Saturday, January 30, 2016

Corporate Tax Dodgers Don't Bother Congress

Another US multinational corporation just turned itself into an Irish corporation.  It took this step primarily to avoid US taxes.  Ireland is one of several nations which offers low corporate tax rates to encourage MNC's to relocate.  Johnson Controls inversion to Ireland is particularly egregious.  It benefited from the bailout of the auto industry and from the state of Michigan which helped it out during the automobile crisis.  Don't bother to ask your Republican congressman to do something about corporate inversions.  They will respond by criticizing corporate tax policy. Those policies may need some changes but they have done nothing about it.  They prefer to complain about high taxes.

Since Congress will do nothing to stop corporate inversions, its up to US citizens to take actions.  This article contains many suggestions that citizen groups and government agencies might use to make corporate inversions more painful for US MNC's. 

Friday, January 29, 2016

What Can President's Do Without Congress?

Democrats had a majority in the House and in the Senate during the first four years of the Obama presidency.  Republicans in the Senate used the filibuster effectively to block many of the administration's initiatives.  Republicans have had a majority in both branches of Congress during his second administration.  This put the Obama Administration in the position of limiting legislative initiatives by a right wing congressional majority.  There was little opportunity for the president to pass any legislation.  This raises a question about presidential authority.  That is, what can a president do to counter congressional opposition.  Elizabeth Warren offers her view on that question.

Warren's answer is simple.  The president has the authority to place strong leaders at the head of the government institutions that he controls.  In many cases he put weak leaders in charge of important institutions such as Justice and the SEC.  Warren argues that this enabled many corporate leaders to to break laws and escape effective punishment.  Corporate fines were imposed on organizations as penalties for criminal charges.  In some cases weak laws were partially responsible, but weak leadership at the top was clearly evident.  However, there were examples of government agencies with strong leaders who were able to do their jobs effectively.  The president has the important power of appointing effective leaders to key administrative positions.  That power should not be underestimated.

The 2016 election will be especially important because a Republican president will have a supportive Congress and an opportunity to appoint dangerous individuals to important positions in government.  Some argue that a Democratic president not be able to accomplish much with strong opposition from Congress.  We need a Democratic president to counter the Republican Congress but we also need a president who appoint strong leaders to key positions in government.

Wednesday, January 27, 2016

Battle Between Fox News And Donald Trump Is Bad News For GOP

Donald Trump decided not to participate in the next GOP debate that it will host.  Trump declared that the Fox host for the event is biased against him.  Fox defended its host and the debate will proceed without its star performer who "fired Fox".  This creates a much bigger problem than it would appear on the surface.  Fox News is the major source of information for "conservatives".  It has positioned itself against the so called mainstream media, which according to Fox, has a liberal bias.  Trump claims that Fox and the MSM are biased against him and his fans believe him.  That is damaging to Fox's market positioning as the source of unbiased news for conservatives.  Moreover, it will create real problems for Fox and the GOP if Trump wins the GOP nomination.  It will be hard for Fox to follow its normal procedure which is to support the GOP candidate and criticize the Democratic nominee in the general election.  If it takes a more neutral position in the general election many of its followers will regard it as part of the MSM.  The GOP will have also lost its primary source of propaganda.

Tuesday, January 26, 2016

What's Responsible For The Corporate Savings Glut?

Many of our largest corporations are sitting on huge piles of cash.  This article provides several explanations for the changes in corporate financial policy.  They used to borrow large sums from financial intermediators to finance investment.  Today they are able to finance investments with their own cash but they are not doing so. You can choose among the explanations, some are related, but none of them are positive.  The implication is that corporations don't see opportunities for investing their cash in the future.  Many are simply buying or merging with other large corporations.

The Rise And Fall Of American Growth

Paul Krugman reviews a book by Robert Gordon which argues against the techno optimist assumption that our best days are ahead of us.  Gordon uses the period from 1870 to 1940 as a benchmark for progress.  It is a stiff benchmark to surpass.  During that period we made real progress in how we lived and how we worked.  The typical household became equipped with electricity,  inside toilets and access to water without a well.  The automobile replaced the horse and carriage and modern travel had arrived.  The workplace also required less toil and effort to produce an income that made those innovations more broadly available.

Gordon realizes that the Internet and social media have been beneficial to many people but he argues that that the information technology revolution has already happened.  The techno optimists don't have a whole lot more to offer us.  The IT revolution is history and there are serious headwinds that will affect our future.  Inequality will continue to rise and we have reached a plateau in educational attainment.  That along with slow population growth leads Gordon to conclude that we have entered a period of slower economic growth and less real change in how we live and how we work.

