Gilded Age v2.0

This week, the Supreme Court handed down a 5-4 decision in AT&T Mobility v Concepcion that protects certain types of corporate wrongdoing from class action lawsuits by consumers.  As with Citizens United v. Federal Election Commission, it represents yet another blow to the rights of citizens, and one more step forward in what has clearly become a concerted effort to consolidate corporate power to the detriment of the individual.

Citizens United held that corporate funding of independent political broadcasts in elections cannot be limited, effectively giving those with the deepest pockets the loudest voice.  AT&T Mobility, meanwhile, essentially permits companies to break the law, as long as they only do it a little bit at a time.  Specifically, this finding allows corporations to use consumer and employment contracts to take away customer rights to join class-action lawsuits.  What this means is that, if you sign a contract with a service provider, and that company mistreats you, your only path of redress is through arbitration.  You cannot join other customers who have experienced the same problem in a class action to address what may be widespread, programmatic negligence, or even criminal activity.

Imagine, for instance, that your phone company illegally charges you and one million other customers $10 a piece. The company is now $10 million richer, but under the Supreme Court’s new ruling, the company can use an arbitration “agreement” hidden in the depths of the contract you signed with them to prohibit you from working with other customers to hold the firm accountable for its actions.  The fact is that almost no one has the time, the money or the expertise to take on an enormous corporation over ten dollars - or $100 or even $1,000 for that matter - and since customers must work separately to address this problem, the company is basically protected from having its widespread malfeasance stopped or even exposed.

Even if one considers AT&T Mobility a relatively small thing on its own (I don't), the fact remains that we are, by all manner of measure, witnessing a return to the worst excesses of the Gilded Age.  But where that period also saw the rise of unions in response to the untrammeled might of private, moneyed interests, todays titans of industry have been undermining their union counterweights in a three decades-long assault that is now reaching a fever pitch.  In New Jersey, GOP Governor Chris Christie has been attacking unions for some time now; in Ohio, Republican Governor John Kasich has signed anti-union legislation; his fellow party member, Michigan Governor Rick Snyder, has done the same and is now wielding flagrantly anti-democratic power.  Florida's Republican chief executive is pursuing the same course; and most famously, Wisconsin's GOP Governor Scott Walker has made crushing unions his primary focus.  Meanwhile, in Maine, the Tea Party-backed Governor Paul LePage is working to loosen restrictions on child labor, and of course, going after unions.

At the same time, Republicans in the House of Representatives have put forth a budget bill that would lower taxes on the wealthiest, end Medicare as a defined benefit program, expand taxes on the middle class, and maintain or grow what can only be described as our current insane levels of defense spending.  How out of whack, how tilted away from the needs of Americans and toward the aims of arms manufacturers and defense contractors are our current priorities?  So misaligned, in fact, that two men serving under the Joint Chiefs of Staff wrote A National Strategic Narrative (PDF), which brings us the remarkable sight of military personnel calling attention to the fact that the United States spends far too much on the military at the expense of everything else:

The term “national security” only entered the foreign policy lexicon after 1947 to reflect the merger of defense and foreign affairs. Today our security lies as much or more in our prosperity as in our military capabilities. Our vocabulary, our institutions, and our assumptions must reflect that shift.  “National security” has become a trump card, justifying military spending even as the domestic foundations of our national strength are crumbling. “National prosperity and security” reminds us where our true security begins.

There are signs that, having played a patient game of attrition for years, corporatists in the United States may have become impatient enough that, their goals in sight, they have begun overplaying their hand.  House Republicans are facing anger among their consistuents, and organized labor - particularly in the public sector - has won enormous support in the wake of the anti-union actions of demonstrably corrupt hacks like Wisconsin's Walker, but it has taken a long time for Americans to begin waking up to the bill of goods they have been - and are being - sold.  So far, there has been little sustained, organized resistance.

