suffer for their desires.

Psssst...it is class warfare: full-throated, no-bullshit class warfare, and the rich ones whining about it are the ones who are winning. Be on your own side for a change of pace.  They got the guns, as a man once said, but we got the numbers.

It is class warfare, and has been for a generation. We've been losing, badly.

For now.

Global revolution - Live Video Feed from Occupy Wall Street RIGHT NOW

Global Revolution brings you live stream video coverage from independent journalists on the ground at nonviolent protests around the world. The team includes members of Mobile Broadcast News, Glassbead Collective, Twin Cities Indymedia and the alt.media ninjas that brought you Terrorizing Dissent and Democracy 101 documentaries. Currently broadcasting from #OccupyWallStreet protests in NYC that began on Saturday, Sept 17, 2011.

How to Lose Readers (Without Even Trying) (2 articles)

by Sam Harris - August 24, 2011


Do you have too many readers of your books and articles? Want to reduce traffic on your blog? It turns out, there is a foolproof way to alienate many of your fans, quickly and at almost no cost.

It took me years to discover this publishing secret, but I’ll pass it along to you for free:

Simply write an article suggesting that taxes should be raised on billionaires. 

Really, it’s that simple!

You can declare the world’s religions to be cesspools of confusion and bigotry, you can argue that all drugs should be made legal and that free will is an illusion. You can even write in defense of torture. But I assure you that nothing will rile and winnow your audience like the suggestion that billionaires should contribute more of their wealth to the good of society.

This is not to say that everyone hated my last article (How Rich is Too Rich?), but the backlash has been ferocious. For candor and concision this was hard to beat:

You are scum sam. unsubscribed.

Unlike many of the emails I received, this one made me laugh out loud—for rarely does one see the pendulum of human affection swing so freely. Note that this response came, not from a mere visitor to my blog, but from someone who had once admired me enough to subscribe to my email newsletter. All it took was a single article about the problem of wealth inequality to provoke, not just criticism, but loathing.

The following should indicate the general gloom that has crept over my inbox:

I will not waste my time addressing your nonsense point-by-point, but I certainly could and I think in a more informed way than many economists—whose credentials you seem to think are necessary for your consideration of a response. Do you see what an elitist ass that makes you seem? I think you should stick to themes you know something about such as how unreasonable religion is. I am sure I am not the only one whose respect you lose with your economic ideology.

Nothing illustrates why people should not leave their comfort zones than this egregiously silly piece….You make such good points about the importance of skeptical inquiry and about how difficult it is to truly know something that your soak the rich comments are, as a good man once said, not even wrong. Take care.

Sorry Sam. I used to praise and promote your works. You’ve lost me. Your promotion of theft by initiating force on others is unforgivable. You’re just a thug now, attempting cheap personal gratification by broadcasting signals which cost you nothing, just like Warren Buffett.

Many readers were enraged that I could support taxation in any form. It was as if I had proposed this mad scheme of confiscation for the first time in history. Several cited my framing of the question—“how much wealth can one person be allowed to keep?”—as especially sinister, as though I had asked, “how many of his internal organs can one person be allowed to keep?”

For what it’s worth—and it won’t be worth much to many of you—I understand the ethical and economic concerns about taxation. I agree that everyone should be entitled to the fruits of his or her labors and that taxation, in the State of Nature, is a form of theft. But it appears to be a form of theft that we require, given how selfish and shortsighted most of us are.


Many of my critics imagine that they have no stake in the well-being of others. How could they possibly benefit from other people getting first-rate educations? How could they be harmed if the next generation is hurled into poverty and despair? Why should anyone care about other people’s children? It amazes me that such questions require answers.


Would Steve Ballmer, CEO of Microsoft, rather have $10 billion in a country where the maximum number of people are prepared to do creative work? Or would he rather have $20 billion in a country with the wealth inequality of an African dictatorship and commensurate levels of crime? [1] I’d wager he would pick door number #1. But if he wouldn’t, I maintain that it is only rational and decent for Uncle Sam to pick it for him.