Gordon did not have much to say about government but we are in deep trouble if our politics continues in its current direction.  A recent poll shows that Donald Trump has a good chance to become the GOP candidate, and that he is more electable than any Democrat.  David Brooks believes that this could be the end of the Republican Party.  His conservative mentor, William Buckley had a similar concern about right wing populism many years ago.  He was worried about the impact of the John Birch Society in the Republican Party.  The sons of one of the Birch Society founders has succeeded in organizing the Tea Party to do what the John Birch Society failed to accomplish. Its influence is strongly apparent in the GOP primary campaign, and in the takeover of state governments in many areas of the US.  Its hard predict what might happen to this movement if we are really in a period of slow economic growth and stagnant household income growth for most Americans.

Government Failure In Flint Michigan And Poison Water

The mayor of Flint Michigan has declared an emergency to deal with the contaminated drinking water that it is using.  This article explains how the residents of Flint were forced to drink bad water.  It was caused by a Governor who decided that governments should be operated as a business.  He came into politics after a career as the CEO of a personal computer firm that no longer exists.  Flint, like many cities in the Detroit area, got into financial trouble after the collapse of the auto industry.  The governor had the authority to take over the government of Flint during its financial crisis.  He sent one of his lieutenants to Flint to rearrange its finances.  Flint was buying water from Detroit and he decided that costs could be cut by using water from the Flint River.  The elected government of Flint had no power to alter that decision.  The EPA tested the water and declared that it was unsafe.  The governor rejected the EPA's analysis and continued to provide bad water to Flint's residents.  The EPA failed to use its authority to counter the governors decision.  The regional manager has been forced to resign.  Flint provides us with a terrible example of government failure and an example of market failure by a government operated like a business.  The residents of Flint are suffering from the consequences of operating government like a business and an EPA that backed away from a powerful governor.

Monday, January 25, 2016

Donald Trump As The Anti-Obama

All of the GOP candidates are appealing to the anti-Obama sentiment in their base.  They don't like his policies and each of the candidates offers an alternative to one or more of his policies.  They offer "conservative" alternatives to Obama's liberalism.  Donald Trump does not contrast his policies, which are seldom discussed, to Obama's policies.  He offers the GOP an anti-Obama personality.  Obama's campaign slogan was "Yes we can".  Trump is selling his base a totally different persona.  His message is "Yes I can".  In other words, he is the personal savior for his supporters.  They are less interested in policy.  They seem to want a new style of leadership. 

Saturday, January 23, 2016

How Falling Commodity Prices Affects Commodity Exporting Economies Like Russia And Canada

Slow growth in Europe and China has reduced demand for natural resources.  Oil exporting nations have been particularly hard hit.  The supply of oil has increased as demand for oil has fallen.  That has the predictable result of lowering the price of oil.  The Russian economy is heavily dependent upon energy exports.  The government derives around half of its revenue from the export of oil and gas.  Falling prices mean less government revenue, which affects citizens dependent on government salaries and subsidies.  Falling exports has also reduced the value of the ruble.  That increases the real cost of imports.  Consequently,  the Russian economy is suffering from high inflation during a period of high unemployment and falling wages.  Ordinarily, nations in recession experience price deflation.

The Canadian economy is also dependent upon the export of commodities like oil.  Falling oil prices have had a similar effect on its economy.  Revenue from commodity exports has declined and the relative value of the Canadian currency is around 40% lower than the US dollar than it was when oil and other resources were in greater demand and fetched higher prices.  That has increased the price of imports, like fresh vegetables, but it has also made some of Canada's exports more price competitive.  Unlike Russia, whose economy has also hit by sanctions, the decline in the value of the Canadian dollar has boosted demand for travel in Canada and increased demand for many of its exports.  The Canadian economy is in much better shape than the Russian economy.

Friday, January 22, 2016

New York City Real Estate Looks Like London Real Estate

London is full of luxury apartments that are seldom occupied.  One third of the luxury apartments in Manhattan are also seldom occupied.  Miami real estate is also similar.  Luxury real estate in these markets has become a place to park money discretely and with little concern about a fall in value.  The sale of existing real estate does little for the economy.  In fact, its bad for the economy because if the money were owned by less wealthy individuals it would be spent on goods and services that grow the economy. 

Republcan National Committee Changes GOP Debate

The National Review was founded by the leader of the conservative revolution against the liberalism that characterized the anti-war movement in the late 1960's.  It spawned the Young Americans for Freedom organization, which attracted students like David Brooks, who has been a spokesperson for the conservatism of its founder William F. Buckley.  The National Review was scheduled to host a GOP primary debate until it published an entire issue of its magazine that was critical of Donald Trump.  The Republican National Committee decided that it would be inappropriate to have the National Review host the debate.  The new Republican Party is not the Buckley or Brooks party.

