What Happened to Faith In The Market?

I’m a capitalist. A real one, not the Congressional variety. I believe in (properly regulated) markets, with the important caveat that I believe in markets in those areas of the economy where markets work. (Markets only work, I constantly remind anyone who listens, in transactions with a willing buyer and a willing seller, both of whom are in possession of all information relevant to the transaction.)

Being predisposed to competition and markets doesn’t mean I think government’s role is unimportant, or that public assistance is never warranted.Government can help markets in a number of ways: outlawing monopolies and anti-competitive practices or, in compelling cases, granting subsidies or tax incentives to industries deemed critical to the national interest.

It won’t surprise anyone reading this to discover that, in today’s America, subsidies are more often used to suffocate progress and protect profitable, established industries than to move the nation forward.

American business spokespersons can be counted on to profess devotion to markets. They can also be counted on to avoid competition whenever possible, because their belief in the market’s level playing field is wholly fictional.

As Vox recently reported,

The coal industry and its allies in the Trump administration have recently devoted considerable energy to arguing that subsidies to renewable energy have distorted energy markets and helped drive coal out of business. “Certain regulations and subsidies,” says Rick Perry, “are having a large impact on the functioning of markets, and thereby challenging our power generation mix.” You can guess which regulations and subsidies he’s talking about.

This is nothing new, of course. It is in keeping with a long conservative tradition of challenging the economic wisdom and effectiveness of energy subsidies.

At least, uh, some energy subsidies.

Energy analysts have made the point again and again that fossil fuels, not renewable energy, most benefit from supportive public policy. Yet this fact, so inconvenient to the conservative worldview, never seems to sink in to the energy debate in a serious way. The supports offered to fossil fuels are so old and familiar, they fade into the background. It is support offered to challengers — typically temporary, fragmentary, and politically uncertain support — that is forever in the spotlight.

The article goes on to shine that spotlight on those older subsidies, beginning with the twenty billion dollar annual production subsidy we taxpayers provide to the fossil fuel industries that contribute massively to climate change. We provide that financial assistance despite the fact that these companies are very, very profitable.

The twenty billion dollar figure is only a beginning. It subsidizes only direct production costs.  Another $14.5 billion in consumption subsidies also benefit fossil fuel companies–things like the Low Income Home Energy Assistance Program(LIHEAP), which helps lower-income residents pay their (fuel oil) heating bills.

It also leaves out subsidies for overseas fossil fuel projects ($2.1 billion a year).

Most significantly, OCI’s analysis leaves out indirect subsidies — things like the money the US military spends to protect oil shipping routes, or the unpaid costs of health and climate impacts from burning fossil fuels. These indirect subsidies reach to the hundreds of billions, dwarfing direct subsidies — the IMF says that, globally speaking, they amount to $5.3 trillion a year. But they are controversial and very difficult to measure precisely.

Finally, OCI acknowledges that its estimates of state-level subsidies are probably low, since many states don’t report the costs of tax expenditures (i.e., tax breaks and credits to industry), so data is difficult to come by.

The best available estimate is that energy companies get $20.5 billion annually in corporate welfare, of which 80 percent goes to oil and gas, and 20 percent to coal. And we don’t know how much remediation will eventually add to that figure.

Vox’s summary says it all better than I could:

If you ask people in fossil fuel industries, their support staff in conservative think tanks, or fossil-state politicians, they will tell you why these fossil fuel production subsidies are necessary. It’s always been this way. They’re more than paid back by tax revenue. Other industries get them too. (For the record: More than half the $20 billion is available to fossil fuels alone). They create jobs. They’re important for national security. Tax expenditures aren’t subsidies at all, if you think about it. Etc.

If the endless debate over energy subsidies has taught me anything, it’s that nobody thinks their own subsidy is a subsidy — and no one outside think tanks and universities really gives a damn about the economic distortions of subsidies as such. Everyone thinks their favored energy sources deserve support and the other guys’ don’t. Period. They use whatever economic argument is handy — “picking winners” if you’re against the subsidy, “supporting jobs” if you’re for it — but such arguments are always instrumental. As I said recently about coal’s rent-seeking, there are no true free marketeers in struggling industries.

Speaking of rent-seeking, here’s a final fun factoid from OCI: In the 2015-2016 election cycle, oil, gas, and coal companies spent $354 million in campaign contributions and lobbying and received $29.4 billion in federal subsidies in total over those same years — an 8,200% return on investment.

The next time some corporate poo-bah piously invokes the genius of the market, tell him to give it a rest. It’s abundantly clear that no one really wants to “let the market decide.”

