“Darth Vader Money”

Congress is finally perfecting a complete inversion of the popular idea of “Charity.” Billionaires and their huge corporations “donate” millions to our elected representatives. Like your $25 donation to your favorite charity, these millions are tax-exempt, meaning, of course, they’re taxpayer-subsidized.

But these donated millions don’t go to the injured and displaced, survivors of natural disaster, and the poor and needy. They go into legislators’ secret slush funds in a process still colloquially known as “bribery.”

The resulting legislation effects a return of billions in completely legal and fully protected profits to the “donors,” a thousandfold return on investment (ROI).

But this is surely just exaggerated hype, right? From Bill Moyers, this morning, in turn quoting Paul Blumenthal at The Huffington Post:

“Republicans in Congress are trying to decrease the already scant amount of disclosure for politically-active nonprofits — known as dark money groups. The legislative effort is unsurprisingly supported by the main political arm of the billionaire brothers Charles and David Koch.”

“Dark Money?” Like “Non-profit.” there we rediscover another grave euphemism. Taxpayers subsidize small investments in legislation, in the process best known as “graft,” which returns huge profits, which in turn are often sheltered under special tax sweetheart deals. In effect, we are paying corporations to corrupt the system for a profit. It’s become “Darth Vader” Money.

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Big Government vs. Big Business

“There is a legitimate concern about large institutions, be they government or others, who haven’t really delivered the America everybody thought we were on our way to,” acknowledged John R. McKernan Jr., a former Maine governor who leads the U.S. Chamber of Commerce Foundation. But, he said, that fear is “totally misplaced” when it comes to the Common Core.

~~ New York Times, “Republicans See Wedge in Common Core,” April 20, 2014.

This interesting article mainly focuses on the opposition to the Common Core educational approach, which is opposed by Tea Party conservatives who want to replace public schools wholesale with privately funded schools whose curricula they can control, and by some liberal groups, such as teachers, who want to see a divorce between educational testing and onerous teacher performance evaluations.

The larger issue is growing mistrust of Big Government, and/or Big Business.

The opposition to the Common Core also captures another shift since the Bush administration: While long contemptuous of an expanding federal government, some Republican activists are growing wary of big business, too, including figures like Bill Gates, the billionaire Microsoft founder whose foundation supported the development of the standards.

The facts of the matter are clear. Government hasn’t adequately delivered on its promises of equality, fairness, equal access, and equal opportunity for all to achieve the American Dream.

The elephant in the room here is Big Business. Somewhat arbitrarily, we can map the start of The Big Rip with the dismantling of the old Anti-trust laws, which happened, counterintuitively, in the Democratic Clinton Administration. This breached the geologist’s “angle of repose,” that steepest angle of a debris slope at which a boulder, or a massive pileup, will not slide downhill.

We’ve watched the buildup of a new breed of corporate and financial giants who dwarfed the old “military-industrial complex,” about which Eisenhower warned our nation. We saw monster rogue corporations like Enron. In 2008 we saw the established premier banking cartels of the country almost bring the country and economy to its knees, and the world with it: Chase-JP Morgan, Bank of America, Citibank, Lehman Brothers, AIG, Countrywide, almost every big name financial institution you can think of, and more that you can’t.

Recently, the right-biased Supreme Court handed down its infamous Citizens United and McCutcheon  decisions. The decision was manna from heaven for the Charles G. Koch and David H. Koch (“Mr. Coal Is Your Friend”) billionaires and their corporate empires. The Kochs can contribute half a trillion dollars to state and federal election campaigns, and I can contribute $25 annually.

The law, in its majesty, has decreed that corporations, being people, are finally able to participate equally with me and you.

Big Government has not delivered on all its promises; NO. But Big Business has delivered on its promise to dismantle democracy, freedom of speech, and the American Dream. If anybody had been listening, they’ve been warning us all along.

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‘Occupy Wall Street’ Protests

BBC News

Looking at the mock US flag displayed by protesters on Wall Street (click thumbnail for BBC graphic), we can see a field of thirty corporate logos in place of the familiar fifty stars. Most of us could come up with a list of fifty “bad” companies, couldn’t we? I can identify most of the thirty: Nike, Coca Cola, AT&T, Wal-Mart, Lilly, GM, Citi, Apple, Google, Fox, Verizon, Warner Brothers, Exxon, Visa, McDonalds, Disney, Pepsi, Ford, NBC, Intel, Master Card, GE, and Microsoft.

In my own humble microcosm of Americana, I don’t find many of the companies I’d personally fancy seeing there. We can all recall consumer protests against Nike, Wal-Mart, Exxon, and McDonalds. But, “do no evil” Google? Apple? These choices leave me baffled. In some political circles there must still be plenty of antipathy for any large US corporation: sized-based discrimination is sometimes still politically correct.