The GOP primary campaign reflects the changes that have been underway in the GOP for some time.  The emergence of Donald Trump and Ted Cruz during the campaign reflect the changes in the GOP electorate.  The RNC has been put in tough position.  Donald Trump or Ted Cruz may win the nomination.  Neither of them are favorites within the GOP leadership but the RNC must support the candidate who is nominated by the Party.  Ted Cruz represents the Tea Party movement within the Party and he is not liked by most of his colleagues in the GOP Senate.  Some leading Republicans believe that he could not win a general election.  Many believe that Donald Trump, could win a general election. 

Wednesday, January 20, 2016

Donald Trump And Christ's Sermon On The Mount

Donald Trump gave a speech at Liberty University which provides an education suitable for evangelical Christians.  Dana Milbank contrasts the thrust of Trump's speech with the comments made by Christ in his famous Sermon On The Mount.  Trump put his ignorance of Christian gospel on full display, and his sermon was remarkably different from the messages that helped to define the Christian gospel.  In a sense, Trump is the Anti Christ that many evangelicals worry about.  That probably will not bother many at Liberty University.  The marriage between the Republican Party and evangelicals has dramatically increased the power and importance of a formerly fringe segment of the Christian community.  They have become mutually dependent upon each other.  Christian fundamentalism aligns well with Republican economic fundamentalism.

Where Is The GOP Silent Majority?

David Brooks hopes that the real Republican Majority will reject Ted Cruz and Donald Trump.  The silent majority will come to their senses and nominate a more thoughtful conservative.  Paul Krugman looks and the numbers and argues that the majority of Republican primary voters support Cruz, Trump and Carson.  Neither of them belong to the Republican Party that David Brooks longs for.  Brooks' silent majority is a minority within the Republican Party.  The people have spoken and they want a right wing populist to be our next president.

Curiously, the "silent majority" term was coined by Richard Nixon in his election campaign.  He decided to enlist the populists from the Democratic Party to pursue his Southern Strategy.  He helped to turn the solid south which always voted for Democrats into red states.  They have become the center of the GOP majority.  The conversion was based mainly on the social wedge issues that now define the GOP electorate.  The GOP establishment provides the campaign funds needed to win elections but they have lost control over its electoral base.  They have been organized into a powerful group by a narrow segment of the GOP elite which is headed by far right extremists like the Koch  brothers. 

Sarah Palin Endorses Donald Trump

Donald Trump secured his first endorsement from a prominent Republican.  Sarah Palin told her supporters that The Donald was the leader that the US needed to make America strong again.  This will help Trump in Iowa because Palin has a lot of influence over Tea Partiers who Ted Cruz has been relying upon.  If Trump wins the nomination, and becomes our next president Palin, will be well rewarded.  Its unlikely, however, that many other prominent Republicans will jump on the Trump bandwagon unless his domination becomes more certain.

The Republican Orthodoxy Is Defined

This article neatly defines what it means to be a Republican.  It also describes some of the methods by which the orthodoxy is enforced.  Curiously, the orthodoxy is not defined and enforced exclusively by politicians.  It is done by lobbyists like the National Rifle Association, and by "intellectuals" who work for conservative media and "think tanks".  For example, Republicans are so intimidated by the gun lobbies that they voted against a bill that would have prevented the sale of guns to individuals on the FBI's watch list.  The orthodoxy list is not complete, but it can be neatly divided into social values, which dominate the list, and policy issues on such things as global warming and tax policy.  All Republicans oppose progressive taxes, and many favor reducing taxes in order to shrink government.  They see no contradiction between cutting taxes and reducing budget deficits.  They have also made significant cuts to the IRS budget.  Reductions in the IRS budget have prevented it from enforcing compliance to existing tax laws.  Tax evasion has cost the government more that it saved by cutting the IRS budget.

Of course there are some orthodoxies that define the Democratic Party.  Most of them are more publically spirited than those in the GOP.  Moreover, they are less consistently adhered to by Democrats.  As someone once said "Herding Democrats is like herding cats." However, both political parties have to fund their election campaigns.  As campaigns become more costly, they are even more dependent upon wealthy contributors.  Working class Americans have not been well served by either party.  The GOP has used social values as wedge issue to recruit white working class voters as they promote policies which are economically harmful.  Robert Reich claims that Democrats cling to the belief that they will continue to be supported by upper middle class professionals who are swing voters in most elections.

Tuesday, January 19, 2016

Donald Trump Would Not Do Well In The UK

The UK Parliament does not like Donald Trump.  They exhausted about all of the negative words that they could imagine during a discussion about banning him from the UK.  I don't think that the video would play well in Iowa or South Carolina.  Ted Cruz may find it a good source quotes in his campaign.

Is Universal Healthcare Possible In US?

