Econ 101 (Why Marx was right and so very wrong, all at once)

The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalized the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation.”(Marx, Capital, Chapter 3

Marx is passe’, I know. Turning the reins of power over to uneducated workers led to a system of imprisonment that taught us all a lesson. So I don’t hold much respect for worker-controlled societies. As in Russia, uneducated workers soon give way to right wing militarists, always waiting in the wings.

There’s really no escape from rule from above – there is only the ability to offset some of the ill effects with progressive policies instituted by force of public will and through government – progressive taxation, universal health care and education, and breakup of monopolies, to name a few. In those societies where such policies have succeeded, people are happier, and even though it sticks in the craw of the right wing, their high rates of taxation have not diminished their individual liberties.

So I am not a Marxist in the sense that I think good governance comes from the uneducated masses. But I do believe in one of the prime precepts of Marx – that wealth is created by labor, that capital is derived from that wealth, and that labor and capital together create new wealth in exponential progression. But I am a Marxist in this sense – Marx very accurately described what we call “capitalism” – the absence of restraints on accumulation. He was just wont to come up with a viable alternative. His solution, communism, was a profound human tragedy on the scale of World War II, maybe even equaling the ill effects of European colonization.

But we have indeed come up with a viable alternative: let the marvelous engine do its thing, but regulate it. Tax the accumulators at high rates to prevent them from gaining too much power. (Accumulators invariably think that they are the producers of wealth, and want us to cede power to them on that premise. This is the essence of Rand.) Equalize some of the benefits by offering health care and education to everyone, to give everyone a firm footing on which to do their life’s work.

The end result, if the post below is any indication, is that we can have what Marx wanted – freedom from want. But to achieve our goals, we need to keep the accumulators (and the politicians and economists and philosophers in their service) at bay. In the U.S., we’re not doing a very good job. We are #23 on the list in the post below – not a bad showing, as we do have a social safety net here.

But our social safety net is under persevering attack, and has been since 1980. As a result, I would guess that our direction on that list is downward, and further that we once sat much higher on the list. Perhaps we were number one.

Spin away now, darlin’s

From The Road to the Horizon:

Adrian White, from the University of Leicester’s School of Psychology, analysed previously published data to create a global projection of subjective well-being: the first world map of happiness.

The research is based on the findings of over 100 different studies around the world, which questioned 80,000 people worldwide.

The top 10 “happiest” countries:

1. Denmark
2. Switzerland
3. Austria
4. Iceland
5. The Bahamas
6. Finland
7. Sweden
8. Bhutan
9. Brunei
10. Canada

Damn Canadians – even though they hate their health care system, they are generally happier than the U.S., which placed 23rd.

So what do these countries have in common?

1. Public health care systems. Their citizens don’t have to worry about getting sick or how to pay for it, and are therefore free to pursue their life’s work.
2. Public education systems that allow students to go as far as their intellects will take them. They don’t enter the work force saddled with huge debt.
3. Low military spending. Denmark’s may be typical – the purpose of their military is to preserve their “sovereignty”. And since they don’t have tentacles all over the globe messing in everyone else’s affairs, it’s unlikely anyone is going to attack them.
4. High taxes. Higher than we pay, for sure. But the deal is this -they don’t have to worry about medical or education costs, and have minimum wages laws that drive wages high enough that they can all make a good living on after-tax dollars.

This all flies in the face of right wing orthodoxy. The question is, what does one do when one’s world view is shown to be wrong?

1) Turn away, or
2) Spin it.

Lies, Damned Lies, and Bruce Bartlett

Gregg Smith links to a Forbes piece by Bruce Bartlett regarding the Social Security Trust Fund. Bartlett says (surprise!!!) that it is not real, and that we should ignore it.

Most Americans believe that the Social Security trust fund contains a pot of money that is sitting somewhere earning interest to pay their benefits when they retire. On paper this is true; somewhere in a Treasury Department ledger there are $2.4 trillion worth of assets labeled “Social Security trust fund.”

The problem is that by law 100% of these “assets” are invested in Treasury securities. Therefore, the trust fund does not have any actual resources with which to pay Social Security benefits. It’s as if you wrote an IOU to yourself; no matter how large the IOU is it doesn’t increase your net worth.

