Merge Left

Real News:

In Southern Spain, Juan Manuel Sánchez Gordillo, mayor of the small town of Marinaleda, is helping organize a growing protest movement against the austerity measures imposed by the Spanish government. Sánchez Gordillo and the landless peasants that follow him are at the forefront of demonstrations seeking a radical change in the country’s economic policies in response to the country’s worsening crisis.

Real News also has an interview with Juan Manuel Sánchez Gordillo:

Juan Manuel Sánchez Gordillo has become the face of the growing protest movement in Spain. The mayor of a small town in Southern Spain called Marinaleda, he has become well-known for leading combative protests and sit-ins, including a protest in a supermarket in which food was taken and redistributed to the poor. But Sánchez Gordillo has backed up his critiques of capitalism with a viable alternative. In his town of Marinaleda, there is full employment, people rent homes for 15 Euros a month, and everybody who works in the agricultural cooperative that was formed, including the mayor, earns the same salary.

From TRNN’s multipart ‘Protests In Spain’ series.

Inequality is on the march:

Paul Jay says until police and their political masters are held responsible under the criminal code, it can all happen again:

from the transcript:

It’s been two years since the Toronto G-20, two years since more than 1,000 people were arrested, hundreds of them brutally clubbed and violently assaulted by police. There’s been a series of reports looking into the police activities. First the Ontario Ombudsman issued a report. Then there was a civilian report looking into the activities of the RCMP, then the Ontario Independent Police Review Director, and now the Independent Civilian Review into matters relating to the G-20 summit—that’s the report issued by the civilian oversight board responsible for the Toronto Police.

Now that all the reviews and reports are in, the question remains: have people responsible been held accountable? And can it all happen again?

But before we dig into all of that, let’s remind ourselves what the G-20 was all about. Let’s take one more look at the big picture.

The 2010 G-20 in Toronto was a declaration by the global governing elite that the economic crisis, largely triggered by banks and financial institutions, would be paid for by ordinary people everywhere. It was also a declaration that force and the violation of basic civil rights would be used against those who protest and resist bearing the consequences of a crisis they didn’t cause. The more than 1,000 arrests at the Toronto G-20 was a statement by the governments of Canada, Ontario, and Toronto that mass protest would be met by mass arrests.

As I pointed out in a previous report, the missing words in the G-20 declaration were higher taxes on the wealthy and higher wages for workers—both obvious solutions to the stated goal of fighting deficits and dealing with a serious lack of demand in the economy.

What the G-20 leaders did agree to was this: “[The] advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016″—we know that means cuts to pensions/social services and other austerity measures. We see this plan being played out across Europe and North America and other countries. The arrests at the G-20 were made in defense of this global strategy.

And now reports from the Ontario Independent Police Review Director and the Ontario Ombudsman have made it clear: the police services responsible during the G-20 violated citizens’ right to free assembly and used excessive force in doing so.
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The 2nd thing of the 10 things you need to know about the Capital Gains Tax from the Center on Budget and Policy Priorities:

There is no sound evidence that cutting capital gains taxes to levels far below ordinary income tax rates contributes to economic growth at all — let alone enough to outweigh the significant economic cost of doing so.

• - Federal Reserve economists concluded in 2005 that the 2003 capital gains and dividend tax cut had little effect on the stock market:  European and U.S. stocks performed similarly both after the announcement of the tax cut and after the tax cut itself, as this chart shows.  As the Wall Street Journal stated, the study “concludes that the tax cut … was a dud when it came to boosting the stock market.”
• - “[T]here is no evidence that links aggregate economic performance to capital gains tax rates,” according to University of Michigan tax economist Joel Slemrod.
• - There is no statistically significant correlation between the top capital gains rate and economic growth (see chart).

• - As Len Burman, Syracuse University tax professor and former director of the Urban-Brookings Tax Policy Center (TPC), has explained of this chart, “Many other things have changed at the same time as [capital] gains rates and many other factors affect economic growth. But the graph should dispel the silver bullet theory of capital gains taxes.  Cutting capital gains taxes will not turbocharge the economy and raising them would not usher in a depression.”

• - There is also no statistically significant correlation between the capital gains rate and the amount of real business investment.

Check out the other 9 things you need to know too.

PS. Happy Independence Day!

