Archive for September 2011

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LAUDING AN INTELLECTUAL OPPONENT

September 18, 2011

Let me recommend for the contrast of ideas a blogger who disagrees with me on many, if not most, ideas on political economy. Steve Attewell is a fellow WordPress blogger at the Realignment Project. He has written much more than I have and is a very accomplished

Steve Attewell's Bio Pic

blogger. He is a very bright and articulate Ph.D. student in the history of public policy at UC Santa Barbara. Steve is a progressive by his own definition, a definition which can be found in the archives of his blog. Lest one believe that there is a lack of good faith on the other side of economic and political debates of our time, Steve’s blog shows this to be a demonstrably false notion. People of intellectual integrity, thoughtfulness and good will do exist on all sides of the debate (assuming that he would consider me and others of like mind as having the equivalent qualities) and I am happy to say, Steve is obviously a man possessing them. This is a pre-requisite for fruitful and informative discussion of any issue.

He recently wrote a blog post, ‘Living in the Age of Magical Austerity Thinking.’ He argues that those who believe that austerity is the answer to our current economic problems are incorrect. He can be forgiven if he goes a bit over the top when characterizing his intellectual opponents as those who feel, “. . . solicitude of the have-muches, distaste for redistribution, fear of state capacity, and fear for the rights of the managing classes . . .” since his economic thinking is largely informed by Nobel Laureate Paul Krugman. Krugman’s own ideas go beyond Steve’s tepid castigation, calling austerity adherents and their political representatives the equivalent of sadists. Some of my own ideas concerning austerity can be found here.

I recommend Steve to anyone who reads this blog as a balance to my own ideas. Incidentally, I admit to being McCurious, Steve’s interlocutor in the comments section of his Magical Thinking post. I also appear in the comments section of his post on GM’s ‘recovery’ as being indicative of the success of “Industrial Policy.”

I’ll be on vacay for a couple weeks. This is unfortunate because there is so much to talk about with the President’s jobs bill, the new “minimum tax on millionaires” and the Republican search for a presidential candidate in the air. I particularly look forward to seeing how the millionaire tax does in the Senate where there are so many wealthy paragons among the Democratic majority. Forgive my cynicism for doubting that they will pass this measure even while many of them will give strong lip service to it. They’ll prefer to attack the House, trying to put the “blame” on the Republicans for being shills for the ultra-wealthy. I hope that this is going to be the fight. I would like full hearings in Congress which investigate the underlying question: the real benefits of taxing capital gains at a lower rate than ordinary incomes.

Rep. Paul Ryan Courtesy SpeakerBoehner

I normally like Representative Paul Ryan’s take on things but this morning on the Fox News Sunday public affairs program is an exception. When defending the tax rate differential for capital gains Ryan could only fall back on the saying that, “when you tax something more you get less of it.” Exactly what does that mean in this context? Why doesn’t the same adage apply to all incomes????? Wouldn’t increasing all incomes be good? Why the advantage for capital gains? Let’s have the question of benefitting capital gains in relation to ordinary income put to the test out in the open meeting rooms of capital (pun intended) hill with C-Span covering the full proceedings. Ryan, who I believe has previously described himself as a Ronald Reagan Republican, will need to explain to the viewers why Ronald Reagan’s tax reform pegged the top marginal rate on all incomes, whether capital or ordinary, at 28%. Did that make economic sense then? Why not now? That’s the sort of political fight that I’d like to see.

At least the President is finally being true to his campaign position that taxing capital gains like ordinary incomes is a “matter of fairness.” You may remember my previous posts on the President and Warren Buffett’s view of the appopriate tax rates which should be applied to capital gains and dividend-type income, here, here, here and here. See you in a couple of weeks.

Categories: Political Economy, Politics, Taxes
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CLASH OF WORLDVIEWS — EXHIBIT 1

September 9, 2011

Have a look at this exchange between Rick Santelli and Tom Friedman on CNBC. Santelli is very focused on the fact that social security is a pyramid scheme requiring constantly increasing numbers of participants over time in order to support those who got in the system, the scheme, ahead of them. Such schemes were apparently originated by Charles Ponzi beginning in the early 1900’s. Friedman is focused on the “out of order idea” that a “popular” government program could be associated with a situation otherwise characterized as criminal conduct. The two of them, Friedman and Santelli, then proceed to cross talk for a couple of minutes instead of carefully delineating what they agreed about and what they did not agree about. Have a look. It looks for a moment that Friedman will begin to reach across and agree with Santelli about the pyramid scheme when Rick removes the criminal connotation from contention but that moment passes and they get back in their corners and fight it out.

This is so very instructive as to what happens in America in the 2010’s. These two men, both very smart, are so invested in their own worldviews that they do not seek points of practical and factual agreement, they seek only points of disagreement.

Who was right? A Ponzi scheme, according to the SEC’s government website, has the following characteristics.