However, many readers view this appeal to State power as a sacrilege. It is difficult to know what to make of this. Either they yearn for reasons to retreat within walled compounds wreathed in razor wire, or they have no awareness of the societal conditions that could warrant such fear and isolation. And they consider any effort the State could take to prevent the most extreme juxtaposition of wealth and poverty to be indistinguishable from Socialism. 

It is difficult to ignore the responsibility that Ayn Rand bears for all of this. I often get emails from people who insist that Rand was a genius—and one who has been unfairly neglected by writers like myself. I also get emails from people who have been “washed in the blood of the Lamb,” or otherwise saved by the “living Christ,” who have decided to pray for my soul. It is hard for me to say which of these sentiments I find less compelling.

As someone who has written and spoken at length about how we might develop a truly “objective” morality, I am often told by followers of Rand that their beloved guru accomplished this task long ago. The result was Objectivism—a view that makes a religious fetish of selfishness and disposes of altruism and compassion as character flaws. If nothing else, this approach to ethics was a triumph of marketing, as Objectivism is basically autism rebranded. And Rand’s attempt to make literature out of this awful philosophy produced some commensurately terrible writing. Even in high school, I found that my copies of The Fountainhead and Atlas Shrugged simply would not open.

And I say this as someone who considers himself, in large part, a “libertarian”—and who has, therefore, embraced more or less everything that was serviceable in Rand’s politics. The problem with pure libertarianism, however, has long been obvious: We are not ready for it. Judging from my recent correspondence, I feel this more strongly than ever. There is simply no question that an obsession with limited government produces impressive failures of wisdom and compassion in otherwise intelligent people.

Why do we have laws in the first place? To prevent adults from behaving like dangerous children. All laws are coercive and take the following form: do this, and don’t do that, or else. Or else what? Or else men with guns will arrive at your door and take you away to prison. Yes, it would be wonderful if we did not need to be corralled and threatened in this way. And many uses of State power are both silly and harmful (the “war on drugs” being, perhaps, the ultimate instance). But the moment certain strictures are relaxed, people reliably go berserk. And we seem unable to motivate ourselves to make the kinds of investments we should make to create a future worth living in. Even the best of us tend to ignore some of the more obvious threats to our long term security.

For instance, Graham Alison, author of Nuclear Terrorism, thinks there is a greater than 50 percent chance that a nuclear bomb will go off in an American city sometime in the next ten years. (A poll of national security experts commissioned by Senator Richard Lugar in 2005 put the risk at 29 percent.) The amount of money required to secure the stockpiles of weapons and nuclear materials in the former Soviet Union is a pittance compared to the private holdings of the richest Americans. And should even a single incident of nuclear terrorism occur, the rich would likely lose more money in the resulting economic collapse than would have been required to secure the offending materials in the first place. 

If private citizens cannot be motivated to allocate the necessary funds to mitigate such problems—as it seems we cannot—the State must do it. The State, however, is broke.

And lurking at the bottom of this morass one finds flagrantly irrational ideas about the human condition. Many of my critics pretend that they have been entirely self-made. They seem to feel responsible for their intellectual gifts, for their freedom from injury and disease, and for the fact that they were born at a specific moment in history. Many appear to have absolutely no awareness of how lucky one must be to succeed at anything in life, no matter how hard one works. One must be lucky to be able to work. One must be lucky to be intelligent, to not have cerebral palsy, or to not have been bankrupted in middle age by the mortal illness of a spouse. 

Many of us have been extraordinarily lucky—and we did not earn it. Many good people have been extraordinarily unlucky—and they did not deserve it. And yet I get the distinct sense that if I asked some of my readers why they weren’t born with club feet, or orphaned before the age of five, they would not hesitate to take credit for these accomplishments.