Sometime after 2015, given current trends, Social Security will no longer be funded in total by current taxes, and will have to draw on its surplus, or Trust Fund. I have been expecting that as we draw closer to that date we would begin to see the right wing and its think tanks begin to caterwaul about the Trust Fund. Bartlett’s piece is as dishonest a piece of sophistry as I have ever seen, and it is just the beginning. The man is a professional liar. Others will be stepping forward.

A little Trust Fund history: Ronald Reagan set out shortly after being elected to crush Social Security. What he found was an impenetrable wall of support for the program. So, he decided to “fix it” instead. What he did was probably intended as a large scam – he had just cut taxes for the wealthiest Americans, and in doing so had created monstrous deficits (for his time, anyway). The government needed to reduce these deficits over time, so Reagan signed into law the largest tax increase in human history. But the taxes he increased were only those of working people – in his day, those making $37,800 or less in wages or self-employment income.

To be fair, most of his tax increase was not set to go into effect until years later. But to this day, his tax increase has resulted in $2.3 trillion in revenue for the government raised mostly from lower and middle income working people. We call it the “Trust Fund”. (The government uses an accounting device invented by LBJ, the “Unified Federal Budget” to bury the Social Security surpluses in with all other government operations, using it to mask the size of the real deficit. The deficit is so large now that the masking is insignificant, but it was not always so.)

Many suspected at the time that Reagan and the right wing were not being honest – that they never really intended that such a fund would have legal standing. They thought that Reagan was merely completing his mission in office – to shift as much of the tax burden as possible away from the wealthy and onto working people. I suspect as much, and evidence that suspicions are correct will play out in the coming days, as economists and other thinkers on the right wing step forward to tell us that “Hey – that so-called Trust Fund? It’s not real!” Enter Bartlett.

So, OK – the Trust Fund is comprised of bonds that the government owes “to itself”. Are the assets then real? Yes, according to Alan Greenspan, who said in 2001 “The crucial question: Are they ultimate claims on real resources? And the answer is yes.” In truth, all debt within a society is money we owe to “ourselves” – one only need expand the deficient of who “we” are to include everybody. In fact, if we expand the definition of “we” to include all humanity, then the money we owe China is owed to “ourselves”. (Let’s repudiate it!)

But it’s not that simple, and here is where the right wing legerdemain comes in. Not all taxpayers pay into the Trust Fund. Not all income is subject to FICA taxes. It is only wages and self-employment income, and an onerous tax on Social Security beneficiaries (also Reagan’s doing). We who have built up the Trust Fund are a subset of the whole of the taxpaying public. The Trust Fund is a legal claim by a subset of taxpayers on the whole body of taxpayers. Workers who built up the Trust Fund will soon turn to all taxpayers – investors, corporations, new workers, and those who pay tariffs (if any tariffs are collected anymore), to repay that debt so that we can collect our benefits.

That was our agreement.

Bartlett dismisses the Trust Fund out of hand. No surprise there. He says that the only way to cover future Social Security deficits is by increasing the Social Security tax. That is, his class of taxpayers, owners of securities and other passive investments, should not have to repay any of the money that was borrowed from workers to cover the Reagan/Clinton/Bush deficits.

Social Security’s unfunded liability equals 1.3% of the gross domestic product. So if we were to fund its deficit with general revenues, income taxes would have to rise by 1.3% of GDP immediately and forever. With the personal income tax raising about 10% of GDP in coming years, according to the Congressional Budget Office, this means that every taxpayer would have to pay 13% more just to make sure that all Social Security benefits currently promised will be paid.

Got that? Bartlett dismisses out of hand the notion that the whole body of taxpayers, which includes the wealthiest people who are exempt from FICA taxation, are liable to repay the debt embodied in the Trust Fund. He’s repudiating it. His middle name might well be “Madoff”, as in “made off”. The very idea that “income taxes” – those taxes collected on all income, including from investors and corporations, would have to be raised to cover a legal obligation seems beyond the pale for him.

Fear mongers like to run out exponential numbers to scare people – they do this with Medicare, citing unfunded future liabilities that are so large that the whole of the economy will be consumed. What they fail to mention is that all of health care is in a crisis, and that the private sector too will not be able to sustain current growth rates in medical costs. Bartlett’s class likes to use these numbers to scare us into doing away with Medicare, even though it represents the most efficient sector of the health care universe. It’s politics – nothing more, part of the right wing agenda to do away with all social programs.

They are doing the same thing with Social Security, running the numbers out in perpetuity.