What is a Ponzi scheme?
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

Why do Ponzi schemes collapse?
With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

Santelli and Friedman could have agreed on the fact that Social Security requires an ever-growing pool of funds from newer workers over time to pay the mandated benefits of retired workers. This certainly meets at least one of the criteria specified in this government website description. Likewise, as with the Ponzi scheme there is no investment activity which goes on with social security, the money is used to pay people who joined the system earlier. Any money not so used is placed into government IOU’s with very low interest rates which, when they are redeemed, will have to be paid out of other government tax monies. They could have agreed that the available funds must meet the mandated benefits over time and that this can only be achieved, in the context of Social Security, by: 1. Cutting mandated benefits; 2. Quickly increasing the numbers of those paying into the system; or 3. Increasing by some means the per person amount that the newer folks, those still working, are required to pay in. The latter solution was tried and is the one alluded to by Friedman which occurred during the Reagan administration in 1984, the last time social security came close to running out of money to pay mandated benefits. Santelli’s implied criticism of this “solution” is that the 2.4 Trillion dollars in taxes which exceeded the benefits actually paid out between 1984 and 2009 was gobbled up by federal government which spent the money as if it were ordinary tax money and the government left a bunch of IOU’s in the till. In terms of the description of the Ponzi scheme, these funds may legitimately be viewed as having been used for the personal expenses of the scheme promoters, in this case the U.S. government. This fact, Santelli’s argument implies, made the government the equivalent of Charles Ponzi, the criminal, who raked off some of the proceeds from the new “investors” for his own use rather than to pay the early investors. It appears to me that just the label, Ponzi scheme, angered Friedman greatly. No real attempt at rational discussion was made after this charge was leveled by Santelli. Pehaps had Santelli chosen the less judgmental term “pyramid scheme” it would have seemed less offensive to Friedman?

What purpose did this exchange serve other than entertainment for CNBC viewers? Who comes off well? Until we get to the point where we can stop calling each other liars or “idiots” because the other’s worldview is different than our own, we’re not going to get very far in bridging the differences between us. We will remain at drawn daggers over every issue. And that is not good since the existence of a country, this country, which is a multicultural country, must necessarily be based upon reaching some type of a broad based agreement across the generations and the classes and the races and the cultures as to what this country’s government should be about.

They could have agreed on all of the facts. But they chose instead to fight out a war of terminology which predicably degenerated into calling the other a belittling name. The different assumptions which each makes underly this argument. The distinction is whether the government is viewed as a benevolent father figure seeking only the good of its citizens or as a self-interested participant whose actions benefit some of its citizens at the expense of others. There you have it, a concrete example of the clash of worldviews.

Categories: Clash of Worldviews, Taxes
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THE PRESIDENT’S JOB-SPEECH

September 8, 2011

Tonight’s the big night. A joint session of Congress and the President will present (at least part of) a plan to create more jobs to reduce the 9.? unemployment rate. Is the air electric with anticipation? Well, uhuh, it’s not, unless you mean about the NFL opener between the last two Super Bowl champs, the Packers and Saints, which will start shortly after the President leaves the speaker’s podium.

What’s happening? It’s just another chance for the President to get on TV and use his teleprompter jiujitsu on his opponents. What will likely transpire is an announcement that there is an exciting list of things which will receive federal money so that “we the people can have jobs.”

Afraid of the moniker that he’s just a big spending liberal, the President will “pay for” at least some of these expenses with “revenue enhancements” paid for by the people who still have a little money left in 2011. The President will seek to tax away any money that might have been “saved” and make sure that it is spent productively, as is always the federal way. Although the Republicans in Congress have already indicated their refusal to go along with this, the motive behind the plan is so that the President can say in his re-election bid that it is the Republican refusal to go along with his brilliant plan that is causing the continuing malaise in the economy. And, he and his surrogates will go on, the Republican refusal is because they love the “rich” so very much and don’t care about the poor unemployed. There will be no discussion about why the plan would have worked or whether there would have been some job losses to offset the job gains if he had gotten his way. It’s the perfect political plan, make it look like you’re trying to do something while making the other guy look like he’s resisting for political purposes, not economic ones. Same old playbook. It worked with the debate over increasing the national debt limit. The Tea Party label is permanently damaged and they got less than a 2% reduction in spending for the fiscal year beginning October 1. He made them pay a pretty high price for that hollow “victory.” Same plan, phase II.

The President, I predict, will not suggest increasing the capital gains or divident taxes on the very wealthy, he will target instead the upper middle class. Tiresome and predictable but it’s worked (politically) before. So why not again?

I know one thing for sure. Mr. Obama doesn’t understand or, perhaps, care about the TANSTAAFL rule. The TANSTAAFL rule provides that there is no such thing as a free lunch, someboy always has to pay. And the only interest group which he feels should not pay in order to build up the economy is the massive and growing government sector.