On one score I do sympathize with these protestors’ frustrations. Wall Street screwed the entire country in the events leading up to the global crash of 2008. But it’s never as simple as that, is it? The collapse having been orchestrated with the full oversight and blessing of the SEC, Fed, Moody’s, S&P and most of the Bush Administration, targeting “Wall Street” isn’t precisely accurate. It was the “too big to fail” bankers themselves that provided the mighty engine for a catastrophic recession that went viral across the globe. What the hell were they thinking? Citi certainly deserves its place on the infamy list, but I feel the sterling reputations of Bank of America, Wells Fargo and many others were tarnished by omission.

As I wrote a friend the other day,

In Europe, countries like Greece ruined the banks, but in the US, the banks ruined the country!

In a somewhat personal aside, my best buddy’s dad was a VP in the “old” BofA (think green visor accountant types), and he is probably rolling over in his grave. None of us should be too surprised at the irresponsible greed of the usual Wall Street perps, but what the banks did was criminally insane.

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Are Corporations ‘People’?

A most interesting question was posed today to panelists on the “Inside Washington” PBS roundtable. Pulitzer Prize-winning columnist Charles Krauthammer, that brilliant conservative whom I admire but with whom I disagree so much, didn’t bite. Columnist and editor Colby King of the Washington Post did.

First of all, this question is loaded. Krauthammer probably saw that. By ‘people’ do we mean, are corporations best viewed as aggregates of “just-plain folks”, like you and me? Or should corporations count under some kind of “one man one vote” rule, getting entitlement to contribute to political campaigns, and to lobby for tax breaks and special treatment?

Second of all, are we talking about how we define corporations, or are we really talking about a extra-constitutional rationale for expanding their enormous power?

Colby King innocently jumped on the question right away. Corporations, he offered in so many words, are comprised of investors, maybe just like you and me, or like the managers of our decimated 401K accounts. So in that sense yes, King said he could see corporations as ‘people’. The question went nowhere. Panelists quickly jumped to the next topic.

Politically, there is one aspect of corporations that’s much like any other interest group. They are and should be entitled to lobby Washington for fair representation of their interests in the scheme of things. But this kind of advocacy should be vetted for impartial relevance in ways we do not tolerate for private citizens. Washington observers have witnessed a sea change in corporate legal status in recent years. Under the Bush Administration, expanded ‘rights’ were extended to corporations, so that, perhaps, corporations might be allowed to donate anonymously to political campaigns and secret slush funds, or the Koch Brothers might be able to buy an election proposition initiative in California.

The unspoken core principle here was that corporations had heretofore been denied basic individual rights, so statutes and enforcement protocols needed to be relaxed to eliminate discrimination against ‘just plain people’ interest groups that just so happen to be incorporated under the laws of a state.

After all, if you own a corporation, presumably you do go to the polls to vote your personal position on the issues, don’t you? Don’t you think there should be some way your corporation can act as an extension your views, since you own a piece of it or actually control it?

So sorry, but you don’t get your vote counted twice just because you’re incorporated in, say, the State of Delaware. If a private citizen’s vote counts as one, should the “vote” of a Bank of America or Koch Industries count as ten million?

A corporation is not an individual. It does not have individual rights. It doesn’t get to vote. The Articles of Constitution only enumerate individual freedoms for individuals. So corporations are not people, and there is a dangerously destabilizing aspect to this trendy popular doublethink. Look at the 2008 consequences of the SEC and Treasury being asleep at the wheel on “good guys” like Bernie Madoff, Bank of America, AIG and Lehman Brothers. But if they were influenced by the Wall Street “old boys network” (from whom they draw so many into their ranks), nobody can prove it: not above suspicion, not accountable, never free of the taint of conflict of interest.

Individual Americans have many diverging views about religious takes on prayer in schools, abortion, gay rights, divorce or evolution, and we are all free to express our opinions, and to vote on them to the extent not pre-empted by statutory and constitutional limitations. But Congress is not free to count the “votes” of our congregations, synagogues and mosques. Yet the century-old corporate problem remains: Congress remains beholden to very large corporations.

Judicial common sense is of course needed here. Perhaps that’s asking a lot of our current crop of representatives. Your pastor, priest or rabbi should certainly be welcomed as an “expert witness” on a topic of debate, perhaps home schooling, subject of course to their personal experience in the area — but not as a spokesperson for, say, The Vatican. Similarly, shouldn’t a respected and honest businessperson such as Warren Buffett be allowed to address Congress on the economy or a hearing on energy? Certainly — but he should not be invited to make a large contribution to the chairperson of the committee hearing a bill under which Berkshire Hathaway would be a principle or sole beneficiary.