Economists generally believe that the appropriate way of calculating the program’s long-term cost is to do so in perpetuity, adjusted for the rate of interest, something called discounting or present value.

Social Security’s actuaries make such a calculation on page 64. It says that Social Security’s unfunded liability in perpetuity is $17.5 trillion (treating the trust fund as meaningless). The program would need that much money today in a real trust fund outside the government earning a true return to pay for all the benefits that have been promised over and above future Social Security taxes. In effect, the capital stock of the nation would have to be $17.5 trillion larger than it is right now.

In perpetuity, to borrow a phrase, we are all dead. Nothing is sustainable when exponential growth is applied – the curve always tilts sharply upward in twenty years. Truth is, that far out, nobody knows anything. All we can do is take care of the present and the near future. “Near future”, in Social Security terms, would be 2040 -2050. Even that is beyond reckoning – guesses get wild beyond even five years.

So as Social Security is structured, it is theoretically solvent to around 2040 or 2050. We’re OK. President Obama (that guy who campaigned for office anyway) wanted to extend the life of Social Security to theoretical perpetuity by extending the payroll tax to incomes above $250,000. He’s broken most of his other campaign pledges, so I assume he will break that one too. But if we need a fix, that would be it.

But that kind of fix would affect Bartlett and his class. What are the chances? It depends on who owns this country.

Anyway, I gave Gregg hell for being too quick to jump on the repudiation bandwagon. I stand by that. The message to right wingers is to “man up”. Honor your commitments.

A Feisty Exchange

MtPundit (Shackleford – who else?) put up a post on Megan McCain, calling her a “painfully stupid attention whore”. As usual, Shackleford turned it all on the left, over whom he looms as the great new intellectual in the sky, or Coobs reincarnate.

I am impressed by all the liberals that think she’s like, totally kewl ‘n stuff!! “I’m mean, ZOMG!1! If more Republicans were as rad as Meghan, I’d totally be a Republican…cuz, like, she totally hangs out with Perez Hilton!1! Quit bein’ so square GOP…be totally rad and hip and off the chain like Meghan!!″

Seriously…nobody sees anything wrong with the Left gushing over this little ignoramus?!? “No, no! If you do it this way, then there’s a waaaay better chance of winning!! Here, let us help you!!” Um…no? If the advice of liberals were taken to heart, then we’d all end up as liberals.

And worst of all…she likes shitty movies…

Who the hell thought Benjamin Button was a good movie? Such a waste of time! I should just assume if Judd Apatow didn’t direct it, its bad.



That is why I am already nominating “The Hangover” for best oscar, even if it hasn’t come out yet.

That is all.

I am “Tomatoguy” over there – and thought it appropriate to introduce to them an example of intense stupidity:

Let me give an example – in one of her speeches during the campaign, Sarah Palin made a haughty arrogant comment about public money being wasted on research involving fruit flies. She had no clue that the research being done would affect her own disabled child.

Now, that is merely ignorant, I grant you, but I’ll take it one step further – the information she needed to process what was being done with fruit flies is beyond her – a place she will never go because it will never occur to her. The world of science and Sarah Palin will never intersect.

And that is because in addition to being ignorant, she is stupid.

Now I leave it to each of you to try to begin to comprehend what you don’t know. I’ll wait.

The answer I got:

You’re off-topic…try to keep up.

PS: Benjamin Button was indeed, in my humble opinion, a terribly boring movie. Brad Pitt must have been preoccupied with the seemingly inescapable situation he got himself into with a psycho bitch and seven kids. Now the kids will suffer, and the paparazzi of the future have a fertile feeding ground.

Great Movie Lines

From AMC Filmsite: Here are some memorable film quotes. Can you recall the movie?

1. “Toga! Toga!”
2. “You’re gonna need a bigger boat.”
3. “Get your stinking paws off me, you damned dirty ape!”
4. “We rob banks.”
5. “Michael…we’re bigger than U.S. Steel.”
6. “Remember, you’re fighting for this woman’s honor, which is probably more than she ever did.”
7. “(Hey!) I’m walking here! I’m walking here!”
8. “Gentlemen. You can’t fight in here. This is the War Room!”
9. “Open the pod bay doors, (please) HAL.”
10. “If they move, kill ’em.”
11. “Tell me, how did you find America?” …- “Turn left at Greenland.”
12. “I’ll have what she’s having.”
13. “I feel the need…”– “…the need for speed!”
14. “A census taker once tried to test me. I ate his liver with some fava beans and a nice Chianti.”
15. “Mmmm-hmmm! This is a tasty burger!”
16. “Nobody puts Baby in a corner.”
17. “(Well), A boy’s best friend is his mother.”
18. “I have always depended on the kindness of strangers.”
19. “Get away from her, you bitch!”
20. “I love the smell of napalm in the morning…smells like…victory.”
21. “Now all you have to do is hold the chicken, bring me the toast, give me a check for the chicken salad sandwich, and you haven’t broken any rules.”… – “You want me to hold the chicken, huh?”…- “I want you to hold it between your knees.”
22. “You’ve got to ask yourself one question: ‘Do I feel lucky?’ Well, do ya, punk?”

