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.

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:

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.

Class War Films:

The National Journal polled Americans on questions surrounding the federal budget deficit (linked from Jon Walker). Did Americans blame the safety-net programs for the deficit in the federal budget?

As important, the survey found Americans unconvinced that safety-net programs represent a major source of the deficit problem. When asked to identify the biggest reason the federal government faces large deficits for the coming years, just 3 percent of those surveyed said it was because of “too much government spending on programs for the elderly”; only 14 percent said the principal reason was “too much government spending on programs for poor people.” Those explanations were dwarfed by the 24 percent who attributed the deficits primarily to excessive defense spending, and the 46 percent plurality who said their principal cause was that “wealthy Americans don’t pay enough in taxes.”  While minorities were more likely than whites to pin the blame on the wealthy avoiding taxes, even 43 percent of whites agreed.

Given that diagnosis, it is perhaps not surprising that relatively few respondents said they would support major reductions in safety-net programs to reduce the deficit. Fully three-fourths of those polled said Social Security should be cut “not at all” to reduce the deficit, and exactly four-fifths said the same about Medicare. Nearly two-thirds even agreed that Medicaid should be entirely spared from cuts; just 5 percent said it should be cut a lot. There was more receptivity to retrenching food stamps and housing vouchers for the poor (only 51 percent said they should be entirely spared), but even so, just 9 percent said they should be cut “a lot.” Twice as many said defense should face big cuts.

And the accompanying graphic:

The 53% who think “the government taxes workers too much to fund programs for people who could get by without help” left me wondering who exactly are those “people who could get by without help.” Because Wall Street, Big Oil, Big Banks and so on certainly don’t need any government help. Another portion will define “people who could get by without help” as those that receive help from safety net programs. Probably many of those exclude themselves from those who get government help that they don’t need. B. Deutsch at ‘Alas! a Blog’ (linked by Meteor Blades), used data from Suzanne Mettler’s “Reconstituting the Submerged State: The Challenge of Social Policy Reform in the Obama Era” that was published in Perspectives on Politics on September 2010 (pdf) and built a revealing table showing how little many people know about the government programs that they receive a boost from:

Percentage of Program Beneficiaries Who Report They “Have Not Used a Government Social Program”
Program	“No, Have Not Used a Government Social Program”
529 or Coverdell	64.3
Home Mortgage Interest Deduction	60.0
Hope or Lifetime Learning Tax Credit	59.6
Student Loans	53.3
Child and Dependent Care Tax Credit	51.7
Earned Income Tax Credit	47.1
Social Security—Retirement & Survivors	44.1
Pell Grants	43.1
Unemployment Insurance	43.0
Veterans Benefits (other than G.I. Bill)	41.7
G.I. Bill	40.3
Medicare	39.8
Head Start	37.2
Social Security Disability	28.7
Supplemental Security Income	28.2
Medicaid	27.8
Welfare/Public Assistance	27.4
Government Subsidized Housing	27.4
Food Stamps	25.4

Deutch based a cartoon on the data he gathered:

Kevin Drum details the unfairness in the state taxes rates:

[The federal income tax] it’s not as progressive as it used to be, back before top marginal rates were lowered and capital gains taxes were slashed in half. But conservatives are a little less excited to talk about other kinds of taxes. Payroll taxes aren’t progressive, for example. In fact, they’re actively regressive, with the poor and middle classes paying higher rates than the rich.

And then there are state taxes. Those include state income taxes, property taxes, sales taxes, and fees of various kinds. How progressive are state taxes?

Answer: They aren’t. The Corporation for Enterprise Development recently released a scorecard for all 50 states, and it has boatloads of useful information. That includes overall tax rates, where data from the Institute on Taxation and Economic Policy shows that in the median state (Mississippi, as it turns out) the poorest 20 percent pay twice the tax rate of the top 1 percent. In the worst states, the poorest 20 percent pay five to six times the rate of the richest 1 percent. Lucky duckies indeed. There’s not one single state with a tax system that’s progressive. Check the table below to see how your state scores.

