15 February 2015

Paul Krugman: Punished for Playing by the Rules


Ambrose Evans-Pritchard, the international business editor at The Telegraph, recently wrote that Europe's slide toward deflation amounts to a "betrayal" of Southern Europe. This sounds over the top, but it is the simple truth. So let me elaborate with a picture I find illuminating.

The chart here shows core inflation (which excludes energy, food, alcohol and tobacco) in Germany, Spain and the euro area as a whole.

How Roy Cohn Helped Rupert Murdoch

Special Report: Through Fox News and a vast media empire, Rupert Murdoch wields enormous political clout in the United States, but his entrée into the world of Washington power came from the notorious McCarthyite Roy Cohn who opened the door into Ronald Reagan’s Oval Office, reports Robert Parry.

By Robert Parry

Rupert Murdoch, the global media mogul who is now a kingmaker in American politics, was brought into those power circles by the infamous lawyer/activist Roy Cohn who arranged Murdoch’s first Oval Office meeting with President Ronald Reagan in 1983, according to documents released by Reagan’s presidential library.

“I had one interest when Tom [Bolan] and I first brought Rupert Murdoch and Governor Reagan together – and that was that at least one major publisher in this country … would become and remain pro-Reagan,” Cohn wrote in a Jan. 27, 1983 letter to senior White House aides Edwin Meese, James Baker and Michael Deaver. “Mr. Murdoch has performed to the limit up through and including today.”

How More and More U.S. Corporate Profits Escape the Corporate Income Tax

The effective corporate income tax rate is almost exactly the same in the United States as in other OECD countries. (While the U.S. statutory corporate tax rate is well above the OECD average, the many loopholes in the U.S. corporate tax bring the effective rate down substantially.) Then how is it that corporate taxes account for a much smaller share of GDP in the United States than in other high-income countries? The answer lies in forms of incorporation that allow U.S. corporate profits to be taxed at the lower individual income tax rate.

John Miller

Two changes paved the way for more and more profit to escape the corporate income tax in the United States. The federal government extended limited legal liability, which protects owners from losing their personal assets if their business fails, to some partnerships and “pass through” corporations not subject to the corporate income tax. Then the tax reform of 1986 cut the top tax bracket of the individual income tax to 28%, well below the statutory corporate income-tax rate. That opened up a large tax advantage for owners who paid individual income taxes on their profits instead of corporate income taxes.

Pass-through businesses—-S-corporations (which afford up to 100 owners limited liability), partnerships (including limited liability partnerships in which all the partners enjoy limited liability), and sole proprietorships—-have flourished over the last three decades. In 1980, corporations subject to the corporate income tax (called “C-corporations”) generated nearly four fifths (78%) of business net income, a measure of a business’s profitability. By 2007, pass-through businesses’ share of net income surpassed that of C-corporations. In fact, partnerships, S-corporations, and sole proprietorships each outnumbered C-corporations.

US companies cut more than 1m jobs a month. When did workers stop mattering?

Even when the economy is healthy, companies lay off hundreds of thousands of people a week, and up to 1 million a month. The problem: they still see workers as an obstacle to higher profits

Suzanne McGee

IBM will reportedly announce this week the largest corporate layoff ever, at a reported 118,000 jobs. If it does, it is hardly the first time IBM or any other big company will have sacrificed its workers to appease the gods of Wall Street.

At American Express, spending by the company’s cardmembers is growing, and so are revenues and profits. But not payroll: American Express just surprised financial markets by announcing plans to slash 4,000 jobs, cutting the number of employees by 6%.

The Martin Luther King You Don't See on TV

By Jeff Cohen and Norman Solomon

It's become a TV ritual: Every year in mid-January, around the time of Martin Luther King's birthday, we get perfunctory network news reports about "the slain civil rights leader."

The remarkable thing about this annual review of King's life is that several years — his last years — are totally missing, as if flushed down a memory hole.

Opinion: Some ugly truths about the bank bailouts

Could you have saved your home with $19,065?

By David Weidner

SAN FRANCISCO (MarketWatch) — More than 4 million Americans lost their homes in the wake of the financial crisis, but the vast majority of lenders survived through government assistance rushed to Wall Street in the fall of 2008.

The main bailout vehicle, the Troubled Asset Relief Program, was hailed six months ago as a success by the Treasury Department. That came after Popular Inc., one of TARP’s repayment laggards, paid the $1.22 billion due to taxpayers.

Paul Krugman: Much Too Responsible


The United States and Europe have a lot in common. Both are multicultural and democratic; both are immensely wealthy; both possess currencies with global reach. Both, unfortunately, experienced giant housing and credit bubbles between 2000 and 2007, and suffered painful slumps when the bubbles burst.

Since then, however, policy on the two sides of the Atlantic has diverged. In one great economy, officials have shown a stern commitment to fiscal and monetary virtue, making strenuous efforts to balance budgets while remaining vigilant against inflation. In the other, not so much.

Evidence Grows Showing Wall Street as a Negative Economic Force

By Pam Martens and Russ Martens: January 27, 2015

Earlier this month, Jim Clifton, Chairman and CEO of Gallup, published a stunning indictment of Wall Street as a job creating engine. Clifton reported that the U.S. now ranks 12th among developed nations in business startups with countries such as Hungary and Italy having higher startup rates. Of equal concern writes Clifton, “American business deaths now outnumber business births.”

Clifton has a theory on why America’s crisis in creating new businesses is a well-kept secret.

A Staggeringly Lopsided Economic Recovery

Zoë Carpenter

Just how strong is the economic recovery? Democrats have offered somewhat contradictory answers to that question recently. The picture President Obama painted in last week’s State of the Union address was mostly rosy. “The shadow of crisis has passed,” he declared, citing “a growing economy, shrinking deficits, bustling industry, and booming energy production.” And indeed, the US economy added more jobs in 2014 than it has since 1999, and unemployment is at its lowest point in more than six years.

The competing, bleaker, view—described most forcefully by Massachusetts Senator Elizabeth Warren—is that the good numbers don’t accurately reflect the reality lived by America’s workers. Middle-class families “are working harder than ever, but they can’t get ahead,” Warren argued in an early January speech. “Opportunity is slipping away. Many feel like the game is rigged against them—and they are right.” The tide may be rising, but it’s failing to lift most of the boats.

GOP's Frightening Plot to Build Laboratories for Plutocracy in States They Control

Right-wing initiatives such as tax cuts and 'right-to-work' legislation are on the table.

By Zaid Jilani

In the American political tradition, states are known as “laboratories of democracy,” miniature examples for the rest of the country to learn from. Following the 2014 elections, Republicans gained more power in state legislatures than they've had in their party's history, controlling 69 of the 99 different state chambers across the country.

With these wide majorities, these Republicans are using these laboratories to put into action some of their wildest plutocratic legislative dreams, everything from enacting discriminatory legislation against gay and lesbian Americans to assaulting the rights of workers, to clawing back laws at every level that protect the public interest.

Dean Baker: Why Rand Paul Is Wrong About Social Security Disability

The Republican Congress decided to make overhauling the Social Security disability program one of its first orders of business. On the first day of the new session it put in place a rule change that would make it difficult to address the shortfall the program is projected to face some time next year.

Republican leaders like Kentucky Sen. Rand Paul justified this change by insisting that half the people getting disability had the sort of back aches and occasional anxieties that we all face. The difference is that they get checks from the government rather than working. For this reason, Rand argued the program is in serious need of reform.

The Triumph of the Military-Industrial-Congressional Complex

To understand perverse military decision-making, follow the money

by BEN COHEN & WINSLOW WHEELER

In his farewell address in January 1961, Pres. Dwight Eisenhower famously cautioned the American public to “guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”

In his farewell address in January 1961, Pres. Dwight Eisenhower famously cautioned the American public to “guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”

When Liberals Were Organized

Progressives seeking a model for an effective Congress could learn from the nearly forgotten history of the Democratic Study Group.

By Julian E. Zelizer

When Republicans took control of the House of Representatives in 1994 for the first time in 40 years, one of Speaker Newt Gingrich’s earliest moves was to end the public funding for the Democratic Study Group (DSG), a caucus of liberal Democrats that had been created in 1959. It was one of Gingrich’s shrewdest maneuvers. As Kansas Republican Pat Roberts, a staunch conservative then and now, wrote in an internal memo, “The demise of the DSG severely damages the power structure of the House Democrats.”