Make no mistake, this attack on individual rights to meet the needs of corproations and the richest among us is a concerted, sustained phenomenon, one that lurked beneath the surface of American society for decades and that began gathering momentum after World War II, picked up steam with the presidency of Ronald Reagan, grew into full-throated song in the wake George W. Bush's misrule, and continues today.  It's got to be stopped.

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Excerpts from President Dwight D. Eisenhower's farewell address, in which he remarks specifically and forcefully about the dangers of combined military and economic power:




The Daily Show's Jon Stewart explores the pitfalls of Citizens United v Federal Elections Commission:

Is America Finally Waking Up?

As the battle over the 2012 federal budget continues to heat up, a variety of interesting and important things have taken place; some publicly trumpeted as terribly important, and others less well-observed.

The item that has perhaps most dominated the news cycle in recent days has been, of course, the downgrading of U.S. Treasury Bonds from "stable" to "negative" by the Wall Street ratings firm Standard & Poor's, followed quickly by warnings from the company that America could even lose its AAA rating.  (A threat on which S&P did not make good.)  Much I-told-you-so clucking ensued from the chattering classes, but what went largely ignored outside the financial press was that the effect this announcement produced among investors was anything but sobering.

After a quick climb in interest rates - the result one would expect if U.S. debt is now, in fact, riskier - the 10-year rate on T-bills continued heading south, indicating - if anything - growing confidence in treasury bonds as a safe investment.  Even leaving aside the rank failure of ratings agencies to do anything approaching a good job in the years leading up to the 2008 financial crisis, the reaction of the people actually investing their money is a far better indicator of expected performance than any pronouncement from the deservedly maligned Standard & Poor's.  As Paul Krugman put it, "... this was a non-event."

Perhaps an even more surprising break from the established narrative, however - if even less reported - are the results of a number of surveys concerning the manner in which the American public wants its government to address our current financial situation.  As we moved into 2010, there was already a broad disconnect between the spending most Americans wanted to cut from the budget, and the significance of the impact such cuts would have on overall spending:

That ignorance of actual budget priorities has continued, and was most recently best exemplified by the hue and cry over federal funding for National Public Radio (NPR):

Nonetheless, despite the yawning chasm between general public perception of federal spending and actual budget realities, some very interesting trends can still be discerned from new polling.  A Washington Post/ABC News survey from April 19th revealed that not only is the prospect of combining spending cuts with tax increases gaining traction, fully 72% of Americans believe taxes on those making $250,000 or more a year should be raised as one element of any plan to reduce the deficit.  Likewise, two-thirds agreed that Medicare should remain a defined benefit program, rather than a voucher-driven initiatve subject to market forces, as proposed by Republicans:

Further, albeit with markedly less precise wording, a New York Times/CBS News poll from last Friday revealed lower support for raising taxes in general, but again found that 72% of all adults would increase the taxes paid by those making more than $250,000 a year.  Even more arresting is the fact that a majority of Republicans questioned feel this way:

More worrying still for movement conservatives is the fact that a clear majority of all adults who took part in the Times poll again believe that government has a role to play in providing health care to the poor and the elderly, with even members of the GOP solidly behind federal involvement in medical care for seniors:

And if all that weren't enough to have Paul Ryan tossing and turning in his bed at night, not only was it revealed that the Wisconsin GOP budget hawk - who frequently blames "entitlements" for the country's fiscal woes - had received significant benefits from Social Security as a child, but a third poll from McClatchy/Marist also shows strong opposition to cuts in Medicare and Medicaid from all points on the political spectrum.  Fully 80% of the McClatchy poll respondents are against reducing  Medicare and Medicaid to close the deficit gap, as are - somewhat astoundingly, given their anti-government rhetoric - 70% of Tea Party supporters.

What does all this mean?  It's probably premature to draw fully-formed conclusions, but there are strong indications that not only have Republicans in the House of Representatives badly miscalculated with their passage of the Ryan budget proposal, but that Americans are starting to wake up to the extremist ideology at the heart of modern GOP leadership.  It would be nice to think that realization stems from compassion, but the reality is that things have gotten so bad on such a broad basis that almost everyone either has firsthand experience of the economic downturn, or knows someone close to them who has. 