We have been consumed by the nonsense spouted by the GOP primary candidates.  There is a real debate in the Democratic primary between Clinton and Sanders.  Paul Krugman came down on the side of Clinton who claims that universal healthcare is not politically possible.  He would prefer the type of universal healthcare that Sanders supports but he explains that the opposition to such a plan is too formidable to overcome.  The entire healthcare industry, which is many times more expensive than any other healthcare industry in world, would fight tooth and nail against a system that would lower prices.  Moreover, we would have to say no to some treatments in which the benefits are much lower than the cost.

Dean Baker argues that Krugman is correct.  The political opposition would be formidable.  He thinks that we should encourage the debate and not be consumed by the art of the political possible.  We pay a high price for patent protections which enable monopoly pricing;  there are less expensive ways to pay for the R&D that is needed to provide innovative products. 

David Brooks Makes A Plea To Save The Republican Party

David Brooks was comfortable being the spokesperson for the Republican Party that he grew up with.  He can't really do that job anymore.  He is very upset by what he is hearing from the candidates that are on the verge of becoming the Party's nominee for the presidency.  He does not believe that either of them could build a coalition that would enable them to run the country, or establish cooperative relationships with our allies.  He argues that they are more like authoritarian foreign conservatives than the more democratic conservatives that seem to have disappeared from his party.  Moreover, he does not believe that either of them could win a general election.  The Republican Party loses whether they win or lose the election.

He offers two ideas for saving the Party.  Tactically, the real Republicans have to get behind one of the other candidates (he likes Rubio).  More strategically, the Party has to offer solutions for many of the real concerns that Trump and Cruz have been taping in the electorate.  He has been a proponent of a reformed conservatism that would go beyond cutting taxes for the rich.  He believes that there is a "silent majority" of Republicans who would respond to a more moderate conservatism that offers real solutions to many of our social and economic problems.  The Tea Party Republicans are only 17% of the Party's base.

David Brooks does not like what he sees in his Party and neither do most Americans.  The question is whether Trump and Cruz are an anomaly or representative of what the Party has become.  All of the current candidates (except Trump) have had to audition for their candidacy.  They had to convince the wealthy supporters of the party that they will support the policies from which they benefit. They all took that pledge in order to join the race. They also have to convince their supporters that they have a good chance to win the nomination and the general election.  They will jump ship during the nomination process and move their support to the candidate who has the best chance of winning.  They have no personal loyalty to any of the candidates.  The Republican Party has placed individuals on the Supreme Court who have made it possible for the wealthy elite to determine the candidates that run for political office.  David Brooks was not uncomfortable with the Republican Party that has consistently served the interests of the economic elite, and have undermined our democratic system.  The good old Republican Party in which Brooks believes is a figment of his imagination.

Sunday, January 17, 2016

Why Is There No Republcian Plan To Replace Obamacare?

Paul Krugman provides the simple answer to the above question.  There is no conservative alternative to the Affordable Care Act.  Krugman, like many of us, would have preferred a single payer system like that in Canada.  That was not politically possible even when Democrats controlled the House and the Senate.  The ACA was modeled after the plan developed by the conservative Heritage Foundation.  The basic idea was to increase  competition between private insurance providers.  That was a market friendly approach that kept the insurance companies from fighting against the plan.  However, the plan would only work if certain conditions were imposed.  Subsidies had to be provided to those with low incomes, and mandates were required so that healthy individuals would keep the available pool of applicants from being dominated by those with preexisting health issues.  The Republican Governor of Massachusetts passed a similar plan in his state with help from the Heritage Foundation.  There was no opposition from the Republican Party to Romney's plan.

The Affordable Care Act was a different story.  The basic problem is that it was an Obama plan.  The GOP was doing everything that it could to delegitimize President Obama.  Attacking the ACA was just part of that strategy.  The other problem is that it was a federal government plan.  Extending health insurance to needy families, many of whom were minorities, was an easy target in red states.  Obama hatred in red states is rampant; the ACA has been a favorite whipping boy for red state politicians.  Consequently, GOP politicians continue to appease their base by proposing bills to repeal the ACA.  They have done so even though they know that it cannot be done without damaging millions of families who have taken advantage of the ACA.  Their problem is that there is no workable alternative to the ACA that does not provide subsidies to low income families and use mandates to make the insurable pool satisfactory for insurance companies.  They are left with the problem of attacking a plan for which they do not have an alternative.  Their only solution would be no plan at all.