On the 1st part of the first episode of Moyers and Company, On Winner-Take-All Politics, Bill Moyers explores how America’s vast inequality didn’t just happen, it’s been politically engineered. The 2nd part is an essay on the Occupy movement. Check the station-finder to find the time Moyers and Company airs and repeats on your PBS station (11am and 7pm on Chicago). Or watch all 57 minutes on BillMoyers.com. There is a transcript there too. Bill, also, has a 5 minute video essay on Bill Guthrie (web only) that was based on his ‘Is This Land Made for You and Me?’ essay.

Description of the first episode:

On Winner-Take-All Politics

January 13, 2012

In its premiere episode, Moyers & Company dives into one of the most important and controversial issues of our time: How Washington and Big Business colluded to make the super-rich richer and turn their backs on the rest of us.

Bill’s guests – Jacob Hacker and Paul Pierson, authors of Winner-Take-All Politics: How Washington Made the Rich Richer — And Turned Its Back on the Middle Class, argue that America’s vast inequality is no accident, but in fact has been politically engineered.

How, in a nation as wealthy as America, can the economy simply stop working for people at large, while super-serving those at the very top? Through exhaustive research and analysis, the political scientists Hacker and Pierson — whom Bill regards as the “Sherlock Holmes and Dr. Watson” of economics — detail important truths behind a 30-year economic assault against the middle class.

Who’s the culprit? “American politics did it– far more than we would have believed when we started this research,” Hacker explains. “What government has done and not done, and the politics that produced it, is really at the heart of the rise of an economy that has showered huge riches on the very, very, very well off.”

Bill considers their book the best he’s seen detailing “how politicians rewrote the rules to create a winner-take-all economy that favors the 1% over everyone else, putting our once and future middle class in peril.”

The show includes an essay on how Occupy Wall Street reflects a widespread belief that politics no longer works for ordinary people, including footage we took at the OWS rally from October – December 2011.

Worthy Reads:

The New York Times: Inconvenient Income Inequality

OpenSecrets: A hard financial look at those SuperPACS

Travis Waldron at Think Progress:

Poverty in America is only getting worse, with data showing rising income inequality and the startling fact that half of all Americans are now either in poverty or considered low-income. Were it not for the government programs that comprise the social safety net, those numbers would be even worse. More than a quarter would live in poverty without the safety net, according to one study, and Social Security alone kept 14 million out of poverty last year. Despite that, Congress — and particularly Republicans in Congress — have made cuts to various programs meant to aid the poorest Americans.

Congress reached a deal Thursday to avert a shutdown that would have begun at midnight tonight, and in doing so, Republicans found another low-income program to target, cutting funding for subsidies that help the poor stay warm during the winter by nearly 25 percent. At the same time, however, the Pentagon’s budget is getting a 1 percent boost, as the Associated Press noted:

Highlights of the $1 trillion-plus 2012 spending legislation in Congress:

—$518 billion for the Pentagon’s core budget, a 1 percent boost, excluding military operations overseas. [...]

—$3.5 billion for low-income heating and utility subsidies, a cut of about 25 percent.

The Low-Income Home Energy Assistance Program (LIHEAP) has become increasingly vital for American families affected by the recession, and it is utilized more and more by military families. One of every five families using LIHEAP is a military family, a 156 percent increase from 2008. Congress, however, decided to cut that program to give a boost to a budget that already makes up 20 percent of the country’s total budget and has been spared in multiple spending agreements this year (the super committee trigger a notable exception).

Plenty of evidence exists that Congress should be focused on investing into programs that boost economic growth and job creation, rather than chasing fiscal austerity toward another recession. If it insists on cutting spending to deal with the deficit now, however, the least it could do is not take the knife to each and every program that helps the poor.

Congress wasn’t satisfied with only half of the people on poverty or low-income…

From ‘Countdown with Keith Olbermann’:

and from ‘Democracy Now’: