– “Medicare at 55’ now on Dianne Feinstein’s agenda”
As Ron Placone tweeted: she is “courting the youth vote”
Wednesday, May 30, 2018
Friday, May 25, 2018
The Origin of the Attack on Schools: Desegregation
Award-winning author Nancy MacClean, author of Democracy in Chains: The Deep History of the Radical Right's Stealth Plan for America discusses the origins of the current education "reform" movement in desegregation.
Sunday, May 20, 2018
Modern Money Theory makes the big time
In Huffingtonpost: Stephanie Kelton Has The Biggest Idea In Washington. Once an outsider, her radical economic thinking won over Wall Street. Now she’s changing the Democratic Party.
This is one of several recent articles about the job guarantee.In the U.S. it's traditional to prop up agricultural prices with government buying commodities like soybeans or cheese. Lately, we've even propped up Wall Street with Quantitative Easing. Now the proposal is to buy surplus labor...about time, too.
There's no shortage of work to be done--everything from fixing the infrastructure to caring for our children and elderly--it's just not always as profitable as the financial sector would like.
But in market capitalism, all of humanity devolves to marketable labor, while all of nature devolves to marketable land. All human interaction is really just a financial transaction, and profit justifies any behavior, no matter how bad. How else can one explain the misbehavior of pharmaceutical companies, or GM with its 97¢ cheaper ignition part that killed people. But hey! It was profitable.
Monday, May 7, 2018
Cenk and Young Turks Team: Your Deficit Hawkery is Unrealistic and Stands in the Way of Progressive Change
The following is a rather long open letter published on neweconomicperspectives.com blog, and is a sobering reminder that the fight between team red and team blue is often a distraction. Similarly, while they can make an important contribution, public banks are a limited solution to a problem that is systemic (covered below and in earlier posts in this blog).
Posted on May 7, 2018 by Michael Hoexter
By Michael Hoexter, Ph.D.
[The Young Turks (TYTNetwork) is an online news network that has a wide reach among mostly progressives and independents in the United States with viewership in the hundreds of thousands of unique visitors per day and over 2 million views per day. Cenk Uygur is its founder, CEO, and leading on-camera commentator.]
Dear Cenk, John Iadarola, Ana Kasparian, and the Young Turks Team,
I’m a Young Turks subscriber, member, and a longtime fan of your coverage of politics. I think you have provided a consistent and detailed perspective on the failures of our political system, consistent criticism of both US major political parties as well as the alarming emergence of Trump and Trumpist/GOP neo-authoritarianism. I think your instincts for analyzing political personalities is grounded in keen and accurate observation of people and political forces. You also rarely shy away from criticizing both the Democratic and Republican Establishments, which distinguishes you from the “liberal” mainstream media. You have been also very good at analyzing some of the biases of mainstream media against progressives and against change that most Americans want. You are a consistent, principled, and very much needed independent voice that I often wish was heard more widely.
There is one area, however, where your coverage of news and economics is quite misleading and creates a trap for the progressive movement that you are elsewhere seeking mightily to foster and strengthen. You have uncritically brought into your coverage some mainstream Democratic and “moderate” Republican economic ideas about federal deficits, federal debt and tax cuts. You might feel you are representing a “solid” position because this locates the Young Turks firmly in the Establishment echo chamber about debt and deficits, as well as seems to put you in a good position to lambaste hypocritical Republicans and Trump.
If, however, you were to step out of the Washington echo chamber and into economic reality, it turns out this position is based on false ideas that are and could, if further pursued, be enormously damaging to the agenda that most Young Turks’ hosts would like to see implemented by the federal government.
Even though in sections of this letter to follow, I may be introducing you to some new abstractions, this is not an academic debate. Jeff Stein of the Washington Post has recently reported on this issue in his piece on “deficit owl” economists, heterodox but reality-based economists with whom I have been collaborating for the past six years. The threat of predatory political usage of our general confusion about debt and deficits by Trump, the GOP, and ultra-right donors like the Koch Brothers, only sharpens the need to “get this right” to defend and expand, among other things, Social Security and Medicare. As I am, for instance, an advocate for an aggressive climate mobilization, something like a large-scale, decades-long ”Green New Deal” to literally save human civilization if not the species itself, it is my understanding that a lot more than our current “First World” well-being is at stake in understanding how money is created and used by governments as well as other economic actors (private lending institutions) for various purposes.
By repeating tired nostrums about money that dominate “Inside the Beltway” thinking, you guys have strapped your own various agendas to an economic millstone. Laboring under these illusions, you have used some of your well-practiced abilities to create compelling-sounding arguments to re-tie progressives to an out-dated and inaccurate picture of how governments and money work that is also wholeheartedly embraced by the Democratic Establishment. These out-of-step ideas undercut the potential power of public policy to do the good you want to see done in the world. In sum, this is a non-trivial matter and I am not here trying to “showboat” to show off some arcane or original knowledge I have.
Example from TYT Webcast of April 15th: “Trump Tax Cuts Add WAY More to Debt Than Advertised”
I have tweeted to you a number of times in the past that you guys have bought into deficit hawkery and federal debt/deficit worry but now want to “escalate” my concern by writing you this public letter.
Now that the bloated, unfair, and unnecessary Trump tax cuts are starting to take effect, it is no wonder that you have revived your coverage of tax-related issues and blend that in with, the comfortable-for-you deficit hawk narrative. As an example you continued to “double down” on your deficit hawk position in your clip “Trump Tax Cuts Add WAY More to Debt Than Advertised” (https://youtu.be/NfipKtQTHOk). I understand that the primary and overt intention of this segment was to, rightly, call out the hypocrisy and plutocratic bias of Trump and the Republicans on taxes and deficits. Despite this overt intention that I recognize, I will use this clip as an example of both your and other “progressive” or liberal/centrist deficit-hawk/deficit-worry positions. The clip is not unique in your work, nor in the genre of liberal discourse you seem to be, wittingly or unwittingly, reinforcing.
This clip struck me as a good place to start this discussion, because Cenk, you, and you, John, seem to be so passionately involved in your argument and feel so compelled by the “sweep” of the political-economic narrative you weave in it. In believing and publicly reinforcing this narrative, unfortunately, you are not alone in the American/progressive/liberal community, so please do not feel singled out if I analyze it as an example of this genre of argument that is common. Unfortunately, Bernie Sanders also slips into this narrative, even as he proposes new social programs that would use public funding.
Like many complex arguments, your argument in the video weaves together narrative strands and propositions, some of which are true and some of which are false or damaging and misleading. Below the main propositions advanced by both of you are sketched out in sequence with my commentary on truth or falsehood in parentheses and bolded after each proposition.
Propositions advanced in the clip in sequence:
Subtext/Take-Home Advice for Democrats/Progressives
I may be taking some liberties here with your intent but these subtexts originate in the discourse onto which you are “hitching” the narrative in this segment.
As can be noted in the sectoral balances chart, the government sector is the sector that can be most responsive to economic and social conditions, thereby managing the crisis-ridden capitalist economy. The process of spending on public goods and services injects the national currency, money, into the economy, while federal taxes destroy that money, while also compelling people to use the currency to pay the taxes, undergirding the value of the currency (rather than some other measure of value). Unlike the federal, currency-issuing government, state and local governments collect some of the money in circulation via local and state taxes to then spend on (local or regional) public goods, much more like how businesses and households must usually get income (or use the promise of future income as collateral to get bank credit) and then spend it. The federal government “invents” new money units as it spends it and then pulls it out of the economy by taxes, dampening inflationary pressures (which are not automatic consequences of the injection of more money into the economy by government). Unlike the federal government, state and local governments need revenue from taxes to spend or pay back the various bonds they have floated for large-scale spending. Managing a business, municipal or state government is not necessarily good training for successful management of the federal government’s fiscal policy, which unnecessarily, for reasons sketched below, remains a “dark art”.
There is another source of dollars (or in other nations, their national currency) in modern economies, that from private bank lending. Banks also “invent” (temporarily) currency by giving out loans that then must be paid back with interest. In the 19th Century and earlier some banks issued their own denominations of currency but the inefficiencies associated with separate bank currencies has led to a system of private banks creating national-currency-denominated loans. The Bank of England has now recognized that this so-called “endogenous” theory of bank money is also the correct one, rather than the “loanable funds” model still taught in conventional economics curricula. The conventional model taught in most Econ 101 classes says erroneously that banks lend out the savings of other bank customers to borrowers.
Contrary to the fictional loanable funds model, the net effect of bank lending over the entire business cycle is deflationary, to withdraw liquidity and currency from circulation in the economy, as bank profits are dependent on collecting back both the (invented) principle and interest which then forms the basis of bank profits that go mostly to the wealthy owners/shareholders and executives of banks.
The apparently-mysterious phenomenon of economic cycles and recessions can best be understood by reference to the endogenous nature of bank-created money and the debt-deflation theory of Great Depressions. In good times, banks create lots of “temporary” money via loans that needs to be repaid with interest (money from other sources other than the bank loan). When a bank makes a loan, it bets that the borrower has an business idea that can not only pay back the principle but also “make money” by attracting funds from other sources to pay back the interest on the loan. This is the way the banks make money: inventing money that then diverts more money from other sources to pay back principle and interest. When the “good risks” are exhausted, banks continue to try to make loans to progressively more risky and eventually to projects that turn out to be “bad risks”. Eventually banks stop making loans or risk going under themselves by making too many bad loans. Mortgage lending follows the same path, preying, as it were, on the incomes of homebuyers to return principle plus interest.
With banks making fewer loans and continuing to demand that existing loans be repaid plus interest, the private banking industry, as a recession begins, starts draining the economy of “bank-created” liquidity plus interest, with fewer businesses and individuals having less money to pay for goods, new assets (housing, buildings, capital), and services. The velocity/frequency of transactions in the economy slows down. The resulting “credit crunch” starts to ripple through the broader economy and GDP growth slows or goes negative, unemployment goes up, and more and more people have less income or lose valuable assets like businesses and homes to foreclosure or bankruptcy.
In one of the most impressive pieces of empirical research by an economist, Steve Keen has shown how changes in lending/private debt (the issuance of new loans) correlates almost perfectly (negatively) with the business cycle, as represented here by unemployment rate:
[Source: http://www.debtdeflation.com/blogs/2014/02/02/modeling-financial-instability/]
Here unemployment is a stand-in for overall economic distress or prosperity, showing that the rate of change in bank lending is very tightly tied to real economic conditions. Beyond increases in bankruptcy of borrowers now defaulting on loans, some banks/creditors that took too many risks during the previous boom will go out of business (Bear Stearns, Lehman Brothers, etc.), further restricting the pool of lenders and potential loans. Without the stabilizing effect of counter-cyclical or constant government spending and deficit spending in particular, economies based on bank lending will permanently contract, as bank-created money/liquidity is premised only on profitable return on investment, which is not always possible, especially in the spiral of a downturn.
Therefore in a modern capitalist economy, there is a tendency towards liquidity crunches and what is described above, debt-deflation, where creditors seek to extract the principle and interest out of a population that is increasingly unable to pay back the loans.
Furthermore, there is still another longer-term dynamic in capitalist economies that underlines the need for government stabilization of and egalitarian distribution of liquidity/money in the economy. Not only banks but capitalist firms and favorably positioned individuals and households attempt to capture as much of the circulating money as possible and “save it”, i.e. accumulate capital to either hoard, invest passively, or invest in productive capital to, in turn, accumulate more capital. There is a tendency towards income and wealth inequality in capitalism that is “a feature not a bug”: “winning” at the capitalist game means becoming ever wealthier at the expense of others, even if what is being produced may at times be a novel and highly useful good or service to its buyers. This “winning” means there is a tendency towards increasing concentration of money and, in many political systems, political power as well, based on economic power concentration. This concentration of money and wealth, in addition to that caused by the bank-lending-driven business cycle, leads to the tendency we see ever more acutely of enormous wealth and income inequality on a national and international level. The formation of a economic and political oligarchy is a tendency of capitalism, in the absence of intense countervailing regulations and social movements for economic equality.
In some vision of economic egalitarianism propounded by many who call themselves progressives, the focus is often on taxing the rich more, a direction of tax policy I also support for a variety of reasons (egalitarianism, “winning” at capitalism is often parasitic & damaging to society and the environment, discourages speculation on asset prices). Few advocates, however, think past how simply taxing the rich more would work to create both equality and prosperity. High levels of taxation of the rich must rest on an implied or stated social agreement that social solidarity and equality are more important than preserving the “winner-take-all” capitalist game. The formation of a political economic oligarchy would then need to be seen as an alien, inhumane phenomenon that should be attacked, by among other things, high tax rates on the rich.
Of course, as we have seen, these high levels of taxation do not directly fund government spending, nor does the reduction in the income and wealth of the rich directly provide benefits to those who have low or inadequate incomes to survive in the economy. It is largely through government spending, regulations, and universal benefit programs that the lifting up of the living standards of the poor, the working and middle classes can be achieved. This provision of liquidity and in-kind services by government that free up disposable income supports economic demand for real goods and services in the economy as a whole, increasing overall social prosperity.
The chronic “leakage” of liquidity upward, even with high levels of taxation, i.e. capital accumulation by the rich and by banks, as well as some level of economic growth (though endless growth is controversial or damaging in a world of limited physical resources), provides the need for government to be continually providing more “economic points” (i.e. money) into the economy for the private sector to “play with”, i.e. successfully complete economic transactions and support economic demand. Providing more (monetary) units of value-measure means more deficit spending. I have proposed elsewhere that the term “deficit” spending is a misnomer when applied to currency-issuing governments and have a proposed we call it the “net contribution” of government to the economy. In our current climate, “too much” government spending is not yet on the table, spending that would lead to inflationary pressure.
So, even if we (still unrealistically but more realistically than conventional wisdom allows) assume that the economy exists purely as a smoothly functioning private sector, continual and habitual deficit spending by governments is absolutely necessary in a capitalist economy to:
buffer the swings and periodic liquidity crunches of the private lending/business cycle.
continually provide liquidity to the very large group, often a majority, of “non-winners” of the capitalist game of money and capital accumulation to keep the economy functioning & support economic demand, via social welfare, income support, and jobs program spending.
add more economic “points” (monetary units) in net to the pool available to enable the economy to grow.
Some of these reasons are recognized by various economists and business people as reality but only the “deficit owl”, Modern Money Theory, school of economists recognizes them all. Modern Money Theory is a stock-flow consistent theory of the modern economy, the only one that addresses all three key challenges to the “flow” of commerce in the economy. The “deficit dove” position, that is sometimes advanced by mainstream liberal economists like Paul Krugman or Jared Bernstein, resting on some quotes by Keynes, recognizes “1” and parts of “2”, on occasion but is stock-flow inconsistent: they don’t recognize the need for government to supply more “points” in the economy overall due to the structural tendencies of capitalism.
Government Social and Economic Leadership Rests on Self-Financing
If we advance beyond the model of the economy that conceives of the purpose of the economy as private and business gains, as sketched out in the previous section, a truly realistic model of the economy sees that political action and initiative is critical to overall social and economic well-being. Using the language of Karl Polanyi, the economy is “embedded” in society and nature. Economies and societies must be continually reinvented and restructured by political action; the current composition of economic sectors and activities are not “natural facts” that must be treated as immutable, otherwise we will ignore and dismiss critical emerging features of the complex multi-tiered reality we live in.
Conventional economic models based on the neoclassical economics taught in “Econ 101” downplays the role of government as an integrated part of the economy. In a more realistic and complete model of the economy, the government and public sector help realize a combined “public purpose” of society as a whole, a purpose that is constantly redefined and renegotiated via politics. To realize the public purpose effectively, especially at times when a fundamental reorientation of society and the economy is necessary, government leaders and the polity that supports them must understand and utilize the creative, inventive aspects of government functioning. Government at times must restructure certain aspects of society in order for the society and civilization to continue functioning at all, continue functioning well, or according to some vision of “the good” that may either be imposed from above by elites or “bubble up” from popular discontent and social movements. In the United States, the mid-20th Century saw a series of these efforts including the New Deal, the WWII mobilization, the GI Bill, the building of the Interstate highway system, the Civil Rights Act, the Great Society, and the Clean Air and Clean Water Acts.
Reactionaries, i.e. the right-wing that call themselves “conservatives”, try to edit out of history the restructuring role of government in realizing a forward-looking vision, thinking that, in the past, things were “better” at least for them and their constituency. The narrow tribalism of reactionaries and their attempts to hoard the benefits of existing institutions (formed exactly by historical efforts to realize the public purpose by government often in response to disruptive events and social movements) are blinkered and ahistorical, requiring at some point refuge in irrationalism and authoritarian submission to a supreme leader.
To re-invent society in the face of new challenges and emerging realities, governments must utilize their ability to finance themselves via spending money into the economy to realize society’s emerging new agenda. The commissioning of public works and the buying of goods and labor for the purposes of realizing a common purpose all draw on this self-financing ability, especially in the post gold-standard era. The gold standard tied down the fiat dimension of governments’ self-financing ability via accounting the issuance of currency in relationship to the possession of gold reserves. The origin of the gold standard is, in turn, a relic of the minting of money only from metallic coins that were supposed to contain their worth in a quantity of metal.
In the era of modern money, dating since 1971 and the end of convertibility of money into metals, governments are freed of the gold accounting yardstick and must utilize other means to adjust the liquidity level and level of overall economic activity in the economy including the level of inflation. The lack of a gold accounting standard has in theory at least, liberated governments, from the arbitrary gold constraint that served mostly rich creditors to the detriment of the working classes and the more dynamic aspects of the capitalist economy.
Unfortunately, there are many hold-overs from the gold-standard era, including the accounting mechanisms used in Congressional Budget Office analyses that implicitly or explicitly generate deficit worry and hysteria and promote budget “balancing”. The matching of tax revenue with government expenditure, i.e. “balancing” federal budgets, is innocent of the fiat dimension of all currencies and in particular, post-gold standard modern currencies like the US dollar, the Japanese yen, etc. If governments followed the CBO analyses religiously, the US economy would enter a deflationary spiral and living standards would plummet, as witnessed by the sectoral balances chart referenced above. Ultimately governments must in reality operate according to a more complex calculation of benefits and drawbacks of spending and taxation that I have called elsewhere “macroeconomic accounting” which contrasts with CBO “bean counting” originating in gold-standard and pre-modern “hard-money” accounting.
“Public Money” Not “Taxpayer Money”
If one then uses CBO analyses as a oracle of economic wisdom to perhaps skewer one’s political opponents, as you, Young Turks, have done, you actually buy into a hierarchical, creditor friendly, and plutocratic vision of public finance and therefore stymie the possibility of certain government actions in the future. If what we have is not “public money” created by government to serve the economy and the polity in a fair, egalitarian manner but instead “taxpayer dollars”, the economy including the public sector is in effect already owned by plutocrats and the rich. It is no wonder that Margaret Thatcher, one of the founders of the current neoliberal, anti-social welfare order in the West, agitated fiercely to define money as “taxpayer money” and not “public money”.
The “taxpayer dollars” theory of criticizing government waste and favoritism (of the rich and corporations) overlooks not only the reality that the taxes of the rich are not required for government to spend but that most taxes are in fact paid by rich people, even if they are being cut in relative terms by pro-plutocratic political operatives. If government is then funded by “taxpayer dollars”, the rich then become sponsors of government and the public sector, as they possess the money that the government “needs”. They then become “creditors” of government and are put in a uniquely powerful position in the ideology of supposed “progressives” who buy into the “taxpayer money” model of government finance.
Progressives think that their position that we must tax the rich more IN ORDER TO “pay for” public benefit is “progressive” because it promises to exact some cosmic justice on the admittedly overly rich, rich. While higher taxes on the rich are desirable they are, 1) hard to enact and effectively collect (though this should be attempted anyway), and 2) get the causality wrong thereby politically hogtying government’s abilities to take initiative to act for the public good. Most people and overall social prosperity will be helped by governments’ freedom to fund public priorities rather than making public policy contingent on the removal of money from the pockets of the rich, under the conceit that it “pays for” (federally-funded) public priorities.
Making the rich, less rich, should be a public priority but not the lynchpin for government’s pro-social and pro-prosperity actions that are required and also desirable. Stated again in other words, paradoxically, the supposed “progressive” position that taxing the rich more is the highest priority, attributes to the rich a power they do not have and puts the entire progressive political agenda in jeopardy and permanent hiatus. Whether or not the rich pay taxes, should not hold up the progressive agenda or needed government action in society and the economy. The supposedly “progressive” position firmly attributes “ownership” of government to the rich, which is then agrees in action with Thatcher and others who sought to hamstring governments’ efforts to manage the economy and increase social welfare via government spending. The digits in the bank accounts of the rich are not required to fund public priorities.
As difficult as it may be for political commentators like you folks at Young Turks, discussion of “taxpayer dollars” needs to be phased out in favor of talking about fair and democratic use of “public money”, including fair taxation to realize social, political and economic goals. The provision of the currency by government is a public utility that must balance public and private concerns and interests. The appeals to Young Turks viewers and their “taxpayer dollars” sounds “populist” but it is an inaccurate portrayal of government finance on the federal level and is a key, unwitting, concession to our already plutocratic and highly unequal society.
The Political Uses of Ignorance about Government Finance and Money
Cenk, Anna, John and TYT Team, it has been alarming to me to see you, mostly reliable progressives, ally yourself around the deficit issue with your political enemies and, in tendency, scuttling or hamstringing the agenda you seem to be promoting. I believe you have not fully understood the stealthy campaign by mostly Wall Street operatives to malign public finance and direct government action in the economy, which has put in some deep roots in both political Parties but in particular within the Democratic Establishment.
It must be admitted that in everyday life, individuals, businesses, and state and local governments need to act as though they still lived under the gold-standard, and maintain a “normal” money fetish, believing that each unit of money is something like a nugget of a precious metal that must be (we hope, legally) acquired to be able to then be used or borrowed as private credit that will then be paid back with interest. To pay attention to having enough of these virtual “nuggets” is a condition of normality in a capitalist society.
It is however dysfunctional and ultimately “not normal” for the finances of the national government, the currency-issuer, to be treated as if they were a business or a household for the reasons sketched in previous sections. As the sectoral balances show, the federal government is over the medium- and long-term the transactional “counter-party” of the private sector as a whole and its actions cannot be evaluated according to the same criteria as businesses and households. In net, over time, the more the federal government “loses” the more households and businesses “win”. In our system, those “losses” are tallied as federal public debt (Treasury bonds are issued automatically in the amount of federal budget deficits) but that is a convention but not a necessity of currency issuance. Because a modern currency-issuing government produces money at near-zero cost to itself, it does not “lose” in reality by running deficits, though real, non-financial and some financial inflationary constraints exist to unlimited government spending, depending on what goods and services the government purchases with its spending.
There are however aggressive political operators as well as misinformed economists and politicians who seek to confuse federal government with businesses and households by promoting deficit worry and hysteria as a condition of “seriousness” about federal government finance. The confusion of government finance and business/household finance has key ideological functions for a narrow set of wealthy economic actors that have been able to sponsor a whirl of political misinformation and “civil society” organizations that supposedly are concerned about public debt and deficits. The recently-deceased Pete Peterson, a Wall Street billionaire hedge fund founder and manager, has been a key political actor and organizer in surrounding Washington politicians with supposedly “knowledgeable” political operatives on government finance who promote balanced budgets and deficit worry. Peterson had a key role in tying the Obama Administration up in deficit hawkery via the Simpson-Bowles Commission. Third Way, the Wall Street lobbying group, closely allied with the Democratic Party Establishment has also played a key role in keeping Democrats mired in deficit worry and deficit hysteria.
It is no accident that Wall Street operatives and bankers are centrally involved in keeping both parties distracted by and involved in the deficit- and public-debt hysteria circus in Washington. The private FIRE sector (finance, insurance and real estate) sees the expansion of direct government finance of social benefits and the economy more generally as a threat to the maintenance and expansion of the generally inferior, sometimes deliberately overly-complex, private financing and insurance products that Wall Street offers. Expanded Social Security and Medicare cut directly into the business of Wall Street and private insurance firms.
There is thus to Wall Street direct competition in government providing liquidity and services to economic actors, as the more financing and services government can provide at zero or low interest, the less economic actors will turn to Wall Street for financing. Wall Street profits are directly tied to how much interest and fees they can extract from public and private sector actors. Private debt peonage of various kinds is the logical end point of a fully (private) financialized economy, that can only be prevented by adequate public liquidity provision and the strict regulation of private finance. Wall Street political operatives see the need then to obfuscate how government actually works and to create false narratives about the dangers of government spending.
As you might note, the Wall Street operatives and politicians who have engineered the deficit hysteria campaign are key opponents of the politics and policy that most Young Turks hosts would like to see enacted. Bernie Sanders though he has employed a prominent deficit-owl economist, Stephanie Kelton, appears unfortunately to still take reducing the deficit as a policy goal. That Bernie Sanders sees deficit reduction as a transcendental goal is problematic if he were ever to try to implement the ambitious set of social welfare policies he would like to see enacted. Just perhaps as have you guys, Sanders perhaps doesn’t want to stick his neck out on this one thing, as he sticks his neck out on so many other issues of importance. Also having once been a mayor of small city, Sanders may be overgeneralizing his experience of balancing a municipal budget to the federal budget. I am still hopeful that Sanders can learn from Kelton and others that deficit reduction is in 98 out of 100 situations leads to damaging outcomes for federal fiscal policy.
Deficit hysteria is the product of a misinformation campaign as or more sophisticated than the 50-year campaign organized by Charles Koch around the libertarian, anti-environmentalist ideology and their pro-plutocratic agenda that now dominates the GOP and Washington D.C. Though not the main drivers of deficit misinformation, the Kochs have also pitched in on promoting deficit worry during Democratic Administrations but now that they have their tax cuts and, in essence, control much of government, they’ve “changed their minds”.
Progressives and Climate Activists Must Claim Fiat Money for the Good of Humanity
As I have shown above, a consistent and realistic model of the economy and its dynamics can be achieved by understanding modern fiat money, both bank-created and government-created versions. There is a gap then between the political discourse of (unjustified) deficit worry/hysteria and the reality of the economy. Most of official Washington and also you, the Young Turks, seem now to be in agreement in supporting myths about deficits and the desirability of reducing them that clash both with daily economic reality and the longer-term policy agenda you might support. You want to raise up the living standards of ordinary people but you support a stance that is almost guaranteed to keep those living standards and a progressive policy agenda confined to small, token gestures.
You and other “progressives” are leaving then the power of fiat money, the reality of the US federal government financial operations, to right-wing fools like Trump, the GOP and “bipartisan” warmongers, who benefit from almost unlimited spending on propping up plutocrats and the military that is one of the drivers of expanded government spending, “no matter what”. Because of the foolish myths about deficits that Democrats subscribe to, apparently in efforts to pantomime financial prudence and virtue, while supporting Wall Street’s agenda to supplant direct government finance, this leaves it to Republicans to continue to shape an American state that is further and further from the social democratic vision of FDR and now Sanders, despite his deficit hawkery that pulls the “other way”.
One of the critical supports of the milquetoast Democrats and their tendency toward self-defeat and deference to Republicans is in fact their marriage to Wall Street and to the deficit hawk narrative that supports Wall Street. Obama at critical points in his Presidency tacked towards deficit hysteria, throttling the economic recovery from the 2007-2008 Great Recession, compulsively reaching “across the aisle” to the fanatical GOP, setting the stage for Democratic losses and eventually Trump’s pseudo-populist exploitation of Democratic abandonment of the working classes. You, Cenk and the Young Turks, if you want to criticize Democrats consistently and radically, you need to stop reinforcing this central narrative that supports their tendency to self-defeat.
Progressives’ promises will be largely empty if they do not commit to using the power of government’s fiat money to realize social welfare improvements and as I have written over the last several years, humanity’s self-rescue by effectively addressing climate change. Ethically/morally good people and good leaders are just as or more entitled to use government’s power for good as are Trump and militarists to use that power for malicious and destructive ends.
I hope you will read through this long letter and take it in the spirit of constructive criticism. I hope what I have written sparks your interest in reading more how modern economies and (currency-issuing) government finance actually work. Acquiring this knowledge is not magic but opens the door for the long, largely political and ethical fight around government fiscal policy in the net amounts of spending versus taxation and its overall direction and purpose.
Sincerely,
Michael Hoexter, Ph.D.
Posted on May 7, 2018 by Michael Hoexter
By Michael Hoexter, Ph.D.
[The Young Turks (TYTNetwork) is an online news network that has a wide reach among mostly progressives and independents in the United States with viewership in the hundreds of thousands of unique visitors per day and over 2 million views per day. Cenk Uygur is its founder, CEO, and leading on-camera commentator.]
Dear Cenk, John Iadarola, Ana Kasparian, and the Young Turks Team,
I’m a Young Turks subscriber, member, and a longtime fan of your coverage of politics. I think you have provided a consistent and detailed perspective on the failures of our political system, consistent criticism of both US major political parties as well as the alarming emergence of Trump and Trumpist/GOP neo-authoritarianism. I think your instincts for analyzing political personalities is grounded in keen and accurate observation of people and political forces. You also rarely shy away from criticizing both the Democratic and Republican Establishments, which distinguishes you from the “liberal” mainstream media. You have been also very good at analyzing some of the biases of mainstream media against progressives and against change that most Americans want. You are a consistent, principled, and very much needed independent voice that I often wish was heard more widely.
There is one area, however, where your coverage of news and economics is quite misleading and creates a trap for the progressive movement that you are elsewhere seeking mightily to foster and strengthen. You have uncritically brought into your coverage some mainstream Democratic and “moderate” Republican economic ideas about federal deficits, federal debt and tax cuts. You might feel you are representing a “solid” position because this locates the Young Turks firmly in the Establishment echo chamber about debt and deficits, as well as seems to put you in a good position to lambaste hypocritical Republicans and Trump.
If, however, you were to step out of the Washington echo chamber and into economic reality, it turns out this position is based on false ideas that are and could, if further pursued, be enormously damaging to the agenda that most Young Turks’ hosts would like to see implemented by the federal government.
Even though in sections of this letter to follow, I may be introducing you to some new abstractions, this is not an academic debate. Jeff Stein of the Washington Post has recently reported on this issue in his piece on “deficit owl” economists, heterodox but reality-based economists with whom I have been collaborating for the past six years. The threat of predatory political usage of our general confusion about debt and deficits by Trump, the GOP, and ultra-right donors like the Koch Brothers, only sharpens the need to “get this right” to defend and expand, among other things, Social Security and Medicare. As I am, for instance, an advocate for an aggressive climate mobilization, something like a large-scale, decades-long ”Green New Deal” to literally save human civilization if not the species itself, it is my understanding that a lot more than our current “First World” well-being is at stake in understanding how money is created and used by governments as well as other economic actors (private lending institutions) for various purposes.
By repeating tired nostrums about money that dominate “Inside the Beltway” thinking, you guys have strapped your own various agendas to an economic millstone. Laboring under these illusions, you have used some of your well-practiced abilities to create compelling-sounding arguments to re-tie progressives to an out-dated and inaccurate picture of how governments and money work that is also wholeheartedly embraced by the Democratic Establishment. These out-of-step ideas undercut the potential power of public policy to do the good you want to see done in the world. In sum, this is a non-trivial matter and I am not here trying to “showboat” to show off some arcane or original knowledge I have.
Example from TYT Webcast of April 15th: “Trump Tax Cuts Add WAY More to Debt Than Advertised”
I have tweeted to you a number of times in the past that you guys have bought into deficit hawkery and federal debt/deficit worry but now want to “escalate” my concern by writing you this public letter.
Now that the bloated, unfair, and unnecessary Trump tax cuts are starting to take effect, it is no wonder that you have revived your coverage of tax-related issues and blend that in with, the comfortable-for-you deficit hawk narrative. As an example you continued to “double down” on your deficit hawk position in your clip “Trump Tax Cuts Add WAY More to Debt Than Advertised” (https://youtu.be/NfipKtQTHOk). I understand that the primary and overt intention of this segment was to, rightly, call out the hypocrisy and plutocratic bias of Trump and the Republicans on taxes and deficits. Despite this overt intention that I recognize, I will use this clip as an example of both your and other “progressive” or liberal/centrist deficit-hawk/deficit-worry positions. The clip is not unique in your work, nor in the genre of liberal discourse you seem to be, wittingly or unwittingly, reinforcing.
This clip struck me as a good place to start this discussion, because Cenk, you, and you, John, seem to be so passionately involved in your argument and feel so compelled by the “sweep” of the political-economic narrative you weave in it. In believing and publicly reinforcing this narrative, unfortunately, you are not alone in the American/progressive/liberal community, so please do not feel singled out if I analyze it as an example of this genre of argument that is common. Unfortunately, Bernie Sanders also slips into this narrative, even as he proposes new social programs that would use public funding.
Like many complex arguments, your argument in the video weaves together narrative strands and propositions, some of which are true and some of which are false or damaging and misleading. Below the main propositions advanced by both of you are sketched out in sequence with my commentary on truth or falsehood in parentheses and bolded after each proposition.
Propositions advanced in the clip in sequence:
- Trump tax bill is “Costing Us” (False conception of government finance; True in an inferred sense of a lost POLITICAL opportunity)
- Republicans strategically “forgot” to add interest payments to the resulting increase in public debt (True)
- Tax cuts could “pay for” progressive agenda, listing examples (False conception of government finance)
- Republicans are liars (mostly True)
- Republicans are hypocrites about debt/deficits (True)
- Republicans (or Democrats) could use tax cuts to axe progressive spending priorities (Appears to be a Republican intention [True] but does not follow ECONOMICALLY from tax cuts [a false premise]; would be then a chosen POLITICAL act by the GOP and some Democrats [Possibly True in the Future as an INTENTIONAL act])
- Rounding error on increase in federal debt from Trump tax cuts could “give” you progressive policies (False conception of government finance)
- Tax cuts “never” make the economy stronger (False; depending on their design and timing they can stimulate or support the economy)
- Trickle down doesn’t happen (Mostly true but not because of federal budget deficits or public debt)
GOP/CBO assuming economic boom is false (Ongoing favorable economic conditions are statistical possibilities though not certain; tax cuts can spur or at least prop up the economy, like it or not. True that this is a pro-Trump, pro-GOP assumption.)
- The rich will have a propensity to hoard/save the tax cuts while the poor and middle class have a much higher propensity to spend income/tax cuts and stimulate the economy (True)
- We are “bleeding money” because of the tax cuts (False)
- It is an injustice and also potentially damaging to the economy that Trump’s tax cuts sunset (go away) for the less well-to-do but not for the rich, who keep their tax cuts (True)
- Bob Corker like other Republicans has played the spineless errand boy for the donor class despite his after-the fact confession that he regrets voting for the tax cuts (True)
Subtext/Take-Home Advice for Democrats/Progressives
I may be taking some liberties here with your intent but these subtexts originate in the discourse onto which you are “hitching” the narrative in this segment.
- Democrats and the public should be worried about deficits/debt in terms of real economic impacts (based on contrary-to-fact assumptions, false conception of government finance, politically self-defeating)
- Democrats should attack Republicans hypocrisy and lies as they reverse their position on government deficits to enable a gift to the rich donor class (they should attack the GOP on these counts but not a) based on false premises and b) not expect to gain much political traction with a large swath of the American public on this issue; i.e. much of the American public doesn’t care about DC-insider’s ideas about fiscal prudence.)
- Democrats should show they are the party that is truly prudent with money and spending by balancing federal budgets as opposed to hypocritical Republicans who spend too much/tax too little (based on contrary-to-fact assumptions, politically self-defeating, economically recessionary)
- Democrats can only protect social spending & progressive priorities by first or as a precondition having government levy higher taxes on the rich and corporations (based on contrary-to-fact assumptions, politically self-defeating)
- Government is like a business or household and needs to balance its books like a business or household (false, politically self-defeating)
- Common sense says that money is a limited set of hard things that you can count and Republicans/Trump have lost touch with common sense. (for businesses, households and state/local governments money must be treated as a “hard thing”; for the federal [currency-issuing] government money CANNOT be treated as a limited set of hard things without dire recessionary consequences)
As you can see from the above, if you accept my commentary as correct, your argument in the video, which is not entirely original to you guys, is based on a mixture of true observations and false or misleading ideas.
Below I will explain why some of your assertions about debt and deficits as well as the often-repeated subtext of your arguments are false and self-defeating.
Currency-Issuing is a Unique Economic Role
The US federal government, really any currency-issuing national government, has a unique but under-recognized economic function: currency-issuing governments in the modern era supply the public and private sectors of the national and global economy with money and economic liquidity at almost-zero cost. They do this in addition to and in the process of supplying public goods like roads, a postal service, various other social services, a legal system, elements of an educational system, a military that is supposed to protect the country from attack etc. Government spending creates money (It isn’t “printed” first in some pre-determined quantity: almost all government spending in the modern era is simply electronically crediting bank accounts). Some national governments provide more public goods than other governments, often taxing more in the process, but those taxes are not absolutely, currency unit for currency unit, necessary for government to spend, as the government generates the currency units themselves. A generally higher level of taxation is usually needed for a large public sector but no one-to-one matching of taxed AMOUNTS to spent AMOUNTS is needed or, as we will see below, desirable.
These almost-inevitable laws of a money-based economy, that are ignored or denied by deficit hawks and most mainstream economists, become obvious when you look at changes in what macroeconomists call “sectoral balances”, the net inflow or outflow of money from the three main sectors of any national economy: the public sector, the domestic private sector, and the “rest of the world” (current account balance). Here we see that changes in each sectoral balance in the US economy almost inevitably require (at risk of total economic collapse) compensating increases or decreases in other sectors, creating a “mirror image” above and below the 0% “no change” line:
[Source: https://theminskys.org/usa-2017-q1-sectoral-balances-update/]
As you see, trade/current account deficits (the green shown as a surplus of “the rest of the world” in the chart) which the US has run for many years, pretty much guarantee that the federal government will have to run deficits (orange below the line). Furthermore for the domestic private sector to overall grow over time (run surpluses and be above 0% growth) either it needs a trade surplus (not happening in the US as above) or a government budget deficit or both. Finally, an economic downturn in a modern economy requires increases in budget deficits to push the domestic private sector again up into surplus (as shown above). Charts like this and the sectoral balances approach, take the “voodoo” out of understanding the macroeconomy and money, exhibiting a stock-flow consistent model of how money in the economy flows.Below I will explain why some of your assertions about debt and deficits as well as the often-repeated subtext of your arguments are false and self-defeating.
Currency-Issuing is a Unique Economic Role
The US federal government, really any currency-issuing national government, has a unique but under-recognized economic function: currency-issuing governments in the modern era supply the public and private sectors of the national and global economy with money and economic liquidity at almost-zero cost. They do this in addition to and in the process of supplying public goods like roads, a postal service, various other social services, a legal system, elements of an educational system, a military that is supposed to protect the country from attack etc. Government spending creates money (It isn’t “printed” first in some pre-determined quantity: almost all government spending in the modern era is simply electronically crediting bank accounts). Some national governments provide more public goods than other governments, often taxing more in the process, but those taxes are not absolutely, currency unit for currency unit, necessary for government to spend, as the government generates the currency units themselves. A generally higher level of taxation is usually needed for a large public sector but no one-to-one matching of taxed AMOUNTS to spent AMOUNTS is needed or, as we will see below, desirable.
These almost-inevitable laws of a money-based economy, that are ignored or denied by deficit hawks and most mainstream economists, become obvious when you look at changes in what macroeconomists call “sectoral balances”, the net inflow or outflow of money from the three main sectors of any national economy: the public sector, the domestic private sector, and the “rest of the world” (current account balance). Here we see that changes in each sectoral balance in the US economy almost inevitably require (at risk of total economic collapse) compensating increases or decreases in other sectors, creating a “mirror image” above and below the 0% “no change” line:
[Source: https://theminskys.org/usa-2017-q1-sectoral-balances-update/]
As can be noted in the sectoral balances chart, the government sector is the sector that can be most responsive to economic and social conditions, thereby managing the crisis-ridden capitalist economy. The process of spending on public goods and services injects the national currency, money, into the economy, while federal taxes destroy that money, while also compelling people to use the currency to pay the taxes, undergirding the value of the currency (rather than some other measure of value). Unlike the federal, currency-issuing government, state and local governments collect some of the money in circulation via local and state taxes to then spend on (local or regional) public goods, much more like how businesses and households must usually get income (or use the promise of future income as collateral to get bank credit) and then spend it. The federal government “invents” new money units as it spends it and then pulls it out of the economy by taxes, dampening inflationary pressures (which are not automatic consequences of the injection of more money into the economy by government). Unlike the federal government, state and local governments need revenue from taxes to spend or pay back the various bonds they have floated for large-scale spending. Managing a business, municipal or state government is not necessarily good training for successful management of the federal government’s fiscal policy, which unnecessarily, for reasons sketched below, remains a “dark art”.
There is another source of dollars (or in other nations, their national currency) in modern economies, that from private bank lending. Banks also “invent” (temporarily) currency by giving out loans that then must be paid back with interest. In the 19th Century and earlier some banks issued their own denominations of currency but the inefficiencies associated with separate bank currencies has led to a system of private banks creating national-currency-denominated loans. The Bank of England has now recognized that this so-called “endogenous” theory of bank money is also the correct one, rather than the “loanable funds” model still taught in conventional economics curricula. The conventional model taught in most Econ 101 classes says erroneously that banks lend out the savings of other bank customers to borrowers.
Contrary to the fictional loanable funds model, the net effect of bank lending over the entire business cycle is deflationary, to withdraw liquidity and currency from circulation in the economy, as bank profits are dependent on collecting back both the (invented) principle and interest which then forms the basis of bank profits that go mostly to the wealthy owners/shareholders and executives of banks.
The apparently-mysterious phenomenon of economic cycles and recessions can best be understood by reference to the endogenous nature of bank-created money and the debt-deflation theory of Great Depressions. In good times, banks create lots of “temporary” money via loans that needs to be repaid with interest (money from other sources other than the bank loan). When a bank makes a loan, it bets that the borrower has an business idea that can not only pay back the principle but also “make money” by attracting funds from other sources to pay back the interest on the loan. This is the way the banks make money: inventing money that then diverts more money from other sources to pay back principle and interest. When the “good risks” are exhausted, banks continue to try to make loans to progressively more risky and eventually to projects that turn out to be “bad risks”. Eventually banks stop making loans or risk going under themselves by making too many bad loans. Mortgage lending follows the same path, preying, as it were, on the incomes of homebuyers to return principle plus interest.
With banks making fewer loans and continuing to demand that existing loans be repaid plus interest, the private banking industry, as a recession begins, starts draining the economy of “bank-created” liquidity plus interest, with fewer businesses and individuals having less money to pay for goods, new assets (housing, buildings, capital), and services. The velocity/frequency of transactions in the economy slows down. The resulting “credit crunch” starts to ripple through the broader economy and GDP growth slows or goes negative, unemployment goes up, and more and more people have less income or lose valuable assets like businesses and homes to foreclosure or bankruptcy.
In one of the most impressive pieces of empirical research by an economist, Steve Keen has shown how changes in lending/private debt (the issuance of new loans) correlates almost perfectly (negatively) with the business cycle, as represented here by unemployment rate:
[Source: http://www.debtdeflation.com/blogs/2014/02/02/modeling-financial-instability/]
Here unemployment is a stand-in for overall economic distress or prosperity, showing that the rate of change in bank lending is very tightly tied to real economic conditions. Beyond increases in bankruptcy of borrowers now defaulting on loans, some banks/creditors that took too many risks during the previous boom will go out of business (Bear Stearns, Lehman Brothers, etc.), further restricting the pool of lenders and potential loans. Without the stabilizing effect of counter-cyclical or constant government spending and deficit spending in particular, economies based on bank lending will permanently contract, as bank-created money/liquidity is premised only on profitable return on investment, which is not always possible, especially in the spiral of a downturn.
Therefore in a modern capitalist economy, there is a tendency towards liquidity crunches and what is described above, debt-deflation, where creditors seek to extract the principle and interest out of a population that is increasingly unable to pay back the loans.
Furthermore, there is still another longer-term dynamic in capitalist economies that underlines the need for government stabilization of and egalitarian distribution of liquidity/money in the economy. Not only banks but capitalist firms and favorably positioned individuals and households attempt to capture as much of the circulating money as possible and “save it”, i.e. accumulate capital to either hoard, invest passively, or invest in productive capital to, in turn, accumulate more capital. There is a tendency towards income and wealth inequality in capitalism that is “a feature not a bug”: “winning” at the capitalist game means becoming ever wealthier at the expense of others, even if what is being produced may at times be a novel and highly useful good or service to its buyers. This “winning” means there is a tendency towards increasing concentration of money and, in many political systems, political power as well, based on economic power concentration. This concentration of money and wealth, in addition to that caused by the bank-lending-driven business cycle, leads to the tendency we see ever more acutely of enormous wealth and income inequality on a national and international level. The formation of a economic and political oligarchy is a tendency of capitalism, in the absence of intense countervailing regulations and social movements for economic equality.
In some vision of economic egalitarianism propounded by many who call themselves progressives, the focus is often on taxing the rich more, a direction of tax policy I also support for a variety of reasons (egalitarianism, “winning” at capitalism is often parasitic & damaging to society and the environment, discourages speculation on asset prices). Few advocates, however, think past how simply taxing the rich more would work to create both equality and prosperity. High levels of taxation of the rich must rest on an implied or stated social agreement that social solidarity and equality are more important than preserving the “winner-take-all” capitalist game. The formation of a political economic oligarchy would then need to be seen as an alien, inhumane phenomenon that should be attacked, by among other things, high tax rates on the rich.
Of course, as we have seen, these high levels of taxation do not directly fund government spending, nor does the reduction in the income and wealth of the rich directly provide benefits to those who have low or inadequate incomes to survive in the economy. It is largely through government spending, regulations, and universal benefit programs that the lifting up of the living standards of the poor, the working and middle classes can be achieved. This provision of liquidity and in-kind services by government that free up disposable income supports economic demand for real goods and services in the economy as a whole, increasing overall social prosperity.
The chronic “leakage” of liquidity upward, even with high levels of taxation, i.e. capital accumulation by the rich and by banks, as well as some level of economic growth (though endless growth is controversial or damaging in a world of limited physical resources), provides the need for government to be continually providing more “economic points” (i.e. money) into the economy for the private sector to “play with”, i.e. successfully complete economic transactions and support economic demand. Providing more (monetary) units of value-measure means more deficit spending. I have proposed elsewhere that the term “deficit” spending is a misnomer when applied to currency-issuing governments and have a proposed we call it the “net contribution” of government to the economy. In our current climate, “too much” government spending is not yet on the table, spending that would lead to inflationary pressure.
So, even if we (still unrealistically but more realistically than conventional wisdom allows) assume that the economy exists purely as a smoothly functioning private sector, continual and habitual deficit spending by governments is absolutely necessary in a capitalist economy to:
buffer the swings and periodic liquidity crunches of the private lending/business cycle.
continually provide liquidity to the very large group, often a majority, of “non-winners” of the capitalist game of money and capital accumulation to keep the economy functioning & support economic demand, via social welfare, income support, and jobs program spending.
add more economic “points” (monetary units) in net to the pool available to enable the economy to grow.
Some of these reasons are recognized by various economists and business people as reality but only the “deficit owl”, Modern Money Theory, school of economists recognizes them all. Modern Money Theory is a stock-flow consistent theory of the modern economy, the only one that addresses all three key challenges to the “flow” of commerce in the economy. The “deficit dove” position, that is sometimes advanced by mainstream liberal economists like Paul Krugman or Jared Bernstein, resting on some quotes by Keynes, recognizes “1” and parts of “2”, on occasion but is stock-flow inconsistent: they don’t recognize the need for government to supply more “points” in the economy overall due to the structural tendencies of capitalism.
Government Social and Economic Leadership Rests on Self-Financing
If we advance beyond the model of the economy that conceives of the purpose of the economy as private and business gains, as sketched out in the previous section, a truly realistic model of the economy sees that political action and initiative is critical to overall social and economic well-being. Using the language of Karl Polanyi, the economy is “embedded” in society and nature. Economies and societies must be continually reinvented and restructured by political action; the current composition of economic sectors and activities are not “natural facts” that must be treated as immutable, otherwise we will ignore and dismiss critical emerging features of the complex multi-tiered reality we live in.
Conventional economic models based on the neoclassical economics taught in “Econ 101” downplays the role of government as an integrated part of the economy. In a more realistic and complete model of the economy, the government and public sector help realize a combined “public purpose” of society as a whole, a purpose that is constantly redefined and renegotiated via politics. To realize the public purpose effectively, especially at times when a fundamental reorientation of society and the economy is necessary, government leaders and the polity that supports them must understand and utilize the creative, inventive aspects of government functioning. Government at times must restructure certain aspects of society in order for the society and civilization to continue functioning at all, continue functioning well, or according to some vision of “the good” that may either be imposed from above by elites or “bubble up” from popular discontent and social movements. In the United States, the mid-20th Century saw a series of these efforts including the New Deal, the WWII mobilization, the GI Bill, the building of the Interstate highway system, the Civil Rights Act, the Great Society, and the Clean Air and Clean Water Acts.
Reactionaries, i.e. the right-wing that call themselves “conservatives”, try to edit out of history the restructuring role of government in realizing a forward-looking vision, thinking that, in the past, things were “better” at least for them and their constituency. The narrow tribalism of reactionaries and their attempts to hoard the benefits of existing institutions (formed exactly by historical efforts to realize the public purpose by government often in response to disruptive events and social movements) are blinkered and ahistorical, requiring at some point refuge in irrationalism and authoritarian submission to a supreme leader.
To re-invent society in the face of new challenges and emerging realities, governments must utilize their ability to finance themselves via spending money into the economy to realize society’s emerging new agenda. The commissioning of public works and the buying of goods and labor for the purposes of realizing a common purpose all draw on this self-financing ability, especially in the post gold-standard era. The gold standard tied down the fiat dimension of governments’ self-financing ability via accounting the issuance of currency in relationship to the possession of gold reserves. The origin of the gold standard is, in turn, a relic of the minting of money only from metallic coins that were supposed to contain their worth in a quantity of metal.
In the era of modern money, dating since 1971 and the end of convertibility of money into metals, governments are freed of the gold accounting yardstick and must utilize other means to adjust the liquidity level and level of overall economic activity in the economy including the level of inflation. The lack of a gold accounting standard has in theory at least, liberated governments, from the arbitrary gold constraint that served mostly rich creditors to the detriment of the working classes and the more dynamic aspects of the capitalist economy.
Unfortunately, there are many hold-overs from the gold-standard era, including the accounting mechanisms used in Congressional Budget Office analyses that implicitly or explicitly generate deficit worry and hysteria and promote budget “balancing”. The matching of tax revenue with government expenditure, i.e. “balancing” federal budgets, is innocent of the fiat dimension of all currencies and in particular, post-gold standard modern currencies like the US dollar, the Japanese yen, etc. If governments followed the CBO analyses religiously, the US economy would enter a deflationary spiral and living standards would plummet, as witnessed by the sectoral balances chart referenced above. Ultimately governments must in reality operate according to a more complex calculation of benefits and drawbacks of spending and taxation that I have called elsewhere “macroeconomic accounting” which contrasts with CBO “bean counting” originating in gold-standard and pre-modern “hard-money” accounting.
“Public Money” Not “Taxpayer Money”
If one then uses CBO analyses as a oracle of economic wisdom to perhaps skewer one’s political opponents, as you, Young Turks, have done, you actually buy into a hierarchical, creditor friendly, and plutocratic vision of public finance and therefore stymie the possibility of certain government actions in the future. If what we have is not “public money” created by government to serve the economy and the polity in a fair, egalitarian manner but instead “taxpayer dollars”, the economy including the public sector is in effect already owned by plutocrats and the rich. It is no wonder that Margaret Thatcher, one of the founders of the current neoliberal, anti-social welfare order in the West, agitated fiercely to define money as “taxpayer money” and not “public money”.
The “taxpayer dollars” theory of criticizing government waste and favoritism (of the rich and corporations) overlooks not only the reality that the taxes of the rich are not required for government to spend but that most taxes are in fact paid by rich people, even if they are being cut in relative terms by pro-plutocratic political operatives. If government is then funded by “taxpayer dollars”, the rich then become sponsors of government and the public sector, as they possess the money that the government “needs”. They then become “creditors” of government and are put in a uniquely powerful position in the ideology of supposed “progressives” who buy into the “taxpayer money” model of government finance.
Progressives think that their position that we must tax the rich more IN ORDER TO “pay for” public benefit is “progressive” because it promises to exact some cosmic justice on the admittedly overly rich, rich. While higher taxes on the rich are desirable they are, 1) hard to enact and effectively collect (though this should be attempted anyway), and 2) get the causality wrong thereby politically hogtying government’s abilities to take initiative to act for the public good. Most people and overall social prosperity will be helped by governments’ freedom to fund public priorities rather than making public policy contingent on the removal of money from the pockets of the rich, under the conceit that it “pays for” (federally-funded) public priorities.
Making the rich, less rich, should be a public priority but not the lynchpin for government’s pro-social and pro-prosperity actions that are required and also desirable. Stated again in other words, paradoxically, the supposed “progressive” position that taxing the rich more is the highest priority, attributes to the rich a power they do not have and puts the entire progressive political agenda in jeopardy and permanent hiatus. Whether or not the rich pay taxes, should not hold up the progressive agenda or needed government action in society and the economy. The supposedly “progressive” position firmly attributes “ownership” of government to the rich, which is then agrees in action with Thatcher and others who sought to hamstring governments’ efforts to manage the economy and increase social welfare via government spending. The digits in the bank accounts of the rich are not required to fund public priorities.
As difficult as it may be for political commentators like you folks at Young Turks, discussion of “taxpayer dollars” needs to be phased out in favor of talking about fair and democratic use of “public money”, including fair taxation to realize social, political and economic goals. The provision of the currency by government is a public utility that must balance public and private concerns and interests. The appeals to Young Turks viewers and their “taxpayer dollars” sounds “populist” but it is an inaccurate portrayal of government finance on the federal level and is a key, unwitting, concession to our already plutocratic and highly unequal society.
The Political Uses of Ignorance about Government Finance and Money
Cenk, Anna, John and TYT Team, it has been alarming to me to see you, mostly reliable progressives, ally yourself around the deficit issue with your political enemies and, in tendency, scuttling or hamstringing the agenda you seem to be promoting. I believe you have not fully understood the stealthy campaign by mostly Wall Street operatives to malign public finance and direct government action in the economy, which has put in some deep roots in both political Parties but in particular within the Democratic Establishment.
It must be admitted that in everyday life, individuals, businesses, and state and local governments need to act as though they still lived under the gold-standard, and maintain a “normal” money fetish, believing that each unit of money is something like a nugget of a precious metal that must be (we hope, legally) acquired to be able to then be used or borrowed as private credit that will then be paid back with interest. To pay attention to having enough of these virtual “nuggets” is a condition of normality in a capitalist society.
It is however dysfunctional and ultimately “not normal” for the finances of the national government, the currency-issuer, to be treated as if they were a business or a household for the reasons sketched in previous sections. As the sectoral balances show, the federal government is over the medium- and long-term the transactional “counter-party” of the private sector as a whole and its actions cannot be evaluated according to the same criteria as businesses and households. In net, over time, the more the federal government “loses” the more households and businesses “win”. In our system, those “losses” are tallied as federal public debt (Treasury bonds are issued automatically in the amount of federal budget deficits) but that is a convention but not a necessity of currency issuance. Because a modern currency-issuing government produces money at near-zero cost to itself, it does not “lose” in reality by running deficits, though real, non-financial and some financial inflationary constraints exist to unlimited government spending, depending on what goods and services the government purchases with its spending.
There are however aggressive political operators as well as misinformed economists and politicians who seek to confuse federal government with businesses and households by promoting deficit worry and hysteria as a condition of “seriousness” about federal government finance. The confusion of government finance and business/household finance has key ideological functions for a narrow set of wealthy economic actors that have been able to sponsor a whirl of political misinformation and “civil society” organizations that supposedly are concerned about public debt and deficits. The recently-deceased Pete Peterson, a Wall Street billionaire hedge fund founder and manager, has been a key political actor and organizer in surrounding Washington politicians with supposedly “knowledgeable” political operatives on government finance who promote balanced budgets and deficit worry. Peterson had a key role in tying the Obama Administration up in deficit hawkery via the Simpson-Bowles Commission. Third Way, the Wall Street lobbying group, closely allied with the Democratic Party Establishment has also played a key role in keeping Democrats mired in deficit worry and deficit hysteria.
It is no accident that Wall Street operatives and bankers are centrally involved in keeping both parties distracted by and involved in the deficit- and public-debt hysteria circus in Washington. The private FIRE sector (finance, insurance and real estate) sees the expansion of direct government finance of social benefits and the economy more generally as a threat to the maintenance and expansion of the generally inferior, sometimes deliberately overly-complex, private financing and insurance products that Wall Street offers. Expanded Social Security and Medicare cut directly into the business of Wall Street and private insurance firms.
There is thus to Wall Street direct competition in government providing liquidity and services to economic actors, as the more financing and services government can provide at zero or low interest, the less economic actors will turn to Wall Street for financing. Wall Street profits are directly tied to how much interest and fees they can extract from public and private sector actors. Private debt peonage of various kinds is the logical end point of a fully (private) financialized economy, that can only be prevented by adequate public liquidity provision and the strict regulation of private finance. Wall Street political operatives see the need then to obfuscate how government actually works and to create false narratives about the dangers of government spending.
As you might note, the Wall Street operatives and politicians who have engineered the deficit hysteria campaign are key opponents of the politics and policy that most Young Turks hosts would like to see enacted. Bernie Sanders though he has employed a prominent deficit-owl economist, Stephanie Kelton, appears unfortunately to still take reducing the deficit as a policy goal. That Bernie Sanders sees deficit reduction as a transcendental goal is problematic if he were ever to try to implement the ambitious set of social welfare policies he would like to see enacted. Just perhaps as have you guys, Sanders perhaps doesn’t want to stick his neck out on this one thing, as he sticks his neck out on so many other issues of importance. Also having once been a mayor of small city, Sanders may be overgeneralizing his experience of balancing a municipal budget to the federal budget. I am still hopeful that Sanders can learn from Kelton and others that deficit reduction is in 98 out of 100 situations leads to damaging outcomes for federal fiscal policy.
Deficit hysteria is the product of a misinformation campaign as or more sophisticated than the 50-year campaign organized by Charles Koch around the libertarian, anti-environmentalist ideology and their pro-plutocratic agenda that now dominates the GOP and Washington D.C. Though not the main drivers of deficit misinformation, the Kochs have also pitched in on promoting deficit worry during Democratic Administrations but now that they have their tax cuts and, in essence, control much of government, they’ve “changed their minds”.
Progressives and Climate Activists Must Claim Fiat Money for the Good of Humanity
As I have shown above, a consistent and realistic model of the economy and its dynamics can be achieved by understanding modern fiat money, both bank-created and government-created versions. There is a gap then between the political discourse of (unjustified) deficit worry/hysteria and the reality of the economy. Most of official Washington and also you, the Young Turks, seem now to be in agreement in supporting myths about deficits and the desirability of reducing them that clash both with daily economic reality and the longer-term policy agenda you might support. You want to raise up the living standards of ordinary people but you support a stance that is almost guaranteed to keep those living standards and a progressive policy agenda confined to small, token gestures.
You and other “progressives” are leaving then the power of fiat money, the reality of the US federal government financial operations, to right-wing fools like Trump, the GOP and “bipartisan” warmongers, who benefit from almost unlimited spending on propping up plutocrats and the military that is one of the drivers of expanded government spending, “no matter what”. Because of the foolish myths about deficits that Democrats subscribe to, apparently in efforts to pantomime financial prudence and virtue, while supporting Wall Street’s agenda to supplant direct government finance, this leaves it to Republicans to continue to shape an American state that is further and further from the social democratic vision of FDR and now Sanders, despite his deficit hawkery that pulls the “other way”.
One of the critical supports of the milquetoast Democrats and their tendency toward self-defeat and deference to Republicans is in fact their marriage to Wall Street and to the deficit hawk narrative that supports Wall Street. Obama at critical points in his Presidency tacked towards deficit hysteria, throttling the economic recovery from the 2007-2008 Great Recession, compulsively reaching “across the aisle” to the fanatical GOP, setting the stage for Democratic losses and eventually Trump’s pseudo-populist exploitation of Democratic abandonment of the working classes. You, Cenk and the Young Turks, if you want to criticize Democrats consistently and radically, you need to stop reinforcing this central narrative that supports their tendency to self-defeat.
Progressives’ promises will be largely empty if they do not commit to using the power of government’s fiat money to realize social welfare improvements and as I have written over the last several years, humanity’s self-rescue by effectively addressing climate change. Ethically/morally good people and good leaders are just as or more entitled to use government’s power for good as are Trump and militarists to use that power for malicious and destructive ends.
I hope you will read through this long letter and take it in the spirit of constructive criticism. I hope what I have written sparks your interest in reading more how modern economies and (currency-issuing) government finance actually work. Acquiring this knowledge is not magic but opens the door for the long, largely political and ethical fight around government fiscal policy in the net amounts of spending versus taxation and its overall direction and purpose.
Sincerely,
Michael Hoexter, Ph.D.
Sunday, May 6, 2018
The Hubris of the Hillaried Classes
Completely unsolicited, a recent breakfast companion announced she would never live in close proximity to a Trump supporter. A little unnerved, I told her I wasn’t a big fan of Obama, either.
Don’t get me wrong, Trump is not my favorite President. He’s a thug, a bigot, and a self-serving criminal (which the link describes in some detail). But the previous Clinton and Obama administrations made Trump possible, if not necessary, and they are all vying for the coveted “Most Corrupt Presidency” award.
Why do I say that? Consider the Trump bigotry. It’s a convenient way to divide and conquer the population, distracting them from the genuine malefactors on Wall Street, and directing the attention of the disaffected to the “other” (Hispanics, LBGT, etc.) rather than the people whose frauds crashed the economy. Trump is particularly hard on those “Bad Hombres” coming from our Hispanic neighbors to the south.
But Obama tripled the rate of deportations of his predecessor.
So who is the real oppressor of the Hispanics here? The harsh talker or the big deporter?
Or...consider the bank scandal Obama greeted on his first day in office. It would have been impossible, or at least much smaller if Clinton hadn’t deregulated Wall Street. To fully appreciate the awfulness of Obama’s response, one has to compare it to the previous biggest-ever bank scandal, the Savings and Loans.
Yes, Reagan made the S&L scandal worse by deregulating them so they could “grow” their way out of trouble by taking even bigger risks. But the regulators--many of them Republican-appointed--actually did their job. They filed 30,000+ referrals for criminal prosecution, and the Justice Dept. prosecuted 1200+ cases with a 90% conviction rate. They got really big fish, too--Charles Keating was one.
So how does the Obama administration’s response compare to Reagan / Bush 41 regulators in the era of the S&L scandal? The scandal itself is 70 times larger than the S&Ls, in fact bailing out a single bank (IndyMAC) cost as much as the entire S&L bailout.
So...how many referrals for criminal prosecution from the Obama regulators? Answer: zero. Even party loyalist, former State Treasurer Phil Angiledes who led an inquiry about the subprime mortgage debacle expressed surprise. The Obama Justice Dept. prosecuted about a dozen cases, all small fish.
The template for treating the big criminals was that Attorney General, and former Wall St. lawyer, Eric Holder threatened prosecution, then settled for dimes-on-the-dollar fines, with no admission of guilt. That latter omission makes it harder for the victims to prosecute civil cases.
So...Obama legitimized criminality. We can’t be surprised when someone who is transparently criminal succeeds such an administration, nor can we be surprised when Trump is called “authentic” when he’s transparently criminal, while Obama obscured this criminality.
The current kerfuffle about Facebook data is just the latest occurrence of Obama getting a pass when Trump is condemned.
And why is Trump "authentic"? Answer: (from Legacy of the Iraq War Matt Taibbi, Rolling Stone):
“Trump is just too stupid to use the antiseptic terminology we once thought we had to cook up to cloak our barbarism. He says “torture” instead of “enhanced interrogation” because he can’t remember what the difference is supposed to be. Which is understandable. Fifteen years is a long time for a rotting brain to keep up a pretense.
"We flatter ourselves that Trump is an aberration. He isn’t. He’s a depraved, cowardly, above-the-law bully, just like the country we’ve allowed ourselves to become in the last fifteen years.
“That we now deserve him as president is a consequence of the final lesson of the Iraq debacle: We lost that war. Not militarily maybe, but in the sense that we so completely dismantled what was left of our civil society in prosecution of it that, looking back, a battlefield loss would surely have been preferable.
“Wherever he is now, as eels perhaps slither through his eye-holes, Osama bin Laden has to be laughing. He had to know all along that only Americans were capable of destroying America. But he couldn’t have dreamed we’d do it so fast.”
So...I don't think adopting the kind of tribalism Trump is promoting is much of a solution to what he's promoting. And letting the Trump supporters know they are "deplorable" by looking down our noses at them isn't likely to promote an end to intolerance.
I wish this was easier...
Don’t get me wrong, Trump is not my favorite President. He’s a thug, a bigot, and a self-serving criminal (which the link describes in some detail). But the previous Clinton and Obama administrations made Trump possible, if not necessary, and they are all vying for the coveted “Most Corrupt Presidency” award.
Why do I say that? Consider the Trump bigotry. It’s a convenient way to divide and conquer the population, distracting them from the genuine malefactors on Wall Street, and directing the attention of the disaffected to the “other” (Hispanics, LBGT, etc.) rather than the people whose frauds crashed the economy. Trump is particularly hard on those “Bad Hombres” coming from our Hispanic neighbors to the south.
But Obama tripled the rate of deportations of his predecessor.
So who is the real oppressor of the Hispanics here? The harsh talker or the big deporter?
Or...consider the bank scandal Obama greeted on his first day in office. It would have been impossible, or at least much smaller if Clinton hadn’t deregulated Wall Street. To fully appreciate the awfulness of Obama’s response, one has to compare it to the previous biggest-ever bank scandal, the Savings and Loans.
Yes, Reagan made the S&L scandal worse by deregulating them so they could “grow” their way out of trouble by taking even bigger risks. But the regulators--many of them Republican-appointed--actually did their job. They filed 30,000+ referrals for criminal prosecution, and the Justice Dept. prosecuted 1200+ cases with a 90% conviction rate. They got really big fish, too--Charles Keating was one.
So how does the Obama administration’s response compare to Reagan / Bush 41 regulators in the era of the S&L scandal? The scandal itself is 70 times larger than the S&Ls, in fact bailing out a single bank (IndyMAC) cost as much as the entire S&L bailout.
So...how many referrals for criminal prosecution from the Obama regulators? Answer: zero. Even party loyalist, former State Treasurer Phil Angiledes who led an inquiry about the subprime mortgage debacle expressed surprise. The Obama Justice Dept. prosecuted about a dozen cases, all small fish.
The template for treating the big criminals was that Attorney General, and former Wall St. lawyer, Eric Holder threatened prosecution, then settled for dimes-on-the-dollar fines, with no admission of guilt. That latter omission makes it harder for the victims to prosecute civil cases.
So...Obama legitimized criminality. We can’t be surprised when someone who is transparently criminal succeeds such an administration, nor can we be surprised when Trump is called “authentic” when he’s transparently criminal, while Obama obscured this criminality.
The current kerfuffle about Facebook data is just the latest occurrence of Obama getting a pass when Trump is condemned.
And why is Trump "authentic"? Answer: (from Legacy of the Iraq War Matt Taibbi, Rolling Stone):
“Trump is just too stupid to use the antiseptic terminology we once thought we had to cook up to cloak our barbarism. He says “torture” instead of “enhanced interrogation” because he can’t remember what the difference is supposed to be. Which is understandable. Fifteen years is a long time for a rotting brain to keep up a pretense.
"We flatter ourselves that Trump is an aberration. He isn’t. He’s a depraved, cowardly, above-the-law bully, just like the country we’ve allowed ourselves to become in the last fifteen years.
“That we now deserve him as president is a consequence of the final lesson of the Iraq debacle: We lost that war. Not militarily maybe, but in the sense that we so completely dismantled what was left of our civil society in prosecution of it that, looking back, a battlefield loss would surely have been preferable.
“Wherever he is now, as eels perhaps slither through his eye-holes, Osama bin Laden has to be laughing. He had to know all along that only Americans were capable of destroying America. But he couldn’t have dreamed we’d do it so fast.”
So...I don't think adopting the kind of tribalism Trump is promoting is much of a solution to what he's promoting. And letting the Trump supporters know they are "deplorable" by looking down our noses at them isn't likely to promote an end to intolerance.
I wish this was easier...
I Know Which Country the U.S. Will Invade Next
By Lee Camp, host of Redacted Tonight
By the end of this column, it will be clear which country the United States will invade and topple next. Or failing that, it will be clear which country our military-intelligence-industrial complex will be aching to invade next.
We all want to know why America does what it does. And I don’t mean why Americans do what we do. I think that question still will be pondered eons from now by a future professor showing his students a video mind-meld of present-day UFC fighters booting each other in the head while thrilled onlookers cheer (not for either of the fighters but rather for more booting in the head).
But we all seem to assume that America—the entity, the corporation—has some sort of larger reasoning behind the actions it takes, the actions put forward by the ruling elite. And almost all of us know that the reasons we’re given by the press secretaries and caricature-shaped heads on the nightly news are the ripest, most fetid grade of bullshit.
We now know that the invasion of Iraq had nothing to do with weapons of mass destruction. We now know that the crushing of Libya had nothing to do with “stopping a bad man.” If one does even a cursory check of what dictators around the world are up to recently, you’ll find that the U.S. doesn’t care in the slightest whether they are bad or good, whether they’re using their free time to kill thousands of innocent people or to harmonize their rock garden. In fact, the U.S. gives military aid to 70 percent of the world’s dictators. (One would hope that’s only around the holidays though.)
So if it’s not for the stated reasons, why does the U.S. overrun, topple and sometimes occupy the countries it does? Obviously, there are oil resources or rare minerals to be had. But there’s something else that links almost all of our recent wars.
As The Guardian reported near the beginning of the Iraq War, “In October 2000, Iraq insisted on dumping the U.S. dollar—the currency of the enemy—for the more multilateral euro.”
However, one example does not make a trend. If it did, I would be a world-renowned beer pong champion rather than touting a 1-27 record. (I certainly can’t go pro with those numbers.)
But there’s more. Soon after Libya began moving toward an African gold-based currency—and lining up all its African neighbors to join it—we invaded it as well, with the help of NATO. Author Ellen Brown pointed this out at the time of the invasion:
[Moammar Gadhafi] initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar.
John Perkins, author of “Confessions of an Economic Hitman,” also has said that the true reason for the attack on Libya was Gadhafi’s move away from the dollar and the euro.
This week, The Intercept reported that the ousting of Gadhafi, which was in many ways led by President Nicolas Sarkozy of France, actually had to do with Sarkozy secretly receiving millions from Gadhafi, and it seemed that his corruption was about to be revealed. But, the article also noted, “[Sarkozy’s] real military zeal and desire for regime change came only after [Hillary] Clinton and the Arab League broadcasted their desire to see [Gadhafi] go.” And the fact that Gadhafi was planning to upend the petrodollar in Africa certainly provides the motivation necessary. (It doesn’t take much to get the U.S. excited about a new bombing campaign. I’m pretty sure we invaded Madagascar once in the 1970s because they smoked our good weed.)
Right now you may be thinking, “But, Lee, your theory is ridiculous. If these invasions were about the banking, then the rebels in Libya—getting help from NATO and the United States—would have set up a new banking system after bringing down Gadhafi.”
Actually, they didn’t wait that long. In the middle of the brutal war, the Libyan rebels formed their own central bank.
Brown said, “Several writers have noted the odd fact that the Libyan rebels took time out from their rebellion in March to create their own central bank—this before they even had a government.”
Wow, that sure does sound like it’s all about the banking.
Many of you know about Gen. Wesley Clark’s famous quote about seven countries in five years. Clark is a four-star general, the former head of NATO Supreme Allied Command, and he ran for president in 2008 (clearly he’s an underachiever). But it’s quite possible that 100 years from now, the one thing he’ll be remembered for is the fact that he told us that the Pentagon said to him in 2002: “We’re going to take down seven countries in five years. We’re going to start with Iraq, then Syria, Lebanon, then Libya, Somalia, Sudan. We’re going to come back and get Iran in five years.”
Most of this has happened. We have, of course, added some countries to the list, such as Yemen. We’re helping to destroy Yemen largely to make Saudi Arabia happy. Apparently our government/media care only about Syrian children (in order to justify regime change). We couldn’t care less about Yemeni children, Iraqi children, Afghan children, Palestinian children, North Korean children, Somali children, Flint (Michigan) children, Baltimore children, Native American children, Puerto Rican children, Na’vi children … oh wait, I think that’s from “Avatar.” Was that fiction? My memories and 3-D movies are starting to blur together.
Brown goes even further in her analysis of Clark’s bombshell:
What do these seven countries have in common? … [N]one of them is listed among the 56 member banks of the Bank for International Settlements (BIS). That evidently puts them outside the long regulatory arm of the central bankers’ central bank in Switzerland. The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked.
What I’m trying to say is: It’s all about the banking.
So right now you’re thinking, “But, Lee, then why is the U.S. so eager to turn Syria into a failed state if Syria never dropped the dollar? Your whole stupid theory falls apart right there.”
First, I don’t appreciate your tone. Second, in February 2006, Syria dropped the dollar as its primary hard currency.
I think I’m noticing a trend. In fact, on Jan. 4, it was reported that Pakistan was ditching the dollar in its trade with China, and that same day, the U.S. placed it on the watch list for religious freedom violations. The same day? Are we really supposed to believe that it just so happened that Pakistan stopped using the dollar with China on the same day it started punching Christians in the nose for no good reason? No, clearly Pakistan had violated our religion of cold hard cash.
This leaves only one question: Who will be next on the list of U.S. illegal invasions cloaked in bullshit justifications? Well, last week, Iran finally did it: It switched from the dollar to the euro. And sure enough, this week, the U.S. military-industrial complex, the corporate media and Israel all got together to claim that Iran is lying about its nuclear weapons development. What are the odds that this news would break within days of Iran dropping the dollar? What. Are. The. Odds?
The one nice thing about our corporate state’s manufacturing of consent is how predictable it is. We will now see the mainstream media running an increasing number of reports pushing the idea that Iran is a sponsor of terrorism and is trying to develop nuclear weapons (which are WMDs, but for some strange reason, our media are shying away from saying, “They have WMDs”). Here’s a 2017 PBS article claiming that Iran is the top state sponsor of terrorism. One must assume this list of terror sponsors does not include the country that made the arms that significantly enhanced Islamic State’s military capabilities. (It’s the U.S.)
Or the country that drops hundreds of bombs per day on the Middle East. (It’s the U.S.) But those bombs don’t cause any terror. Those are the happy bombs, clearly. Apparently, we just drop 1995 Richard Simmons down on unsuspecting people.
Point is, as we watch our pathetic corporate media continue their manufacturing of consent for war with Iran, don’t fall for it. These wars are all about the banking. And millions of innocent people are killed in them. Millions more have their lives destroyed.
You and I are just pawns in this game, and the last thing the ruling elite want are pawns who question the official narrative.
If you enjoyed this article, please share it, and check out Lee Camp’s free weekly podcast, “Common Censored.”
By the end of this column, it will be clear which country the United States will invade and topple next. Or failing that, it will be clear which country our military-intelligence-industrial complex will be aching to invade next.
We all want to know why America does what it does. And I don’t mean why Americans do what we do. I think that question still will be pondered eons from now by a future professor showing his students a video mind-meld of present-day UFC fighters booting each other in the head while thrilled onlookers cheer (not for either of the fighters but rather for more booting in the head).
But we all seem to assume that America—the entity, the corporation—has some sort of larger reasoning behind the actions it takes, the actions put forward by the ruling elite. And almost all of us know that the reasons we’re given by the press secretaries and caricature-shaped heads on the nightly news are the ripest, most fetid grade of bullshit.
We now know that the invasion of Iraq had nothing to do with weapons of mass destruction. We now know that the crushing of Libya had nothing to do with “stopping a bad man.” If one does even a cursory check of what dictators around the world are up to recently, you’ll find that the U.S. doesn’t care in the slightest whether they are bad or good, whether they’re using their free time to kill thousands of innocent people or to harmonize their rock garden. In fact, the U.S. gives military aid to 70 percent of the world’s dictators. (One would hope that’s only around the holidays though.)
So if it’s not for the stated reasons, why does the U.S. overrun, topple and sometimes occupy the countries it does? Obviously, there are oil resources or rare minerals to be had. But there’s something else that links almost all of our recent wars.
As The Guardian reported near the beginning of the Iraq War, “In October 2000, Iraq insisted on dumping the U.S. dollar—the currency of the enemy—for the more multilateral euro.”
However, one example does not make a trend. If it did, I would be a world-renowned beer pong champion rather than touting a 1-27 record. (I certainly can’t go pro with those numbers.)
But there’s more. Soon after Libya began moving toward an African gold-based currency—and lining up all its African neighbors to join it—we invaded it as well, with the help of NATO. Author Ellen Brown pointed this out at the time of the invasion:
[Moammar Gadhafi] initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar.
John Perkins, author of “Confessions of an Economic Hitman,” also has said that the true reason for the attack on Libya was Gadhafi’s move away from the dollar and the euro.
This week, The Intercept reported that the ousting of Gadhafi, which was in many ways led by President Nicolas Sarkozy of France, actually had to do with Sarkozy secretly receiving millions from Gadhafi, and it seemed that his corruption was about to be revealed. But, the article also noted, “[Sarkozy’s] real military zeal and desire for regime change came only after [Hillary] Clinton and the Arab League broadcasted their desire to see [Gadhafi] go.” And the fact that Gadhafi was planning to upend the petrodollar in Africa certainly provides the motivation necessary. (It doesn’t take much to get the U.S. excited about a new bombing campaign. I’m pretty sure we invaded Madagascar once in the 1970s because they smoked our good weed.)
Right now you may be thinking, “But, Lee, your theory is ridiculous. If these invasions were about the banking, then the rebels in Libya—getting help from NATO and the United States—would have set up a new banking system after bringing down Gadhafi.”
Actually, they didn’t wait that long. In the middle of the brutal war, the Libyan rebels formed their own central bank.
Brown said, “Several writers have noted the odd fact that the Libyan rebels took time out from their rebellion in March to create their own central bank—this before they even had a government.”
Wow, that sure does sound like it’s all about the banking.
Many of you know about Gen. Wesley Clark’s famous quote about seven countries in five years. Clark is a four-star general, the former head of NATO Supreme Allied Command, and he ran for president in 2008 (clearly he’s an underachiever). But it’s quite possible that 100 years from now, the one thing he’ll be remembered for is the fact that he told us that the Pentagon said to him in 2002: “We’re going to take down seven countries in five years. We’re going to start with Iraq, then Syria, Lebanon, then Libya, Somalia, Sudan. We’re going to come back and get Iran in five years.”
Most of this has happened. We have, of course, added some countries to the list, such as Yemen. We’re helping to destroy Yemen largely to make Saudi Arabia happy. Apparently our government/media care only about Syrian children (in order to justify regime change). We couldn’t care less about Yemeni children, Iraqi children, Afghan children, Palestinian children, North Korean children, Somali children, Flint (Michigan) children, Baltimore children, Native American children, Puerto Rican children, Na’vi children … oh wait, I think that’s from “Avatar.” Was that fiction? My memories and 3-D movies are starting to blur together.
Brown goes even further in her analysis of Clark’s bombshell:
What do these seven countries have in common? … [N]one of them is listed among the 56 member banks of the Bank for International Settlements (BIS). That evidently puts them outside the long regulatory arm of the central bankers’ central bank in Switzerland. The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked.
What I’m trying to say is: It’s all about the banking.
So right now you’re thinking, “But, Lee, then why is the U.S. so eager to turn Syria into a failed state if Syria never dropped the dollar? Your whole stupid theory falls apart right there.”
First, I don’t appreciate your tone. Second, in February 2006, Syria dropped the dollar as its primary hard currency.
I think I’m noticing a trend. In fact, on Jan. 4, it was reported that Pakistan was ditching the dollar in its trade with China, and that same day, the U.S. placed it on the watch list for religious freedom violations. The same day? Are we really supposed to believe that it just so happened that Pakistan stopped using the dollar with China on the same day it started punching Christians in the nose for no good reason? No, clearly Pakistan had violated our religion of cold hard cash.
This leaves only one question: Who will be next on the list of U.S. illegal invasions cloaked in bullshit justifications? Well, last week, Iran finally did it: It switched from the dollar to the euro. And sure enough, this week, the U.S. military-industrial complex, the corporate media and Israel all got together to claim that Iran is lying about its nuclear weapons development. What are the odds that this news would break within days of Iran dropping the dollar? What. Are. The. Odds?
The one nice thing about our corporate state’s manufacturing of consent is how predictable it is. We will now see the mainstream media running an increasing number of reports pushing the idea that Iran is a sponsor of terrorism and is trying to develop nuclear weapons (which are WMDs, but for some strange reason, our media are shying away from saying, “They have WMDs”). Here’s a 2017 PBS article claiming that Iran is the top state sponsor of terrorism. One must assume this list of terror sponsors does not include the country that made the arms that significantly enhanced Islamic State’s military capabilities. (It’s the U.S.)
Or the country that drops hundreds of bombs per day on the Middle East. (It’s the U.S.) But those bombs don’t cause any terror. Those are the happy bombs, clearly. Apparently, we just drop 1995 Richard Simmons down on unsuspecting people.
Point is, as we watch our pathetic corporate media continue their manufacturing of consent for war with Iran, don’t fall for it. These wars are all about the banking. And millions of innocent people are killed in them. Millions more have their lives destroyed.
You and I are just pawns in this game, and the last thing the ruling elite want are pawns who question the official narrative.
If you enjoyed this article, please share it, and check out Lee Camp’s free weekly podcast, “Common Censored.”
Friday, May 4, 2018
How Bill Cosby, Obama and Mega-preachers Sold Economic Snake Oil to Black America
By Lynn Parramore
MAY 2, 2018
It’s time to connect political violence with economic violence.
Lester K. Spence, Associate Professor of Political Science and Africana Studies at Johns Hopkins University, focuses on black, racial, and urban politics in the neoliberal era. In an interview with the Institute for New Economic Thinking (INET), he shares his perspective on a false brand of economic and political “common sense” that black elites helped sell to black communities.
Lynn Parramore: In your book, Knocking the Hustle, you describe a shift in America that took place when a new crop of intellectuals successfully sold the idea that everybody and everything ought to be judged by market competition and market-oriented behavior, something you call the “neoliberal turn.” How did this change manifest in black communities?
Lester K. Spence: The change really begins in the 50s and early 60s, but takes a sharp turn in the late 60s and early 70s, when the middle class moves to the suburbs. Detroit’s population in 1950 is 1.9 million, but by 1960 it has already dropped significantly. This is a partial byproduct of federal policy and a partial byproduct of private action, but the dynamic was racialized: whites had access to the suburbs and blacks did not. Cities like Detroit become increasingly African American, and as blacks come to take up a larger proportion of the population, they gain more and more political power, which they use to elect representatives.
Black mayors take control of the black cities, but as these cities become black, their ability to garner revenue to provide social services drops dramatically. So one of the reasons that the neoliberal turn takes the form it does in black communities is because the cities that blacks increasingly live in are themselves altered by neoliberal policies.
The decrease in the ability of cities to collect tax revenues causes mayors to turn more to the bond rating market and to things like downtown development. And there is an alteration of the welfare state — we could think about welfare itself or things like the transition to public housing, which really alters the policy terrain that blacks can operate in. You increasingly see people begin to articulate neoliberal policies as a way for black folks to advance.
LP: Could you give an example?
LS: In Detroit in the 90s, by the time the neoliberal turn really takes shape, you see somebody like Dennis Archer, Sr., the city’s second black mayor, attempt to use what’s called “total quality management” to revamp Detroit’s bureaucracy. That’s a management strategy that was taught at MBA schools in the late 80s and early 90s that puts the customer and customer decisions at the forefront of bureaucracy formation. You see it in Bill Clinton and Al Gore’s National Partnership for Reinventing Government [a task force to reform the way the federal government works] — but Archer is one of the first to implement it in a city. He brought in Ford executives in order to get the bureaucracies to think of citizens as consumers. This has an ideational impact.
You also see it in cities that are looking increasingly to downtown development and forced to transform downtowns into entertainment hubs. By the mid-to-late 90s, Detroit brought in three casinos, the idea being to give the city the types of jobs it once had when the automotive industry loomed large. Of course, it did not. They also created two new publicly subsidized sports stadiums. In the last few years, even as Detroit was dealing with bankruptcy, the state basically subsidized a new stadium for the Detroit Red Wings to the tune of about $300 million.
LP: So people living in cities are no longer citizens who require services to meet their needs but consumers in need of market-based solutions.
LS: Right.
LP: The title of your book references “the hustle.” What is it and how is it reflected in black culture and entertainment?
LS: I begin the book by juxtaposing Nat Adderley and Oscar Brown’s “Work Song” that’s about a certain type of labor in the 1960s against Ace Hood’s, “Hustle Hard.” He does more than just describe a condition in which he’s consistently having to work to make ends meet for himself and his family. The video features Ace Hood in a regular East Coast neighborhood, and all around him, people engage in different hustles to get by. The seasons change, and although the things that people sell change, like in the summer they’re hustling water and in the winter they’re hustling coats and gloves, the hustle itself doesn’t change. He doesn’t give a critique of that situation, but actually makes a normative argument for it, suggesting that it is a good thing. If you want to work in the world, this is what you’re supposed to do. If you don’t do it, your value as a human being is significantly reduced.
Entrepreneurialism is seen as the key to black problems and the key to being fully human. We definitely see this some of Jay Z’s work and that of other MCs, although not as much lately given the shift towards Black Lives Matter-type cultural production.
LP: What’s wrong with entrepreneurialism?
LS: Empirically speaking, it doesn’t tend to work. We don’t really have examples of poor communities that become really successful through entrepreneurialism. Even when it does work, it only works for a thin slice of the population. One of the fundamental consequences of the neoliberal turn is a really sharp uptick in inequality in the United States. It’s higher now than it was during the Great Depression. This is partially attributable to the idea that entrepreneurship is our solution.
LP: You’ve discussed a tendency among black elites to come down harshly on the black family, blaming it for problems like poverty and incarceration. It’s hard not to think of Bill Cosby right now and his admonishing black people to behave better with his image of the ideal, respectable black family. How does this fit into the narrative of the neoliberal turn?
LS: The neoliberal turn isn’t just a set of policies; it also embeds a certain type of common sense, like the idea that what we need in black communities is more business development and entrepreneurialism. The theory is that once you have these, the results trickle down. It’s a black form of Reagonomics.
On the flip side, once you believe that black business or hustling hard is the solution, you have to explain why some people don’t succeed and why some families end up at the bottom. So the natural explanation is that people are poor because of something related to their own personal circumstance. Maybe they don’t have the right cultural appreciation of education; maybe it’s because men and women don’t make the right reproductive choices; maybe it’s because they’re more interested in buying Michael Jordans than books. Right? There are a whole host of rhetorics that become naturalized, making it seem as if black poverty is solely the product of black decisions.