Scott Walker Turns Wisconsin Into A Koch Brothers' Paradise

The Koch brothers have been leading a movement to implement laws at the state level that they would like to see at the national level.  Wisconsin's Governor, with the help of a Republican legislature, has followed the blueprint of the ALEC program in Wisconsin.  This editorial describes the steps that he has taken to establish Wisconsin as an "employee at will" state.  He has also eviscerated Wisconsin's progressive civil service laws which were designed to protect government administrators from partisan politicians.  Wisconsin, which was once a model for progressive state government, now looks like Arizona, and other conservative states, which had an easier time following the ALEC model.  A government run by partisan ideologues, with total political control, may be where we are headed.  Democracy is the enemy that ALEC is attacking. We will continue to have elections but they will become meaningless as unlimited corporate funding of political campaigns becomes the rule.

Saturday, January 16, 2016

Why Is Inequality Rising And What Can Be Done About It?

The problem of rising inequality has received a lot attention.  Even right wing populists are concerned about inequality.  They blame it on establishment politicians in the Republican Party who are not really conservative enough.  Many believe that they can elect true conservatives who will not compromise with Democrats whose progressive policies are ruining the economy. Robert Kuttner reviews a book by Tony Atkinson which offers an explanation for rising inequality and some solutions for the problem.  The good news is that many economists are reconsidering the common explanations for rising inequality and they are proposing solutions that address the real causes of rising inequality.  The bad news is that many of the solutions are constrained by a determination of what is politically possible.  Even modest solutions are unrealistic given the current state of politics.

Standard economic theory assumes a competitive labor market rewards those with the required skills in accordance with their contribution, and it penalizes those who lack the skills that are demanded by the market.  The solutions that follow from that analysis suggest that educational reforms that provide the skills demanded by the market will fix the inequality problem.  That analysis is being rejected by a growing number of economists.  Competitive forces in the labor market are not responsible for rising inequality.  Political power has shifted, and those with political power have placed their fingers on the scale to rebalance it in their favor.  The benefits from oligopoly are going to top executives, who determine their own compensation, and to shareholders and investment managers.  Government is necessarily a party to this process.  Every economy is composed of market participants and government official who set the rules.  There has been a powerful shift in the rules of the game which has altered the distribution of income. 

Kuttner does a nice job of reviewing four of the the common conservative explanations for rising inequality.  He also considers a bipartisan proposal for reducing poverty that was hosted by the Brookings Institute.  Many believe that we could solve our economic problems if conservatives and liberals could reach compromises which used to be more common in our politics.  The Brookings compromise would have no chance of passage even if we elected a Democratic president and reached a Democratic majority in the Senate.  The political center has shifted so far to the right that compromises between the center left and center right cannot address the real issues.  It took several decades to shift the center so far to the right; it will take a long time, and a lot of planning to accomplish what conservative forces were able to achieve.  Perhaps we have arrived at new beginning to the process.  Kuttner's analysis provides a good starting point.

Friday, January 15, 2016

Why Is Warren Buffet Buying An Oil Stock As Shares Plummet In Value?

Warren Buffet is regarded as a great investor.  One of his investment ideas is that investors should buy when assets are on sale.  This is different from the behavior of many investors who buy when assets are expensive, and sell when they fall in price.  That is a certain way to lose money.  Oil industry stocks have been hard hit by falling oil prices.  Buffet has been doubling down on his large investment in Philips and taking advantage of fire sale prices.  He takes a longer term view in which oil prices will rise along with the value of Phillips stock.  In the meantime, he will collect nice dividend checks that he can use to buy other underpriced assets.  This is a good time for bargain hunters like Buffet. 

Two Ways Of Reporting On The Last GOP Debate

One of the editorial writers for the Washington Post explained why he was not happy with much of the debate.  The contenders for the GOP nomination spent some of the time attacking each other.  They spent the rest of the time competing with each other for the honor of telling the best horror story about the failures of the Obama Administration, and how it has weakened our country.  If Hillary Clinton is elected the destruction will be complete.  Its hard to determine who won the debate over the ruination of our great nation that has been doing quite well in a weak global economy and in response to a civil war in the Mid-East. 

Jennifer Rubin, one of the conservative writers for the Washington Post,  provided a more traditional description of the prize fight.  She acted as a referee and awarded points and demerits to each of the brawlers in the debate.  Some of them landed good blows and others didn't belong in the contest. She concluded by awarding her decision to Marco Rubio.  It was an entertaining battle but Rubio, who has been her favorite for some time, was awarded the victory.  Unfortunately, one of the contenders may become our president and will have to lead our government in difficult times.  Winning the prize fight is not a good audition for that job.

How The Social Media Spread Misinformation And Increase Social Polarization

Political polarization has become common place in the US and it much of the world.  This article describes what happened to a Washington Post columnist when he was trolled in the social media.  It is not pretty.  The social media have increased the potential for misinformation to be widely dispersed within polarized groups.  They become more polarized as a result.  The social media are also used to radicalize individuals who may become violent.  We have all benefited from the use of the social media which enable us to stay in contact with our friends and to share information.  We have few means by which we can limit the misuse of the social media by angry and dangerous groups. 