There is a stunning lack of insight into the unfolding of human events that passes for moral and economic wisdom in some circles. And it is pernicious. Followers of Rand, in particular, believe that only a blind reliance on market forces and the narrowest conception of self interest can steer us collectively toward the best civilization possible and that any attempt to impose wisdom or compassion from the top—no matter who is at the top and no matter what the need—is necessarily corrupting of the whole enterprise. This conviction is, at the very least, unproven. And there are many reasons to believe that it is dangerously wrong. 

Given the current condition of the human mind, we seem to need a State to set and enforce certain priorities. I share everyone’s concern that our political process is broken, that it can select for precisely the sorts of people one wouldn’t want in charge, and that fantastic sums of money get squandered. But no one has profited more from our current system, with all its flaws, than the ultra rich. They should be the last to take their money off the table. And they should be the first to realize when more resources are necessary to secure the common good.

In reply to my question about future breakthroughs in technology (e.g. robotics, nanotech) eliminating millions of jobs very quickly, and creating a serious problem of unemployment, the most common response I got from economists was some version of the following:

1. There ***IS*** a fundamental principle of economics that rules out a serious long-term problem of unemployment:

The first principle of economics is that we live in a world of scarcity, and the second principle of economics is that we have unlimited wants and desires.
Therefore, the second principle of economics: unlimited wants and desires, rules out long-term problem of unemployment.

2. What if we were having this discussion in the 1800s, when it was largely an agricultural-based economy, and you were suggesting that “future breakthroughs in farm technology (e.g. tractors, electricity, combines, cotton gin, automatic milking machinery, computers, GPS, hybrid seeds, irrigation systems, herbicides, pesticides, etc.) could eliminate millions of jobs, creating a serious problem of unemployment.”

With hindsight, we know that didn’t happen, and all of the American workers who would have been working on farms without those technological, labor-saving inventions found employment in different or new sectors of the economy like manufacturing, health care, education, business, retail, transportation, etc.
For example, 90% of Americans in 1790 were working in agriculture, and now that percentage is down to about 2%, even though we have greater employment overall now than in 1790. The technological breakthroughs reduced the share of workers in farming, but certainly didn’t create long-term problems of unemployment. Thanks to “unlimited wants and desires,” Americans found gainful employment in industries besides farming.

Mark J. Perry
Professor of Economics, University of Michigan, Flint campus and
Visiting Scholar at The American Enterprise Institute and
Carpe Diem Blog

As I wrote to several of these correspondents, I worry that the adjective “long-term” waves the magician’s scarf a bit, concealing some very unpleasant possibilities. Are they so unpleasant that any rational billionaire who loves this country (and his grandchildren) would want to avoid them at significant cost in the near term? I suspect the answer could be “yes.”

Also, it seemed to me that many readers aren’t envisioning just how novel future technological developments might be. The analogy to agriculture doesn’t strike me as very helpful. The moment we have truly intelligent machines, the pace of innovation could be extraordinarily steep, and the end of drudgery could come quickly. In a world without work everyone would be free—but, in our current system, some would be free to starve.

However, at least one reader suggested that the effect of truly game-changing nanotechnology or AI could not concentrate wealth, because its spread would be uncontainable, making it impossible to enforce intellectual property laws. The resultant increases in wealth would be free for the taking. This is an interesting point. I’m not sure it blocks every pathway to pathological concentrations of wealth—but it offers a ray of hope I hadn’t seen before. It is interesting to note, however, what a strange hope it is: The technological singularity that will redeem human history is, essentially, Napster.

Fewer people wanted to tackle the issue of an infrastructure bank. Almost everyone who commented on this idea supported it, but many thought either (1) that it need not be funded now (i.e. We should take on more debt to pay for it) or (2) that if funded, it must be done voluntarily.