PEW (June 14, 2012):

Do you see ‘Tax Cuts’ there? No? Me neither. How about ‘Tax Code Loopholes’? No? No. Apparently spending less on ‘Tax Cuts’ or closing tax code loopholes is not an option. Conservative hegemony at work as Paul would say.

What an excellent film! I wonder how did I miss it all this time. Missing describes the story of the disappearance of U.S. citizen Charles Horman in the violent aftermath of the the 1973 military coup in Chile. Horman was in Chile at the time along with his wife, Beth Horman, and his friend, Terry Simon. His father, Ed Horman, flew to Chile to join Beth in trying to find Charles. Ed was under the impression the U.S. embassy in Chile would help him.

Here’s the description on the Wikipedia article:

Missing is a 1982 American drama film directed by Costa Gavras, and starring Jack Lemmon, Sissy Spacek, Melanie Mayron, John Shea, Charles Cioffi and Janice Rule. It is based on the true story of American journalist Charles Horman, who disappeared in the bloody aftermath of the US-backed Chilean coup of 1973 that deposed leftist President Salvador Allende.

The film was banned in Chile during Pinochet‘s dictatorship, even though neither Chile nor Pinochet are specifically mentioned by name in the film (although the Chilean cities of Viña del Mar and Santiago are).^[1]

Both the film and Thomas Hauser‘s book The Execution of Charles Horman were removed from the United States market following a lawsuit filed against Costa-Gavras and Universal Pictures‘s parent company MCA by former Ambassador Nathaniel Davis and two others for defamation of character. A lawsuit against Hauser himself was dismissed because the statute of limitations had expired. Davis and his compatriots lost their lawsuit, after which the film was re-released by Universal in 2006.^{[citation needed]}

There is a fascinating interview with Peter Kornbluth, director of the National Security Archive’s Chile Documentation Project at George Washington University, in the 2nd disc. As you can imagine the State Department took issue with the film at the time. When Bill Clinton declassified some relevant documents things changed. Can you imagine Barack Obama doing such a thing? Me neither.

Krugman wipes the floor with the two pro-austerity guests:

Daniel, also, posted about that.

And the segment where Krugman detailed his view of the current situation to the BBC host:

UPDATE: There was another segment with Paul Krugman and an ex finance minister of Greece. It’s at the 6 minute mark:

UPDATE END

And here’s the entire BBC program:

Chad Terhune at the L.A. Times:

A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336. Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054. “I couldn’t believe it,” said Snyder, a 57-year-old hair salon manager. “I was really upset that I got charged so much and Blue Shield allowed that. You expect them to work harder for you and negotiate a better deal.”

Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance. That disparity in pricing is coming under fire from people like Snyder, who say it’s unfair for patients who pay hefty insurance premiums and deductibles to be penalized with higher rates for treatment. The difference in price can be stunning. Los Alamitos Medical Center, for instance, lists a CT scan of the abdomen on a state website for $4,423. Blue Shield says its negotiated rate at the hospital is about $2,400. When The Times called for a cash price, the hospital said it was $250.

“It frustrates people because there’s no correlation between what things cost and what is charged,” said Paul Keckley, executive director of the Deloitte Center for Health Solutions, a research arm of the accounting firm. “It changes the game when healthcare’s secrets aren’t so secret.” Snyder’s experience is hardly unique. In addition to Los Alamitos, The Times contacted seven other hospitals across Southern California, and nearly all had similar disparities between what a patient would pay through an insurer and the cash price offered for a common CT, or computed tomography, scan, which provides a more detailed image than an X-ray.
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I rolled my eyes when I read Mrs. Snyder’s comments. Not that I disagreed with her expectations about health-care costs. But Blue Shield and the rest in the AHIP cartel don’t care about the price American’s pay. They care how to make the most money they can and if that means screwing the public that’s what will happen.

Writing at New Economic Perspectives, Bill Black goes into inevitable territory during an election cycle, in which we are being asked to choose between two brands of “austerity”: The Democratic Version or The Republican one. He’s lays out the problem on very realistic ground and let’s us know who the greater enemy to our economy really is: The Democrats.

After this election is finally over, the Democrats are going to go full bore on Social Security and every other social program they can get their grubby hands on. Nancy Pelosi, openly (and ironically) supported by the Congressional Progressive Caucus, have already signaled their intent over the last few weeks. It’s just a shame we can’t have a debate on this before the election, when it might do more good.

