Trickle Down Economics

 

The Family Business: Perpetual War

 Next time you read an editorial by one of these people (Kagan, Nuland, etc), remember their allegiance is to the military-industrial complex, not the U.S.

 https://therealnews.com/a-family-business-of-perpetual-war

Part of "Labor Discipline" is to defund the public realm (available even to the poor)

 Stephanie Kelton responds with this:

The Oldest Trick in the Book

Cut taxes. Cry Broke. Defund the public sector.

 

Meanwhile, to keep the peasants in line:

The Court of Mass Incarceration (PDF) Rachel E. Barkow, CATO Institute. 

“One out of every 52 people in the United States is under some form of criminal justice supervision (such as probation or parole). In some states and communities, the rates are even higher. In Georgia, for example, one out of every 18 people is on probation or parole. We are now living in a country where one out of every three adults in America has a criminal record.” 

Inflation Answers

In a continuation of a conversation with my brother about inflation, he’s responded to this blog post with the text in italics below.

…from what I can see, suppressing the economy (through raising interest rates or using other methods) is the only method that has historically worked to lower inflation….do you have a historical reference to your approach that documents that you are correct?

If you reread that original blog post, you’ll see several suggested inflation suppressing alternatives to raising Fed Funds rates. Also, your insistence that Volcker’s rate rise was the definitive template for dealing with inflation confuses correlation with causation. Your thinking is “Volcker raised interest rates, and inflation receded. He must have caused the receding!” It was a coincidence, not a cause, though.

So…what you believe is historically truth is not necessarily so. Other things were going on at the time Volcker raised rates.

I doubt there’s much controversy about the cause of the inflation in the ‘70s. Petroleum went from $1.75/bbl in 1971 (U.S. pre-fracking peak oil), quadrupling overnight when OPEC withheld production in 1973 until it reached $42/bbl in 1982. 

This period was the first time the U.S. couldn’t produce its way out of an energy shortfall. Remember, one reason the Japanese attacked Pearl Harbor is that the U.S. stopped shipping oil to Japan inresponse to its invasion of Manchuria.

A shortage of goods (oil) and a balance of payments problem (imported oil), not “too much money” were at the source of the ‘70s inflation problem. Note that the growth rate of U.S. GDP declined after this energy crisis and has never recovered.

The price rise in oil seriously damaged the American economy and Volcker used inflation as an excuse to raise interest rates until prime commercial loans cost 21%, and mortgages were 16% - 18%. That made the economy much worse. It’s hard to imagine any economy thriving after that beating (and the beatings must continue until morale improves).

But Volcker’s primary agenda was to reduce wages–something he and current economists believe is at the root of inflation despite all the evidence to the contrary (see the graph below). Inflation reduction was incidental. (Historian and economist Michael Hudson’s tells the full story).

That’s the history. You may ask: If Volcker’s high-interest “medicine” didn’t make inflation subside and was merely coincidental, what did suppress inflation? First: Jimmy Carter deregulated natural gas. The effect wasn’t immediate–it takes time to drill and produce, and as you know, oilmen won’t drill unless they can charge more than it costs to produce the stuff. Offshore and fracked oil requires $70/bbl oil at least.

More difficult to get gas meant they had to get higher prices. The price of natural gas as delivered to consumers peaked in 1986 at about six times its cost in the early 70s (see this for the graph). Compare the six times more expensive natural gas inflation to oil going from $1.75 in 1971 to $42 in 1982 (That's a 24 times increase). So deregulated gas was orders of magnitude less inflationary than OPEC oil.

One side note: the petroleum industry is not above stirring up trouble internationally to raise oil prices. The Iraq war is a prime example. They didn’t support the war to get Iraqi oil, they supported it to keep that cheaper oil in the ground.

Second: One other thing brought down inflation in the Reagan administration: Alaska’s North Slope oil production came online, alleviating the petroleum shortage to the extent that prices retreated to nearer $10/bbl. That’s a little less than six times the $1.75 1971 price. Again, less inflationary than the $42 peak price.

So addressing the source of inflation was effective. Volcker’s Fed interest rate rise was a sideshow.

Nevertheless, Carter was on board with Volcker’s attack on labor. He deregulated trucking and airlines, demonstrating deregulation for Reagan to mimic. This deregulation essentially kicked unions out of those heavily unionized industries. In response, the Teamsters endorsed Reagan in the next election.

Before Carter did this, unions were powerful, and 70% of American workers had defined-benefit pensions. Defined-contribution retirement plans (IRAs, 401Ks) are about half as remunerative as the defined benefit pensions. The current population with defined-benefit pensions is around 4%. So what’s all this nostalgia about making America Great Again about? There’s a hint for you.

Reagan was very slick and persuasive, and Carter is not a kindly Christian, as his current, carefully curated public image suggests. He ruthlessly attacked labor to lower wages (and Reagan attacked their pensions...see Ellen E. Schultz' Retirement Heist), just as Volcker did. 

You might remember this graph of our current situation:



It demonstrates that wages (the red line) are not the source of current inflation, but egregious corporate profits (the blue line) just might be. You want an alternative strategy to curb inflation? How about an excess profits tax on corporate America? Or isn’t that a plausible cure for inflation? Our last liberal president, Richard Nixon, addressed inflation with wage and price controls.

As for the history of inflations:

Studies of extreme inflation demonstrate issuing too much currency did not produce hyperinflation. "Not a single one of … 56 cases [of historic hyperinflation documented by a recent Cato study] was caused by a central bank that ran amok. In virtually every case, the inflation was not caused by too much money but too few goods." In the most famous of often-cited hyperinflations, farming collapsed in Zimbabwe as Rhodesian farmers left, leading to a food shortage, and German World War I payments deprived German consumers of goods. The cherry on top of this goods shortage came in 1923 when France sent troops and annexed the industrial Ruhr further depriving Weimar Germany of goods while it was still burdened with those Reparations. - (Quote from Stephanie Kelton, commenting on the Koch-funded Cato institute history of hyperinflations)

Historically, inflation "is overwhelmingly driven by cost-push variables... Printing money just doesn't do it. If it did, Japan would have exploded decades ago, because they've been trying quantitative easing for nearly 20 years, and they can't move the needle on inflation. We've been trying it here in the U.S. for about five years, and [the Fed can’t even hit its then current] 2% [inflation] target." – Stephanie Kelton, Senate budget committee economist commenting in 2013.

In other words all the “money printing” by central banks in history did not initiate inflation–even hyperinflation!

… giving money to the poor is an undesirable method of lowering inflation which can be seen by Bidon's American Rescue plan

The big question: “undesireable” to whom?

Biden’s “giving money to the poor” plan was a smaller successor to a similar Trump policy. Here’s the Trump administration’s economic record from Wikipedia.

Poverty receded (2016: 12.7%, 2019: 10.5%)

Trump’s Coronavirus Aid, Relief, and Economic Security Act (CARES) had a $2.3 trillion price tag compared to $1.9 trillion for Biden's plan. Trump’s plan gave and lent people money, but inflation remained low. Here are the (annualized) inflation rates for the months following that act's passage: 2.3% 1.5% 0.4% 0.2% 0.7% 1.0% 1.3% 1.4%.

So here’s the question you need to answer: Trump’s distribution of money did not cause inflation, certainly not at current levels. Why would Biden’s smaller distribution suddenly be inflationary now?

So, though you’re free to believe otherwise, Biden giving people “rescue” money is not at the root of inflation, that's just the propaganda you'll read on the editorial pages. Shortages of goods from COVID-19, industrial shutdowns in China and domestically, the sanctions restricting access to petroleum, and the war in Ukraine are all to blame back here in reality. It’s not “too much money”; it’s too few goods.

