Category Archives: Government

Rich countries working on secret climate treaty that favors them

The US, UK and other rich countries are discussing a secret draft climate treaty for the UN Copenhagen climate talks.  Excluded from the discussion are developing countries, who were rightly upset.  The Guardian reported that the draft treaty would:

  • hand effective control of
    climate change finance to the World Bank;
  • would abandon the Kyoto protocol –
    the only legally binding treaty that the world has on emissions reductions;
  • would make any money to help poor countries adapt to climate change dependent
    on them taking a range of actions [forcing more privatizations so as to enrich they buyers?];
  • not allow poor countries to emit more than 1.44 tonnes of carbon per
    person by 2050, while allowing rich countries to emit 2.67 tonnes.

The last point is quite key since rich countries have produced the vast majority of CO2 emissions since 1900, as this graph at the World Resources Institute demonstrates:

A climate treaty that does not recognize that rich counties got us into this mess and need pay more to get us to climate stability, will not be accepted by developing countries.

Also, Naked Capitalism has a piece on the effectiveness of Cap and Trade solutions in reducing CO2 emissions.  It isn’t favorable.

Bernanke Reloaded

I have wished to talk about Fed. Chairman Ben Bernanke's renomination and the quality of the job that the former Princeton Econ prof and expert on the economics of he Great Depression did, but since Doug Henwood, of Left Business Observer, sums up Chairman Ben's performance so well, I'll leave it to him:

Why is this guy getting reappointed? He let the bubble inflate,
dismissed worries about the dangers of subprime mortgages and
derivatives, said in mid-2008 that the recession was unlikely to get
too serious (just as it was about to get very serious)—and then, when
everything fell apart, set about writing big big big giant big checks
to Wall Street. Yes, in a financial crisis, it’s essential that a
central bank flood the system with money to keep things from imploding
utterly. But he’s done so without any clear strategy or accountability,
and absolutely no commitment to insuring that it doesn’t happen again.
Truly the American ruling class is a rotting social formation.

and later:

Fed chair Ben Bernanke was before the Senate just the other day urging
Congress to cut Medicare and Social Security. I suspect that the upper
reaches of American society are deeply interested in imposing an
austerity program on most of us in order to pay the bills for the
bailout and stimulus programs. It’s never too early to gear up for that

The rest of Doug's article is his assessment of the latest economic news and worth the read as it always is, even when I disagree, which is seldom.

Billion Dollar-O-Gram: money visualizations

David McCandless, at Information is Beautiful, has a great visualization of spending on a variety of things at his Billion Dollar-O-Gram.  It is a great way to compare spending on the Internet Porn Industry with foreign aid given by the world's major nations (about equal) or the total cost of the financial crisis to the US government ($2800 billion) to the value of Africa's entire debt to Western nations ($200 billion).  Enjoy!

German laws supporting workers helps their economy plus Utah Phillips on natural resources

Paul Krugman writes about how Germany is hasn't seen as high an increase in unemployment as the US has and that this is due to the laws Germany has to support employment and the subsidies to employers who reduce the hours of their workers rather than lay them off.

He goes on to suggest that the government cannot use monetary policy to get us out of the recession, and for 90% we STILL are in a recession, and the government leadership may not be willing to borrow enough to counter the demand short fall that resulted from the recession.  He suggests creating a new W.P.A. to hire people and reduce unemployment (worked for one of my grandfathers, who helped build the Quabbin reservoir).  He argues against the standard objections:

But these aren’t normal times. Right now, workers who lose their
jobs aren’t moving to the jobs of the future; they’re entering the
ranks of the unemployed and staying there. Long-term unemployment is
already at its highest levels since the 1930s, and it’s still on the

And long-term unemployment inflicts long-term damage.
Workers who have been out of a job for too long often find it hard to
get back into the labor market even when conditions improve. And there
are hidden costs, too — not least for children, who suffer physically
and emotionally when their parents spend months or years unemployed.

Yves Smith of Naked Capitalism adds a bunch of points including:

Krugman does Germany an injustice by failing to contest US prejudices
about European (particularly German) labor practices. If German labor
practices are so terrible, then how was Germany an export powerhouse,
able to punch above its weight versus Japan and China, while the US,
with our supposedly great advantage of more flexible (and therefore
cheaper) labor, has run chronic and large current account deficits? And
why is Germany a hotbed of successful entrepreneurial companies, its
famed Mittelstand? If Germany was such a terrible place to do business,
wouldn’t they have hollowed out manufacturing just as the US has done?
Might it be that there are unrecognized pluses of not being able to
fire workers at will, that the company and the employees recognize that
they are in the same boat, and the company has more reason to invest in
its employees (ignore the US nonsense “employees are our asset,”
another line from the corporate Ministry of Truth).