Bill Cosby is a good example of this. He gave a speech in 2004 at the 50th anniversary of Brown v. Board of Education in front of a black audience in which he argues that what’s happening now, particularly as a result of Brown v. Board, is solely the product of black populations and black choices, and what we need to do is to take our black family back.
We see the message that poverty is the product of black family decisions as opposed to larger structural dynamics in Cosby’s speech, or even going back 30 or 40 years in popular culture that we thought of as progressive. There’s John Singleton’s Boyz n the Hood. At the time it came out in 1991, the movie was deemed progressive, a critique of Reagan era policies and their effect on South Central Los Angeles. But it really argues that places like South Central L.A. are in trouble because black men haven’t done enough to take care of the black family.
LP: You write that the neoliberal turn is not the 21st century version of Jim Crow. Why is that framework problematic? Does racism mean something different in a neoliberal context?
LS: The concept of the new Jim Crow was popularized by a really important work by Michelle Alexander examining the criminal justice system. It’s a powerful phrase and it speaks to a black common sense about what going on now. It allows us to make easy sets of connections between some contemporary dynamics and what happened in the 1950s and late 1960s. We recently commemorated the 50th anniversary of Martin Luther King, Jr.’s assassination. That event looms large in our memory, and you can easily imagine people being more likely to engage in all kinds of political activity if they think of something as the new Jim Crow.
But the challenge is that even if we look at criminal justice, it’s not just blacks caught up in the dynamic. Even in the old Jim Crow that was designed to deal with blacks specifically through segregation, you see a number of white people who weren’t able to vote due to restrictions, though blacks were disproportionately affected.
If you look at the increase in incarceration, it’s not just blacks and it’s not just all blacks; it’s working-class-to-lower-income blacks. The new Jim Crow framework can’t really explain why that is. Why is it that I no longer fear the police? I don’t. I’ve been stopped a number of times, and I now treat police as I imagine whites do because I know and the police who engage with me know that I’m not the black people they are trying to socially control. I’m not in that population.
Politically, even as I do think the new Jim Crow concept enables us to mobilize in certain ways, it doesn’t mobilize us to effectively to deal with the class dynamics. The new Jim Crow makes it seem like it’s totally a race thing. There’s a way that you can organize around race that leaves class and inequality totally untouched. And we need to get at this race/class interaction that is prominent in places like Detroit or where I work now, in Baltimore.
LP: Can you talk about Barack Obama and his relationship to neoliberal ideas?
LS: I think a good example is My Brother’s Keeper (launched by Obama in 2014), which he talked about as a partial response to the wave of murders, including that of Trayvon Martin. He argued that if we brought together a robust suite of private-public partnerships, we could then identify a set of best practices that can help boys of color. Progressive women argued that he was ignoring the needs of girls of color, and that was an important critique. But the most important critique is one that very few people brought up, which is that Obama argued that My Brother’s Keeper wasn’t a big government program. He didn’t propose any increase in government spending, which, to be fair, would have been difficult under a Republican administration, but at least if he’d argued for it, he could have potentially created a constituency that could fight for it.
The other critique is that his primary assumption about the reason boys are on the wrong end of a variety of social and economic measures is because they’re not culturally predisposed to do the work necessary to do well in school. They don’t know how to deal with conflict, so all they do is get into fights and engage in other types of violence. Because they don’t have fathers in the home, they don’t know how to be good fathers themselves. Again, it argues that the reason they are at the bottom end economically is solely the function of culture. It has no structural dynamics at all.
Yet if we said that nuclear families are better than other forms of families (though I don’t necessarily agree with that), every bit of social science tells us that nuclear families are more likely to happen where people aren’t poor. So Obama is reversing the causal arrow. You don’t have to go to Marxist economists to find this. People who are poor tend to have families that look a certain way versus people that aren’t poor. If you have a robust safety net, families tend to have different types of outcomes than if don’t have it. This is Social Science 101.
LP: How does the neoliberal turn manifest in black megachurches like those led by popular ministers like T.D. James and Creflo Dollar?
LS: Even when Martin Luther King, Jr. was alive and running the Southern Christian Leadership Conference, there were different tendencies within black churches. Some, while not necessarily supporting the Jim Crow regime, definitely kind of acquiesced to it and were not interested in having their churchgoers be involved in anti-racist politics. At the same time, you had people using the church to connect to a really radical critique of capitalism and white supremacy.
In the 70s and into the 80s, this radical-to-left tendency is becoming less and less important in black churches. What you see instead is the growth of churches that use the Bible as a kind of self-help guide and promote the prosperity gospel, which holds that if you follow the Bible, you will become not only spiritually but materially wealthy. The flip side is that if you don’t follow the Bible, you’ll become poor. So somebody like Creflo Dollar [founder of the World Changers Church International based in College Park, Georgia] argues that you’re poor because you don’t have the right mindset. That’s naturalizing poverty.
Related is the growth of black megachurches with as many as 10,000 or even 20,000 members. They have their own community development corporations. Some of them actually look like corporations in their design and require a significant outlay of capital in order to operate. So even if they are not proposing the whole prosperity gospel, they have to propose some aspect of it in order to exist.
LP: It seems burdensome that in addition to paying taxes, churchgoers end up funding social services through tithing.
LS: States and local governments are now outsourcing some of their social service provisions to churches. This is problematic for several reasons. One is because of the important distinction between church and state. It’s all too likely that a church would use the resources to proselytize instead of provide services. Also, churches provide a function of spiritual guidance – they aren’t bureaucracies. People who work in churches don’t know how to deal with poverty or public housing provisions.
We wouldn’t expect a charity to fund NASA: the scale of the challenge is something that no private entity could actually fulfill. Well, it’s the same with social service provision. When people pay their tithe, the resources might really go to social services instead of lining somebody’s pocket, but those services are nowhere near what’s needed to deal with inequality. In a way, it demobilizes people when you connect this to the rhetoric that suggests that people are poor because of their own choices, it makes it more difficult for people to organize not just for more social services, but to get at structural dynamics.
LP: What does it take to challenge the neoliberal turn? What have we learned about what’s effective and what’s not?
LS: Martin Luther King, Jr. talked about a wrong-headed approach that posits that the reason we have gains is because of leaders like him who spoke to power and as a result were able to galvanize hundreds of thousands of folks in the South and the North to overturn the Jim Crow regime.
If you really look at the history, what you find instead is really deep organizing. What that charismatic leadership cannot do is build deep, enduring institutions to build the political capacity of regular folks. These institutions tend to have at least some modicum of democratic accountability. With the charismatic leadership model, there’s the idea that everything the leader says is correct. There are very few ways to hold them accountable or even create debate about strategies or tactics. But in a robust model of organizing, people can actually create conditions to lead themselves and engage in making decisions, whether we’re talking about labor issues, racial inequality, or #MeToo and gender inequality.
One of the things that happened with the neoliberal turn is that the ability of labor unions to organize was significantly reduced. In the 2012 strike that was the first of the current wave, the Chicago teacher’s union had to organize tens of thousands of teachers in all these local spaces to get them to understand why schools were being closed, how their current contract made educational circumstances worse as opposed to better, and how the possibility of losing income in the short-term would actually increase their ability to build in the future. They had to do this in a space where there were already a whole host of arguments about education (that it didn’t operate according to the values of the market) and about teachers’ unions (that they are the problem) — this whole common sense apparatus. They were able to contest it and replace it. The teacher’s strikes we’re seeing now across the country get at the deep organizing we have to engage in that works across time and is durable.
When you look at Black Lives Matter, it focused our attention to police killings as a function of a state that doesn’t work. People are able to use social media to quickly galvanize people and move them in interesting direct action ways. There have been some political successes: Marilyn Mosby [State’s Attorney for Baltimore] actually brought charges against police in Baltimore and we don’t have her election without Black Lives Matter. There have also been various Justice Department victories. But we need to connect the argument about state violence to a larger argument about economic violence. That’s where you need ideation work, like the work done in think tanks.
A lot of what we have to do is mundane work so that we can be ready when the moment comes; things like collecting data, building an archive. Maybe you get something unexpected — a candidate like Bernie Sanders. But the opportunity only means something as a result of the mundane work of preparation. Often women perform this kind of work. Our economy is based on labor that women aren’t really acknowledged for, and if you look at the political labor, a lot of the organizing labor tends to be done by women and it gets devalued. People focus on more on charismatic male leaders.
Overall, I think we need to focus more on developing institutions. Organizing has to start locally, maybe even best on a neighborhood-by-neighborhood basis, educating citizens, giving them the ability to understand their situation and giving them another set of narratives. We need to work with these communities developing coalitions across cities and then states in order to promote policies and individuals who support them. Policies have to be about reorienting the economy in such a way where lower income people get the bulk of the resources as opposed to the dynamic that we have now.
MAY 2, 2018
It’s time to connect political violence with economic violence.
Lester K. Spence, Associate Professor of Political Science and Africana Studies at Johns Hopkins University, focuses on black, racial, and urban politics in the neoliberal era. In an interview with the Institute for New Economic Thinking (INET), he shares his perspective on a false brand of economic and political “common sense” that black elites helped sell to black communities.
Lynn Parramore: In your book, Knocking the Hustle, you describe a shift in America that took place when a new crop of intellectuals successfully sold the idea that everybody and everything ought to be judged by market competition and market-oriented behavior, something you call the “neoliberal turn.” How did this change manifest in black communities?
Lester K. Spence: The change really begins in the 50s and early 60s, but takes a sharp turn in the late 60s and early 70s, when the middle class moves to the suburbs. Detroit’s population in 1950 is 1.9 million, but by 1960 it has already dropped significantly. This is a partial byproduct of federal policy and a partial byproduct of private action, but the dynamic was racialized: whites had access to the suburbs and blacks did not. Cities like Detroit become increasingly African American, and as blacks come to take up a larger proportion of the population, they gain more and more political power, which they use to elect representatives.
Black mayors take control of the black cities, but as these cities become black, their ability to garner revenue to provide social services drops dramatically. So one of the reasons that the neoliberal turn takes the form it does in black communities is because the cities that blacks increasingly live in are themselves altered by neoliberal policies.
The decrease in the ability of cities to collect tax revenues causes mayors to turn more to the bond rating market and to things like downtown development. And there is an alteration of the welfare state — we could think about welfare itself or things like the transition to public housing, which really alters the policy terrain that blacks can operate in. You increasingly see people begin to articulate neoliberal policies as a way for black folks to advance.
LP: Could you give an example?
LS: In Detroit in the 90s, by the time the neoliberal turn really takes shape, you see somebody like Dennis Archer, Sr., the city’s second black mayor, attempt to use what’s called “total quality management” to revamp Detroit’s bureaucracy. That’s a management strategy that was taught at MBA schools in the late 80s and early 90s that puts the customer and customer decisions at the forefront of bureaucracy formation. You see it in Bill Clinton and Al Gore’s National Partnership for Reinventing Government [a task force to reform the way the federal government works] — but Archer is one of the first to implement it in a city. He brought in Ford executives in order to get the bureaucracies to think of citizens as consumers. This has an ideational impact.
You also see it in cities that are looking increasingly to downtown development and forced to transform downtowns into entertainment hubs. By the mid-to-late 90s, Detroit brought in three casinos, the idea being to give the city the types of jobs it once had when the automotive industry loomed large. Of course, it did not. They also created two new publicly subsidized sports stadiums. In the last few years, even as Detroit was dealing with bankruptcy, the state basically subsidized a new stadium for the Detroit Red Wings to the tune of about $300 million.
LP: So people living in cities are no longer citizens who require services to meet their needs but consumers in need of market-based solutions.
LS: Right.
LP: The title of your book references “the hustle.” What is it and how is it reflected in black culture and entertainment?
LS: I begin the book by juxtaposing Nat Adderley and Oscar Brown’s “Work Song” that’s about a certain type of labor in the 1960s against Ace Hood’s, “Hustle Hard.” He does more than just describe a condition in which he’s consistently having to work to make ends meet for himself and his family. The video features Ace Hood in a regular East Coast neighborhood, and all around him, people engage in different hustles to get by. The seasons change, and although the things that people sell change, like in the summer they’re hustling water and in the winter they’re hustling coats and gloves, the hustle itself doesn’t change. He doesn’t give a critique of that situation, but actually makes a normative argument for it, suggesting that it is a good thing. If you want to work in the world, this is what you’re supposed to do. If you don’t do it, your value as a human being is significantly reduced.
Entrepreneurialism is seen as the key to black problems and the key to being fully human. We definitely see this some of Jay Z’s work and that of other MCs, although not as much lately given the shift towards Black Lives Matter-type cultural production.
LP: What’s wrong with entrepreneurialism?
LS: Empirically speaking, it doesn’t tend to work. We don’t really have examples of poor communities that become really successful through entrepreneurialism. Even when it does work, it only works for a thin slice of the population. One of the fundamental consequences of the neoliberal turn is a really sharp uptick in inequality in the United States. It’s higher now than it was during the Great Depression. This is partially attributable to the idea that entrepreneurship is our solution.
LP: You’ve discussed a tendency among black elites to come down harshly on the black family, blaming it for problems like poverty and incarceration. It’s hard not to think of Bill Cosby right now and his admonishing black people to behave better with his image of the ideal, respectable black family. How does this fit into the narrative of the neoliberal turn?
LS: The neoliberal turn isn’t just a set of policies; it also embeds a certain type of common sense, like the idea that what we need in black communities is more business development and entrepreneurialism. The theory is that once you have these, the results trickle down. It’s a black form of Reagonomics.
On the flip side, once you believe that black business or hustling hard is the solution, you have to explain why some people don’t succeed and why some families end up at the bottom. So the natural explanation is that people are poor because of something related to their own personal circumstance. Maybe they don’t have the right cultural appreciation of education; maybe it’s because men and women don’t make the right reproductive choices; maybe it’s because they’re more interested in buying Michael Jordans than books. Right? There are a whole host of rhetorics that become naturalized, making it seem as if black poverty is solely the product of black decisions.
Bill Cosby is a good example of this. He gave a speech in 2004 at the 50th anniversary of Brown v. Board of Education in front of a black audience in which he argues that what’s happening now, particularly as a result of Brown v. Board, is solely the product of black populations and black choices, and what we need to do is to take our black family back.
We see the message that poverty is the product of black family decisions as opposed to larger structural dynamics in Cosby’s speech, or even going back 30 or 40 years in popular culture that we thought of as progressive. There’s John Singleton’s Boyz n the Hood. At the time it came out in 1991, the movie was deemed progressive, a critique of Reagan era policies and their effect on South Central Los Angeles. But it really argues that places like South Central L.A. are in trouble because black men haven’t done enough to take care of the black family.