If inflation were a product of high demand or higher wages, the Fed raising interest rates might be justified. That Volcker-esque strategy “works” by suppressing wages and making employment uncertain, as the previous post documented. In other words: it promotes labor discipline. Remember, labor discipline sends the message that “You had better take whatever crappy job is on offer, or suffer the indignities of poverty, even homelessness, and starvation. And if you’re extra ornery, we’ll put you in a cage.” With 5% of the world’s population, the U.S. has 25% of its prisoners. The beatings must continue until morale improves, too.

Here’s a recent tweet about how that threat of labor discipline shows up in local law enforcement:

Conditions in Cleveland's Cuyahoga County Jail are so horrific that at one point a judge refused to send people there, releasing everyone charged with crimes without bail.

Wardens and guards have been criminally prosecuted for beating and killing people. Hard to see the humor.

Meanwhile: US is becoming a ‘developing country’ on global rankings that measure democracy, inequality

In its global rankings, the United Nations Office of Sustainable Development dropped the U.S. to 41st worldwide, down from its previous ranking of 32nd. Under this methodology – an expansive model of 17 categories, or “goals,” many of them focused on the environment and equity – the U.S. ranks between Cuba and Bulgaria. Both are widely regarded as developing countries.

The U.S. is also now considered a “flawed democracy,” according to The Economist’s democracy index.

As a political historian who studies U.S. institutional development, I recognize these dismal ratings as the inevitable result of two problems. Racism has cheated many Americans out of the health care, education, economic security and environment they deserve. At the same time, as threats to democracy become more serious, a devotion to “American exceptionalism” keeps the country from candid appraisals and course corrections. [emphasis added]

Also, you did not address my point about addressing social problems instead of handing out money to the poor. Giving money to the poor does not guarantee social engagement or provide people with the tools, or knowledge or support to combat poverty.

Your proposal is sort of like Mitt Romney’s advice for the poor. He suggested poor people just borrow $20K from their family to start a business. It’s superficially credible, but clueless, especially in an economy where (according to the Fed) 40% of the population can’t handle a $400 emergency without selling something or borrowing, and where 95% of new businesses fail. 

Your "strategy" completely ignores the systemic component of poverty, too, focusing exclusively on individual responsibility. It covertly endorses the popular narrative that the poor are just lazy, Cadillac welfare queens. If they’d only show some initiative, darn them…!

Not sucking up, but kicking down on someone exhausted by economic deprivation is not an effective motivator. That’s not how motivation works. See Barbara Ehrenreich’s Nickled and Dimed for an account of how exhausting poverty is. Or take a look at George Orwell’s Down and Out in Paris and London (1933). Excerpt:

“Hunger reduces one to an utterly spineless, brainless condition, more like the after-effects of influenza than anything else. It is as though all one’s blood had been pumped out and lukewarm water substituted.”

“It is fatal to look hungry. It makes people want to kick you.”

Feeding the starving must precede the demand that they become sensible. Your suggested strategy is something like "Look, I know they're sick, but they've got to do this really strenuous dance/gymnastic before we give them medicine." See Steve Martin's sobriety test for an example.

Economic inequality actually distorts the public narrative, too.

“In … Domination and the Arts of Resistance (1990), James Scott makes the point that whenever one group has overwhelming power over another, as when a community is divided between lords and serfs, masters and slaves, high-caste and untouchable, both sides tend to end up acting as if they were conspiring to falsify the historical record. That is: there will always be an 'official version' of reality--say, that plantation owners are benevolent paternal figures who only have the best interest of their slaves at heart--which no one, neither masters nor slaves, actually believes, and which they are likely to treat as self-evidently ridiculous when 'offstage' and speaking only to each other, but which the dominant group insists subordinates play along with, particularly at anything that might be considered a public event. In a way, this is the purest expression of power: the ability to force the dominated to pretend, effectively, that two plus two is five. Or that the pharaoh is a god. As a result, the version of reality that tends to be preserved for history and posterity is precisely that 'official transcript.' – From (footnotes) The Dawn of Everything: A New History of Humanity by Graeber and Wengrow

The political talking point is that poor people deserve their poverty. Its corollary is that rich people deserve their wealth, and no rich person stole their fortune! Unfortunately, curing poverty means having to treat entire populations for the PTSD stemming from this misinformation. Why? Because the beatings will continue until morale improves.

Deserving, and “earning” privileges is paramount in this point of view. It’s a false premise. Think of the dogs retrieving bones in my example of systemic problems. Whether they deserved a bone or not, one came up short because the system only had nine bones when there were ten dogs. The self-flattery that you deserve existence, wealth, health, etc. is part an parcel of this kind of delusional thinking. These things are gifts! They are not earned.

Humans often feel they must earn, or repay as part of the instinctual programming that enhances social cohesion, but gifts are very tough on us all. I’d say all those prayers of thanks and sacrifices on altars are to relieve the pent up tension of feeling obligated. God doesn’t need any of that stuff. We do.

Honestly, unless we just decide to ignore inflation as a necessary evil, I can't seem to find any other tool to lower it.

Well of course you can’t find it. You’re not looking anywhere except at the story you’ve already told yourself. You ignore the alternatives suggested in my previous blog post. Things like making peace in Ukraine, or a job guarantee.

In this writing, I remind you that ending a critical shortage (Carter deregulating natural gas, Alaska's North Slope) was the cause of lower inflation, it wasn’t Fed funds rate manipulation. My suggestion: stop clinging to a false narrative, and believing the “official” history. It’s propaganda with an agenda.

Incidentally, I don’t blame you for adopting this narrative’s point of view. Practically every mainstream medium emits it constantly. Says New Zealand blogger Caitline Johnstone:

“Make no mistake, maintaining narrative control is the single highest priority of the establishment. Not keeping taxes down, not keeping Bernie out of office, not even keeping the wars going. Without narrative control, their entire empire will crumble. Never lose sight of this….

If you can control what happens, you’ll have power until the public gets sick of your bullshit and removes you. If you can control what the public thinks about what happens, you’ll have power forever ….

The overwhelming majority of human effort goes into competing against other humans. We do have the ability to take all that lost energy and re-route it toward collaborating with each other toward health and thriving. There is no real reason we can’t do this. There are no hard obstacles preventing us from moving away from our failed competition-based model to a collaboration-based model. All that’s stopping us is plutocratic propaganda and our collective belief in it. We do have the ability to drop that belief and move toward sanity.

For a fuller explanation of the economic narrative you must abandon to see alternatives, I’d recommend reading Economics is Bunk (written before this dialog). Here’s an excerpt:

“Leading active members of today’s economics profession… have formed themselves into a kind of Politburo for correct economic thinking. As a general rule—as one might generally expect from a gentleman’s club—this has placed them on the wrong side of every important policy issue, and not just recently but for decades. They predict disaster where none occurs. They deny the possibility of events that then happen. … They oppose the most basic, decent and sensible reforms, while offering placebos instead. They are always surprised when something untoward (like a recession) actually occurs. And when finally they sense that some position cannot be sustained, they do not reexamine their ideas. They do not consider the possibility of a flaw in logic or theory. Rather, they simply change the subject. No one loses face, in this club, for having been wrong. No one is disinvited from presenting papers at later annual meetings. And still less is anyone from the outside invited in.” [emphasis added] - from James K. Galbraith’s Who are these economists anyway?]

Conventional economics is baloney, through and through. The policies you believe are the only alternatives come from orthodox, neoclassical (monetarist) economics. 

I teach a senior education course called “Heterodox Economics.” And I’m certainly not the only one who disagrees with the current economic orthodoxy. Orthodox (Republican) economist Greg Mankiw has had protests staged by his students because he insists on ignoring a wider point of view.

Changing your mind

In my experience, humans have great difficulty changing their minds, or their mental narratives–and narratives always trump facts. The thrust of what I’ve been saying is that your economics narrative is mistaken. I’m not sure the facts are completely convincing to you, though.

Hans Christian Anderson’s story about the emperor parading proudly until a child says “Hey! He’s naked!” does not end with the emperor saying “Thanks little child for pointing out my mistake. I’ll go back home and put some clothes on so I’ll be warm and can parade with dignity.” Instead, the emperor “grimly continues the parade.” That’s human nature. None of us is exempt from the impulse to cling to faulty narratives. Admitting a mistake is like pulling teeth.

Calling what guides your life a “narrative” is not something exotic. If I asked you whether you left your keys on your bedside table, odds are you’d look at the picture of that table in your head before you walked back to see it in the flesh–a tremendous time saver and one of the reasons human beings are this planet’s dominant species.

The picture in your head is part of the narrative, and contradicting even a tiny corner of that story is something most people resist fiercely. Losing a piece of the narrative may appear to be life-threatening (In the extreme: “I’ll die if those keys aren’t where I picture them!”).

Historical examples of resistance to narrative changes.

When Copernicus and Galileo contradicted the conventional geocentric system of planets during their time, the church “corrected” them. Copernicus published posthumously, evading punishment, but Galileo endorsed the heliocentric solar system and spent his later years under house arrest for contradicting the official narrative, even though his facts were accurate.

Max Planck, the discoverer of the quanta of quantum mechanics, tried in vain to persuade his physics professor peers that quanta solved some major difficulties with the Newtonian physics they taught. Among other things, Newton’s physics predicts the heat death of the universe. In Newtonian physics,  electrons must spiral into the nucleus of atoms, essentially wiping out everything. Quanta corrects that obviously false prediction..

So…did the very smart physicists Planck contacted say “Thanks, Max! You’ve shown us the error of our ways”? Nope. They stuck to their story, saying “We can see no solution to the problem of heat death.” Planck famously proclaimed “The truth never triumphs. Its opponents simply die out. Science advances one funeral at a time.”

The “enlightenment” promoted by eastern religions is at least partly cultivating the ability to entertain alternative narratives. Zen Koans disclose flaws in language describing reality. Christian parables (e.g. the Prodigal Son) disclose that our ideas about obligation may be limited–after all, the prodigal, not the good son who deserved it, got the fatted calf. Eric Berne’s work (particularly What Do You Say After You Say Hello?) describes how people become servants of narratives that can be literally centuries old. How many people are waiting for prince/princess charming before they wake up? The fiction of Sleeping Beauty is that such a wait doesn’t age the princess, but people still believe they can wait without consequence or aging!

Various courses (New Warrior Adventure Training, The Forum, etc.) promise enlightenment, explore alternative narratives, and are very popular. Why? Because unenlightened ways of being imprison us, sapping our energy, distorting our perception, etc. People feel liberated and lighter after they escape their previous narrow thinking.

...reference my preference for dealing with social problems.

As far as I can tell, your preference for dealing with social problems is to find deserving poor people and “enrich” them with training, scholarships, and/or laptops. These means-tested grants would eliminate the problem of giving money to the undeserving poor.

In addition to my evaluation of the problem as systemic (see the previous blog post), I say “Judge not lest ye be judged” is the standard to follow here. We’re not equipped to evaluate others without prejudice and find the people who “deserve” a healthy, productive life, and those who do not. Individual actions that do not change the system are impotent when it comes to solving such problems. One example: Giving homes to homeless people (as Finland does) often predates their return to sanity.

Even people with disabilities can be treated compassionately, without the cruel suppression and homelessness currently in vogue. Our current cruelty to the unhoused is a long time coming, too. Nixon stopped the government building affordable housing. After he cut taxes on the wealthy roughly in half, Reagan cut HUD's affordable housing budget by 75%.

Decades ago, American mental institutions were defunded, closed, and a substitute was never funded. Ever wonder where all those homeless mentally ill come from? Answer: public policy.

Science tells us, for another example, that special needs kids need a maximum of eight in a classroom if they are to progress and have productive lives, yet our public policy chronically underfunds special ed.

A crappy public realm (what's available to all) is part of labor discipline. It reminds poor people that poverty is a major hassle. Meanwhile, there are alternatives: The arts budget for the City of Berlin exceeds the National Endowment for the Arts’ budget for the U.S. of A. But no! We can't have that! We must have labor discipline! The beatings must continue until morale improves!

It’s not a shortage of resources that constrains us to this kind of cruelty, San Francisco has five times its homeless population in vacant homes. Even the finances make more sense when kindness guides policies. Studies in Colorado and Nevada demonstrate housing the homeless is cheaper than hassling them with cops and taking them to emergency rooms.

History has many examples of societies refusing to value outcasts. People of color could not access social safety nets before 1964 (the Civil Rights Act changed that). So…were all people of color unqualified for our sympathy and support? All were certainly denied those safety nets. Ever wonder why people of color are so poor…?

And yes, people with an agenda–like Carter and Volcker–will distort history to favor their cruel conclusions. The Confederate South even fantasized that the Civil War wasn’t about slavery, it was to enforce the dominance of the northern banks (They want to teach this in schools). Critical Race Theory is controversial now because we apparently can’t acknowledge that African Americans were really Kidnapped Americans.

What’s worse, even those on top suffer from this setup. Harry Truman proposed single-payer healthcare in 1948. The Dixiecrats were concerned that they would have to integrate their hospitals, so they killed that proposal.

We’re still dealing with the fallout from that. The U.S. has a half million medical bankruptcies and an estimated 40,000 annual deaths because people don’t have the kind of care they need. Canada has none of that (and one-seventh the prisoners, per capita, without any increase in crime).

Meanwhile:  

More Than 335,000 Lives Could Have Been Saved During Pandemic if U.S. Had Universal Health Care (excerpt: "In the United States, death rates from COVID-19 are higher than in any other high-income country—and our fragmented and inefficient health system may be largely to blame, Yale researchers say in a new study.").

That’s how even the dominant race suffers from prejudice. It’s lose-lose. Yet how many people do you know who would rather than die than admit a mistake?

Single-payer healthcare has better outcomes and costs roughly half of what we currently pay for health care. How about single-payer as a non-raising-interest-rates solution for inflation?

And I’m not kidding when I say we have to deal with entire populations with PTSD. That’s not light duty, and standing in judgment on such people, means testing programs that address their problems, is more than beside the point, it’s cruel, ineffective and insensitive. It’s not what they need, and it’s not what works. As long as you want means-tested scholarships and laptops to solve our problems, and ignore the big issue–poverty that afflicts undeserving and deserving alike–you’re straining at a gnat while swallowing a camel.

The overall impression I get from your recommendations is that a little unemployment is good for us all if we cure inflation with it, right? They (those undeserving poor people) deserve unemployment after all! They’re lazy! Unambitious! Undeserving! Heck, even unproductive!

But you didn’t deserve to exist, or deserve to be born without birth defects, or to have funds for college, or to be white and male, or to inherit from parents. Deserving has nothing to do with that. You were born on third base. Yes, you’ve made some good decisions, but acting as though you hit a triple isn’t credible. Why do you pick the mote from poor peoples' eyes and ignore the beam in your own?

Incidentally, in case you’re thinking “But if we pay those economic losers, or provide cheap or free housing, won’t taxes rise?” No. Not even that. Financially speaking, the cruelty is entirely unjustified. 

Federal programs are not provisioned by tax revenue. They can’t be. Federal spending is constrained by available resources, but the Fed says U.S. economic capacity is about 79% employed. It’s not possible for a new program to “steal” resources from existing ones (as Nancy Pelosi’s “PayGo” principle says) if resources used are less than 100%, at least not yet. It is, however, possible for federal spending to mobilize unemployed resources. So…no sacrifice is necessary to provide a humane environment even for the poor, disabled, widows and orphans.

So…sorry…your economic illusions are a small part of you, so I won’t like you any less because you cling to the story that you’re deserving and certain poor people aren’t, even if it’s not true.

This discussion of changing minds reminds me of a scene in an old Andy Griffith show I saw recently where Floyd the Barber said something like “It’s like Mark Twain said ‘The more things change, the more they stay the same.’” Andy replied: “Floyd, I don’t think Mark Twain said that.” Floyd deferred to Andy’s knowledge, and the conversation continued. Then, a little later, Floyd said “Yep, it’s just like Mark Twain said ‘The more things change, the more they stay the same.’…” The persistence of incorrect knowledge was a gentle joke.

That’s us. 

 Update: The Inevitable Financial Crisis

Update #2: Today Yves Smith of Naked Capitalism writes about the now Inevitable Financial Crisis….

 The second warning comes from ‘Dr. Doom’ Nouriel Roubini….

The central banks have misdiagnosed the reason for the currently high inflation rates. They were caused not only by too much stimulus provided by governments and the central banks but to a large part by the lack of supplies which is to the consequence of the pandemic and the ‘western’ sanctions following the war in Ukraine. By increasing interest rates the central banks fought against the wrong enemy. They made things worse….

 

Update #3: From Hyman Minsky (the economist of disequilibrium, cited by Stephanie Kelton):

...if an economy with a sizeable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values.

 

Update #4: 

[Contradicting predictions] Physical child abuse dipped substantially [during COVID], according to a recent analysis of child abuse indicators and statistics published in a journal of the American Medical Association—in large part due to the substantial government investment in keeping families financially afloat during the economic shutdown.

It illustrates a major analytical error underpinning American child abuse policy. Appalling cases of beating or rape of children are a major political motivation behind child protective services (CPS) and their habit of “child separation,” or taking kids from their families and placing them into foster or group homes. But in reality, a large and growing majority of child abuse is simple neglect, which can be greatly ameliorated with the welfare state; and CPS actions are themselves often abusive. 

Pandemic consequences

 

bet marie kondo is wishing she had more shit in her house right about now.

— pony starwars (@tigersgoroooar) April 15, 2020

How to Solve the Inflation Problem, and some others...

(c) by Mark Dempsey

My brother and I have been debating inflation recently. He's a retired acupuncturist and one of the many blessings of my life has been to have our relationship. His economic opinions are not as in-depth as mine--I correspond with contemporary heterodox economists--but my brother's rather conventional economic opinions are such a small part of him that they're as peripheral to the whole of him as his shoelaces. Kind of beside the point.

That said, here's part of our debate:

Brother says: " ... Although economic policy and the stock market are related, I see them as two separate things. In other words, we can change our economic theories and still have our stock market."

My reply:  First, markets and public policy are inextricably intertwined. Economics is not a debate about how many angels can dance on the head of a pin, it's the attempt to describe the dynamics of interactions we call "markets." Whether conscious or unconscious, religious or scientific, economic theories are what make all markets and their outcomes happen.

You cannot have a stock market, or any market for that matter, without guiding regulations, and some theory justifying the regulations. Modern science at least lets us aspire to have our theories predict the effect of the regulations in the real world.

Politics, and its handmaiden, orthodox economics, on the other hand, often work very hard to conceal those policy effects. "Without lies, there wouldn't be any politics" - says Will Rogers. The underpinnings of these policies can be everything from "Pharoah is a god" to "All men [except negroes] are created equal."

A few examples of how public policy shapes markets:

• It used to be illegal to sell at less than the "Manufacturer's Suggested Retail" price. Imagine the consequences for Walmart and other discounters if that were still true.
• It used to be illegal to pay C-suite executives with stock. Currently, they have every motivation in the world to manipulate their stock.
• Stock buy-backs used to be illegal too.

See Matt Stoller's Goliath for many more of these, and you'll see why Walmart wiped out mom-and-pop stores. Public policy is critical in shaping markets, including the stock market, and determines the shape of entire societies--which is one reason politics is so hotly contested. Those policies determine who survives and who thrives, economically speaking. 

There’s a libertarian strain of economics that denies regulations are necessary. Koch-funded professor James Buchannan’s “public choice” economics says the state always screws things up. Always! See Nancy MacLean's Democracy in Chains: The Deep History of the Radical Right's Stealth Plan for America for an in depth look. Not pretty.

This libertarian way of thinking denies that 75% of pharmaceutical innovation is from government-funded research (that's true, though). It also denies that 80% of those inventions on your cell phone came from government-funded research (also true). 

So let's just say libertarianism is a philosophy for amateurs.

In our culture's common mythos, the common belief that currency evolved from barter has made it intellectually respectable to believe that markets are separate from states and public policy. In this myth, Robinson Crusoe and Friday bartered goods in which they specialized (e.g. coconuts for Robinson Crusoe, fish for Friday), making their bartering more convenient by using seashells as "coins," and in the end, marking their cave walls with credit/debit entries to record their mutual obligations for days when there were no fish or coconuts to be found.

Note that at no point in this mythical economy does any authority--political or religious--guide these transactions. It's just a "willing buyer and willing seller"--a phrase you'll hear from libertarians frequently. The theory implies that minimizing government and regulation is what we need to do to make markets function most effectively and efficiently. Note that the history this myth suggests is barter came first, then "coins," then finally credit.

However, this is just a myth, as true as Santa Claus and the tooth fairy. Archaeological discoveries debunk the Robinson Crusoe myth. The historical sequence is credit, then money, and not much barter. 

Discoveries of credit predate even writing, dating from before 3500 BC--imagine bar tabs from Babylon on clay tablets. Coins made their first appearance in 800 - 600 BC, coincidentally around the time archaeologists believe the Midas myth appeared. 

As for barter: “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing.” - says anthropologist Caroline Humphrey from Barter and Economic Disintegration.

But does humanity really need an authority regulating and issuing the exchange of goods, services and money? Says David Graeber in Debt: The First 5,000 Years: "There are no economic markets without states in the history of the world. States create and encourage markets." 

In other words, down here on planet earth, humanity has done the opposite of the Robinson Crusoe myth, relying on religious, legal, or regulatory authority in all cases. Emile Durkheim, one of the founders of sociology, even notes that all states have a covert religion, otherwise people would be dishonest when it was to their advantage even for arms-length transactions when their dishonesty couldn't be discovered. Having arms-length transactions (e.g. buying goods from China) is kind of the point of markets.

How does a state create a market? For a simplified example, imagine the king wants to employ 1,000 soldiers. It's a logistical nightmare to feed, arm, house, and deploy all these soldiers. To create a market, the king uses his power to create currency–let's call that currency "crowns"--and pays the soldiers' salaries in crowns. Then he taxes the entire kingdom, payable only in crowns. Presto! A market!

Nevertheless, the Robinson Crusoe myth still appears in some conventional economics texts. One bit of its agenda is to de-legitimize state authority while advising deregulation and de-supervision to make markets "efficient." Gold-bugs and/or cryptocurrency fans also omit the state from the currency's authentication (both are difficult to counterfeit) and value. These stories are believable but only superficially, and history certainly does not validate them. They pointedly ignore the context or system in which markers for obligation (currency) appear, and context is really everything here.

For the libertarian myth-makers, everything devolves to individual responsibility. "There is no such thing as society," said Margaret Thatcher, one of modernity's most prolific mythmakers, "there are only individuals and families"--a statement roughly equivalent to saying "You have no body, only cells, and organs." 

If you watch Call the Midwife you'll see socialist post-World-War-II Britain's government supplied healthcare and housing, and Thatcher came up as a reaction to that. One of Thatcher's most popular moves was to sell council (public) housing to those who occupied them at a discount. This was temporarily profitable for those families who bought their homes, but in the long run childhood poverty tripled in the U.K. after Thatcher and her policies were done with it. Cheap homes were the bait.

Thatcher also said something like "There's no such thing as public money, just money the state takes from your income or savings"--which, if true, means we must adopt austerity, the origin of that increase in childhood poverty. Apparently, Thatcher believed pounds grew on billionaires. That’s an obvious myth--our central bank, the Federal Reserve, is the monopoly provider of non-counterfeit dollars and the Bank of England is the monopoly provider of pounds--but how much traction has this particular myth gained in popular opinion?