There are honest businesspeople, remember, and Buffett would certainly be one of them. Constraints need to be reimposed upon abuse of power in both private enterprise and Congress.

We need political separation of corporation and state just as we need separation of church and state, and for the very same reasons.

Further Reading

1. The Billionaire Koch Brothers’ War Against Obama : Jane Mayer, The New Yorker
“The Kochs have long depended on the public’s not knowing all the details about them. They have been content to operate what David Koch has called ‘the largest company that you’ve never heard of.’ But with the growing prominence of the Tea Party, and with increased awareness of the Kochs’ ties to the movement, the brothers may find it harder to deflect scrutiny.

2. The Koch brothers: all the influence money can buy : Paul Harris, Guardian
“Not just liberals but conservatives should be deeply worried by a revelatory investigation of the libertarian billionaires’ lobbying”

3. Corporate personhood : Wikipedia
“Others argue that corporations should have the protection of the U.S. Constitution, pointing out that they are organizations of people, and that these people shouldn’t be deprived of their human rights when they join with others to act collectively.”

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What Republicans and Democrats Still Need to Do

On August 2 the world watched the conclusion of Congress’s recent and embarrassing failure to address time-critical debt ceiling and budget decisions until the very last possible moment. It was very possibly the first time in recorded history that Communist China lambasted the United States in a rant almost everybody here in the United States could actually agree with.

We averted a credit default, but the solution was a draconian compromise that’s sure to please nobody. The compromise left untouched revenue strategies, our dire unemployment picture, and the need to balance the budget. If any modern American corporation conducted its management planning the way our senators and house representatives do, its Board would have long ago fired the lot of them. That situation is hardly new.

Our underperforming Congress largely falls back on a blizzard of blamestorming to excuse its failure to execute. If you’re a Republican, it’s the fault of those intransigent liberal socialists who are trying to kill off the goose that laid the golden egg. If you’re a Democrat, it’s those fascistic neoconservative plutocrats who are again trying to push the U.S. working class into virtual serfdom.
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LOL: Should Corporations Pay Taxes?

  • Joe Sestak: “Pat Toomey thinks corporations shouldn’t pay any taxes.”
  • The Truth-o-Meter says: Mostly True

I frequently use PolitiFact.com as one of two main resources for checking out the reliability of political statements and web rumors (the other resource being Snopes.com, of course). I subscribe to PolitiFact’s RSS feed. That’s how we happen to be staring at the apparently preposterous proposition that the US taxpayer should get stuck with 100% of the IRS tax bill.

This particular controversy is about the Pennsylvania race the for U.S. Senate, with Republican Pat Toomey and Democrat Joe Sestak trading potshots in the manner to which we’ve all come to expect of politicians. You can read the entire PolitiFact analysis at this link.

Narrator: “Do you think corporations pay their fair share? Pat Toomey thinks corporations shouldn’t pay any taxes.”

Clip of Toomey: “Lets not tax corporations. … I think the solution is to eliminate corporate taxes altogether.”

PolitiFact digs down into the source of this video sequence. Toomey began by arguing that taxes on corporations end up getting passed on to the consumer, “which ends up hurting economic growth”.

Taxes Affect Prices. I knew the first part. It’s a basic axiom of Econ 101 that taxes (and any other cost of doing business) are, and must be, built into the pricing model. No matter what the tax policy of a particular nation, in the long run the spread between gross profit and net profit must exceed a certain minimum margin, or it’s curtains for the corporation, shareholders and any consumer depending on that product or service.

Costs of Economic Growth. The second part is partly true and partly pure twaddle. Toomey argues that reduced corporate taxes would make the U.S. more competitive in global markets. We only have to look at Chinese competitive strategy, and the sheer size of U.S. trade imports, to realize this part of Toomey’s argument is true. For 2009 the trade deficit with China alone was 20 billion dollars (US Census data). Remember,  this represents the extent to which U.S. corporations buy from China to avoid buying from each other.

Toomey appears to realize that a zero corporate tax obligation is not politically or economically feasible, but would settle for a tax reduction: “I’d prefer none on corporations, but much lower would be better.”

Twaddle: Whether lower corporate tax or zero, Toomey’s argument assumes that most or all of the savings in the costs of doing business would end up being passed on to the consumer in the form of lower prices, while simultaneously increasing U.S. sales volumes.