Answers are below:
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1. Animal House
2. Jaws
3. Planet of the Apes
4. Bonnie and Clyde
5. The Godfather, Part II
6. Duck Soup
7. Midnight Cowboy
8. Dr. Strangelove
9. 2001: A Space Odyssey
10. The Wild Bunch
11. A Hard Day’s Night
12. When Harry Met Sally
13. Top Gun
14. The Silence of the Lambs
15. Pulp Fiction
16. Dirty Dancing
17. Psycho
18. A Streetcar Named Desire
19. Alien
20. Apocalypse Now
21. Five Easy Pieces
22. Dirty Harry

American Ingenuity

I have written here and elsewhere on the subject of torture that 1) it is widely misunderstood on the left; 2) it didn’t start eight years ago, 3) it is not done for for the purpose of gaining intelligence; and 4) what we stumbled upon at Abu Ghraib was classic U.S. use of techniques developed in the last half century. I’ve further said that torture is meant to break people down, and is in standard use in our many counter-insurgency campaigns. (Right now, those would be Afghanistan, Pakistan, Iraq and Colombia, and surely many other places.)

Iraq, an illegal invasion used to set up a permanent occupation, was a “shock and awe” campaign, but a counter-insurgency as well. Our leaders did not know to what extent there would be resistance – but once it became apparent that it was there and was widespread, they went to work on breaking its back. It’s a long and tedious process – rebels have to be broken, one by one. U.S. soldiers break down doors of homes in the middle of the night, terrifying the family, and take away fathers and young men to places like Abu Ghraib for the purpose of torturing them. (There are many Abu Ghraibs.) Once done, victims are released back into the population, but they are not the same. They are traumatized and no longer resistant to the new authority structure. (The message: Resistance is futile.)

Torture not only worked to break down individuals, but also sent a powerful message to others. In general, torture was an important facet of our terror campaign against Iraq.

People don’t believe me, of course. There’s a widespread notion in the population that the U.S. is both better and different than other countries. Consequently, what we find is the general impression that Abu Ghraib was isolated, not that terrible, and anyway is now behind us. Further, Democrats like to believe that it started with Bush and stopped with Obama.

Not so. Not so. Here’s an excerpt from a 2006 book by Alfred W. McCoy called A Question of Torture: CIA Interrogation from the Cold War to the War on Terror. I saw Mr. McCoy in a TV interview months ago, then promptly forgot his name as was never able to recover the lost memory. I stumbled upon him in other reading. This from the introduction:

From 1950 to 1962, the CIA became involved in torture through a massive mind control effort, with psychological warfare and secret research into human consciousness that reach a cost of a billion dollars annually – a veritable Manhattan Project of the mind. After experiments with hallucinogenic drugs, electric shock, and sensory deprivation the work then produced a new approach to torture that was psychological, not physical, perhaps best described as “no-touch torture”. The agency’s discovery was a counterintuitive breakthrough – indeed, the first real revolution in the cruel science of pain in more than three centuries. To test, and then propagate, its distinctive form of torture, the CIA operated covertly within its own society, penetrating and compromising key American institutions – universities, hospitals, U.S. Agency for International Development, and the armed forces. As the lead agency within the larger intelligence community, the CIA has long been able to draw upon both military and civil resources to amplify its reach and reduce its responsibility. Moreover, the agency’s attempts to conceal these programs from executive and legislative review have required manipulation of its own government through clandestine techniques, notably disinformation, and destruction of incriminating documents.