So this piece is well-timed and very worthy of  your attention. In my not-so-humble opinion:

To many people, it seems paradoxical that conservatives target not the worst social programs, but the best.  There is no paradox.  Bad government programs are desirable from the right’s perspective – they discredit government intervention.  Good government programs pose an existential challenge to conservative memes, so they are the prime target for attack.

The attacks from the right, however, do not provide any guarantee of success.  The right’s immense success has come from convincing large numbers of moderates and liberals to join the assault on successful government programs.  The major financial deregulation bills that have shaped the criminogenic environments that produced the epidemics of accounting control fraud that have driven our recurrent, intensifying financial crises have enjoyed strong, even overwhelming, governmental support.  The Garn-St Germain Act of 1982, the state S&L deregulation laws in Texas and California that “won” the regulatory “race to the bottom”, the “reinventing government” assault on financial regulation, the Gramm-Leach-Bliley Act of 1999, and the Commodities Futures Modernization Act of 2000, all enjoyed broad bi-partisan support.  Laws making it extremely difficult for victims of securities fraud to obtain civil remedies passed with such strong bipartisan support that supporters were able to override President Clinton’s veto.

Just as only a conservative Republican like Nixon could begin to normalize diplomatic relationships with China without bearing a crippling political price, only “liberal” Democrats can safely begin the process of attacking Social Security.  The rationale for the liberal assault on Social Security is “there is no alternative” (TINA).  TINA is a particularly nonsensical argument in this context, however, because we are trying to recover from a Great Recession. There are vastly superior alternatives to cutting Social Security benefits, which could force the economy back into recession.  There is also no need to cut Social Security benefits.  The funding required to meet fulfill our promises is modest (relative to the U.S. economy) and poses no threat to our economy.

(snip)

The progressive austerians are all the more remarkable because the economists and economic theories they rely on were wholly discredited even before Europe’s suicidal experiment with austerity.  The neoclassical and Austrian economists that push austerity were the same economists who (1) propounded the anti-regulatory policies that caused the global crisis, (2) the opponents of counter-cyclical fiscal policies who predicted that pro-cyclical U.S. fiscal policies would speed the U.S. recovery while counter-cyclical policies would fail to spur growth and would cause inflation, and (3) the deficit hawks who claimed that counter-cyclical U.S. monetary and fiscal policies would cause hyper-inflation.  The predictions of the proponents of austerity have proven consistently wrong and the proponents of counter-cyclical fiscal policies have proven consistently correct.  The predictions of the proponents of counter-cyclical fiscal policies proved correct as to both the direction and the magnitude of the economic recovery.  We argued from the beginning that the stimulus package was far too small and that there would be a financial disaster among many states and localities absent a program of federal revenue sharing.

Please do read the whole thing. It’s worth every minute of your time.

Real News:

Transcript at the link:

BILL BLACK: Well, there were a series of articles in The New York Times covering the recent elections in Europe, particularly in France and Greece, but also mentioning Germany and England. And the common denominator in each of these elections was that the people rose up against the parties imposing Berlin’s austerity program, which has forced Europe back into recession and forced the periphery of Europe back into depression. And they rejected this soundly in these votes.

But the amazing thing was that The New York Times reporters were treating this like, well, these people must be financially illiterate, because everybody knows austerity is the only thing that can be done, and austerity must be done, and it’s good and such. So the more they destroy the economy, the more the New York Times reporters seem to think that destroying the economy is the objective.

And Paul Krugman has been very good. He is, after all, Nobel laureate in economics. He writes a regular column for The New York Times, and for months he’s been explaining how insane the austerity program is. But apparently the New York Times reporters don’t read their own Nobel prize winning economists.

PS. There is an update to the previous post as well.

Real News interviewed James Galbraith about his new book ‘Inequality and Instability’:

Part 1:

Part 2:

Part 3:

Part 4:

James Galbraith explains how raising the minimum wage would boost demand and give millions of people a better wage:

There is a transcript at the link

Last month we learned that 93% of the 2010 recovery. David Cay Johnston compared the 1934 recovery to the 2010 recovery and the results speak for themselves. Pat Garofalo at ThinkProgress explains:

In 2010, as the nation slowly ground its way from Great Recession to recovery, 93 percent of national income gains went to the richest 1 percent of Americans. As Reuters’s David Cay Johnston pointed out today, this makes the 2010 recovery quite different from the recovery that followed the Great Depression, as then, income gains were widely shared by the population, not concentrated at the very top:

The 1934 economic rebound was widely shared, with strong income gains for the vast majority, the bottom 90 percent.