As President Obama recently said, "Nothing is easier than solving a problem on the backs of people who are poor, or people who are powerless, or don’t have any lobbyists, or don’t have clout. I don’t think that’s particularly courageous."  For whatever reason, more Americans seem to be realizing that, and that fact is - perhaps, just maybe, hopefully - indicative of better things to come.

Back Soon

It's been a high-stress couple of weeks at work, and I do not have either the energy or the focus for blogging at the moment.  Back soon!

Forget the Politics, the Numbers Don't Add Up

Late Friday night, a budget compromise was finally reached between the White House, Senate Democrats and the GOP-held House of Representatives.  The result was more than $38 billion in cuts for fiscal 2011, and the political brinksmanship involved in hammering out this agreement just barely avoided a shutdown of the government.  While federal workers and military personnel breathed a sigh of relief - and hardcore right wing policy riders targeting abortion and environmental regulation were left out of the deal - the real fight is just about to start: the budget for 2012.

The Republican plan has been assembled by the Chairman of the House Budget Committee, Representative Paul Ryan of Wisconsin. The GOP budget, tagged The Path to Prosperity, is unquestionably radical - it's author has said of it, "This isn't a budget. This is a cause." - but it is also a deeply flawed and reckless delusion spawned directly from the works of Mr. Ryan's hero, Ayn Rand.  This is perhaps unsurprising, as Rand's philosophy of Objectivism, embodied in her novel Atlas Shrugged, can probably be best described as follows:

There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.

Despite all manner of effort to bolster Paul Ryan's credentials - Charles Krauthammer recently praised him as "super wonky" and David Brooks effused that The Path to Prosperity is the "standard for seriousness" - there are a host of very big and very obvious problems with the Republican 2012 budget plan.  Worse, for Mr. Ryan and the GOP, they aren't even philosophical, they're quantitative, and that's pretty troubling for a document that its author has repeatedly claimed is fact-based and doesn't rely on accounting tricks or gimmicks.

First and foremost, Mr. Ryan's plan calls for cutting taxes - surprise! - for the wealthiest Americans, dropping the top marginal tax rate from 35% to 25%.  The last time the top marginal rate was that low was 1931, before the advent of Social Security, Medicare, or Medicaid.  What is more troubling however, is that somehow, with this rate cut in place and no reductions in defense spending, Mr. Ryan claims that public revenues will be held steady, while offering no specifics for how such a thing can be accomplished.  The immediate answer from conservatives of course, is that more money in the hands of the "job creators" will cause them to hire more people, growing the economy, but that simply takes us back to the fallacy that lowering taxes will somehow increase federal revenues.

The problem with this idea - besides that obvious flaw - is that the unemployment figures used in Mr. Ryan's plan to illustrate the effects of all this hypothetical hiring are, flatly, ridiculous. Rather than rely on the non-partisan Congressional Budget Office (CBO) for his assumptions and modeling, The Path to Prosperity instead rests on numbers from the ultra-conservative Heritage Foundation, and the Heritage Foundation claimes that the result of the Republican budget would be 2.8% unemployment by 2021!  (Interestingly, this data was recently scrubbed from their website, as can be seen here.  H/T Paul Krugman.)  For perspective, unemployment in the United States at the end of the Clinton Administration's 8-year expansion was around 4%, and any downward trend wasn't starting from  a point nearly as high we're experiencing today.  More broadly, jobless rates haven't been under three percent since the post-war boom of the 1950s.

MIT economist Jonathan Gruber has called the Heritage Foundation numbers "insane", and using Congressman Ryan's Heritage data, projections for unemployment would take this extremely-hard-to-credit shape:

But what if the Heritage Foundation is right?  Do they have a solid track record we should take into consideration?  Indeed, they are tremendously consistent - just not in a good way.  In 2001, they analyzed what they believed the effects of the Bush tax cuts would be, and came up with an incremental 1.6 billion jobs over a decade.  What actually happened was the worst jobs creation record of any president in the last 60 years, with employment growth below even what was claimed would occur if no tax cuts took place:

As tranparently wrong as these assumptions are, however, the capper comes with regard to health care.  Under the Republican plan, Americans currently younger than 55 would not be eligible for traditional Medicare benefits, receiving government insurance vouchers instead.  The Congressional Budget Office reviewed The Path to Prosperity's  health care provisions, however, and found that "Under the proposal, most elderly people would pay more for their health care than they would  pay  under  the  current  Medicare system."  Worse, the effects would go far beyond just what senior citizens pay in health care costs.  The Economic Policy Institute's analysis of the GOP budget found that the side-effects of its changes to Medicare would actually cost the country 2.9 million jobs:

Over the next five years (during which time CBO projects that the economy will still be below potential), Chairman Ryan's Medicaid proposal would cut the program by $207 billion, which includes both eliminating the Medicaid expansion under the Affordable Care Act and even deeper cuts to the Medicaid program. Using a standard macroeconomic model that is consistent with private- and public-sector forecasters, we find that a $207 billion cut would result in a loss of 2.1 million jobs over the next five years, or 2.9 million full-time equivalent jobs... These figures are in job-years, which refer to a job held for a single year, meaning that five jobs lost in a single year is the equivalent to one job lost over five years.

Furthermore, the job loss would overwhelmingly be in the private economy. Medicaid has very low overhead, as about 96% of the program’s funds go toward benefits which are spent in the private sector. Assuming the 96% ratio is relatively constant across states (or at least not systematically biased in one direction), Medicaid cuts of this magnitude would result in the loss of just under 2 million private-sector jobs, or 2.8 million full-time equivalent jobs.

This estimate is conservative for two reasons. First, because Medicaid is a program that generally benefits low-income households - who out of necessity are much more likely to consume rather than save - a larger-than-normal share of these cuts will undermine demand in the private sector. This suggests that the cut to Medicaid would have an even larger impact on the economy than we estimate here. Second, it is likely that an even larger share of the job loss would fall on the private sector because overhead includes not only labor but equipment and supplies as well, which are provided by private companies.

In other words, if 2.8% unemployment looked comically optimistic before, contemplate for a moment how ludicrous it is if 2.9 million net jobs are sacrificed while trying to get there.

Depsite media-political bubble claims of "bravery," "seriousness" and a lack of gimmickry, Paul Ryan's 2012 Republican budget proposal is - politics aside - a mathematical joke.  The assumptions it uses and the conclusions it reaches are clearly untethered from reality, it is bereft of specifics on spending cuts and revenue increases, and - worryingly for the Chairman of the House Budget Committee - the numbers simply do not add up.

The Ethics of Expedience

Ted Rall's work can be a bit hit or miss from my perspective, but when he's dialed in, he's capable of highly incisive social commentary, as the cartoon above illustrates.

I don't think the conundrum described - that "our stragetic interests are at odds with our values" - is unique to the Obama Administration, or, for that matter, any of its predecessors.  But while it's something with which all presidents struggle to one degree or another, it's a fight our values seem to have lost more often than not in recent years, whether in the arena of foreign policy or here at home.  Worse, as in the case of civil liberties, the morality to which we aspire is increasingly outweighed not by strategic necessity, but by tactical expedience.

Ethics are often inconvenient, but how well a nation adheres to its principles in difficult times is the measure of its character.  Anything less is hypocrisy, and the fundamental issues of genuine consequence - things like equal justice, due process, and the rule of law; not ginned-up wedge issues like "traditional values" or ersatz socialism - seem not just to be of fading importance, but the subjects of outright dismissal, as if America can no longer look itself in the mirror.