Still, if genius is discovery of the obvious, then CIA perfection of psychological torture was a major scientific turning point, albeit unheralded and unnoticed in the world beyond its secret safe houses. For more than two thousand years, interrogators had found that mere physical pain, no matter how extreme, often produced heightened resistance. By contrast, the CIA’s psychological paradigm fused two new methods, “sensory deprivation”, and “self-inflicted pain”, whose combination causes victims to feel responsible for their suffering and thus capitulate more readily to their torturers. Although seemingly benign, the term “sensory disorientation” means, in this CIA usage, something far more invasive. Through relentless probing into the essential nature of the human organism to reveal its physiological and psychological vulnerabilities, the CIA’s “sensory deprivation” has evolved into a total assault on all the senses and sensibilities – auditory, visual, tactile, temporal, temperature, survival, sexual and cultural. Refined through years of practice, the method relies on simple, even banal procedures – isolation, standing, heat and cold, light and dark, noise and silence – for a systematic assault on all the human senses. The fusion of these two techniques, sensory disorientation and self-inflicted pain, creates a synergy of physical and psychological trauma whose sum is a hammer-blow to the fundamentals of personal identity.

The notorious photo of an Iraqi in a box, arms extended and wires to his hands, exposes this covert method. The hood is for sensory deprivation, and the arms are extended for self-inflicted pain. A week after the scandal broke, the U.S. prison chief in Iraq summarized this two-phased torture. “We ill no longer, in any circumstances, hood any of the detainees,” the general said. “We will no longer use stress positions in any of our interrogations.”

Although seemingly less brutal than physical methods, no-touch torture leaves deep psychological scars on both victims and interrogators. One British journalists who observed this method’s use in Northern Ireland called sensory deprivation “the worst form of torture” because it provokes more anxiety among the interogatees than traditional tortures, leaves no scars, and produces long lasting effects. Victims often need extensive treatment to recover from injury far more crippling than mere physical pain. Perpetrators can suffer a dangerous expansion of ego, leading to escalating cruelty and lasting emotional disorders. Though any ordinary man or woman can be trained to torture, every gulag has a few masters who take to the task with a sadistic flair – abhorred by their victims and valued by their superiors. Applied under the pressure of actual field operations after 1963, psychological torture soon gave way to unimaginable cruelties, physical and sexual, by individual perpetrators whose improvisations, plumbing the human capacity for brutality, are often horrifying.

I guess we can be proud of one thing – we did apply good ol’ American ingenuity to torture, and by god, made it better than ever before.

Is this anything?

America’s health insurers have come forth with a new proposal for saving money – it is being trumpeted as being worth $2 trillion. For some reason it made me think of an old Letterman Late Night bit where the curtain rises, and some oddball does an act, like twirling several hula hoops or creating sparks with a grinding wheel against parts of a metal costume.

Letterman and Paul Schaffer then have to decide whether it is “something”, or “nothing”.

This proposal seems to have been thrown together like a late night sandwich, probably in response to public pressure for either single payer or at least a public option in health care insurance. But President Obama jumped all over it – an anonymous spokesperson called it a “game changer”, and Obama himself a “watershed event”. That smacks of cheerleading for the industry. Why?

Timing is everything. There’s nothing in the package that could not have been done last year or twenty years ago. But health insurance companies are hugely profitable, and therefore have seen no need to rectify problems like soaring costs or millions of uninsured. As long as investors were getting a good return, there was no talk of change.

But right now there is pressure for change, and they are under intense scrutiny. What better time for a grand and meaningless gesture?

The cost savings would be welcome, but as with ever-elusive future projected shrinking federal budget deficits, are probably not going to materialize. The gesture is most likely just some good political gamesmanship, a way of keeping the insurance industry in the health care game. It also offers political cover for Democrats as they work with the health insurance industry to preserve … the health insurance industry.

Health insurance companies are the problem. We need to get rid of them. They know this. This grand gesture is, in the end, not a “game changer” so much as a “bacon saver”.

I vote that it’s “nothing”. What do you say, Paul Shaffer?

Hayduke Lives

Here’s a great interview with Doug Peacock. Mr. Peacock is a Vietnam veteran who suffered from PTSD. He has long been an environmental activist, and is credited for being, at least in part, the person who inspired the character George Washington Hayduke in Edward Abbey’s books The Monkey Wrench Gang and Hayduke Lives.

Part One, 4/23/09, here.
Part Two, 5/12/09 here.

Amy Goodman was in Bozeman and participated in a fundraiser for our new radio station, Gallatin Valley Community Radio (KGLT). I have been mildly involved in the formation of this station, though others have done far more to make it happen.