A different example. A US colleague was sent to Paris to turn around a
medical database business (spanning 11 timezones). She succeeded. Now
American managers don’t know how to turn around businesses without
firing people, which was not an option for her. I submit that no one is
willing to consider that the vaunted US labor market flexibility has
produced lower skilled managers, one who resort to the simple expedient
of expanding or contracting the workforce (which is actually pretty
disruptive and results in the loss of skills and know-how) rather than
learning how to manage a business with more foresight and in a more
organic fashion because the business is defined to a large degree
around its employees.

Both are useful articles and the discussion on the Naked Capitalism article is very interesting.

One last thing, the "employees are our asset" nonsense always reminds me of this Utah Philips story (called "Natural Resources") which appears the album "The Past Didn't Go Anywhere" that he did with Ani DeFranco:

was invited to the State Young Writers' Conference out at Cheney, which
was at Eastern Washington university. And I didn't want to embarrass my
son, you know, and I was gonna behave myself cause I had to live there
then – it was a chore. But I got on the stage – it was an enormous
auditorium; there were twenty-seven hundred young faces out there, none
of them with any prospects anybody could detect – and off to the side
of the stage was the suit-and-tie crowd of people from the school
district and the principals, and the, the main speaker following me was
from the Chamber of Commerce.

Well something inside of me snapped.

And I got to the microphone, and I looked out over that multitude of faces and I said something to the effect of:

"You're about to be told one more time that you're America's most valuable natural resource. Have you seen what they do to valuable natural resources? Have you seen them strip mine? Have you seen a clear-cut in a forest? Have
you seen a polluted river? Don't ever let them call you a valuable
natural resource! They're gonna strip mine your soul! They're gonna
clear-cut your best thoughts for the sake of profit, unless you learn
to resist, cause the profit system follows the path of least
resistance, and following the path of least resistance is what makes
the river crooked! Hmph!"

Well there was great gnashing of teeth
and rending of garments – mine. I was borne to the door, screaming
epithets over my shoulder, something to the effect of: "Make a break
for it, kids!" "Flee to the wilderness!" The one within, if you can
find it.

There is a bit more.  The whole album as well as the others he did are most worth it.  He is still sorely missed.

New ways to measure progress

Joseph Stiglitz and Amartya Sen, at the request of the French Commission on the Measurement of Economic Performance and Social Progress, put out a report on alternative methods for measuring economic performance. Such methods include Gross Domestic Product (GDP) statistics, but the report calls for including social and environmental factors.

Herman Daly and many others in the Ecological Economics community have been calling for better measures of our economic, social and environmental progress for over twenty years.  Indeed, Redefining Progress already releases its Genuine Progress Indicator each year, though at a three year delay.

Edward Harrison of Credit Writedowns rightly points out (via Naked Capitalism) that GDP is an inadequate measure of our economic state.  Rather he wants to be sure that our economic statistics include not just income (GDP), but debt.  I completely agree with him and hope that such revised metrics, note the plural,  include measure such assets as our environment, the health & education of our people and other non-market debts and assets.

Hopefully this report will put a pressure on the world's governments to devise and track metrics that better reflect our economic, social and ecological progress.  Until then, we should create and track our own community indicators.

Noble lies or Glad we got that out in the open

Irving Kristol, "godfather of neoconservatism", died on the 18th.  A friend blogged about this quote from Kristol:

"There are different kinds of truths for different kinds of people.
There are truths appropriate for children; truths that are appropriate
for students; truths that are appropriate for educated adults; and
truths that are appropriate for highly educated adults, and the notion
that there should be one set of truths available to everyone is a
modern democratic fallacy. It doesn't work."

Here he is expounding on the need for "Noble lies".  Glad we got that cleared up.  Nice to know the "grandfather of neoconservatism" thought it was ok for elites to lie to us lowly citizens.  Its for our own good after all.