In 2010, we saw the opposite as the vast majority lost ground.

National income gained overall in 2010, but all of the gains were among the top 10 percent. Even within those 15.6 million households, the gains were extraordinarily concentrated among the super-rich, the top one percent of the top one percent.

Just 15,600 super-rich households pocketed an astonishing 37 percent of the entire national gain.

During the recovery, corporate profits have also roared back, already hitting their pre-recession heights. Wages, however, have not done the same.

Not only was the recovery of the bottom 90% nowhere near the recovery of the top 0.1%, but the bottom 90% went backward.

A while ago David recommended Bernand Harcourt’s ‘The Illusion of Free Markets: Punishment and the Myth of Natural Order.’ I started reading it a while ago. The ‘Chicago School’ chapter was interesting. Luckily I found a PDF copy of a draft of that chapter. Here’s an excerpt where Harcourt talks about how ‘efficiency’ is defined by laissez-faire economists (from page 24 of the pdf, page 168 of the draft, emphasis is mine):

The Efficiency of the Competitive Market

Ultimately, in the law-and-economics tradition, the Physiocratic belief in natural order metamorphoses into a faith in the efficiency of the competitive market. The earlier, more nebulous concept of an economic system is refined into the “competitive” market. To unpack this claim, a few observations are necessary. First, it is crucial to properly understand how the contemporary use of the term “efficiency” gets refined and improved—and in the process becomes so much more persuasive. As a result of the work of economists such as Vilfredo Pareto, Nicholas Kaldor, and John Hicks, the field of welfare analysis developed a far more workable definition of efficiency. At an earlier time, the concept of welfare maximization aggregated individual welfare without always paying attention to particular individuals whose welfare might decline. This was true, to a certain extent, of Bentham himself. In his Introduction to the Principles of Morals and Legislation, where he clearly defined all his terms, Bentham wrote that “An action then may be said to be conformable to the principle of utility, or, for shortness sake, to utility, meaning with respect to the community at large) when the tendency it has to augment the happiness of the community is greater than any it has to diminish it.”⁶⁵⁸ The interest of the community, on this formulation, represents the sum of the interests of the individuals, but increasing the total utility of the community does not preclude the fact that some individuals may end up worse off. The utility principle, which Bentham would alternatively discuss under the rubric of “the greatest happiness of the greatest number,” might still allow for decreased utility of some individuals, even perhaps as few as one.⁶⁵⁹

This collective notion of welfare would give way, in the twentieth century, to more refined definitions of “efficiency.” The first, associated with Pareto, provides that an improvement in collective welfare requires that absolutely no one be make worse off individually. In other words, a Pareto improvement is possible if some people are made better off, but none worse off. This gives rise to the notion of a Pareto efficient (or Pareto optimal) outcome, which is one in which no further Pareto improvements can be made. It also gives rise to another definition of efficiency, the Kaldor-Hicks efficient outcome, where persons who would be made better off by a Pareto improvement could hypothetically compensate those who are made worse off, so that a Pareto efficient result would have obtained at least in theory. These crisper definitions of efficiency now substitute for the looser notion of welfare maximization.⁶⁶⁰

Once the Pareto and Kaldor-Hicks refinements are in place, it becomes far easier to argue that “efficient” outcomes are in fact neutral, objective, or non-normative, since no one should be opposed to a Pareto improvement in the distribution of resources (unless, of course, equity matters). Some view these Pareto and Kaldor-Hicks refinements as “a much weaker form of utilitarianism,” since they narrow the category of welfare improvements and eviscerate the possibility of collective welfare debates.⁶⁶¹ Some argue that they render the entire economic analysis trivial and marginal, something everyone could agree about and that therefore functions only at the margins.⁶⁶² I think otherwise. Making the term “efficiency” so much less controversial has in fact empowered the welfarist argument, at least in the legal domain. This is especially true since, as Coase admitted, it is generally impossible to imagine assembling the empirical data to support any of these complex welfare calculations. Being able to claim that a legal rule or allocation of resources is Pareto efficient is far more persuasive than to say that it maximizes collective welfare. It facilitates a myth of neutrality. It allows the law-and-economists to argue, as Posner does, that efficiency “offers a neutral standpoint on politically controversial legal topics.”⁶⁶³ In most legal controversies, we are told, lawyers tend to favor either the propertied or the propertyless. “The economist favors neither side, only efficiency.”⁶⁶⁴ Clearly, the term “efficient” now has a more crisp definition and does a lot more work. …

With a definition of ‘efficiency’ an income growth pattern like this:

would be characterized as efficient! So, be careful when the word ‘efficiency’ is thrown around.

