In politics, things are seldom as they appear. That’s a given, since the profession is largely run by the advertising business. Every public appearance, every stump speech, and especially every TV advertisement is meant to have an effect, never openly stated. The key to understanding politics is to ignore everything that is said, and concentrate on actions.

Bill Clinton gave us NAFTA, an agreement designed to allow American corporations access to cheap labor and resources in Canada, but mostly Mexico. Underdeveloped countries need to protect their markets and native industries. Trade may be their friend, but free trade is their enemy. NAFTA was meant to bring our labor costs down, to displace American workers with Mexicans, to open up markets in which to dump American surpluses, and prevent countries that supply us with cheap labor and resources from developing. All the while protecting our vital assets – the markets we want to protect, generally falling under the heading “intellectual property”. That’s our seed and manufacturing patents, the formula for Coca Cola, and weapon system designs. The things we do best.

It’s a neat formula – we get theirs while protecting ours. We used to call it “imperialism”, but we’ve advanced beyond that.

NAFTA was controversial, and it is typical of American politics that both parties favored the treaty while the public was mostly opposed. An outsider, H. Ross Perot, upset the apple cart by opposing it, and built a large public following in the process. Perot kept George H.W. Bush from having a second term, and harmonized with American workers. He was clearly dangerous.

The parties dealt with Perot and others like him in the only way the knew – they took over the presidential debates from the League of Women Voters, and from 1996 forward, prohibited third parties from participating. Never again would an outsider be allowed to challenge the two-party system to the degree that Perot did. Never again would a third party be given that kind of visibility. He almost undid them. He scared them.

Free trade agreements are the staple of both parties. Bill Clinton gave us a little syrup to help us swallow NAFTA by negotiating meaningless environmental and labor side agreements. But NAFTA was meant to be be a hard-wired policy and a wave of the future. Other free trade agreements would follow, each controversial, each supported by both parties, opposed by the public and native populations in targeted countries. The trick would be in the implementation in the face of public opposition. Candidates would have to publicly oppose the agreements while privately supporting them.

Now comes Colombia. Hillary Clinton says she opposes the Colombia free trade agreement. Not likely. But we’ve had a “gaffe” (def: accidentally saying something true) – her trusted senior strategist, Mark Penn, is also working for the Colombian government in promoting the agreement. It’s created a stir. But in every press report I have read about the gaffe, such as this one over at Huffington Post, they refer to the treaty that Hillary Clinton opposes. They take her at face. It’s their job not to be suspicious, and they are good at their job.

Forget what they say, watch what they do. The Colombian Free Trade Agreement was obviously low on Clinton’s horizon, not something she much thought about except to know not to touch it for fear of getting shocked. The fact that Penn is there, that he is actively working for the treaty speaks, and we should listen. Most likely if she were elected, it would sail through, and because it would be early in her term, she could easily withstand the damage. Democrats love being in power, and as with Bill Clinton, will suffer any amount of humiliation to have a “D” behind the person in power.

Hillary Clinton is pro-free-trade, pro-NAFTA, pro-CAFTA, and pro Colombian Free Trade Agreement. I know she doesn’t say this, I know we are to take her at face when she brazenly lies to us, but I see what I see. It is what it is.

We’ve had a gaffe, they’re in damage control mode now, but the Colombian free trade agreement is safe and on track.

We had an interesting discussion below, three of us, and it devolved, as it usually does, into a discussion of the nature of wealth creation. In the end I defaulted to Abraham Lincoln, who famously said

I believe that labor is the source of all wealth, though I am told by fancypants conservatives that the concept is trite and long discredited, perhaps even Marxist. (Did Lincoln read Marx?) But it’s pretty much bedrock – everything we have is the result of someone’s labor. The fact that I own stock means that I tap into a pool of wealth creation. The mere fact that I purchased the stock means nothing.

But I don’t want to discount the contributions of forms of labor that achieve greater benefit for all of us – I regard creativity as the highest form of labor. The fact that Steve Jobs made a small computer in his garage, or that Henry Ford devised a way to make cars more efficiently opened up new horizons for workers, made necessities of luxuries, and opened up new commercial potential. These men gave us jobs and made life better for everyone. Creative geniuses are amply rewarded, and should be.