Even a "liberal" like Nancy Pelosi believes we must tax more if we’re to have more federal programs. I'd suggest people who believe this particular myth must also answer the question: Where do taxpayers get the dollars with which they pay taxes if the government doesn’t spend them first? 

Federal fiscal policy is not “tax and spend,” it must be “spent first, then retrieve some dollars in taxes”--otherwise no one has dollars they can use to pay taxes. Tax revenue does not (and cannot) provision federal programs, but taxes are important–they make dollars something that’s in demand.

And what do we call the dollars left out in the economy, not retrieved in taxes? Answer #1: the dollar financial assets of the private sector (i.e. people’s savings). Answer #2: National debt. They are exactly the same thing, just as your bank account is your asset and the bank's liability. 

Incidentally, the obligation is from the central bank to the holders of dollars and other debt obligations. What does the central bank ("the Fed") owe us for our dollars? Answer: that many dollars' relief from an inevitable liability--taxes.

Reducing national debt is a very bad idea. It impairs people’s ability to pay their obligations. Every time we’ve adopted “Fiscal Responsibility™” and significantly reduced national debt there’s a wave of asset forfeitures and foreclosures–a Great Depression-sized hole in the economy. This is historical fact, not theoretical observation.

Brother says: "Your point about raising interest rates to blunt inflation is a good one and I agree with you that it hurts lower-income families more. But, what's the alternative?..."

My reply: Sometimes it's better to do nothing rather than keep digging a deeper hole. Currently, inflation stems largely from shortages and supply chain problems--everything from COVID to jammed ports to Russian sanctions. Doing nothing would be preferable to harming workers, and increasing unemployment by raising interest rates, as I'll explain in a bit. (see Inflation Hurts Everyone, But So Does Unemployment by economist Stephanie Kelton too. Excerpt: "the accounting and consulting firm RSM has estimated that [raising rates] could involve the loss of 5.3 million jobs, which would drive unemployment up to a whopping 6.7 percent.")

And there are remedies besides raising interest rates to increase unemployment and cause a recession. One would be to permit Ukraine to make peace...but that's not on the agenda, in fact sabotaging peace negotiations is the current U.S. strategy. That's right, the U.S. could end this war (and could have prevented it) in a hot minute. It doesn't excuse Putin, but his attack was not unprovoked, as all the editorial pages in mainstream media would have you believe.

Meanwhile, "What if we're fighting inflation all wrong?" says "...it’s a scam to say that we need to balance things like inflation on the backs of the unemployed...As a well-known economist, Olivier Blanchard put it recently, it’s kind of difficult to explain to people that Russia invaded Ukraine, so you need to lose your job." More from that same source:

"The other important part about [raising interest rates to quell inflation] is it sets us up to be in an even worse situation for next time. If you think rent is a problem, raising interest rates is going to make it a lot more expensive to build apartment buildings and provide housing for people. The same can be true for certain parts of the economy — oil and gas, certain commodity investments.

"We go through these cycles where there is a little bit of price pressure and because the Federal Reserve has been given [sole!] responsibility for it, we use their interest rate policy. It is the only tool that we have, instead of using other policy tools that could potentially push through bottlenecks. That leads to a negative dynamic, especially for ordinary people."

Who does inflation help? Answer: debtors (they pay the creditors back with cheaper money). Of course, the poor may suffer more than the rich, but they're more likely to be debtors too.

Besides supporting negotiations about Ukraine, is there another alternative? How about we stop giving money to Ukraine and give that same money to our poor? I've read that for half the recent $40 billion in arms sent to Ukraine we could have solved homelessness.

How to end the war? Reassuring Russia that NATO won't accept Ukraine as a member would be a start. Incidentally, Russia has declared it suspects the U.S. is not "agreement capable." (Ask a native American what they mean.)

I'll add that there is no coherent theory of inflation in any economics of which I'm aware. Chicago school Milton Friedman's statement "Inflation is always and everywhere a monetary phenomenon" is just baloney. Here's a chart of the growth in money supply vs. inflation:



CPI (Consumer Price Index, the blue line) and growth in the money supply (the red line) have virtually no connection. Nevertheless, the Fed, and its 300 PhD economists, is still advocating baloney, increasing interest rates, and increasing unemployment.

Friedman's economics didn't work when they tried it in the early Reagan administration, so discounting his pronouncements is not unscientific. See Paul Krugman's Peddling Prosperity for a detailed account of Friedman's failings. Among other things, Friedman believed the Fed could manage the money supply. Anyone with an elementary understanding of how banks work could tell you that would be impossible.

What's the difficulty of a coherent inflation theory? One example: If the Fed gave every family a million dollars it could be inflationary...or not. It depends on whether the recipients spent the money, bidding up prices, or "unspent" the money, paying off loans. If the recipients just put the dollars under a mattress it wouldn't be inflationary. No one would be bidding up the price of goods or services.

Another solution for current inflation: the U.S. buys surplus soybeans, how about buying surplus labor with a job guarantee? Who else is bidding for the unemployed? A job guarantee would work to end inflation, provide a living wage as a floor for workers, and replace all kinds of "welfare" programs as a social safety net.

The orthodox (neoclassical economics) Friedmanite advice to not give families money (Welfare! Eeek! Inflationary! Job guarantee! Eeek! Ditto!) prevents solving two primarily systemic problems we now face: education and crime. Incidentally, the neoclassicals now dominate academic economics and the editorial pages of even the most “liberal” papers, so you'll seldom hear the respectable, orthodox, neoclassical economists even mention these alternative remedies, even though their suggested remedies have been cruel and ineffective.

Systemic Problems

So you understand what "systemic problems" are, here's an example for you: I throw nine bones out my back door and release ten dogs to retrieve a bone. I don't care how deserving, intelligent, well-trained, etc. those dogs are, one is going to come up short. None of the dogs who got the bone could help the poor tenth dog who came back without one. The system, not the individual, needs to change before everyone gets a bone. Just about every big problem the country faces now is either wholly or in large part systemic–COVID, climate, unemployment, immigration, education, crime, etc.--and public policy guides the system. 

Education

The solution proposed by "reformers" for current U.S. education problems is to ignore the systemic context of education and view school problems as individual responsibility only. By their lights, we need to fess up, and sternly shake our index fingers at the (individual) malefactors: Bad students (and bad families)! Bad teachers! Bad administrators! Those individuals are the source of the problems.

The billionaire fans of non-systemic solutions have funded self-serving solutions like Michelle Rhee's "Students First" organization. They even sponsored a film -- Waiting for Superman -- about Rhee firing tenured teachers who didn't "add value" as she managed the Washington D.C. school system. "Adding value" is MBA-speak for not improving test scores.

The non-systemic solutions the reformers propose are: 1. Merit pay for teachers (because they're so financially motivated, doncha know) 2. (Union-busting) Charter Schools, and 3. Testing, testing, testing to see if teachers are "adding value" week by week, minute by minute.

The nostalgia for an America where 70% of workers had defined-benefit pensions, could work one job to support their household, could send their kids to a state college from which they could graduate with little or no debt... that "Greatness" was once available to everyone, deserving or not. Not anymore. Systemic changes have eliminated it as even a possibility.

Waiting for Superman even touts the Finnish schools as the ones to emulate--and Finland has very good schools indeed. Oddly enough the film omits to mention that Finland's teachers are well-paid, tenured, and unionized.

As for the three "solutions" promoted by the individual responsibility billionaires (merit pay, charter schools, and testing), no science validates that these are effective or that they even correlate with better educational outcomes. What does science suggest is behind better student achievement? Answer: reduced childhood poverty. In Finland, childhood poverty afflicts 2% of the population; in the U.S. 23% of children are poor (at the time of the film). 