Obama Administration Proposes $4 Billion Investment In Driverless Cars

Car makers and technology firms expect driverless cars to be on the road in ten years.  That would not be possible without government regulations and investment in technologies that are required on our roadways.  It will be interesting to see whether the GOP House will pass a budget that includes this investment.  The automakers are enthusiastic about the government partnership.  Republicans will be less enthusiastic about government's role in developing the cars of the future.  BMW has already developed a car that conforms to federal regulations.  Republicans may be willing to cede this market to foreign producers, or delay progress in this direction, in order to maintain its anti-government and anti-Obama posture.

Should We Elect Budget Busters To Reduce Budget Deficits?

The federal budget deficit tripled under Ronald Reagan; it doubled under George Bush; it would also increase substantially if any of the GOP candidates were elected and persuaded the GOP congress to pass the budgets that they have proposed.  This article, written by a Republican who served on House and Senate budget committees, tells the real story about GOP budget policy.  Republicans are committed to cutting taxes, primarily for those who fund their campaigns.  They have never cut federal spending enough to compensate for the loss of tax revenue.  Large budget deficits are the only result from this formula.

The real mystery is how Republicans get away with accusing Democrats of fiscal irresponsibility and portraying themselves as proponents of a balanced budget.  The answer is simple. They understand that most voters don't understand fiscal policy.  They realize that a business cannot reduce its revenue and remain solvent without cutting spending, but many believe that government can cut taxes without creating budget deficits.  Republicans tell them they will cut spending but they never follow through on the promise.  Some also believe that tax cuts will stimulate enough economic growth to pay for the tax cuts.  They also believe in the tooth fairy.  Republican promises to balance the federal budget depend upon voter ignorance and misinformation that is part of their regular diet.  

Thursday, January 14, 2016

Paul Ryan Gives The Fed Credit For US Economic Growth

Paul Ryan has a tough job.  The Tea Party crowd in the House hates the Fed, but Ryan can't give Obama credit for the economic growth that occurred during his administration.  Ryan was forced to give a press conference in which he gave the Fed credit for US economic growth.  He will now have to explain to House tea lovers why he has fallen in love with the Fed.  He has spent much of his time in office predicting that Fed policies would create hyperinflation and debase the dollar.  The tea drinkers in the House are still waiting for Ryan's divine prophesies to come true.  They are certain that there will be a "second coming".

George Will Exposes Marco Rubio

David Brooks told us why Ted Cruz was not a good conservative.  George Will, who is the Washington Post's chief conservative mouthpiece, tells his audience that Marco Rubio is not a true conservative.  He enumerates his sins in this article.  Most of his sins were due to his support for Obama Administration policies.  The GOP is running out of true conservative candidates.  Neither Brooks or Will would support Donald Trump.  Who is left at the bottom of the pile of dung that is running for government office in order to shut down funding for everything but Defense?  This problem may have inspired the Washington Post to attack Brooks for destroying one of its leading populist candidates.  All of its candidates are tarnishing the GOP brand by pretending that they have the same values as the populists who they need to win elections.

How Wall Street Helped Ted Cruz To Campaign Against Wall Street

Ted Cruz won the GOP primary that allowed him to run for a Senate seat that he eventually won.  His campaign failed to report large loans that he received from Wall Street banks to finance his campaign.  There was a good reason for the campaign to violate election campaign disclosure laws.  He ran as a Tea Party firebrand who opposed the bailout of the Wall Street banks.  He and his wife, who was a Goldman Sachs executive in Houston, borrowed large sums against their Goldman Sachs investment account to finance ads that helped him to win the nomination.  The campaign also received a large loan from CitiBank which it failed to disclose.  If that information were disclosed it would have made it difficult for Cruz to brand himself as a right wing populist who intended to punish the Wall Street banks for their sins. 

Campaign disclosure laws are intended to provide information to voters that will help them to make informed decisions when they vote.  Politicians like Cruz ignore those laws when they interfere with their branding efforts.  They believe that selling the brand to poorly informed voters is more important than conformance to laws which interfere with effective branding. 

Wednesday, January 13, 2016

How The Right Has Captured State Governments In US

This article describes the programs adopted by the right to gain control of state governments.  The focus on the right is "economic freedom".  This enlists support from extraction industries which benefit from deregulation.  They also take a communitarian approach by focusing on local community organizations like the Elks, veteran groups and religious organizations.  Their approach contrasts with the focus on "personal freedom" by progressive groups.  Their advocacy of sexual freedom and personal liberty has provided an opportunity for the right to use social values as wedge issues. This takes the focus off of economic issues which have historically benefited Democrats. 