Considering the last eight years of lies: Iraq has WMDs, we need to bail out the fat cats on wall street who save the economy, the planet isn't warming because of our emissions of CO2, housing prices will keep going up, the rich deserve their wealth, I'd rather some truth please.

The Reason magazine article, don't worry they are libertarians, that reports the previous quote has this little Kristol gem as well:

"If God does not exist, and if religion is an illusion that the
majority of men cannot live without…let men believe in the lies of
religion since they cannot do without them, and let then a handful of
sages, who know the truth and can live with it, keep it among
themselves. Men are then divided into the wise and the foolish, the
philosophers and the common men, and atheism becomes a guarded,
esoteric doctrine–for if the illusions of religion were to be
discredited, there is no telling with what madness men would be seized,
with what uncontrollable anguish." (cite).

Seems to me that the Golden Rule of "do to others what you would like to be done to you" is pretty universal.  Whether given from a god, gods, or just something we developed in our long evolution, it doesn't much matter.  However, Kristol seems to believe "he who has the gold makes the rules".  How very Machiavellian of him.  I'll leave out the Dante reference.

A Cash for Clunkers Review

According to Toyota Tops List of Cash-for-Clunkers Winners (NY Times), 690,000 new vehicles were purchased with money from the Cash for Clunkers program.  On average, new cars got 25 miles per gallon (mpg) while "clunkers" got 16 mpg.  If the average person in the US drives 15,000 miles/year, then new cars will save 337.5 gallons of gas a year (937.5 gallons for "clunkers" and 600 gallons for the newer cars).

So did the Cash for Clunkers program pay off?  Lets try a back of the envelope calculation.

If we estimate that the "clunkers", without the program, would have been replaced within five years on average, then the total gas saved would be:

690,000 cars x 337.5 gallons saved per year x 5 years = 1,164,375,000 gallons saved

or about 1.16 billion gallons of gas saved.

Since about $2.9 billion was spent, that means that for every gallon saved, it cost the federal government about $2.49.  Increasing the average replacement time decreases the cost per gallon, while decreasing the replacement time raises the cost per gallon.

With gas costing $2.62 a gallon on 8/24 (see, this is a slight savings.  The savings would grow should the price of gas go back to its high point of $4.00 in July 2008 or even higher when peak oil really kicks in.

Some (1 , 2) have estimated the true cost of a gallon of gas to be significantly higher due to such factors as the subsidies the government gives to gas, protecting the oil supply in the Persian Gulf, lost time in traffic and the environmental cost.  Estimates of the true cost of a gallon of gas vary between $5 and $15.  At those prices, Cash for Clunkers program was quite a good investment. 

However, whether the Cash for Clunkers program was as efficient at cutting our oil usage and pollution as other approaches such as home energy efficiency improvements, or increased ride sharing, public transit or bike paths remains to be seen.

MA State Treasurer Cahill voted to double supporter’s pension

Wow!  I wish I knew this in 2002 when I ran for Treasurer of the Commonwealth of Massachusetts: 
Cahill voted to double supporter's pension.  Then again, so do Cahill's other opponents.  Here are the interesting bits (the bolds are mine in case you just want to skim it):

Shea, who retired that year at age 49, has been collecting a pension
now worth $47,000 a year, plus health-care insurance, paid by Norfolk
county taxpayers. If she had received the kind of pension usually given
to sheriff's department administrators, instead of the type Norfolk
corrections officers get for their potentially dangerous jobs, her
pension would be worth less than half
that, $21,230 a year.

Steve Kenneway, president of the Massachusetts Correctional Officers Federation Union, blasted Shea's pension.

"I don't see a lot of stress on a paper-pusher, not compared to an
officer who might get stabbed or beaten up on the cellblock," he said.
"These retirements are meant for officers who get old before their time
under the stress and physical demands of the job."

Shea's work for Cahill, a Democrat,
extends back at least to 1996 when she was actively raising funds for
his campaign to become county treasurer, according to three Quincy
Democrats who observed their relationship.
She also used her contacts
from having served on the retirement board to round up support for
Cahill around the county.

again worked closely with him in his 2002 campaign to win the state
treasurer's post. After he took office, she continued to be on his
inner financial team that met in Quincy, sometimes weekly, to plan
fund-raising for Cahill's political account, said two Cahill
Shea has also donated to Cahill's coffers, more than $3,000
since Cahill won election as state treasurer.

The five-member Norfolk County Retirement Board approved Shea's pension
with no questions asked
, minutes show. At the time, Cahill was
chairman, and Shea was also a member of the board (and still is)
Neither Cahill nor Shea recused themselves from the July 2000 vote,
according to minutes of the meeting, which state that the vote was
unanimous to approve a batch of pension requests, including Shea's.


Shea has since embarked on a second career as a broker for firms
seeking to invest state and county pension funds; her firm earned what
is estimated to be a substantial fee for helping to arrange a deal for
an investment management firm to handle $250 million from the
Massachusetts pension fund, which is overseen by Cahill.

After she stopped working at the sheriff's office, Shea began work as a
pension investment consultant for Connors & Co.
, a Georgia company
that earns fees by matching investment companies with state and local
pension funds. Shea is the firm's director of sales and marketing for
New England.

Paul F. Connors Jr. and his wife
have been longtime contributors to Cahill's campaign committee, dating
back to when he was first elected county treasurer. Since Cahill was
elected to the state post in 2002, they have contributed $12,000.

Connors could not be reached yesterday; he has previously not responded
to requests for comment about his firm's dealings in Massachusetts.

October 2005, the state retirement board chose EARNEST Partners, an
Atlanta-based financial firm, to manage $250 million in pension money.
EARNEST used Connors & Co. as a broker on the deal.
Cahill also
chaired the selection committee that reviewed the proposals.

normal industry standards were used, Connors & Co. would have
earned between 1 and 12 percent of the $6.8 million fee that the state
pension board paid EARNEST to manage the funds. EARNEST's disclosure
statement did not include the fee Connors & Co. received.

served on the state pension board selection committee that recommended
EARNEST and also voted for final approval.
He has said he does not
excuse himself from participating, even if his political supporters are
involved, because he is not told which third-party brokers helped
arrange an investment.

Please go read the Boston Globe article: Cahill voted to double supporter's pension.  It does make for interesting reading.

Increase the sales tax: Is our legislature crazy?

On the 27th, the Massachusetts House of Representatives approved an increase in the sales tax from 5% to 6.25%.  Strangely, my own legislators in Somerville, who are viewed as very progressive and who I know and like, voted for it.

I understand that our Massachusetts' government is facing a very large deficit and that vital programs will be cut to balance the budget.  If we don't raise taxes then vital programs that help our cities and towns, children and provide the little safety net we have, will be axed.

However, increasing the sales tax is not the way to do it!

The sales tax is incredibly regressive.  Page 58 of The Institute on Taxation & Economic Policy's Who Pays: A distributional analysis of the Tax Systems in All 50 States lists a break down for the total tax burden faced by people at different levels of income in Massachusetts. 

Those in the lowest 20% by income, pay 9.3% of their income in taxes.  The poorest 20% pay 5.4% of their income in sales and excise taxes.

Those in the top 1% by income, pay 4.6% of their income (6.8% before they get a kick back from the federal government because of our state income tax) in taxes.  The richest 1% pay 0.6% of their income in sales taxes.  

Basically the Massachusetts House has decided to fund services used by the poor and middle class (as well as corporate welfare) on the back of the poor.

There are alternatives to a blanket increase in the sales tax. 

Short term, we could raise corporate taxes and eliminate the Fidelity and Raytheon tax breaks.  We could also raise the income tax rate while also increasing the value of deductions and exemptions so the higher rates don't hit the poor and middle class.  If need be, it would be more preferable to change the sales tax to cover services, or items bought over the internet.  While not perfect, both changes in the sales tax are more likely to effect the well off.

Longer term we could make the income tax progressive, or impose a wealth tax.  Yes, I know "that's not possible" because the rich and the corporations own our government.  Still, we have to fight for a just tax system.

The financial corporations and rich are getting a bailout, but the poor and middle class are getting the shaft.  Please urge your State Senator to vote against this increase in the sales tax and to seek fairer taxes.

So how does the $700 billion wall street bailout compare to other spending?

The Big Picture reproduces a great graphic in the NYT about how the $700 billion wall street bailout compares to other spending by the Federal government.  100 times the money spent on the S-Chip program to provide health care for children whose parents cannot afford it for one. 

One reminder, with what the Fed and Treasury have already spent to take over bad financial institutions or take on bad debt, $700 billion more puts at well over a trillion $ spent to bailout wall street.  More likely the total will be $1.5+ trillion.  Government-funded universal health care never looked so inexpensive.