A more recent Washington Post editorial page notes that childhood poverty has declined from 28% in 1993 to 11% today.[update*] Why? Answer: Pandemic relief and some revisions to the child tax credit. If nothing else, this should tell us public policy, not academic success, shapes who is poor and who is not. If you doubt poverty is a problem, before the beginning of the pandemic, the Fed published a report saying 40% of Americans couldn't pay for a $400 emergency without selling something or borrowing. Sixty-five percent of seniors have only Social Security to fund their retirement. Public policy has managed to impoverish the American population.

If you think "that's only fair, American workers are less productive so they don't deserve a raise"...think again:

Crime

Poverty plays a role in crime too. U.S. population increased 42% from 1982 to 2017. U.S. spending on policing increased 187% during that period. During this period, Clinton and Newt Gingrich also turned AFDC into TANF, reducing welfare rolls dramatically. Before that transformation 76% of those needing public assistance got it. After: 26%. The attacks on the poor have been unrelenting.

There's good evidence that better welfare reduces crime significantly. It certainly makes sense that poor people would be less desperate if they had a good safety net. 

Nevertheless, panicky headlines aside, crime is in decline thanks to an aging population. So...do we have room to defund the police? Gee, we've only been spending four times as much as the population grew on Imperial Storm Troops...er, I mean cops. 

In California, police only solve 15% of crimes. Meanwhile, the very wealthy criminals on Wall Street who perpetrated what's arguably the largest theft in human history (the subprime/derivatives meltdown) are all free with slap-on-the-wrist fines. (Thanks Obama!) The FBI estimates white collar crime costs the economy $1 trillion annually. The "blue-collar" crimes of robbery, mugging, etc. cost $12 billion annually. Yet who gets punished? Doesn't justice include fairness too?

In Sacramento County, the jail is full, not of convicts, but people awaiting trial. You're not "innocent until proven guilty" in Sacramento, you're "incarcerated if you can't make bail." The people too poor to make bail are 60 - 80% of the County jail population.

The common term for this situation is "class warfare." Many people deny such a thing exists, but wealthy stock-picker Warren Buffet says we do have class warfare "and my class is winning."

Incidentally, why so many votes for Trump? Trump won 74 million votes, nearly five million more than any previous presidential candidate. Says Thomas Greene (from Noteworthy): “Trump will not be defeated by educating voters, by exposing his many foibles and inadequacies. Highlighting what’s wrong with him is futile; his supporters didn’t elect him because they mistook him for a competent administrator or a decent man. They’re angry, not stupid. Trump is an agent of disruption — indeed, of revenge.....Workers now sense that economic justice — a condition in which labor and capital recognize and value each other — is permanently out of reach; the class war is over and it was an absolute rout: insatiable parasites control everything now, and even drain us gratuitously as if exacting reparations for the money and effort they spent taming us. The economy itself, and the institutions protecting it, must be attacked, and actually crippled, to get the attention of the smug patricians in charge. Two decades of appealing to justice, proportion, and common decency have yielded nothing."

And if you think petty criminals and low-achieving students are not sensing the victory of the smug patricians, then I'd say you're overlooking an essential element of our current condition.

Rather than embrace a rather cheap remedy for crime--certainly cheaper than spending four times more on policing than population growth and building more prisons--U.S. public policy demonizes and attacks poor people. The U.S. currently has 5% of the world's population, but 25% of its prisoners. That's five times the world's per-capita average, and seven times the age-demographics-identical Canadian incarceration rate. So is crime way worse in Canada? Nope. About the same. "Lock 'em up and throw away the key" doesn't work and (bonus!) it's enormously expensive. America's motto is no longer e Pluribus Unum ("from many, one). It's "The beatings will continue until morale improves."

It's no accident that Canadian crime is relatively low, despite its relatively low incarceration rate. Among other things, Canada has single-payer healthcare while the U.S. records a half million medical bankruptcies annually and experiences an estimated 40,000 annual deaths because of the lack of access to healthcare. No Canadian has to start cooking meth to pay his spouse's medical bills (the plot of Breaking Bad). Oh yes, and single-payer is roughly half as expensive as what the U.S. enjoys in healthcare now, and it produces better outcomes, as I'm sure you know.

Poverty

So...my point is that poverty and its attendent problems have expanded massively thanks to some very subtle public policy changes, including those like raising Fed Funds rates that ensure continuing employment is always at uncertain. These changes have been backed by perfectly respectable economists and their theories. Polish economist Michal Kalecki calls this exploitive policy "Labor Discipline." The message Labor Discipline sends is this: "You had better take whatever crappy job is on offer, or you will suffer the indignity of poverty (and we'll make sure the public realm available to the poor is crappy too), perhaps even homelessness and starvation. And if you're extra ornery, we'll put you in a cage."

What public policy changed? For one thing Reagan cut taxes for the wealthy (the top marginal income tax brackets) roughly in half, and (less well publicized) with his successor raised payroll taxes eight-fold. This worsened the U.S. economic divide and impoverished large sectors of the population. The marketing of Reagan's policy was flawless, though. The Wall St. Journal called the Reagan recovery "Morning in America." Turns out Morning in America was an average business cycle recovery that enormously favored the rich.

How are the poor doing? Investigative reporter David Cay Johnstone reports that real, median income for the bottom 90% of incomes has increased by only $59 since 1972. If that were an inch on a bar graph, the bar for the top 10% would be 141 feet high. The bar for the top 0.1% would be five miles high.

That pervasive poverty is at the root of schools' underperformance, crime, and lots of other problems (homelessness, food insecurity, etc.). It's systemic, guided by public policy, not individual responsibility, and certainly not by the Fed funds rate.

Speaking of housing, the U.S. has experienced a massive increase in homelessness and unaffordable housing as the result of several public policy changes. Richard Nixon stopped the federal government building affordable housing, and Ronald Reagan--as he was cutting taxes on the wealthy roughly in half (justified as "trickle down")--reduced HUD's affordable housing budget by 75%.

It's not as though the country doesn’t have the resources--San Francisco has five times its homeless population in vacant homes. But we've started to believe that public policy is separate from the market, and the unregulated [genuflects] sacred market will always make the right decision. It’s a relatively unconscious subsidy for real estate speculation (as is prop 13).

The belief my brother states that "an intervention by the feds seems reasonable as a way of curbing the mindset that often happens when inflation starts spiraling out of control" is something straight out of Milton Friedman's playbook. It treats the Federal Reserve (our central bank) as the only potential problem solver, even though there are other, less-harmful alternatives. 

Yet so far the only public policy intervention currently under consideration is raising interest rates. That won’t cure COVID or solve these other supply problems. It will cause unemployment, and suppress any upward wage pressure. I'd suggest that endorsing the Fed's "hard-line approach" amounts to pushing a string. The Fed's policy is designed to keep employment insecure--but wages are not the problem. See the graph below.

“In a nutshell, wages are falling as corporate profits are rising. This chart shows the disparity as a percentage of total U.S. GDP. Since the mid-'70s, wages as a percentage of GDP have fallen 7%, while corporate profits have risen 7%” (Wealth Daily)



(Corporate profits are the blue line, wages are the red. The graph is from the St. Louis Fed.)

Among other remedies, we could curb house inflation by building housing with public money and diminish energy inflation by making peace in Ukraine.

Yes, I know governing can be done badly, but other countries demonstrate that is not the case universally, and it is not always the case here. Seventy-five percent of pharmaceutical innovations and 80% of the inventions in your iPhone are the result of government-funded research. So even our own government is not always clueless.

I always ask my right-wing (invariably white male) friends if they'd feel the same way about individual responsibility if they were born black and female in Somalia. My father told me that most of the wealthy people he knew were, in effect, born on third base, but they all wanted to act like they hit a triple. We often don't deserve our current circumstances, and neither do the poor. Taking care of even the undeserving is smart public policy, and the Christian thing to do. In light of all the scripture advising us to be loving and generous, Reverend William Barber says making Christianity about preventing gay marriage and abortion amounts to theological malpractice.

In any case, thinking of things systemically is both liberating (solutions are possible!) and discouraging (but we're doing everything in our power to ignore systemic solutions!).