It was disconcerting how many people felt the need to lecture me about the failure of Socialism. To worry about the current level of wealth inequality is not to endorse Socialism, or to claim that the equal distribution of goods should be an economic goal. I think a certain level of wealth inequality is probably a very good thing—being both reflective and encouraging of differences between people that should be recognized and rewarded. There are people who can be motivated to work 100 hours a week by the prospect of getting rich, and they often accomplish goals that are very beneficial. And there are people who are simply incapable of making similar contributions to society. But do you really think that Steve Jobs would have retired earlier if he knew that all the wealth he acquired beyond $5 billion would be taxed at 90 percent? Many of people apparently do. However, I think they are being far too cynical about the motivations of smart, creative people.

Finally, many readers said something like the following:

If you or Warren Buffett want to pay more in taxes, go ahead. You are perfectly free to write the Treasury a check. And if you haven’t done this, you’re just a hypocrite.

Few people are eager to make large, solitary, and ineffectual sacrifices. And I was not arguing that the best use of Buffett’s wealth would be for him to simply send it to the Treasury so that the government could use it however it wanted. I believe the important question is, how can we get everyone with significant resources to put their shoulders to the wheel at the same moment so that large goals get accomplished? 

Imagine opening the newspaper tomorrow and discovering that Buffett had convened a meeting of the entire Forbes 400 list, and everyone had agreed to put 50 percent of his or her wealth toward crucial infrastructure improvements and the development of renewable energy technologies. I would like to believe that we live in a world where such things could happen—because, increasingly, it seems that we live in a world where such things must happen. 

What can be done to bridge this gap?

[1.] The Gini coefficient is a measure of wealth inequality in a society. It is also one of the best predictors of its homicide rate—better than GDP, unemployment levels, energy consumption per capita, or any other measure of average wealth. This suggests that it is relative rather than absolute scarcity that motivates violent competition between people (see, for instance, Daly, Wilson, & Vasdev, “Income inequality and homicide rates in Canada and the United States.” Canadian Journal of Criminology, April 2001: 219-236).

++++++++++++++++

How Rich is Too Rich?
August 17, 2011



I’ve written before about the crisis of inequality in the United States and about the quasi-religious abhorrence of “wealth redistribution” that causes many Americans to oppose tax increases, even on the ultra rich. The conviction that taxation is intrinsically evil has achieved a sadomasochistic fervor in conservative circles—producing the Tea Party, their Republican zombies, and increasingly terrifying failures of governance.

Happily, not all billionaires are content to hoard their money in silence. Earlier this week, Warren Buffett published an op-ed in the New York Times in which he criticized our current approach to raising revenue. As he has lamented many times before, he is taxed at a lower rate than his secretary is. Many conservatives pretend not to find this embarrassing.

Conservatives view taxation as a species of theft—and to raise taxes, on anyone for any reason, is simply to steal more. Conservatives also believe that people become rich by creating value for others. Once rich, they cannot help but create more value by investing their wealth and spawning new jobs in the process. We should not punish our best and brightest for their success, and stealing their money is a form of punishment.

Of course, this is just an economic cartoon. Markets aren’t perfectly reflective of the value of goods and services, and many wealthy people don’t create much in the way of value for others. In fact, as our recent financial crisis has shown, it is possible for a few people to become extraordinarily rich by wrecking the global economy.

Nevertheless, the basic argument often holds: Many people have amassed fortunes because they (or their parent’s, parent’s, parents) created value. Steve Jobs resurrected Apple Computer and has since produced one gorgeous product after another. It isn’t an accident that millions of us are happy to give him our money.

But even in the ideal case, where obvious value has been created, how much wealth can one person be allowed to keep? A trillion dollars? Ten trillion? (Fifty trillion is the current GDP of Earth.) Granted, there will be some limit to how fully wealth can concentrate in any society, for the richest possible person must still spend money on something, thereby spreading wealth to others. But there is nothing to prevent the ultra rich from cooking all their meals at home, using vegetables grown in their own gardens, and investing the majority of their assets in China.