Tuesday, January 12, 2016

David Brooks Crucifies Ted Cruz

David Brooks is arguably the conservative spokesperson with the largest following among educated readers. His description of Ted Cruz's character is devastating. It is an opinion that is shared by many of his Republican colleagues in the Senate.  Unfortunately, he is the favorite to win the primary in Iowa and he has is only surpassed by Donald Trump in the national polls.  The majority of Republican primary voters approve of the messages that are being delivered by Cruz and Trump.  The political party that Brooks represents is the party of Cruz and Trump.  Marco Rubio, who is the best alternative to Cruz and Trump according to Brooks, is not that different from Cruz or Trump in the policies that he advocates.  All of the GOP primary candidates have moved closer to Cruz and Trump as the campaign has progressed.  They have learned what their base is looking for.  They are a sorry lot but that is what their Party has become

Monday, January 11, 2016

The Separation Of Morality From The Modern University And Its Social Impact

This article is about the transformation of philosophy from the pursuit of virtue as it was absorbed into the research university.  Philosophers gave up the pursuit of virtue in order to demonstrate how smart they had become as they imitated the natural scientists and social scientists who pursued objective knowledge.  This article provides a critique of modern philosophy but it is even more apparent in modern economics.  Milton Friedman declared that economics was an objective science and that it no moral purpose.  It did not matter how the output of the economy was distributed as long as it pursued efficiency.  Friedman also issued a commandment about the mission of the corporation.  Its purpose was to maximize profits and shareholder value.  The corporation has no moral purpose; it is only constrained by laws which it should play a major role in determining.  It is not surprising that corporate incentive systems have evolved so that corporate executives and shareholders have a common interest.  It is also not surprising that executives, who are rewarded for short term performance,  would take risks that might be harmful to society and to longer term shareholders.  Few of the executives who contributed to the financial crisis faced criminal prosecution.  The executives at Volkswagen took risks that rewarded them in the short term, but they do not face criminal prosecution for violating laws that were designed to protect society.  The long term survival of Volkswagen has also been put at risk. 

European Union Declares Belgian Tax Breaks To Multinational Corporations Illegal

Belgian gave tax breaks to around 50 MNC's which have been declared illegal.  The government will be required to demand payment of uncollected taxes from the the MNC's.  The decision was based upon the concept of unfair competition.  Providing tax breaks to MNC's was unfair to domestic competitors who did not receive the tax breaks.  This could spread to other nations which provide similar tax breaks to MNC's.  For example, Ireland is a tax haven for MNC's which find ways to locate their profits in Ireland even though Ireland is not the source of their revenue.

Friday, January 8, 2016

The Battle Between Sunni and Shiite Muslims And US Policy In Mid-East

Like most Americans, I know little about the conflict between Sunni and Shiite Muslims.  I found this article informative.  It describes the conflict in the Mid-East as sectarian warfare and it does not offer much hope for US intervention in the civil wars that are underway in the Mid-East.

Should We Worry About China's Ecnomic Problems?

Paul Krugman offers his description of China's economic problems and discusses the implications for the global economy.  His first take is that China's slowdown is very important since it accounts for 25% of global manufacturing.  He confesses some ignorance because there are many doubts about the statistics available from China.  Moreover, China's has the second largest economy in the world but it is only a small share of the global economy.  His greater concern is that many nations will have difficulty using monetary policy and fiscal policy in a weak business cycle.  Monetary policy is close to its limits in the US and Europe since interest rate are already close to zero.  Politics prevent the use of fiscal policy in the US and Europe. Therefore, we will be stuck in a bad business cycle for longer than necessary.

My view is that Krugman's analysis of the global economy is colored strongly by his understanding of business cycle theory in a nation state.  Nations that export raw materials to China are in trouble and they will purchase less from the rest of the world.  Oil prices and the prices of other commodities have also fallen in response to weak global demand.  This has already created turmoil in the currency exchange markets. Its also hard to gauge the reaction of stock markets to the problems in China's market.  I worry much more about financial contagion than Krugman. 

Thursday, January 7, 2016

Why Do So Many Americans Oppose Efforts To Reduce Carbon Emissions?

The post below is critical of the claim that well informed individuals make rational decisions about the economic impact of climate change mitigation on their household budget.  Consequently, they vote against government proposals to reduce carbon emissions. In other words, democracy works.  This article describes the methods employed by energy companies  to misinform the "rational agents" who vote against government proposals to reduce carbon emissions.  It concludes that energy companies have corrupted the democratic process.  It also elevates the issue of climate change above and beyond the narrow economic interests of poorly informed voters.  It argues that we have a moral duty to prevent the certain harms to the only planet that we have.  We owe this to ourselves and to future generations. Of course, there is no room for morality in economics.  Economic efficiency is the only objective of economic analysis.