So I encourage you to take a look at things systemically. Big systems do respond to small perturbations, too. This is called "The Butterfly Effect." A butterfly in the Amazon flaps her wings and through a series of causes and effects, triggers a hurricane. Even knowing the systemic nature of the problem, that little bit of consciousness, can be that small perturbation.

Ignorance and unconsciousness is not a winning life strategy. It's not even a good strategy to cross the living room without bumping into the furniture.

The idea that the stock market is a systemic process has been described even in older (heterodox) economics--e.g. Hyman Minsky. The very conditions of a rising market create behaviors that ultimately undermine stability. The new bit of business that started our correspondence is that modern physics, which can predict chaotic systems like the weather, can now predict market failures, and suggest market-correcting systemic remedies. That seems like a good thing, at least to me.

Steve Keen outlines several of these market-disequilibrium-correcting remedies in his latest (The New Economics: A Manifesto). None of the remedies include raising Fed Funds rates. 

There are plenty of examples of countries self-sabotaging throughout history. The U.S. is going through one now.

So...solutions are possible, just not available in conventional wisdom. The U.S. can alleviate poverty, promote justice, and make peace, not war if we look at reality using current tools rather than the DSGE models of orthodox economics that emanate from the 18th century.

Steve Keen notes that if you took a scientist from that 18th century to a modern lab, you would blow his mind. If you did the same thing with an economist from that same period, taking him to a modern economics class, he would feel right at home. The monopoly on public attention from such orthodox economists is what's deceptive, and even the "liberal" Sacramento Bee regularly publishes their theories and dire warnings. This serves the oligarchy, but not much else.

H.G. Wells said, "Civilization is a race between education and catastrophe." So far, humanity has been embracing catastrophe as a kind of cultural death wish. I'd sure like it if even some people could awaken from this nightmare...but I'm not counting on it.

Apologies if this offends, but it's something I've looked into and...who knows?...you might even agree (although I'm not holding out for that).

[* A recent splashy New York Times piece by Jason DeParle, based on a study using data from Columbia University, contained an eye-popping conclusion: American child poverty has fallen by nearly three-fifths over the past quarter-century, from 28 percent in 1993 to 11 percent in 2019. The principal mechanism was expansions of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which provide money to some of the working poor. Sounds pretty good!

Unfortunately, these figures are simply inaccurate. As Matt Bruenig explains at the People’s Policy Project, the study assumes perfect uptake of these credits through a tax simulation, and we know for a fact that this isn’t true. Another study using IRS administrative data found that this assumption overstates the actual anti–child poverty effect of the EITC by 67 percent.…

The EITC in particular exemplifies all the pathologies of America’s default mode of policy. The first is the work requirement: The credit “phases in” starting at your first dollar of labor income, meaning if you don’t work that much, you get very little, and if you don’t work at all, you get nothing. That means for the very poorest people in the country—typically single mothers who only have access to jobs that don’t pay enough for child care—it is no help at all. And contrary to neoliberal notions of poor people being largely able-bodied adults who refuse to look for jobs, about 86 percent of people who don’t work are children, students, the elderly, or disabled—that is, people who either can’t work, or shouldn’t be working.

The second pathology is complexity and concomitant administrative burden. The EITC has a different phase-in schedule depending on whether you are single or married, or whether you have zero, one, two, or three or more children—eight different calculations may be required of applicants. That adds a large bureaucratic headache for both low-income tax filers (who often struggle to fill out complicated forms) and the IRS. That obstacle in turn prevents about 22 percent of eligible people from actually getting the benefit, and fuels a purely parasitic sector of tax prep firms, which about 60 percent of EITC recipients use. As Bruenig points out, the resulting fees eat up something like 13 to 22 percent of the average EITC benefit.]

[update #2: "Under today’s neoliberal system, the government allows employers to pay wages that are too low to survive on, and then the government uses taxpayer money to bail out the underpaid workers, with programs like the Earned Income Tax Credit (EITC)—a subsidy to poverty-wage workers—and in-kind benefits like food stamps and housing vouchers. The Labor Center at Berkeley has calculated that welfare for low-wage American workers costs taxpayers $150 billion each year. As Teresa Ghilarducci and Aida Farmand noted in The American Prospect in 2019, “The heavy reliance on the EITC, rather than the minimum wage and the strength of trade unions, is one major reason why the U.S. leads the OECD in the share of jobs that pay poverty wages—a full 25.3 percent of jobs are poverty jobs, compared to 3 percent of jobs in Norway.”"

 

In This Disaster We Are All, Ultimately, Innocent

In This Disaster We Are All, Ultimately, Innocent
by Caitlin Johnstone

Whenever I talk about the way our species is sliding toward annihilation via nuclear armageddon or environmental disaster I always get a few people saying something along the lines of, “Good, humans are horrible. The planet will be better off without us.”

This attitude generally seems to be born of frustration. People learn about what’s happening to our world and begin to see how easy it would be to change course if not for the greed and megalomania of our rulers, as well as the obedience of the rank-and-file public and its credulous acceptance of the propaganda that keeps them accepting status quo systems, and they get frustrated. Frustrated with a humanity that just won’t come to its senses, even with all the evidence right there to be seen.

That frustration often turns to disgust as people discover that not only do others fail to see what they see, but they actively avoid looking at it even if you point it out to them. You can lay out the evidence for the corruption and unsustainability of status quo politics and the omnicidal, ecocidal depravity of oligarchic imperialism — lay it out right under their noses — and they’ll make up excuses to turn away.

One way of dealing with the psychological discomfort of this situation is to try and distance yourself emotionally from the plight of humanity and say, “Fine, screw it. Let humanity plunge into dystopia and armageddon. The sooner it happens, the better. We deserve it.”

And I understand the sentiment, but to me saying humanity deserves destruction sounds a lot like saying a drug addict deserves to overdose.

A heroin addict isn’t fully in control of their actions; if they were they would simply quit, because they know from both public knowledge and firsthand observation that it’s a destructive habit. Addiction is described — at least by anyone whose mind is worth a damn — not as a personal choice, but as a disease. Just as would be the case with any other disease, addiction is a condition over which they do not have control, because it has taken over their operating system against their will in some way.

Humanity as a whole is on much the same boat. We have a condition which makes us behave in a self-destructive way, and on paper we could technically all just collectively change course, even if a few oligarchs and empire managers tried to stop us. But we don’t, because we’re not in control.

Those with a substance abuse problem use because they don’t know how to feel okay without the substance, and if they ever overcome their addiction they will eventually discover that this was because there were unconscious forces within them which made the experience of sober life intolerable. Forces like psychological tendencies born of trauma, deprivation or dysfunction earlier in life, tendencies which might manifest as experiences like depression, anxiety or self-loathing which can become too difficult to tolerate without their substance of preference.

Human behavior likewise is driven by unconscious forces on the collective level, but instead of early childhood trauma we’re talking about our entire evolutionary history, as well as the history of civilization.

It’s a ridiculous situation, if you think about it. The story of life on this planet has been about organisms trying to avoid being eaten long enough to reproduce, and our species stumbled out of that horrifying predicament with all the same fear responses and stress hormones and now all of a sudden you find yourself sitting in a cubicle with your heart racing as though you’re running from a saber-toothed tiger because you overhear Janice from accounting gossiping about you.

The eat-or-be-eaten dynamic came crashing headlong through the dawn of a new species with a rapidly-evolved cerebral cortex and the sudden capacity for abstract thought, and all that fear and stress kept marching forward from generation to generation entangling itself with this added new element of thought, language and storytelling. This gave rise to societal constructs like religion, government, hierarchy and family power structures, all largely born of the primitive, fear-based desire to control and dominate which we carried with us from our evolutionary ancestors who lived in trees to hide from predators.