Roberts was right. The DSG is almost forgotten today, but its history suggests lessons for the current generation of Democrats. Since 1994, congressional liberals have failed to replicate a powerful, independent organization like the Democratic Study Group. They have been dependent on a House leadership that is sometimes but not always sympathetic to their goals. The closest thing to a DSG, the Congressional Progressive Caucus, has been a pale imitation of its predecessor, a fragile informal coalition that has lacked the same kind of leadership, money, publications, communications strategy, or clout. As liberals prepare for the start of the 114th Congress and hope for stronger Democratic returns in 2016, they would benefit from looking back at the history of the DSG to see just how much a vibrant and robust caucus can offer.

Save the Honeybee, Sterilize the Earth

A decade ago, people started panicking about the collapse of the honeybee population and the crash of our food supply. But today there are more honeybees than there were then. We have engineered our way to a frenzied and precarious new normal.

Josh Dzieza

To drive through California's Central Valley is to witness farming on a baffling scale. For hundreds of miles along either side of Highway 99—which splits the valley from the college town of Chico in the north to the sprawling, boxy city of Bakersfield in the south—are orderly corridors of grapevines and cherry trees, followed by flat expanses of yams, followed by fields of carrots and the gigantic harvesters that yank them from the ground by the thousands. Dwarfing all these crops, however, are row after row of snaggly black-limbed almond trees, punctuated occasionally by monolithic towers where the nuts are shelled. In recent years, these almond groves have grown to cover almost a million acres; they now produce four-fifths of all the almonds in the world.

The Central Valley is a paradoxical place, both desolate and tremendously fertile. As Joan Didion, a native of the region, wrote in 1965, the towns there “hint at evenings spent hanging around gas stations, and suicide pacts sealed in drive-ins,” yet “U.S. 99 in fact passes through the richest and most intensely cultivated agricultural region in the world, a giant outdoor hothouse with a billion-dollar crop.” Generations of farmers have transformed this arid and flat valley into a machine that produces more than a third of the vegetables in the United States and nearly two-thirds of the fruits and nuts. To keep running, it must be fed with tremendous quantities of fertilizer, flooded with water pumped from deep underground or diverted from the Sacramento and San Joaquin rivers, doused with insecticides, herbicides, and fungicides, and harvested by an arsenal of lumbering machinery. But for the system to work, it also needs bees.

Why industry is trying to tell you how to think

Erin Quinn and Chris Young explain how they investigated the top message peddlers influencing public policy — and why you should care.

By Erin Quinn, Chris Young

The nation’s most politically active trade associations appear to be more interested in lobbying the public than they are in lobbying lawmakers.

That’s the main takeaway from a new Center investigation by Erin Quinn and Chris Young.

Removing the Social Security Tax Cap Would Benefit Most Workers

by Yves Smith

Yves here. As we and others have discussed at some length, the concern over Social Security funding is vastly overhyped. As Nicole Woo discusses in this Real News Network interview, one simple fix, that of eliminating the cap on who is subject to the tax, would solve most of the gap that is anticipated in long-term projections. And the Social Security tax as now constituted is regressive and thus promotes inequality, so lifting the cap also moves the tax system toward being more progressive. That’s before we get to the MMT issue that “taxing” to fund any government activity is a political mechanism that is a holdover from the gold standard days, and not how government functions are funded operationally.

In fact, with more and more promised pensions being slashed, and investment returns flagging thanks to QE and ZIRP, the notion that ordinary people can save enough for their retirement is a chimera. Thus preserving and strengthening Social Security is more important than ever.

Democrats Should Listen To What Sen. Whitehouse Said About Education

Jeff Bryant

A curious thing happened this week on Capital Hill: A politician said something about education that made sense.

The “something” didn’t come from President Obama.

In the president’s annual State of the Union address, “K-12 policy largely took a back seat,” Education Week’s Alyson Klein observed. Indeed, the issue was barely in the car. Although the president took credit for “the highest math and reading scores on record” and a high school graduation rate at “an all-time high,” there were no strong claims about the success of his programs, no bold, new initiatives, and no combative stances against the oppositional positions on K-12 policy.