And a second excerpt  from the ‘Chicago School’ chapter where Harcourt talks about how criminal sanction is seen by laissez-faire economists (page 32 of the pdf, page 176 of the draft, emphasis is mine):

The Birth of Neoliberal Penality

The function of the criminal sanction in a capitalist market economy, then, is to prevent individuals from bypassing the inherently efficient competitive market because market bypassing—non-voluntary, non-compensated forms of social interaction—are by their very nature inefficient and reduce social welfare. Criminal activity is best understood as an end-run around the market, and the criminal law is therefore best understood as what prevents this kind of market evasion. The central premise of this argument, naturally, is the efficiency of markets: “When transaction costs are low,” Posner emphasizes, “the market is, virtually by definition, the most efficient method of allocating resources.”⁶⁸⁰ This maps on perfectly, as well, to Richard Epstein’s conception of the penal sphere. The role of the penal sanction, on Epstein’s view, is to prevent fraud and coercion, in order to facilitate the proper functioning of the free market. Notice the underlying notion of orderliness and the strong parallel to Quesnay’s ordre naturel.

This view of the penal sanction has a number of important features that are worth emphasizing. First, …
Fourth, there is a clear wealth dimension to these distinctions. The criminal sanction—rather than tort law—is necessary in the case of murder, violent crime, theft, property crimes, and generally street crime because the value at which the deterrence would have to be placed is too high and the defendants are most often judgment proof (Epstein and Posner agree on this). Both for reasons of insolvency and because of the high costs that would be necessary to deter street crime, the tort system is inadequate and the government must intervene. Posner explains: “In cases where tort remedies, including punitive damages, are an adequate deterrent because they do not strain the potential defendant’s ability to pay, there is no need to invoke criminal penalties—penalties which … are costlier than civil penalties even when just a fine is imposed. In such cases, the misconduct probably will be deterred…. This means that the criminal law is designed primarily for the nonaffluent; the affluent are kept in line, for the most part, by tort law.”⁶⁸²

“This means that the criminal law is designed primarily for the nonaffluent.” Isn’t this how the law is applied towards the thieves at Wall Street?

Rortybomb:

There was a brief debate focused on the following question: would the gains of the economy continue to accrue to the top 1% once the recovery started, or would the top 1% have a weak post-recession showing in terms of raw income growth as well as income share of the economy?  The top 1% had a rough Great Recession.  They absorbed 50% of the income losses, and their share of income dropped from 23.5% to 18.1% percent.  Is this a new state of affairs, or would the 1% bounce back in 2010?

Well we finally have the estimated data for 2010 by income percentile, and it turns out that the top 1%  had a fantastic year.  The data is in the World Top Income Database, as well as Emmanuel Saez’s updated Striking it Richer: The Evolution of Top Incomes in the United States (as well as the excel spreadsheet on his webpage).  Timothy Noah has a first set of responses here.  The takeaway quote from Saez should be: “The top 1% captured 93% of the income gains in the first year of recovery.”

… As you can image, this has increased the percentage of the economic pie that the top 1% takes home.  As Saez notes, “excluding realized capital gains, the top decile share in 2010 is equal to 46.3%, higher than in 2007.”

… It’s also worth mentioning that, pre-Recession, inequality hadn’t been that high since the Great Depression, and we are looking to rapidly return to that state.  It’s important to remember that a series of choices were made during the New Deal to react to runaway inequality, including changes to progressive taxation, financial regulation, monetary policy, labor unionization, and the provisioning of public goods and guaranteed social insurance.  A battle will be fought over the next decade – it’s been fought for the past three years – on all these fronts.  The subsequent resolution will determine how broadly-shared prosperity is going forward and whether or economy will continue to be as unstable as it has been.

The low taxing of capital gains plays a huge part in this. The special treatment it is given should’ve stopped. But, as Meteor Blades says, the 1% thinks taking the 93% of the recovery is the way things should be.