Our founders were concerned about the dependency of a democratic government on well informed citizens.  They recognized the importance of education and a well informed public. The opponents of democracy have been doing what they can to mobilize the political activity of the information poor segment of the population.  The GOP primary debates bear witness to their success.  It is also apparent in the US House of Representatives.  One would think that our representatives would be primarily concerned with the global trouble spots that are real national threats.  Unfortunately, they have been more interested in repealing Obamacare.  They approved a bill to repeal Obamacare with the full understanding that it would be vetoed by Obama.  They did so primarily to demonstrate their hatred for the president that their base has been taught to hate.  They also showed support for armed protesters who have occupied a government facility.  The protesters are demonstrating their hatred of government and we have elected representatives to Congress who share that hatred.  Of course, they realize that their efforts will be cheered by those who voted for them.  Fox News has been turning the armed occupiers into heroes.

Wednesday, January 6, 2016

A Rational Agent Explanation For Opposition To Climate Change Mitigation

Its not easy to pass legislation which will put a price on carbon emissions.  One source of opposition is the energy industry which is directly effected.  They have lobbied governments, and they have sponsored climate change denial "studies" which have misled the public.  This article offers another explanation for resistance to carbon pricing.  It assumes that each voter is a rational agent who calculates the costs of carbon pricing versus benefits which might never be received.  A simple economic analysis tells them to vote against carbon pricing.  Therefore, we should not blame the energy industry and its allies for resistance to carbon pricing.  "Economic Man" has made a rational decision and voted accordingly.  Consequently, according to a simple economic analysis, an optimum allocation of resources will occur.  Everyone will be better off if we give free reign to individuals so that they can maximize their self interest. 

There are many problems with this article.  The first problem is that businesses which oppose carbon pricing do much of the analysis for the rational agents assumed in this article.  They have misled the public by warning them of the costs and minimizing the benefits.  They will not allow Economic Man to make rational decisions without a lot of help from their propaganda.  Independent rational agents are a fiction.  Furthermore, we expect governments to use expert advice to make decisions which are in the best interest of society.  For example, the FDA does not permit the sale of a prescription drug without testing the effectiveness and safety of the drug.  Rational agents (consumers) spend billions on non-prescription drugs which do not require FDA approval.  Many of those drugs do not even contain the ingredients listed on the labels, and few of them provide the advertised benefits.

Tuesday, January 5, 2016

Is Saudi Arabia A Reliable Ally?

The recent terrorist attacks have inspired a lot of poorly informed comments from politicians who know little about the complex situation in the Mid-East.  This editorial in the NYT provides three different perspectives on Saudi Arabia.  Their interests do not always coincide with our national interest but we have learned to live with some of the differences.  Hopefully, the commentary in this editorial will be informative.

Monday, January 4, 2016

China Sneezes And Global Economy Reacts

The manufacturing index in China fell for the tenth consecutive month and its stock market contracted by 7% in response to a wave of selling.  Concerns about slowing growth in China spread to nations which depend upon exports to China.  Recent events in the Mid-East between Iran and Saudi Arabia also raised concerns about the oil supply and higher energy prices. 

What Did Obama Accomplish During His Presidency?

Politics is essentially about how the government is funded and what the government does with the money it collected.  President Obama's tax policies were very different from those proposed by his Republican opponents.  He raised taxes on the top 1% substantially.  They are back to where they were before Ronald Reagan and George Bush reduced the top rates.  He also passed the Affordable Care Act which has increased the number of insured citizens by 17 million.  Furthermore, one of the major reasons why Republican's oppose ACA is that it includes a substantial tax on the top 1%.

 Paul Krugman reminds us that elections have consequences.  If McCain or Romney had been elected they would have cut the top tax rates even further and they would not have spent money to increase the number of insured citizens.  All of the Republican candidates have proposed tax plans which would cut taxes for the super rich, who fund their campaigns,  and they would cut government spending on programs that provide benefits for the majority of Americans.  They argue that cutting taxes for the rich will encourage the "job creators" to grow the economy.  They falsely argued in their campaigns against Obama that his tax policies would shrink the economy and increase the unemployment rate.  The unemployment rate is now lower than Mitt Romney claimed that it would be if he were elected, and more jobs were created under Obama than were created under George Bush.

If most Americans understood the real differences between the two political parties the Republican Party would continue to lose national elections.  There is little discussion among the Republican presidential candidates about tax policy and spending priorities.  The early debates were mostly about social values and conservative ideology.  After the terrorist attacks in Paris and California they have turned to foreign policy.  All of the candidates tell us how tough they are but none of them have demonstrated an understanding of the real issues that we face; nor have they described responses that are more likely to make us safer than those that have been employed in the Mid-East and elsewhere.