LP: You write that the neoliberal turn is not the 21st century version of Jim Crow. Why is that framework problematic? Does racism mean something different in a neoliberal context?
LS: The concept of the new Jim Crow was popularized by a really important work by Michelle Alexander examining the criminal justice system. It’s a powerful phrase and it speaks to a black common sense about what going on now. It allows us to make easy sets of connections between some contemporary dynamics and what happened in the 1950s and late 1960s. We recently commemorated the 50th anniversary of Martin Luther King, Jr.’s assassination. That event looms large in our memory, and you can easily imagine people being more likely to engage in all kinds of political activity if they think of something as the new Jim Crow.
But the challenge is that even if we look at criminal justice, it’s not just blacks caught up in the dynamic. Even in the old Jim Crow that was designed to deal with blacks specifically through segregation, you see a number of white people who weren’t able to vote due to restrictions, though blacks were disproportionately affected.
If you look at the increase in incarceration, it’s not just blacks and it’s not just all blacks; it’s working-class-to-lower-income blacks. The new Jim Crow framework can’t really explain why that is. Why is it that I no longer fear the police? I don’t. I’ve been stopped a number of times, and I now treat police as I imagine whites do because I know and the police who engage with me know that I’m not the black people they are trying to socially control. I’m not in that population.
Politically, even as I do think the new Jim Crow concept enables us to mobilize in certain ways, it doesn’t mobilize us to effectively to deal with the class dynamics. The new Jim Crow makes it seem like it’s totally a race thing. There’s a way that you can organize around race that leaves class and inequality totally untouched. And we need to get at this race/class interaction that is prominent in places like Detroit or where I work now, in Baltimore.
LP: Can you talk about Barack Obama and his relationship to neoliberal ideas?
LS: I think a good example is My Brother’s Keeper (launched by Obama in 2014), which he talked about as a partial response to the wave of murders, including that of Trayvon Martin. He argued that if we brought together a robust suite of private-public partnerships, we could then identify a set of best practices that can help boys of color. Progressive women argued that he was ignoring the needs of girls of color, and that was an important critique. But the most important critique is one that very few people brought up, which is that Obama argued that My Brother’s Keeper wasn’t a big government program. He didn’t propose any increase in government spending, which, to be fair, would have been difficult under a Republican administration, but at least if he’d argued for it, he could have potentially created a constituency that could fight for it.
The other critique is that his primary assumption about the reason boys are on the wrong end of a variety of social and economic measures is because they’re not culturally predisposed to do the work necessary to do well in school. They don’t know how to deal with conflict, so all they do is get into fights and engage in other types of violence. Because they don’t have fathers in the home, they don’t know how to be good fathers themselves. Again, it argues that the reason they are at the bottom end economically is solely the function of culture. It has no structural dynamics at all.
Yet if we said that nuclear families are better than other forms of families (though I don’t necessarily agree with that), every bit of social science tells us that nuclear families are more likely to happen where people aren’t poor. So Obama is reversing the causal arrow. You don’t have to go to Marxist economists to find this. People who are poor tend to have families that look a certain way versus people that aren’t poor. If you have a robust safety net, families tend to have different types of outcomes than if don’t have it. This is Social Science 101.
LP: How does the neoliberal turn manifest in black megachurches like those led by popular ministers like T.D. James and Creflo Dollar?
LS: Even when Martin Luther King, Jr. was alive and running the Southern Christian Leadership Conference, there were different tendencies within black churches. Some, while not necessarily supporting the Jim Crow regime, definitely kind of acquiesced to it and were not interested in having their churchgoers be involved in anti-racist politics. At the same time, you had people using the church to connect to a really radical critique of capitalism and white supremacy.
In the 70s and into the 80s, this radical-to-left tendency is becoming less and less important in black churches. What you see instead is the growth of churches that use the Bible as a kind of self-help guide and promote the prosperity gospel, which holds that if you follow the Bible, you will become not only spiritually but materially wealthy. The flip side is that if you don’t follow the Bible, you’ll become poor. So somebody like Creflo Dollar [founder of the World Changers Church International based in College Park, Georgia] argues that you’re poor because you don’t have the right mindset. That’s naturalizing poverty.
Related is the growth of black megachurches with as many as 10,000 or even 20,000 members. They have their own community development corporations. Some of them actually look like corporations in their design and require a significant outlay of capital in order to operate. So even if they are not proposing the whole prosperity gospel, they have to propose some aspect of it in order to exist.
LP: It seems burdensome that in addition to paying taxes, churchgoers end up funding social services through tithing.
LS: States and local governments are now outsourcing some of their social service provisions to churches. This is problematic for several reasons. One is because of the important distinction between church and state. It’s all too likely that a church would use the resources to proselytize instead of provide services. Also, churches provide a function of spiritual guidance – they aren’t bureaucracies. People who work in churches don’t know how to deal with poverty or public housing provisions.
We wouldn’t expect a charity to fund NASA: the scale of the challenge is something that no private entity could actually fulfill. Well, it’s the same with social service provision. When people pay their tithe, the resources might really go to social services instead of lining somebody’s pocket, but those services are nowhere near what’s needed to deal with inequality. In a way, it demobilizes people when you connect this to the rhetoric that suggests that people are poor because of their own choices, it makes it more difficult for people to organize not just for more social services, but to get at structural dynamics.
LP: What does it take to challenge the neoliberal turn? What have we learned about what’s effective and what’s not?
LS: Martin Luther King, Jr. talked about a wrong-headed approach that posits that the reason we have gains is because of leaders like him who spoke to power and as a result were able to galvanize hundreds of thousands of folks in the South and the North to overturn the Jim Crow regime.
If you really look at the history, what you find instead is really deep organizing. What that charismatic leadership cannot do is build deep, enduring institutions to build the political capacity of regular folks. These institutions tend to have at least some modicum of democratic accountability. With the charismatic leadership model, there’s the idea that everything the leader says is correct. There are very few ways to hold them accountable or even create debate about strategies or tactics. But in a robust model of organizing, people can actually create conditions to lead themselves and engage in making decisions, whether we’re talking about labor issues, racial inequality, or #MeToo and gender inequality.
One of the things that happened with the neoliberal turn is that the ability of labor unions to organize was significantly reduced. In the 2012 strike that was the first of the current wave, the Chicago teacher’s union had to organize tens of thousands of teachers in all these local spaces to get them to understand why schools were being closed, how their current contract made educational circumstances worse as opposed to better, and how the possibility of losing income in the short-term would actually increase their ability to build in the future. They had to do this in a space where there were already a whole host of arguments about education (that it didn’t operate according to the values of the market) and about teachers’ unions (that they are the problem) — this whole common sense apparatus. They were able to contest it and replace it. The teacher’s strikes we’re seeing now across the country get at the deep organizing we have to engage in that works across time and is durable.
When you look at Black Lives Matter, it focused our attention to police killings as a function of a state that doesn’t work. People are able to use social media to quickly galvanize people and move them in interesting direct action ways. There have been some political successes: Marilyn Mosby [State’s Attorney for Baltimore] actually brought charges against police in Baltimore and we don’t have her election without Black Lives Matter. There have also been various Justice Department victories. But we need to connect the argument about state violence to a larger argument about economic violence. That’s where you need ideation work, like the work done in think tanks.
A lot of what we have to do is mundane work so that we can be ready when the moment comes; things like collecting data, building an archive. Maybe you get something unexpected — a candidate like Bernie Sanders. But the opportunity only means something as a result of the mundane work of preparation. Often women perform this kind of work. Our economy is based on labor that women aren’t really acknowledged for, and if you look at the political labor, a lot of the organizing labor tends to be done by women and it gets devalued. People focus on more on charismatic male leaders.
Overall, I think we need to focus more on developing institutions. Organizing has to start locally, maybe even best on a neighborhood-by-neighborhood basis, educating citizens, giving them the ability to understand their situation and giving them another set of narratives. We need to work with these communities developing coalitions across cities and then states in order to promote policies and individuals who support them. Policies have to be about reorienting the economy in such a way where lower income people get the bulk of the resources as opposed to the dynamic that we have now.
Thursday, May 3, 2018
Framing A Job Guarantee
[From your humble blogger: We apparently have no problem buying up surplus corn, or soybeans or cheese...or for that matter buying surplus Wall Street dreck ("Quantitative Easing"), but when it comes to labor...that's a problem...]
By J.D. ALT
01 May 2018
Now that progressive leaders (Bernie Sanders, Kirsten Gillibrand, and Corey Booker) have placed a proposed “Job Guarantee” program onto the mainstream political stage, it is essential they begin explaining the proposal’s underpinning macroeconomic logic. Otherwise they lay themselves, and the proposal itself, wide open to scathing public ridicule — as exemplified by a recent Megan McArdle op-ed in the Washington Post (“A federal job for everyone?” April 25, 2018). But what should they be saying by way of explaining?
Perhaps a point-by-point response to Ms. McArdle’s arguments is a way to begin.
First, her title itself is an intentionally misleading — and pejorative — portrayal of the proposal. The Job Guarantee (JG) program will use federal dollars to pay wages, but few (if any) of the wage earners would become part of a federal bureaucracy that most Americans believe is already over-bloated and inefficient. Instead, think of all the private doctors and nurses paid federal dollars to provide health care services to Medicaid and Medicare patients; think of all the private enterprise farmers, food processors and distributors who are paid federal dollars to implement the SNAP (food stamp) program; think of the millions of private defense contractor employees who build ships, planes, and missiles. Ms. McArdle is being disingenuous in planting the idea that everyone who is paid with federal dollars is a federal employee; it’s an idea that immediately discredits the JG program, and it should be proactively discredited itself.
Second, there is the “cost,” of the program, which Ms. McArdle helpfully calculates (since, as she points out, none of the progressive leaders have offered to do so). This calculated cost of $1-2 trillion per year exceeds, she points out derisively, “our total expenditure on Social Security, with maybe Medicare thrown in for good measure.” In other words, an amount totally ludicrous to even contemplate given the current and projected deficit between federal tax dollars collected and federal dollars spent. Let’s defer a response to this argument for last, simply noting, for the moment, that progressive leaders cannot continue to propose programs that required the federal government to spend large quantities of U.S. dollars without explaining why it is both possible and rational for the government to do so.
Third, Ms. McArdle argues that the proposed Job Guarantee program establishes a de facto minimum wage ($15/hr) which she characterizes as a “highly paid” job that will put small businesses — whose profit margins depend on unskilled, low-wage ($7/hr?) workers — out of business. Walmart, she argues, can grudgingly compete with the proposed government $15 wage scale, but the mom and pop landscape business cannot: Their employees will all opt to work for the government’s Job Guarantee program instead, leaving mom and pop destitute — except for the fact, she disparagingly notes, mom and pop themselves would be guaranteed the option to join the government’s program as well! Shutting down all the local businesses that depend on low-wage employees, Ms. McArdle declares, would deprive local communities of all the services $7/hr so usefully provides.
This argument is a red herring because it has nothing to do, per se, with the proposed Job Guarantee program itself. Instead, it is simply an argument over what the minimum wage should be in America — something that must be debated and decided upon with or without a Job Guarantee. The original and basic concept of a Job Guarantee says only that the JG wage would be set just below the minimum wage, thus enabling private enterprise to hire workers out of the JG program simply by offering the minimum wage.
The important macroeconomic concept here is to provide support for private enterprise in two fundamental ways: First, by training and maintaining a job-ready “buffer stock” of labor which is available to private businesses as their needs arise; second, by maintaining a strong consumer base (consistently reinforced by the purchasing power of the JG wage-earners themselves) for the goods and services the private economy produces. The fluctuations of the business cycle are thus flattened out — to the benefit of both businesses and family-supporting wage-earners. When the private economy shrinks, laid-off workers transition to the JG program — which enables them to continue to be consumers; when the private economy wants to grow again, the workers haven’t disappeared into a nebulous downward spiral of joblessness (and hopelessness) but are readily available to be hired back by the expanding American enterprise.
The fact that Ms. McArdle does not even seem aware of this macroeconomic underpinning of the Job Guarantee concept demonstrates how poorly progressive leaders are framing and presenting it. This is something progressives need to proactively fix immediately. Otherwise, they risk losing the battle for public opinion upon which the JG program will ultimately depend.
Finally, Ms. McArdle asks what all the workers in a Job Guarantee program would actually do? She goes on to suggest there isn’t much work they can undertake to accomplish — primarily because most of the work America needs doing requires higher levels of skills and training than the JG workers can be expected to have. This argument misunderstands one of the central premises of the JG program we’ve just discussed — namely that a primary mission of the program is to train workers in the skills the private economy needs. In other words, one of the “jobs” JG workers are paid to undertake and accomplish is to get themselves trained to be useful employees.
Ms. McArdle’s question about what JG workers will do also builds on another sleight-of-hand premise: that the “work” undertaken by a JG worker must produce something tangibly useful to justify its “cost.” But since the goal of the JG program is not to produce profits, there is no cost to be justified. In addition to acquiring personal and organizational skills and training, it is easy to imagine a comprehensive list of useful — but non-profitable — goods and services that JG workers could provide to local and regional communities. Painstaking and non-partisan registration and confirmation of legal voters is a service that comes to mind. Restoring streams and mountain ecosystems destroyed by coal-mining is another. Planting trees and building contour check-damns on the public — and even private — lands threatened by desertification is another.
In fact, the tasks of recovering from, and rebuilding for, climate change alone are going to be innumerable — and many of these tasks will be of no interest whatsoever to the profit-making motives of private enterprise. But (and this is crucially important) profit-oriented private enterprise will greatly benefit if these tasks are undertaken and accomplished — for no other reason than because the workers (who are paid to accomplish the tasks) will become paying customers of private enterprise.
Now we can return to the crucial question that the progressive leaders dance around as if it were the kiss-of-death — and indeed, as I earlier alluded to, Ms. McArdle does her best to bestow that very kiss not only on the Job Guarantee concept but on the politicians who have had the audacity to propose it. That question is not just how much the program will cost, but how is the federal government going to collect enough tax dollars to pay for it?
There are basically two strategies to address this question: The first is to frame the Job Guarantee program as an “investment” that will ultimately pay dividends for the American economy and the American people. A skilled economist could surely do this, and it is the kind of argument that has been made before and accepted, apparently, by the public as legitimate — “trickle-down economics” comes to mind.
The second strategy is more difficult, but will pay bigger dividends, by far, if it can be successfully implemented: Teach the American public how modern, sovereign fiat-money actually works. Because if they learn that, not only does the Job Guarantee program become a logical and viable opportunity, many other public goods and services — which previously no one could imagine how to collect enough tax-dollars to pay for — become viable opportunities as well. Ms. McArdle can call this “socialism” — and consign it, as she does, to the “ash heap of history.” I would call it the modern future of sovereign democracy, assuming sovereign democracy is to have any future at all.
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