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Voting One’s Interests

Fareed Zakaria is a savvy observer of both domestic governance and international relations, and he makes a very good point in a recent Washington Post column.

It has become a (tiresome) truism that many Americans “vote against their own interests.” This assertion has always annoyed me, because it embodies a couple of arrogant assumptions: first, that the speaker/writer knows better than those voters where their “true” interests lie; and second, that voters’ interests are limited to economic issues.

Zakaria uses the negative financial consequences of the GOP’s tax “reform” bill for Trump voters to make his point:

Congress’s own think tanks — the Joint Committee on Taxation and the Congressional Budget Office — calculate that in 10 years, people making between $50,000 and $75,000 (around the median income in the United States) would effectively pay a whopping $4 billion more in taxes, while people making $1 million or more would pay $5.8 billion less under the Senate bill. And that doesn’t take into account the massive cuts in services, health care and other benefits that would likely result. Martin Wolf, the sober and fact-based chief economics commentator for the Financial Times, concludes, “This is a determined effort to shift resources from the bottom, middle and even upper middle of the U.S. income distribution toward the very top, combined with big increases in economic insecurity for the great majority.”

The puzzle, Wolf says, is why this is a politically successful strategy. The Republican Party is pursuing an economic agenda for the 0.1 percent, but it needs to win the votes of the majority.

Cue the chorus: why would the people in Trump’s base continue to support him, when his actions (in concert with his party’s) are inimical to their interests? Wouldn’t they desert him if they realized that he is pursuing an agenda that privileges large corporations, wealthy families, and well-positioned rent-seekers? When will they come to their senses and see that Trump and the Congressional GOP are putting in place budgetary policies that will be devastating to the predominantly rural people who voted for him?

Is it that the Republican Party is cleverly and successfully hoodwinking its supporters, promising them populism and enacting plutocratic capitalism instead? This view has been a staple of liberal analysis for years, most prominently in Thomas Frank’s book “What’s the Matter with Kansas?” Frank argued that Republicans have been able to work this magic trick by dangling social issues in front of working-class voters, who fall for the bait and lose sight of the fact that they are voting against their own interests. Both Wolf and Pierson believe that this trickery will prove dangerous for Republicans. “The plutocrats are riding on a hungry tiger,” writes Wolf.

I fully agree with Zakaria’s rebuttal to that analysis.

But what if people are not being fooled at all? What if people are actually motivated far more deeply by issues surrounding religion, race and culture than they are by economics? There is increasing evidence that Trump’s base supports him because they feel a deep emotional, cultural and class affinity for him. And while the tax bill is analyzed by economists, Trump picks fights with black athletes, retweets misleading anti-Muslim videos and promises not to yield on immigration. Perhaps he knows his base better than we do. In fact, Trump’s populism might not be as unique as it’s made out to be. Polling from Europe suggests that the core issues motivating people to support Brexit or the far-right parties in France and Germany, and even the populist parties of Eastern Europe, are cultural and social.

This is a much more tactful way to explain what the data shows, and what I have repeatedly argued: the majority of Trump’s supporters are White Nationalists (aka bigots), for whom the indignity of Obama’s eight years as President was simply a bridge too far. The real “interests” of these voters aren’t economic; they’re tribal. They are desperately clinging to the white privilege that is diminishing in a rapidly diversifying society. That desperation overpowers any other “interest.”

As Zakaria writes,

 What if, in the eyes of a large group of Americans, these other issues are the ones for which they will stand up, protest, support politicians and even pay an economic price? What if, for many people, in America and around the world, these are their true interests?

So long as they see Trump normalizing and justifying racism and misogyny, these voters aren’t going anywhere. Polls suggest that they represent around 30% of Americans voters, a depressingly high number.

Getting that other 70% to the polls has never been more important.

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Can We Trade Trump For France’s Macron?

Remember “Freedom Fries”? Remember those sneering comments about the French? Because after all, we’re Amuricans, so we are clearly superior.

Right.

I watched the French election with interest. It was right after “Amurica” accidentally elected the Orange Ignoramus, and thoughtful observers were worried whether our disastrous election–coming on the heels of the equally disastrous Brexit vote in England–heralded a global spread of white nationalist extremism.

Trump, if you’ll recall, endorsed Marine Le Pen.

Fortunately, Trump’s Le Pen endorsement was every bit as effective as his lukewarm endorsement of Luther Strange and his full-throated advocacy for Roy Moore. The French election was won overwhelmingly by Emmanuel Macron. I’d been rooting for Macron–my middle son’s partner is Parisian and they split their time between Manhattan and Paris, so I had more insight into the French candidates than I would otherwise have had.

My preference for Macron has now been validated. As Reuters recently reported,

PARIS (Reuters) – French President Emmanuel Macron plans to award multi-year grants for several U.S.-based scientists to relocate to France, his office said on Monday on the eve of a climate summit hosted by the president to raise finances to counter global warming.

Macron unveiled the “Make our Planet Great Again” grants after President Donald Trump in June said he was pulling the United States out of an international accord to reduce greenhouse gas emissions that was brokered in Paris in 2015.

Macron repeatedly tried to persuade the U.S. leader to reverse his decision. In a statement, the Elysee Palace said 13 of the initial 18 grants will be awarded to scientists based in the United States.

Meanwhile, our dumb and delusional President just dropped climate change from America’s National Security Strategy, in favor of “economic competitiveness.” (I assume we’ll be exceedingly competitive when we’re underfed and underwater..).

Lest you dismiss Macron’s offer to the scientific community as simply a (richly-deserved) middle-finger gesture to Trump, Science Magazine informs us that Macron’s invitation has already borne fruit:

French President Emmanuel Macron’s effort to lure disgruntled foreign climate scientists to France—especially from the United States—has produced its first harvest. France today announced that Macron’s Make Our Planet Great Again initiative has recruited its first class of 18 scientists. Of the new recruits, 13, including a few French nationals, now work in the United States, whereas others are based in Canada, India, and elsewhere in Europe.

It’s hard to disagree with the reaction of the liberal website Daily Kos:

Macron is appealing to shunned U.S. scientists with a simple message: Come do your work in France and we will give you grant money and respect you. What France gets out of the deal is a front-row seat for all of the environmental, energy, and other technical innovation that those scientists will now be producing in their new laboratories. Being on the forefront of new technology has been one of the surest ways to ensure your own workforce is highly skilled and earns high wages. You know, that thing that the United States was once famous for.

You have to wonder just how Donald Trump justifies his daily presidential existence when, at this point, even allies like France are openly mocking him. Donald said he’d be staffing our government with “the best people.” It turns out we got people like Kellyanne Conway while our “best people” take job offers in countries willing to respect their work.

Of course, Donald Trump doesn’t see any reason to “justify” his Presidential existence. He wouldn’t even understand the question.

America has elected an intellectually-challenged and severely mentally ill Chief Executive (casting serious doubt on the mental/intellectual capacities of American voters, but that’s a subject for a different day). Other countries–not just France, which will at least continue to be our ally during this depressing interlude– but China and of course Russia will take advantage of our diminished capacities and our dramatically declining global status.

But hey– Trump voters are happy. They got rid of that black President, brown people aren’t coming here anymore (even as tourists!), and as a bonus, they’re offloading those fancy-shmantsy elitists who do “science” and “facts.”

Happy (White Christian) days are here again….

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Connect The Dots!

It’s not just easy access to guns–although that access certainly facilitates rising American homicide rates.

As the Guardian recently reports, there is a strong–if surprising– connection between income inequality, respect, and increases in violence.

A 17-year-old boy shoots a 15-year-old stranger to death, apparently believing that the victim had given him a dirty look. A Chicago man stabs his stepfather in a fight over whether his entry into his parents’ house without knocking was disrespectful. A San Francisco UPS employee guns down three of his co-workers, then turns his weapon on himself, seemingly as a response to minor slights.

These killings may seem unrelated – but they are only a few recent examples of the kind of crime that demonstrates a surprising link between homicide and inequality.

The article cites emerging research that strongly suggests that inequality plays a pivotal role in escalating passions in encounters that might otherwise end with some profanity and fisticuffs–that it raises the stakes of fights for status among men.

The connection is so strong that, according to the World Bank, a simple measure of inequality predicts about half of the variance in murder rates between American states and between countries around the world. When inequality is high and strips large numbers of men of the usual markers of status – like a good job and the ability to support a family – matters of respect and disrespect loom disproportionately.

Inequality predicts homicide rates “better than any other variable”, says Martin Daly, professor emeritus of psychology and neuroscience at McMaster University in Ontario and author of Killing the Competition: Economic Inequality and Homicide.

Other studies show that rates of gun ownership rise when inequality does. Rising inequality also predicts the re-emergence of cultural traits like placing more emphasis on “honor.”

“About 60 [academic] papers show that a very common result of greater inequality is more violence, usually measured by homicide rates,” says Richard Wilkinson, author of The Spirit Level and co-founder of the Equality Trust.

Why would financial inequality lead to a renewed emphasis on status and respect? Researchers explain:

When someone bumps into someone on the dance floor, looks too long at someone else’s girlfriend or makes an insulting remark, it doesn’t threaten the self-respect of people who have other types of status the way it can when you feel this is your only source of value.

“If your social reputation in that milieu is all you’ve got, you’ve got to defend it,” says Daly. “Inequality makes these confrontations more fraught because there’s much more at stake when there are winners and losers and you can see that you are on track to be one of the losers.”

Social science is methodically enumerating the negative social consequences of extreme inequality. Most reasonably well-educated people recognize that inequality produces social instability–history teaches us that growing anger from those with nothing to lose leads to riots, even revolutions–but most of us are less familiar with other ancillary effects.

There is ample evidence that large gaps between the rich and poor retard economic growth, depress marriage rates, and raise crime and homicide rates. (Ignoring the 41 million Americans who live in abject poverty in order to gift your already obscenely wealthy donors with a tax cut also implicates that pesky little thing called morality.) Historical precedent suggests that these effects–left unaddressed– ultimately destroy societies.

None of that evidence, evidently, is persuasive to the Paul Ryans and Mitch McConnells of this world. Or perhaps they know and just don’t care. They are perfect examples of what Hannah Arendt called “the banality of evil.”

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Ryan: I Yam What I Yam

The GOP doesn’t even bother to pretend any more. The party is waging a class war in which the rich and connected are taking unremitting aim at the struggling, powerless and unconnected: children, the disabled and the working poor.

Excuse my language, but the only thing “trickling down” is piss.

On December 6th, The Hill reported on Paul Ryan’s next despicable but not unexpected goal:

House Speaker Paul Ryan (R-Wis.) on Wednesday said House Republicans will aim to cut spending on Medicare, Medicaid and welfare programs next year as a way to trim the federal deficit.

“We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said during an interview on Ross Kaminsky’s talk radio show.

Health-care entitlements such as Medicare and Medicaid “are the big drivers of debt,” Ryan said, “so we spend more time on the health-care entitlements, because that’s really where the problem lies, fiscally speaking.”

No, Mr. Ryan, the “problem” lies with snakes like you.

The ink isn’t even dry on the mammoth tax gift that Congressional Republicans have just jerry-rigged–a bill with one and only one goal: to reward their donors and patrons, and make rich people richer. To be fair, sticking it to the poor wasn’t a goal–it was just an outcome they were perfectly willing to accept. (That isn’t true of the provision that will cost 13 million Americans their health insurance coverage–that was deliberate. I remain amazed by the GOP’s intense hostility to the notion that poor people might get access to medical care. The possibility clearly offends them.)

Ryan is confident that he has gotten the President on board.

“I think the president is understanding choice and competition works everywhere, especially in Medicare,” Ryan said.

Leaving aside the fact that we have a “President” for whom the word “understanding” is never accurate, any economist can explain–to both Ryan and the President–why “choice and competition” do not work for Medicare, or Medicaid, or almost anywhere in health care. Hell–any halfway competent high school student who has taken elementary economics can explain it.

For reasons that escape me, Paul Ryan set his sights on entitlement programs from his first days in Congress. The mental midgets who form a majority of his GOP colleagues have been only too happy to parrot his insistence that Social Security and Medicare are the real impediments to Nirvana–not the greed of their corporate masters or their disdain for facts and evidence. They don’t just ignore the experience of all other Western democratic countries–they ignore American history, and more recent “experiments” like the recent disaster in Kansas.

Ryan also mentioned that he wants to work on changing the welfare system, and Republicans have in the past expressed a desire to add work requirements to programs such as food stamps.

Speaking on the Senate floor while debating the tax bill last week, Senate Finance Committee Chairman Orrin Hatch (R-Utah) said he had a “rough time wanting to spend billions and billions and trillions of dollars to help people who won’t help themselves, won’t lift a finger and expect the federal government to do everything.”

His comments were echoed by Ryan.

“We have a welfare system that’s trapping people in poverty and effectively paying people not to work,” Ryan said Wednesday. “We’ve got to work on that.”

These are the statements of delusional people–inhabitants of fact-free (not to mention compassion-free) bubbles. Most people on food stamps already work, and those who don’t, can’t. The only people we are spending “billions and billions” on who won’t help themselves (unless hiring expensive lobbyists qualifies as self-help) are the recipients of the enormous subsidies and tax giveaways to corporate bigwigs who are unwilling to compete on a level playing field in that market they piously extol.

American government is infested with a (barely) human variety of cockroach: blabberus giganteus Ryan.

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