Coils of USPS Stamps - Courtesy USPS Website

The government does actually produce things but mostly not things that the public would pay for at the prices it charges. It uses either monopolies or taxes to corral the resources to make it run. If we don’t watch out, though, plans like President’s will create an entire country in the image of the U.S. Postal System. And that would be a helluva shame.

Categories: Political Economy, Politics, Taxes
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VIDEO RECORDING OF COPS IS PROTECTED

September 2, 2011

Every good cop in this country should be happy about what happened on August 26, 2011!!! Why? On that day the United States Court of Appeals for the First Circuit (Northeastern U.S.) handed down an opinion strongly protecting the rights of we the people to record the police while they do their jobs in public. In Glik v. The City of Boston, et al., the Court decides that it is already “clearly established” that an individual has a first amendment right to record video of police while on duty in public and a fourth amendment right against being arrested for doing so notwithstanding the Massachusetts wire-tap statute. The Court goes so far as to call this first amendment right “virtually self-evident.” The right identified by the First Circuit is predicated upon Supreme Court precedent that generally the government may not limit the “stock of information” available to the public. This right, the Court holds, extends to members of the public who are not “reporter[s] gathering information about public officials.” It is also important to the Court that the filming was in public, that it was done from a “remove” and that Glik neither spoke to nor molested the officers in any way.

The result in this case is good news for everyone, but especially so for cops given the public display of video recordings of police apparently threatening arrest and prosecution of citizens lawfully exercising their first amendment rights. This decision removes from argument, within the territorial boundaries of the U.S. First Circuit Court of Appeals anyway, the proposition that such recordings are unprotected and subject to state infringement. All police should be happy about this since it sounds the death knell for such reports as this one which place the police in a very bad light indeed.

Law enforcement for centuries has gotten the benefit of the doubt in court. Convictions must be based upon evidence of guilt beyond all reasonable doubt. Many such convictions have been obtained based nearly solely upon police court testimony. This “presumption” is both wise and understandable. It is wise since police are hired to serve the law abiding community and to arrest law breakers thus they are empowered to do on our behalf what we would otherwise have to do for ourselves. It is also understandable because cops, as the representatives of the rest of us, are presumed to have no reason to lie about what they have seen and heard. They are generally perceived by juries as being unbiased truth tellers. Obviously what is true in most communities is not true in all a la O.J. Simpson and downtown Los Angeles.

The proliferation of video recording equipment in society should have been welcome news to the good police officer who expects to be filmed doing his job well and justly. But now, in view of the many videos and even more reports of police attempting to intimidate private citizens into not filming their activities, every thinking head will have a question. When numerous police are captured actually turning their power against those whose only crime is video recording, is it fair to wonder whether they have something to hide? That perception has the potential to make the job of the policing effectively impossible. If the police aren’t given the benefit of the doubt in court, how can our laws ever be enforced. Will a change in perception with the attendant reduction of convictions cause the frustrated police to take enforcement matters into their own hands since they will no longer be able to “trust” the public? That would be truly corrupt. Even if it doesn’t go that far it has the potential of creating a dangerous downward spiral.

Part of the problem is that, like in every profession, there are bad people who are police. There are those who simply relish control and power. They push things up to and over the line when they can. They like the adrenalin rush. And they feel protected in the current system because it’s their word against that of the ordinary citizens and “who you gonna believe?” Of course, a problem will arise when they take the case to court and the prosecution has to say, “who you gonna believe, me or your lying eyes?” The potentially worse problem arises when a significant number of jurors ask themselves what would this policeman be saying if there had been a camera, this could wreck the entire system of prosecutions?

So why are police concerned about video recordings anyway? There are at least three reasons that occur to me. 1. Everybody, even police, can have a bad day and a bad day recorded on video may get very bad for them. 2. They are concerned that being recorded “doing their job” may interfere with their ability to do their jobs in the future by disclosing “police procedures” which are not already generally known; by public dissemination of their identities which will be received by members of the public who they would rather be invisible to; and, 3. The traditional police model of “it’s us against them” forces police in general to protect even the bad apples among them and this can be very difficult when the bad apple in blue has made an appearance on a recorded video acting disgracefully.

Why then would good cops, and the rest of us, be happy with the protection provided by this First Circuit ruling of the right to unobtrusively record video of police in public? Because it takes the police out of the box they which they are in. They can’t just say to themselves, it’s us against them. They will themselves now have to discriminate between good cops and bad cops, because they can no longer afford to protect the bad ones. Harboring and remaining silent about bad police endangers all of them. They no longer have any choice. They will now have to discriminate in their support between those “good cops” having a bad day and those bad cops who can’t be trusted with power and who ought to be shown the door. It forces the police to hold themselves and their “brothers in blue” to a higher standard. They cannot hide from the camera being wielded by someone with first amendment rights. So if they insist on “protecting their own” and they protect the bad among them as well as the good, then they’ll lose the benefit of the doubt. This result is one which, neither they nor we, can afford.

Categories: Law, The US Constitution
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