Administrative skill is also a form of labor that reaps higher benefits. Those who are able to recruit and discipline management personnel to create organizational efficiency are highly rewarded in our society. But they are not creating wealth – they are merely harnessing the creative engine. Nonetheless, we need them and should reward them. But all too often, administrative ‘creativity’ is nothing more than arbitrage – putting a Chinese worker at a lower wage in the place of an American, allowing investors to pocket the difference. That type of managerial activity deserves no reward, in fact, ought to be penalized.

Ordinary workers who create wealth by working eight hour shifts are low on the scale, and the lowest skilled jobs are poorly rewarded – in fact, would be a form of slavery were it not for minimum wage laws. (Slaves, after all, did receive food and housing in return for their labor.) But these jobs, even as they depend on the creative skills of those who design the machines they operate and the managerial skills of people above them, are still wealth creation engines. In fact, in theory anyway, every working person is paid less than the sum of the wealth created by his labors, otherwise our economy would collapse. What business can survive by paying more for labor than labor pays in return?

Where does this leave investors? Do we need them? Surely we do need them, to allocate wealth among various endeavors – as one sector of our economy falters, investors will move their resources to another, or as a new invention comes along that harnesses human energy in new wealth creation, investors rush to benefit thereby and put seed capital in the new industry. In short, we need investors as a resource allocation tool. But conservative economists have reversed the natural order of affairs, and will tell us that by the mere act of investing in an activity, that investors are creating wealth. Nonsense – they are organizing it, harnessing it, and if lucky, harvesting it. If unlucky, they lose everything.

For that reason, prior to 1981 or so, investment income – dividends, interest, and (off-again on-again) capital gains were taxed at higher rates than income from labor. It was called “passive” income, meaning that the wealth (fruits of someone else’s labor) would flow to the owner of capital regardless of whether he was actively involved or not. No matter that Andrew Carnegie was on a cruise in the Caribbean, his wealth flowed in without a hitch. Congress therefore saw no harm in taxing this type of income at higher rates than that from the sweat of the brow.

Perhaps the greatest achievement of the conservative revolution in this country has been to change our basic attitude about the nature of wealth creation. Where once labor was taxed at lower rates than passive income, we have reversed course now. Dividends and capital gains, the primary source of income for our wealthy classes, are now taxed at a top rate of 15%, while labor is taxed as high as 43%. (Why other forms of passive income like interest, rents and royalties were not given preferential treatment as well is a mystery to me. It’s probably in our future.) And the means by which this reversal in tax policy was achieved was by implanting a meme in our thought processes. Conservatives have sold the idea that the mere act of investment is a wealth creation activity, while payments of wages is a drain on our health. It’s bizzaro world.

The postwar period in America, from 1945 to the early 1980’s, was perhaps the most egalitarian in our history, as more people participated in the rewards of our wealth creation engine than ever before. I grew up in a small post-war stucco tract house – hard to imagine, but I was privileged by earlier American standards. We had strong unions, and higher wages rippled out from those unions, and even lowly factory workers made good salaries. But since Ronald Reagan, there has been a change of course – inequality is on the rise, and has been since he took office. Unions are at a low ebb, and forming a union in the United States is is probalby as hard as forming a business in the old Soviet Union.

It’s a game – it’s about harvesting wealth as it is created. Unions capture wealth created by labor for workers before it moves up. Conservatives, though they don’t openly say so, believe in trickle down theory – the idea that wealth is created at the top and flows in the other direction. They believe we are feeding the sparrows though the cow. But reality is more like a system of percolation – wealth is created by labor at many levels, highly intelligent labor, and the grunt variety, and works its way up. It is finally harvested by investors, who take credit for making it in the first place.

I’m not a Marxist – I don’t see a world without investors. We need them, but should not overvalue their function. Right now, as a result of our system of campaign finance, they have control of politicians, and our wealth allocation system is being skewed in their favor. As a result, we have created a society with a leisure class building ever-larger mansions and driving Hummers, while more and more of us are barely hanging on at the bottom. All the while, the safety net for those at the bottom is under attack. We are not even allowed to make a health care system that benefits all of us.

It helps to understand the basic makeup of our economic system and the reason for our well being. Then we can put investors in their place, and tax them accordingly. We need them, but they need us far, far more.

We live in a time of “conspicuous consumption”, a phrase Thorstein Veblen coined at the turn of the twentieth century. It’s largely made possible by the Bush tax cuts – much capital has been freed up and has no useful purpose, and so is put out to pasture. It’s an odd phenomenon, not unique to that time period, to wit:

I usually imagine people that drive Hummers as either repressed homosexuals or straight dudes with inadequate equipment. Compensation is definitely the underlying theme. But here’s where it helps to have lived as long as I have. I remember that nothing really changes, people are always the same. To wit:

Bottom line: For all their talk of investment and fantasies about “job creation”, having a lot of money is really about leisure time and expensive toys. Typically, the clerk at Burger King and the Mexican gardener are working harder and are more important to our economic well-being than any WalMart heir or trust baby. If millionaires were to go on strike, John Galt be damned, very few of us would notice outside the country club. But if the sanitation workers go out, or the police, or the retail clerks, we would quickly disintegrate into chaos.

That’s why we should not be too uppity when we see this:

It’s probably driven by a guy who makes our days run a whole lot smoother, someone whom we depend on and rarely acknowledge, except to sneer at and say “Get a job”.

Prior to the U.S. invasion of Iraq, Saddam Hussein had switched from the dollar to the Euro as his oil trading currency. There are some who, looking to make simple of a complex situation, say that this was the motive behind the U.S. attack. And while it may not have been the motive, but it certainly did not help the Iraqis.

The dollar is on a perilous perch. But it has two things going in its favor – one that it is backed by the incredible military might of the United States, and the other that it is the reserve currency for trading oil on world markets. Any country than needs to buy oil needs to have dollars on hand. This keeps demand up. But if there is a move away from the dollar, we are in deep, deep trouble.

The question is, would the U.S. resort to military action to keep the dollar the world standard? There is a test available – it’s called a “bourse”, and the Iranians are running one right now.

I haven’t thought about the Iranian bourse in quite a while. I had read years ago that the Iranians wanted to set up a world exchange where oil could be traded in any currency. (The word “bourse” merely means a “trading floor”, or an exchange. The New York Stock Exchange is a bourse.) I looked it up again recently to see if it had ever come to pass – indeed it has. Since February 17 of this year the Iranians have been competing with the New York Mercantile Exchange and the International Petroleum Exchange in London, the primary trading platforms for world oil. The currency basis for the bourse is the Iranian rial, and of course, the Euro.

Vice President Cheney was recently in Saudi Arabia. Shortly after his visit the Saudi paper Okaz reported that they were developing “national plans to deal with any sudden nuclear and radioactive hazards that may affect the kingdom following experts’ warnings of possible attacks on Iran’s Bushehr nuclear reactors.” (Apparently the Saudi press, under rigid control of the royal family, is a little more free to report on these matters than our own.)

Is Cheney’s mission to the Middle East to prepare them for an impending attack on Iran? Is the bourse part of the reason for that attack?

If the dollar ceases to be the world trading currency for oil, it becomes just another currency. Given our massive trade and budget deficits, it would not even be a desirable one to hold. So trading oil in Euros is a real and present danger to the economic well being of the United States. I don’t know how significant the Iranian oil bourse will be or whether or not it poses a real threat to us. But I do know this – if the United States perceives that the Iranian bourse represents clear and present danger, we will bomb them. I’ve seen it happen before.

And all Bush has to do is give the word – Congress has already authorized action. If they do bomb Iran, they will use “bunker busters”, or tactical nuclear weapons. Thousands of people will be killed, and millions more are downwind. We are a dangerous people, and these are indeed dangerous times.

Fascinating stuff, this – it gets even more interesting. It’s just a small example of how much news we miss living here in the land of the free. The Iranian bourse is internet-based – right around the time it was set to open, five undersea cables that carry Internet traffic to Mideastern countries were severed – one source says as many as nine. Millions of users were without service. One of the cuts was reported to have been caused by a ship dragging anchor dragging near Egypt, but after four other cables were cut (two of them in one day) people got suspicious. Read here and here and here and here for more.

Many possibilities – maybe multiple tankers worldwide forgot how to drop and bring anchors aweigh, all within a week of one another. Problem is, no ships were reported in the area of the cuts. Or, it could be Arab states harassing one another – we all know how emotional and irrational they can be.

Or it could be the U.S. preparing for war. We have the technology to engage in ocean-floor warfare, and have been doing it since the Cold War. It could be a not-so-subtle warning to the Iranians to shut down the bourse. Or it could be the real game – it could be step one in the attack. It could be that Cheney’s mission is to prepare our allies for yet another unprovoked attack on an oil-rich and uppity state.

PS: If there is an attack, watch the details to see if the Island of Kish is bombed. That is the physical location of the bourse.

Her eyes were focused on some future point, her disposition sunny. All of the worry and planning was now over. She was free.

She left the room in silence, leaving all of us wondering if perhaps we had been too hasty, if maybe she was the right person in the right time. Maybe we had made a mistake.

The right wing noise machine now focuses on him. The Swift Boats are gunning their engines. In the dead of night? At dawn’s first light?

Is he up to it?

This much we knew last night as Hillary Clinton exited, stage left: She was up to it. She had been battle-tested. There was nothing new they could say. No slight or smear would harm her. As she left last night, Bill at her side, we realized that an era was passing as well. Clinton time was over. Politics would go back to normal now. No more dreaming, no more pulling liberal rabbits out of this right wing top hat they call DC.

Maybe it is not her time, this year, 2008. Maybe she needs some more aging, like a fine wine.

Our hopes are dashed. The progressive movement is stunned. Maybe she will approach us again in 2012? Maybe then we will listen?

Or maybe then we will go to her.

I couldn’t stop laughing as I watched this. I kept picturing Will Farrell doing a SNL routine.

And anyway, not commonly known, it’s easier to peel a banana from the bottom rather than the top. Try it sometime.

Now and then as I interact with conservatives on the blogs I come across bedrock principles that they hold to be self-evident. One of these is that corporations don’t pay taxes, but rather just collect them. By this logic, any tax on a corporation is just a hidden tax on consumers.

It’s logical, I guess, to think that. But it doesn’t hold up under scrutiny. The underlying presumption is that corporations are free to pass on whatever costs they incur when they sell their products. Taken a step further, it also presumes that corporations are not maximizing profit potential, since when they arbitrarily pass along costs, they seemingly have the power to raise prices as they please, and have not done so.

It doesn’t quite work like that. Corporations are looking for monopoly pricing – that’s the whole game in a nutshell. But true monopolies are the exception rather than the rule. Most corporations selling goods to the public find themselves in a competitive environment, and are forced to do intense marketing to justify the prices they do charge. That’s the whole point of advertising – to create an aura around a product that justifies its price. So when I buy a bottle of shampoo at the drug store, I am paying every last dime that Proctor and Gamble thinks it can squeeze out of me for that product.

At a certain point, Proctor and Gamble will have maximized its revenue and created a profit pool. But they have to deal with one more expense on top of it all – taxes on those profits. Rates vary by jurisdiction – nationally, corporate tax rates are graduated and go up to 35%, or about the same level as individual rates. Here in Montana, corporations are taxed at a flat 6.75%, comparable again to our individual income tax.

Never mind that few corporations actually pay tax at stated rates. Conservatives say that the tax on corporations is really just a consumer tax, since the corporate profits started out as consumer dollars. But that’s true of everyone’s profit – every dollar passes through many hands – we only levy tax on certain (and arbitrary) events, as when employers pay wages, for example, or when corporations figure their annual bottom line. The corporate profit stream is split at that time, part to government, part to investors. If the tax were not imposed, the profit stream would go wholly to investors, and not back to consumers.

Investors pay the corporate tax, and not consumers. In fact, investors are unable to pass that tax along to consumers, and that’s why all the hubbub about reducing corporate tax rates. Investors don’t like paying taxes. Neither do I.

Here’s a fair point that conservatives make: Dividends paid to investors are not deductible to the corporation, and are taxed again when the investor receives them (though at a favored rate). That is indeed double taxation. It was once seen as a fair price to charge for the luxury of corporate status and all of the legal favors thereby bestowed.

But they are right – dividends are double taxed, and the practice ought to cease. I look forward to that day – the day that all double taxation ceases. But before we worry about investors’ double-tax problem, let’s first look at workers whose every dollar is taxed twice, once by income tax, again by payroll tax. Let’s be fair about this. Let’s eliminate double taxation for all of us. Workers go first. After all, they are producing the wealth that eventually ends up being called “dividends”.

Mel Gibson lands three of them.

http://movies.yahoo.com/feature/10mosthistoricallyinaccurate.html