Bill Gates and Warren Buffet, the two richest men in the United States, each have around $50 billion. Let’s put this number in perspective: They each have a thousand times the amount of money you would have if you were a movie star who had managed to save $50 million over the course of a very successful career. Think of every actor you can name or even dimly recognize, including the rare few who have banked hundreds of millions of dollars in recent years, and run this highlight reel back half a century. Gates and Buffet each have more personal wealth than all of these glamorous men and women—from Bogart and Bacall to Pitt and Jolie—combined.

In fact, there are people who rank far below Gates and Buffet in net worth, who still make several million dollars a day, every day of the year, and have throughout the current recession.

And there is no reason to think that we have reached the upper bound of wealth inequality, as not every breakthrough in technology creates new jobs. The ultimate labor saving device might be just that—the ultimate labor saving device. Imagine the future Google of robotics or nanotechnology: Its CEO could make Steve Jobs look like a sharecropper, and its products could put tens of millions of people out of work. What would it mean for one person to hold the most valuable patents compatible with the laws of physics and to amass more wealth than everyone else on the Forbes 400 list combined?

How many Republicans who have vowed not to raise taxes on billionaires would want to live in a country with a trillionaire and 30 percent unemployment? If the answer is “none”—and it really must be—then everyone is in favor of “wealth redistribution.” They just haven’t been forced to admit it.

Yes, we must cut spending and reduce inefficiencies in government—and yes, many things are best accomplished in the private sector. But this does not mean that we can ignore the astonishing gaps in wealth that have opened between the poor and the rich, and between the rich and the ultra rich. Some of your neighbors have no more than $2,000 in total assets (in fact, 40 percent of Americans fall into this category); some have around $2 million; and some have $2 billion (and a few have much more). Each of these gaps represents a thousandfold increase in wealth.

Some Americans have amassed more wealth than they or their descendants can possibly spend. Who do conservatives think is in a better position to help pull this country back from the brink?



**** ADDENDUM (8/19/11)

I have received a fair amount of push back for this post—much of it, frankly, a little crazier than normal.

If you are an economist and believe that you have detected any erroneous assumptions above, please write to me here. If your comments are significant, I will be happy to publish our exchange on this website.

Specifically, I would be interested to know if any economist has an economic argument against the following ideas:

Future breakthroughs in technology (e.g. robotics, nanotech) could eliminate millions of jobs very quickly, creating a serious problem of unemployment.
 
I am not suggesting that this is likely in the near term. I am saying that it is possible. Many people believe that there is some fundamental principle of economics (even of physics) that rules this out. Drawing a lesson from the information revolution, many readers have written to inform me that the birth of the computer led to new industries and new jobs (thank you). Needless to say, I do not disagree. I am suggesting, however, that there is nothing that rules out the possibility of vastly more powerful technologies creating a net loss of available jobs and concentrating wealth to an unprecedented degree.

The federal government should levy a one-time wealth tax (perhaps 10 percent for estates above $10 million, rising to 50 percent for estates above $1 billion) and use these assets to fund an infrastructure bank.
 
Contrary to many readers’ assumptions, I am not recommending that the federal government confiscate productive capital from the rich to subsidize the shiftlessness of people who do not want to work. Nor do I imagine that a mere increase in income tax can erase the national debt. However, to the eye of this non-economist, it seems obvious that spending a few trillion dollars wisely, on projects that will improve our infrastructure, create jobs, and hasten our progress toward energy independence, would be a good thing to do.

Yes, I share everyone’s fear that our government, riven by political partisanship and special interests, is often incapable of spending money wisely. But that doesn’t mean a structure couldn’t be put in place to prevent poor uses of these funds. Leaving aside fears of government ineptitude, please tell me why it would be a bad idea for the rich to fund such a bank voluntarily.

Needless to say, if there are any economists who want to write in support of these ideas, I would be happy to hear from you.

In the hopes of receiving feedback that I can publish, I encourage you to keep your responses as concise as possible.