Parents who were traumatized by their parents passed their trauma on to their own children because their trauma made them behave in a traumatized way, and those children passed their own trauma on to their children too. On top of this small-scale generational trauma we added things like wars, slavery, tyranny, colonization and genocides which traumatized entire populations, and that trauma would be passed on from generation to generation as well.

And then we showed up. We, the people who are currently alive. That’s what we were born into. That’s the wave we rode in on. And that wave is still going.

And we wonder why everyone’s so dysfunctional and self-destructive.

We never really had a chance to build a healthy world. Our ancestors went from running away from monsters with sharp fangs to burning witches and heretics to fighting world wars to giving birth to us, and that wave of fear and chaos carried forward right into our own psyches and into the psyches of everyone else on this planet without skipping a beat. If you look at where we came from and how we got here, it’s amazing we’re even as functional as we are.

And that’s what we’re dealing with here. A heritage of trauma stretching back into an unfathomably vast expanse of time, incarnating in the current form of some eight billion homo sapiens. If you zoom out and look at the big picture with this understanding, it’s difficult to find real guilt anywhere, in anyone. Even in the most abusive and traumatizing among us.

Certainly it is in our collective interest to immobilize anyone whose tendencies are dangerously destructive. And certainly establishing culpability and accountability for misdeeds is going to be an important part of expanding human consciousness and creating a healthy world, because we have to understand how and why things are going wrong before we can fix our problems. But even the most destructive among us are simply carrying forward the heritage of trauma which has been reverberating from generation to generation from the deepest recesses of prehistoric life.

Think about a mistake you’ve made in the past. A real bad one, one that makes you cringe whenever you think about it. You wouldn’t make that mistake in the same way again, would you? Of course not, because you now know things you didn’t know back then. You are conscious now of things you previously were not. Depending on how conscious you are now in relation to how conscious you were then you might repeat similar mistakes in similar ways, but you wouldn’t intentionally repeat the exact same error if you had a do-over. In that small way, your consciousness has expanded.

That’s all negative human behavior ultimately is: mistakes that were made due to a lack of consciousness. A lack of empathy, a lack of serenity, a lack of information, a lack of insight, a lack of knowledge that there are better choices, a lack of perception on what’s really going on in the world, a lack of clarity on the ways propaganda manipulates us into serving the interests of the powerful — these are all just different kinds of unconsciousness. Different ways that one can fail to accurately perceive reality.

In this churning, chaotic tidal wave of evolutionary trauma that we were all born into, the only thing we really have any amount of real control over is whether we mindlessly repeat our conditioning patterns or start bringing consciousness to them. But even that is greatly limited by how much consciousness we have access to at the time; many people are just barely treading water psychologically and don’t often have the space to pause and bring clarity to their own inner processes. A lot of people are just stumbling blindly along, and it’s not ultimately their fault any more than the blindness of an actual blind person.

So we’re all innocent, in the end. Again, we must of course push to bring consciousness to the parts of humanity that have taken a wrong turn — to the war criminals and plutocrats and managers of empire, and all other abusers and the abusive systems which elevate them. But underneath that fierce burst of light there can also be a deep compassion and understanding born of a lucid seeing of how we got here in the first place.

We’re all ultimately doing the best we can while riding the momentum of a chain of events far beyond our control which stretches backward through time all the way to the Big Bang. Everyone is playing with a lousy hand which was dealt to them by the churning tumult of evolution and history while grappling with the puzzle of mortality on a tiny blue world of unfathomable beauty that is hurtling through a universe that none of us understand.

Let’s be tender with each other.

For those who still think Russia's Ukraine invasion wasn't provoked...

 

Most fascinating thing about the Ukraine war is the sheer number of top strategic thinkers who warned for years that it was coming if we continued down the same path.

No-one listened to them and here we are.

Small compilation 🧵 of these warnings, from Kissinger to Mearsheimer.

— Arnaud Bertrand (@RnaudBertrand) March 1, 2022

It's worth reading the whole (rather lengthy) thread.

Meanwhile, from Caitlin Johnstone (also worth reading in full):

This is to say nothing of the US empire actively fomenting a violent uprising in 2014 which ousted Kyiv’s sitting government and fractured the nation between its more Moscow-loyal populations to the east and the more US/EU-friendly parts of the country. This led to the [Russian] annexation of Crimea (overwhelmingly supported by the people who live there) and eight years of brutal warfare against Russia-backed separatists in the Donbas. Ukrainian attacks on those separatists are known to have increased exponentially in the days leading up to the invasion, and it has been argued that this is what provoked Putin’s final decision to commit to invading (which was a last-minute decision according to US intelligence).

The US power alliance could very easily have prevented this war with a few low-cost concessions like enshrining Ukrainian neutrality, rolling back its war machinery from Russia’s borders and sincerely pursuing detente with Moscow instead of shredding treaties and ramping up cold war escalations. Hell, it could likely have prevented this war just by protecting President Zelensky from the anti-Moscow far right nationalists who were openly threatening to lynch him if he began honoring the Minsk agreements and pursuing peace with Russia, as he was originally elected to do.

Instead it knowingly chose the opposite course: continuing to float the possibility of formal NATO membership for Ukraine while pouring weapons into the nation and making it more and more of a de facto NATO member with closer and closer intimacy with the US war machine, and then either ordering, encouraging or tolerating Ukraine’s aggressive assault on Donbas separatists.

Why did the empire opt for provocation over peace? Congressman Adam Schiff gave a pretty good answer to that question in January of 2020 as the road to war was being paved: “so that we can fight Russia over there, and we don’t have to fight Russia here.” If you relinquish the infantile idea that the US empire is helping its good friend Ukraine because it loves the Ukrainian people and wants them to have freedom and democracy, it’s not hard to see that the US sparked a convenient proxy war because it was in its geostrategic interests to do so, and because it wouldn’t be their lives and property getting laid to waste.

 

 

Political update

 Quoted in NakedCapitalism.com:

From an interview with Glenn Greenwald, Reason Magazine. One bit:

Q: How can we make sense of the political shift we are experiencing in the U.S.?

A: The thing that makes no sense is that anybody would twice vote for Obama and then vote for Trump. How do you make sense of that if you see the world through conservatism versus liberalism? It makes perfect sense, though, if your driving ideology is not conservatism or liberalism, but contempt for the status quo and the ruling elites that safeguard it. Because that is what Obama channeled more than anything, right? “I’m an outsider. I have this funny name. I haven’t been in Washington very long. I want to change the way Washington works.” That’s exactly the message Trump nestled within his work in his own different style.

https://reason.com/2022/09/04/glenn-greenwald-on-corporate-media-and-identity-politics/

 

...which is in line with Boss Tweed's famous saying: "I don't care who people vote for as long as I can pick the candidates."

 

Excavator Magic

 

I love excavator

— Brekeke (@Kocurstvo) September 1, 2022

Leave it to the Chinese...

#COVID19

“Tiny discovery in Chinese lab could be a big deal in stopping Covid-19” [South China Morning Post] (Nature original). “A Chinese research team has developed a nanomaterial that can find Sars-CoV-2 viruses in a living cell and remove them. Unlike most existing Covid-19 drugs, the material can inhibit infections from all major variants including Alpha, Beta, Delta and Omicron with high biosafety, the researchers said….. The structure of the material – called CIPS because it is made of copper, indium, phosphorus and sulphur – takes the form of nanosheets that are about 200 nanometres, around the size of two viral particles…. Normally, the Sars-CoV-2 virus invades human cells with help of the spike protein on its surface. The spike protein binds with the ACE2 protein on the surface of the human cell in the same way a key opens a lock, thus allowing the virus to invade the host cell. CIPS, however, is capable of selectively binding with the virus’ spike protein, resulting in the infection process being blocked… Once CIPS has captured the virus, it forms a stable complex. The complex is then recognised and eliminated by the host’s macrophages, large white blood cells in the human immune system that digest foreign substances…. The good news is that the nanomaterials could be relatively cheap enough for mass production and widespread applications.” (from NakedCapitalism.com)