  • It’s folly to suppose that Congress could agree to pay for reduced corporate taxes by coordinated reductions in U.S. spending, so the slack would be picked up by reductions in services (which would have to be paid for some other way), and by increases in the individual income tax rate.
  • Therefore a cut in the corporate tax rate could further erode U.S. consumer purchasing power, causing an even greater weakening of the U.S. economy.
  • “Demand pull” does not necessarily reduce prices even if we can afford to buy more. Contrary to classic free-market theory, prices are elastic upward, not downward. In the last 52 weeks, oil has gone from $92.75 to $74 a barrel (20% reduction) but gasoline in my area has fallen from about $3.59 a gallon to $3.16 (12% reduction).

Conclusions:

  • Conservative free-market rhetoric is jingoistic and poorly thought out.
  • A sea change in U.S. economic direction requires broad-based popular support and understanding. It has to be underwritten by the taxpayer. No one political party or ideology will ever be able to accomplish this on its own.
  • Toomey’s plan is also poorly thought out. Its arguments would make just as much sense if the proposition were to eliminate individual income taxes and let corporations pick up 100% of the tab.
  • The U.S. trade deficit and global competitive position are serious long-range issues and must be dealt with.
  • Unfair trade-off: Toomey’s plan probably would increase U.S. competitiveness in global markets, while adversely affecting domestic consumption.

The quaint notion that there’s some equitable mix of corporate and individual taxes is a dangerous misunderstanding. Toomey’s arguments rest on the assumption that the two main sources of tax revenue are economically intertwined.

So it is strange, to say the least, that he would favor a reduction in one of the components with no mention of its impact on the other.

If it’s a stealth spending reduction Toomey is really favoring, elimination of the three trillion dollar war ($500,000 a minute) would go a long way in the right direction.  Toomey is a libertarian-leaning conservative with a disregard for civil rights (go figure) whose voting record supported the Iraq war.

Toomey isn’t challenging the U.S. tax structure; he’s only whining about who should shoulder the burden, which is still to say, he doesn’t think our pals in corporate America should shoulder any of it … in an idealized Big Rock Candy Mountain conservative world of the future.

VAT

If we want to open the Pandora’s Box issue of who should pay taxes, let’s expand the discussion to include looking at the European-style VAT (value-added tax). Everybody pays it (directly or indirectly), nobody gets to weasel out, and we could dump the universally despised federal income tax entirely.

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Amazon Heuristics

It’s all a matter of mining the shopping data. Amazon knows quite a bit more about me than I thought they did.

From the Wikipedia article on Heuristics:

Heuristic … (from the Greek … for “find” or “discover”) is an adjective for experience-based techniques that help in problem solving, learning and discovery. A heuristic method is particularly used to rapidly come to a solution that is hoped to be close to the best possible answer, or ‘optimal solution’. Heuristics are “rules of thumb”, educated guesses, intuitive judgments or simply common sense. A Heuristic is a general way of solving a problem. Heuristics as a noun is another name for heuristic methods.

From an email today: Amazon.com has new recommendations for you based on items you purchased or told us you own.
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There Goes The Knowledge Base

What’s happening to the legendary American know-how in the USA today? It’s not exactly “brain drain”, but it’s not the parallel phenomenon of “brain gain”, either. We’re losing our know-how, but the language to describe what’s happening is still alien to our vocabulary.

Wikipedia  defines “brain drain” thusly: “Brain drain or human capital flight is a large emigration of individuals with technical skills or knowledge, normally due to conflict, lack of opportunity, political instability, or health risks. Brain drain is usually regarded as an economic cost, since emigrants usually take with them the fraction of value of their training sponsored by the government.”

In American we saw “brain drain” [as a talent inflow] from several skillset migrations over the past 60 years. Over that same time frame, we saw that the quality of education in America has never been lower than it is today. Continue reading

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Getting a Handle on the Economy

There was an interesting short article in the April 13 New Yorker about a group of Ayn Rand devotees who meet monthly in New York. Fitting. Here’s a meeting of advocates of pure, full-blown laissez-faire capitalism, huddling by the ruins of the Wall Street collapse, ruing the advance of the forces of statism and the contradictions of that turncoat Greenspan creature. Continue reading

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Of Bubbles and Butterflies

Chaos and Financial Markets II

The following story is based on true events. The characters are fictitious. Any resemblance to characters living or dead is entirely unintentional. Close cover before striking.

Rupert and Millie Paltridge, of Silver Springs, Maryland, were considering spec properties in the Phoenix area as a vacation home. “And we could even retire there,” Millie would always say. Prices were at historic highs, thanks to the national boom in real estate. They found a really upscale condo in a new development project outside tony Scottsdale. The year was early 2005. The asking price was $580,000. The development even had its own Starbucks. “We can’t afford this,” Rupert announced. But, friends explained they couldn’t afford NOT to get in on the housing market.
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